Hotel companies in the United States are imploring Washington for relief amid the escalating cancellations because of the coronavirus pandemic. Industry leaders face seemingly impossible decisions as revenues have all but disappeared while significant fixed expenses remain.
Chief executives from the largest hospitality companies – including Marriott International, Best Western Hotels and Resorts, Choice Hotels, Hyatt Hotels and MGM Resorts International – have approached the Trump administration for assistance to help employees who will be affected by the downturn.
Hotel occupancy rates in the U.S. have plunged
The potential cuts are dire and will have a ripple effect throughout the economy. The American Hotel and Lodging Association is estimating that 4 million total jobs in the U.S. have been eliminated or will be lost in the next few weeks, and that 1 in 25 jobs in the American economy are directly supported by the hotel industry.
The U.S. Travel Association isn’t standing by and waiting for the storm to pass. The organization has pleaded with the Treasury Department to work with banks on debt forbearance and flexibility around loan options as well as collaborating with lawmakers on an economic stimulus package that would benefit employees and employers.
With the Centers for Disease Control and Prevention calling for group limitations of in-person events of 50 or more, closures are increasingly widespread. State and local governments have responded by calling for restaurant and bar closures, and industries across the board have been left reeling.
Occupancy rates reached single digits in China during the outbreak. Expect the same in the United States.
Marriott, for example, has furloughed employees across the globe with the hope that it will be able to bring them back once demand for hospitality returns. The length and severity of the impact of the virus remains in question, but if China is any indication, the road to recovery is long.
Occupancy rates reached single digits in China during the outbreak there and have been plummeting across the United States as the contagion spreads.
While travel has been heavily hit, if prior outbreaks are any indication, there will be pent-up demand for travel as much of the world is adhering to social distancing and travel bans. Once the pandemic has passed, the travel and hospitality industries should be able to rebound.
What to do with empty hotels?
The coronavirus crisis has forced officials to think creatively about how to use available resources to address this public health emergency. Among some of their ideas:
Makeshift hospitals: With the number of hotels seeing a decrease in occupancy, one idea is to explore the possibility of turning hotels into makeshift hospitals. To be sure, there are a litany of requirements by the Centers for Medicare and Medicaid Services as well as state regulations, not to mention the number of states that require a “certificate of need” or have a moratorium on adding additional in-patient beds in the state.
But given the increasing demands placed on the nation’s health providers, we expect that many of these rules will eventually have to be eased, not unlike the Trump administration relaxing rules around telemedicine.
On March 17, the governor of California stated that under the worst-case scenario, California is short approximately 20,000 beds. California has said that it is planning on buying two vacant hotels and discussing the potential of acquiring rooms from another 900 hotels in the state to deal with this shortage.
Protecting the homeless: Some empty hotel rooms could be used to house the homeless population, which is particularly vulnerable to the virus. Among the 10 states with the most hospital beds, California is the lowest in terms of beds per 1,000 persons, although none of the states have more than a fraction per person more than California.
Hotels may represent a makeshift way to increase beds for patients
The takeaway
Perhaps no industry in the United States will be hit harder by the coronavirus than the hospitality sector. Industry executives will need to think creatively about how to manage their resources as this crisis continues.
