The nation’s major hotel chains are going to need much more help from the government beyond forgiving loans via the Coronavirus Aid, Relief, & Economic Security (CARES) Act to spur a strong job-creating industry recovery, says one of the lodging sector’s most prominent names.
“When we move [beyond the crisis], we are going to need to have marketing campaigns that are going to end up having to be supported locally, regionally and likely underwritten in part by the federal government to get people — once they feel safe, and we have enough testing and right hygiene and protection protocols and those safety measures are there — that we get a message out that it’s safe to travel,” said Hilton CEO Christopher Nassetta in an interview with Yahoo Finance. “The other thing is ultimately providing some incentives. Whether that is tax credits, deductibility of travel in a way that was consistent with how we used to [do].”
Nassetta says he and his colleagues in the lodging space have worked overtime these past few months with government officials to get industry relief included in the CARES Act. That ultimately came via forgivable loans for the franchisees — viewed as small business owners — that typically own and operate hotel chains.
With that out of the way, Nassetta believes the focus by all parties should return to rebuilding the hard-hit industry.
“These will have to be the next steps in the process. When I talked to members of Congress and the administration it’s clearly their intension. They are dealing with a crisis, creating a bridge to get us from this thing to get people to the other side. The next steps will be about recovery. There is clearly things we will be working for our industry,” Nassetta added.
It’s hard to argue the hotel sector doesn’t deserve another helping hand from the Feds.
The hotel industry supports one in 25 American jobs or 8.3 million jobs annually, according to the American Hotel & Lodging Association (AHLA). It contributes nearly $700 billion annually to U.S. GDP. That economic contribution has all been blown up, however, as the coronavirus has kept hotels closed across the country. Thousands of hotel workers across the sector have been put on furlough. The industry’s corporate employees have seen their pay reduced.
Hotel occupancy in the U.S. plunged 70% from the prior year to a mere 21% for the week of April 5-11, per the AHLA. The lodging sector is on pace to lose $500 million in room revenue per day, says the AHLA.
The trade group predicts 5.2 million jobs in the hospitality sector could be lost due to the coronavirus.
For its part, Hilton’s revenue per available room (a key industry metric known as RevPar) plunged in the first quarter. Nassetta has moved quickly to raise enough liquidity that will carry it well beyond 2021 if current revenue trends hold.
Making matters worse, many in the industry are unsure not only when hotels will reopen but what demand will look like in the post coronavirus world where people may be afraid to travel.
Nassetta is confident the hotel industry will recover. But he acknowledges it will take time as society adapts to lingering social distancing recommendations by governments and hotels spend more money to keep buildings free of contamination.
“We will recover. You can start to see early signs of that already,” says Nassetta. “We are in a fantastic position to weather the crisis for a very extended period of time. We remain super confident in the long-term prospects of our business and our model. We just have to get from here to the other side of this.”
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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