While U.S. hotel RevPAR has dropped a whopping 80.6 percent since Feb. 15, hospitality companies will get some relief through the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, notes a report released this week.
In Benefits of Fiscal Stimulus to Hotels, Marcus & Millichap details how hotel companies will be able to avail themselves of the package’s loans, grants and tax abatements.
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In a video message to employees on March 19, Arne Sorenson, CEO of Marriott International, summarized the effect the coronavirus is having on one of the largest hospitality companies in the world.
“COVID-19 is having a more severe and sudden financial impact on our business than 9/11 and the 2009 financial crisis combined,” Sorenson said.
Such is likely the case for most hotel companies. As Marcus & Millichap notes, U.S. hotel occupancy rate has plummeted since COVID-19 began to take hold, dropping 63.6 percent from Feb. 15 to just 21.6 percent in the week ending April 4. Roughly $500 billion of the fiscal package has been designated for large corporations, including qualifying major hotel companies. Tax adjustments will help mitigate the companies’ financial losses, but it is the series of new loan programs that will serve as the chief form of support for struggling businesses.
Under the coronavirus relief bill, the Small Business Administration is guaranteeing new loan initiatives that will help companies address short-term costs, including payroll. Small and medium-size businesses with fewer than 500 employees will be able to seek payroll assistance via the Paycheck Protection Program, which will provide low-interest rate, SBA-guaranteed loans of up to $10 million.
However, larger hotel companies and other businesses classified under NAICS Code 72—including ski resorts and casino hotels—may be deemed eligible for the Paycheck Protection Program if their staff does not exceed 500 at any one property. Lodging companies with fewer than 500 employees may also qualify for assistance under the SBA’s Economic Injury Disaster Loan Program, which offers loans of up to $2 million at a 3.75 percent interest rate, and, as part of a newly added benefit, provides an immediate $10,000 cash grant.
The numbers tell the story
While higher chain-scale hotel properties are experiencing the greatest decrease in demand, no segment of the lodging industry has gone unscathed by the pandemic. Demand sources are now limited to health-care professionals, individuals supporting supply chains, individuals choosing to self-isolate away from home and the small percentage of individuals traveling for personal reasons.
According to the American Hotel & Lodging Association, since the pandemic began escalating in mid-February, U.S. hotels have lost more than $10 billion in revenue and are currently on pace to lose an additional $500 million in revenue per day, for a total loss of roughly $3.5 billion per week. The devastation follows a near decade-long period of record revenue gains in the hotel sector.