The travel industry is in shambles. Hotel workers and CEOs are furious with Congress for failing to help

More than 2 million hospitality jobs have already disappeared during the pandemic. Within the next six months, a stunning 38,000 US hotels could be forced to close, according to the American Hotel & Lodging Association.

Posted: Oct 16, 2020 1:28 PM

(CNN) -- The hotel industry is crumbling -- and Uncle Sam may not be coming to the rescue.

More than 2 million hospitality jobs have already disappeared during the pandemic. Within the next six months, a stunning 38,000 US hotels could be forced to close, according to the American Hotel & Lodging Association.

"If we don't get a vaccine soon and business doesn't return, it's going to get much worse," Best Western CEO David Kong, the industry's longest-serving CEO, told CNN Business.

Kong, who in March met with President Donald Trump at the White House to discuss federal aid, expressed deep frustration with the leaders of Congress for failing to reach a bipartisan agreement on another round of fiscal stimulus.

"They are just so stuck in their positions. I feel so aggravated by it. Why can't we work something out?" the Best Western CEO said.

Like many hotels, Best Westerns are owned by franchisees, rather than a deep-pocketed corporation. These Best Western small businesses have cut an estimated 20,000 jobs since the start of the health crisis. That's on top of the layoffs of 800 corporate associates at the parent company that owns the hotel brand.

"We're putting them out on the street during a pandemic," Kong said. "They don't have a safety net. It's a very heart-wrenching situation."

With stimulus talks stalled, leading hotel CEOs wrote a letter to Trump on Thursday pleading for help.

"Your engagement is desperately needed to support struggling businesses, stem the impending wave of foreclosures and save millions of jobs," the hotel CEOs wrote.

'There is so much pain and suffering'
Politicians may not feel a sense of urgency to spend trillions more because of the uneven nature of the recession.

Although hotels, airlines, restaurants and cruise lines are in crisis, other parts of the economy are recovering swiftly -- or already have. Home prices are soaring. Millions of jobs have been added to the economy. The S&P 500 has raced back to record highs. And companies like Amazon, Zoom and Apple are booming.

"There is so much pain and suffering, but they're numb to it because the stock market is doing well and unemployment is below 9%," Kong said.

Even the deadlock in Congress on another round of fiscal stimulus has failed to deal a meaningful blow to the stock market. The S&P 500 is just 2% away from its early September record high.

"A lot of people would say they don't understand why the market is seemingly going up and up," Kong said. "That's not Main Street. That's Wall Street. They don't seem to feel the pain of most businesses."

A broken-down car away from disaster
Maura Robson was working full-time at a Holiday Inn in Webster, New York, when the pandemic erupted. The 31-year-old mother has made the difficult decision to stay home because her hotel can't afford protective gear for its workers and she doesn't want to get her newborn sick. Plus, Robson's nine-year-old stepson is going to school on a fully remote basis.

"We saved everything we could from the last stimulus package. But now we're a car breaking down away from a really bad situation," said Robson, whose husband's salary covers the rent.

Robson, a self-described "hardcore Democrat" who campaigned for Hillary Clinton, expressed dismay at House Speaker Nancy Pelosi as the deadlock continues.

"I am furious at Congress. Nancy Pelosi is shooting Democrats in the foot and she's shooting American workers in the foot," Robson said.

After unilaterally pulling out of stimulus talks last week, President Donald Trump reengaged and upped his stimulus offer to $1.8 trillion. But that's still well shy of the $2.2 trillion stimulus bill passed by the House of Representatives.

"There is a $400 billion gap. I get that. But it is really, really hard to make ends meet," Robson said.

Pre-election stimulus chances fade
Pelosi wrote a letter to House Democrats Thursday explaining that beyond the dollar amount, key differences remain over a strategic plan to fight the pandemic as well as funding for state and local government, support to small businesses and childcare funding.

"To our constituents, we promise: HELP IS ON THE WAY," Pelosi wrote. "It will be safer, bigger and better, and it will be retroactive."

Although Pelosi and Treasury Secretary Steven Mnuchin continue to negotiate, Senate Republicans have balked at the price tag. And Senate Majority Leader Mitch McConnell appeared to put an end to any hope of a pre-election stimulus deal Thursday by saying he has no plans to bring to the floor any package at $1.8 trillion or above.

Meanwhile, the pain in the hotel industry continues -- and it could get worse if the recent rise in coronavirus infections worsens, as many health experts expect.

Shares of Marriott and Hyatt are down nearly 40% apiece on the year, a far cry from the S&P 500's 8% gain.

The CNN Business Recovery Dashboard shows that hotel occupancy is down by nearly a third from pre-crisis levels.

Revenue per available room, a key metric of financial health in the hotel industry, has been cut in half over the past year, according to Morgan Stanley. Room rates are down by about a quarter.

Main Street bailout disappointment
In the industry letter on Thursday, the hotel companies asked the Trump administration to encourage the Federal Reserve to modify and expand the Main Street Lending Program. Although authorized to lend out $600 billion, the Fed's Main Street program had made a mere $2.2 billion of loans as of the end of September. And those are funds that hotels badly need.

Kong, the Best Western CEO, complained that the lending guidelines for Main Street are too restrictive. Most struggling hotels simply don't qualify for loans.

