PHX Reporter

With hotels nationwide challenged by the COVID-19 economic downturn, industry leaders say results need to come soon before the financial crisis worsens.

The sudden impact of stay-at-home orders and mandated closures has reached all levels of the hospitality sector, Girish Patel, a Principal with NewGen Worldwide, said in an email to the PHX Reporter.

“Prior to COVID-19, our hotels were performing at record-high levels, roughly 20% above our break-even occupancy levels. Our average rooms rates were also at record-high levels, growing at 2% every year for the past decade,” Patel said.

Girish Patel | LinkedIn

“Overnight we dropped from these record levels of revenue down to renting a handful of rooms per night. At this current pace we cannot achieve break-even anytime soon,” Patel said. “Many industry experts predict that it could take a year before we see a meaningful recovery…for business travel to reach a level where we can pay all our bills.”

With the precipitous decline in business, hotel workers have faced layoffs and pay cuts.

“Across our hotels, we have furloughed 75% of our staff.  Across the industry, wages have declined 90% in the past two months with 7.7 million jobs estimated to be permanently lost,” Patel said.

“We decided to keep many of our most experienced team-members on payroll even though we didn’t have any work for them. Without them it will make the recovery process that much harder. We won’t be able to sustain that for too much longer,” he added.

For potential federal legislation to be effective, it needs to be hospitality-sector specific, Patel said.

“Congressional bills can only help our industry if they’re speaking with our industry leaders - we need thoughtful regulatory and liquidity programs across four areas:

1.  Any bill must first address our lender issues. Our mortgage payment is the biggest check we cut every month, and unregulated lenders like CMBS (Commercial Mortgage-Backed Securities) servicers, are going to collapse our businesses by their current strangle-hold practices…eventually that will squeeze the life out of us and the pension funds that hold our bonds. There has to be an industry-wide COVID-19 loan modification standard for lenders to adhere to. Remember Wall Street got a standard bailout after 2008 after they themselves caused a national crisis. Borrowers of their loans deserve the same help when, again, we didn’t cause this.

2.  Second, we need programs that benefit our role as employer, those include tuition assistance for training, employee retention credits, tax rebates, and a proper expansion of the PPP (Paycheck Protection Program) to cover a longer period of time.

3.  Third, we have to incentivize travel and continue promoting the industry. Corporations need to know it’s safe to travel and they need budgetary help to begin do it. The travel industry generates $660 billion in GDP; $186 billion in annual taxes to our local, state, and national economies. Our hotels are likely the safest place to be outside of your home. The sanitization programs have brought our health standards to an even higher level.

4.  Fourth is adequate insurance and liability protection. We can’t have businesses getting sued for being open. We can’t have insurance companies not paying out their claims and also raising our premiums. This could collapse any hopes for recovery.”

As the summer travel season begins, hotels want the public to know they are ready for guests.

“We are open. We are safe,” Patel said. “Without adequate government intervention within the next month or two, the job and economic losses from the hotel industry will reverberate through local communities and our national economy.”