Coronavirus' hit on the hotel industry is 'unprecedented... revenue is off 90%,': Best Western CEO

Summary

In an interview, David Kong, CEO of Best Western Hotels and Resorts, discusses the unprecedented impact of the COVID-19 crisis on the hotel industry, with revenue down by 90% and many hotels closed or considering closure. He highlights the challenges of keeping employees on payroll and the limitations of the CARES Act relief. Kong also addresses the need for increased financial support in future stimulus packages and the importance of overcoming consumer confidence hurdles for industry recovery.

Takeaways

• 📉 The hotel industry is experiencing an unprecedented decline in revenue, with Best Western's revenue down by almost 90 percent.
• 🏨 Many Best Western hotels worldwide are closed due to government directives or lack of business, with about 300 out of 2,500 in North America currently shut.
• 🛌 The closure of hotels has resulted in a significant number of layoffs, with employees being let go as hotels cease operations.
• 💼 The CARES Act has provided some relief for open hotels, offering incentives to rehire staff, but the available loan amount is limited and has restrictions on its usage.
• 🤔 The relief provided by the CARES Act may not be sufficient to cover more than a few months of operations, with further relief packages being considered.
• 🗣️ David Kong, CEO of Best Western, has been in discussions with government officials, including Senator Marco Rubio, about the need for more substantial support for the hotel industry.
• 🏥 Hotels, including some Best Western properties, have been offering their spaces to accommodate healthcare workers and those needing to quarantine.
• 🧼 Best Western has provided protocols for hotel owners on how to safely accommodate guests during the pandemic, including guidelines for cleaning and handling linens.
• 🙏 David Kong expressed gratitude for healthcare workers and first responders who are risking their lives during the crisis.
• 🔮 There are grim predictions for the hotel industry's recovery, with some suggesting that up to 50% of hotels may not survive the crisis.
• 🌟 Kong is optimistic about finding a cure for the virus and the industry's eventual recovery, emphasizing the need for consumer confidence and a new normal in travel and accommodations.

Q & A

What is the current impact of the crisis on Best Western hotels and resorts globally?

The impact is unprecedented, with revenue down by almost 90 percent compared to a 16% decline in 2009, which was considered a record at the time. Many hotels worldwide are closed or performing poorly.

How many of Best Western's hotels in North America are currently closed?

Approximately 300 out of 2,500 hotels in North America are closed, with more considering closure due to government directives and lack of business.

What government actions are forcing hotels to close?

Government directives such as stay-at-home orders and other restrictions are forcing hotels to close as there is no business to sustain operations.

What has been the employment impact of the hotel closures?

Employees are being laid off as hotels close. The CARES Act provides some relief, but the amount of loan available is not very high and has restricted usage.

How does the CARES Act help hotels that are still open?

The CARES Act provides relief to open hotels by offering loans that can be used to cover payroll costs, incentivizing the hiring of laid-off employees.

What are the limitations of the financial relief provided by the CARES Act?

The relief is limited to two and a half times the payroll cost, which does not cover all expenses such as debt service, taxes, and insurance.

What discussions have taken place regarding the inadequacy of the CARES Act relief?

David Kong, CEO of Best Western, has been in discussions with Senator Marco Rubio and the Treasury Department, advocating for a more substantial relief package.

What is the potential content of the fourth relief package according to the discussions?

David Kong suggests that the amount made available needs to be significantly increased, possibly to four times the payroll cost, to cover essential bills.

How is Best Western contributing to the fight against the virus?

Best Western has provided thorough protocols for hotel owners and operators to consider, such as cleaning procedures and precautions for healthcare workers staying at the hotels.

What challenges does the hotel industry face in terms of recovery post-crisis?

The recovery depends on overcoming consumer confidence challenges, finding a cure or vaccine for the virus, and ensuring job security for people to feel comfortable traveling again.

What percentage of hotels might not survive the crisis according to some predictions?

Some predictions suggest that up to 50% of hotels may not survive, depending on the duration of the crisis and the effectiveness of relief measures.