"Banks are not in the business of lending money to businesses that are failing. Small and medium-sized businesses are struggling and they can't get help," he said.

Fed chief Jerome Powell said during a press conference last month that officials are considering changes that would address underwriting concerns held by banks. But he also highlighted legal limitations.

The 2010 Dodd-Frank financial reform law made it clear the Fed is permitted to lend only to solvent borrowers, not broke ones.

"For many borrowers, they're in a situation where their business is still relatively shut down, and they won't be able to service a loan," Powell said. "So, they may need more fiscal support."

In other words, this is a problem for Pelosi, Trump and McConnell to address -- not Powell.

The-CNN-Wire
™ & © 2020 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

Terre Haute
Overcast
49° wxIcon
Hi: 56° Lo: 44°
Feels Like: 44°
Robinson
Overcast
49° wxIcon
Hi: 56° Lo: 44°
Feels Like: 45°
Indianapolis
Overcast
47° wxIcon
Hi: 53° Lo: 44°
Feels Like: 41°
Rockville
Overcast
42° wxIcon
Hi: 54° Lo: 42°
Feels Like: 42°
Casey
Overcast
45° wxIcon
Hi: 54° Lo: 44°
Feels Like: 41°
Brazil
Overcast
49° wxIcon
Hi: 55° Lo: 44°
Feels Like: 44°
Marshall
Overcast
49° wxIcon
Hi: 54° Lo: 43°
Feels Like: 44°
Cloudy, Chilly, Showers
WTHI Planner
WTHI Temps
WTHI Radar

WTHI Events

 

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Confirmed Cases: 347631

Reported Deaths: 9474
CountyConfirmedDeaths
Cook1639125357
DuPage20724596
Lake19438503
Will16748418
Kane15234341
Winnebago9027165
St. Clair7512213
Madison6748152
Champaign566028
McHenry5583120
Peoria420761
McLean384930
Rock Island364188
Unassigned3633260
Sangamon344454
Kankakee314378
Macon251248
Kendall244127
Tazewell238647
LaSalle215759
DeKalb207242
Coles177438
Williamson169657
Boone164024
Adams158515
Clinton156024
Vermilion15137
Jackson142825
Randolph114114
Whiteside113421
Knox10769
Effingham10703
Ogle10307
Grundy8597
Jefferson85244
Bureau84217
Monroe84227
Franklin8346
Marion82912
Morgan79224
Henry7905
Stephenson7807
Christian76325
Union72525
Macoupin7229
McDonough65415
Fayette61917
Crawford6156
Lee5921
Shelby5808
Montgomery54514
Woodford54210
Livingston5389
Logan5384
Douglas5238
Saline4977
Bond4609
Jersey45321
Warren4507
Cass44911
Iroquois44919
Wayne4329
Jo Daviess4165
Perry40316
Fulton3910
Moultrie3605
Carroll3567
Richland31614
Johnson3110
Lawrence3068
Clay27911
Hancock2793
Washington2751
Greene26415
Clark2536
Cumberland2496
Pike2494
Jasper24010
White2371
Mason2321
Pulaski2261
De Witt2253
Mercer2136
Piatt2050
Wabash2035
Ford1799
Menard1591
Massac1392
Edgar1388
Marshall1353
Hamilton1092
Henderson1080
Alexander1071
Gallatin1032
Edwards980
Brown960
Scott930
Putnam830
Schuyler791
Stark782
Calhoun690
Hardin490
Pope361
Out of IL10

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Confirmed Cases: 147582

Reported Deaths: 3937
CountyConfirmedDeaths
Marion24410780
Lake12911350
St. Joseph8651154
Elkhart8281130
Allen7756221
Hamilton5872113
Vanderburgh547750
Tippecanoe346414
Monroe316238
Hendricks3116130
Johnson2947127
Porter288948
Clark280857
Delaware277174
Vigo245534
Madison224587
Cass220120
LaPorte208853
Warrick185362
Floyd170865
Kosciusko169221
Howard155366
Bartholomew137557
Dubois133423
Marshall129826
Henry120728
Boone117748
Grant116839
Wayne114923
Hancock112844
Noble110033
Jackson106412
Morgan90840
Dearborn89528
Daviess82732
Gibson8229
Clinton80116
Shelby76929
Lawrence76732
LaGrange76114
Harrison72924
Putnam69415
Knox68610
DeKalb67411
Posey6695
Steuben5798
Miami5655
Montgomery55722
Fayette55615
White55615
Jasper5264
Greene50537
Scott50313
Decatur49339
Adams4555
Clay4266
Whitley4246
Ripley4138
Sullivan40612
Wells4045
Orange38124
Starke3787
Wabash3769
Spencer3656
Huntington3645
Franklin35925
Jennings35813
Washington3452
Randolph3318
Jefferson3275
Fulton3232
Pike31512
Carroll30513
Perry28214
Jay2756
Fountain2733
Tipton26123
Parke2152
Newton20511
Vermillion2031
Owen1991
Rush1984
Martin1930
Blackford1843
Crawford1401
Pulaski1401
Brown1283
Ohio1167
Benton1060
Union1010
Switzerland840
Warren721
Unassigned0233