A reopening timeline for these hotels
can be determined only once there is
clarity on the lifting of state and city
executive orders, and there is data
pointing to people beginning to travel
again.
Recovery is dependent on the overall
economy reopening, and consumer
confidence around airlines and hotels
implementing necessary protocols for
safety and hygiene. Currently no one
is traveling for business, a big driver for
weekday occupancy, and there is very
little leisure and no travel groups. Only
once there is some clarity around the
increased testing, number of new cases
decreasing and executive orders being
lifted, will we start to see some uptick,
first with business travelers as they get
back to projects, followed by regional
leisure travel. A key factor of leisure
and F&B demand will be the overall
trend on employment figures.
WHAT DOES THIS MEAN FOR
GROUP BUSINESS?
Business is still getting done, small
groups are working from home,
conducting zoom and skype calls;
large groups like conventions and
conferences are mostly canceled
through the end of the year. Group
business will be the last segment to
come back, and these larger hotels will
have to fundamentally change their
operating model on the other side of
this crisis.
The second quarter of this year will be
a washout, and we are starting to see
cancellations for the third quarter and
fourth quarter; if the data points to an
upward trend in June we would expect
to reopen in July, to take advantage of
summer leisure travel. Recovery will
be uneven based on location and type
of hotel. Business transient hotels will
come back first, drive to leisure hotels
will be next. Convention hotels will
take longer. As it relates to markets, on
the West coast, most of the summer
business will be transient driven,
Florida markets may take a little longer
as those are generally lower occupancy
months. Urban markets like New
York, Boston, Washington DC will be
impacted by lack of group business,
but will likely see a strong rebound of
business travel.
Meanwhile, some hotels are shoring up
occupancy by working with healthcare,
government segments, FEMA, the
CDC, traveling nurse and doctor
groups, the National Guard and other
government agencies. We have steered
clear of converting hotels to hospitals,
as it is a much more complex operation
with significant liability and insurance
ramifications.
GOVERNMENT STIMULUS AND
THE CARES ACT
The CARES Act has been very
helpful with SBA loans that different
businesses can take advantage of. The
Paycheck Protection Program (PPP)
will advance a business funds so that
they can keep their staff on payroll and
bring them back by June 30. As long
as you spend the PPP funds on payroll,
mortgage, rent and utilities, the loan
amount spent over the first 8 weeks
will be forgiven. If you think you are
going to bring back all your employees
by the end of June, it is a very good
option to create liquidity in the
operation via a partially forgivable loan.
But even if you only bring back part
of your workforce, it is still attractive
as the interest is only 1%. It provides
short-term cashflow relief at a low
cost, to tide businesses over the next
60-90 days.
EMPLOYEE ENGAGEMENT
We decided to mostly furlough
employees vs. terminating them so
that they are still active employees
but can also file for unemployment
benefits. To encourage engagement,
we do a virtual townhall with a GM
state of the union update that tells
them what is going on at the hotel and
put out a positive message so that they
feel connected to the property and
will rejoin the hotel once the crisis is
over. The cost of retraining a new staff
member is so much higher than getting
an original employee back so it really
is important to keep them actively
engaged with the hotel. The response
has been great. Employees don’t have
access to their emails, but they can use
their personal emails to stay connected
to the hotel via group chats, online
townhalls etc.
THE FUTURE
The big question going forward is what
does the future hold. This truly is an
unprecedented event in our industry,
and how we recover from this is going
to be different compared to previous
cycles. My view is that a crisis like this
will fundamentally change how we
operate for the foreseeable future.
The operating model within hotels
will have to shift to respond to new
and different customer needs. For
example: buffets will be minimized or
eliminated, community workspaces
and F&B options will have to be
rethought, large group gatherings will
essentially cease to exist until there is
a vaccine, In-Room Dining will have
to be retooled via higher standards of
hygiene. The customer is going to be
looking for operating practices that
create confidence regarding safety
and hygiene. Therefore, this is a good
time to be planning, getting organized,
putting new operating procedures in
place, and picking a date to open that
is flexible, with a timeline you can shift
as needed based on data trends and
leading indicators.
As an industry, we have not been
through this level and pace of demand
decline before, so we cannot fully
compare this to at previous cycles.
Even after 9/11, hotels were not shut
down for an extended time, and in
2008 we never got to this extreme
low level of occupancy so quickly.
We must use this time to reimagine,
rethink and remodel our operations,
to not only respond to a different set
of consumer needs, but also do it in a
manner that is efficient and profitable,
in a new “normal” post COVID-19.
12
ILHA