Coronavirus' hit on the hotel industry is 'unprecedented... revenue is off 90%,': Best Western CEO
Summary
TLDRIn 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.
Outlines
📉 Impact of Crisis on Best Western Hotels
David Kong, CEO of Best Western Hotels and Resorts, discusses the unprecedented impact of the current crisis on the hotel industry, with revenue down by 90% compared to a 16% decline in 2009. Many hotels worldwide are closed due to government directives, and those remaining open are struggling. Kong highlights the CARES Act as a relief measure but notes its limitations, such as the insufficient loan amount and restricted usage. He also mentions a conversation with Senator Marco Rubio about the need for a more substantial relief package in the fourth phase, emphasizing the importance of overcoming consumer confidence challenges for recovery.
🏥 Hotel Industry's Response to COVID-19
The script describes the hotel industry's efforts to combat the COVID-19 pandemic, with some hotels offering space for hospital workers and quarantine needs. David Kong explains that while Best Western has not had direct conversations with governments about using their facilities, they have provided thorough protocols for hotel owners and operators to follow for safety. He also expresses gratitude to healthcare workers and first responders for their service during the crisis. Kong discusses the grim predictions for the hotel industry, including potential massive job losses and the challenge of recovery, which hinges on overcoming consumer confidence issues and finding a 'new normal' in travel and accommodation.
Mindmap
Keywords
💡CEO
💡Unprecedented
💡Crisis
💡Revenue
💡Global Operations
💡Government Directives
💡Laid Off
💡CARES Act
💡Deputy Secretary of Treasury
💡Vaccine
💡New Normal
Highlights
David Kong, CEO of Best Western hotels and resorts, discusses the unprecedented impact of the current crisis on the hotel industry.
Revenue for Best Western is down by almost 90 percent, a significant hit compared to the 16% decline in 2009.
Many hotels worldwide are closed due to government directives and lack of business.
In North America, about 300 out of 2,500 Best Western hotels are closed, with more considering closure.
The CARES Act provides some relief for open hotels but the loan amount is insufficient for all expenses.
David Kong suggests the relief amount should be increased to four times the payroll cost to cover essential bills.
David Kong had a call with Senator Marco Rubio discussing the need for a fourth relief package.
The hotel industry is offering space for hospital workers and quarantine needs, although not mandated by the government.
Best Western has provided protocols for hotel owners on how to clean rooms and safeguard health during the crisis.
David Kong expresses gratitude to healthcare workers and first responders for their service during the crisis.
The recovery of the hotel industry will depend on overcoming consumer confidence challenges.
Finding a cure or vaccine for the virus is key to restoring consumer confidence in traveling and staying in hotels.
David Kong is optimistic about finding a cure in the future but acknowledges the lasting changes the virus will bring.
The CEO of the HLA predicts that 50% of hotels may not survive the crisis.
The duration of the crisis will significantly impact the survival rate of hotels.
David Kong emphasizes the importance of job security and consumer confidence for the future of the hotel industry.
Transcripts
[Music]
damp Macomb CEO of Best Western hotels
and resorts so good to have you on today
thank you for joining us I want to start
with where things stand from a broader
perspective were a month into this
crisis here in the US but of course
you've got global operations so you've
been dealing with this longer than those
of us here in the US have how big of a
hit his Best Western taken as its
standing right now it's unprecedented
type of area we have never seen this
kind of devastation in the industry you
know previously back in 2009 the
industry declined by 16% and that was
presented unprecedented at that time but
right now revenue is off by almost 90
percent so it's it's extremely difficult
time and many of the hotels worldwide
are closed right now and many of them
are doing very poorly and many of them
are thinking about closing as well so
it's a it's a total devastation it's
very difficult 90 percent that is and
that's a significant hit what percent of
your hotels are currently closed right
now and what are you doing to make sure
you can keep some of those employees on
your payroll
yeah many of the hotels worldwide are
closed not by their own so choosing but
government directives and whatnot it's
so I mean and there's no business so it
doesn't make sense for them to be open
in North America where we have about
2,500 hotels we have about 300 that's
closed right now in North America but
more and more hotels are thinking about
closing and more and more cities and
states that have stay at home or other
restrictions so they're forcing hotels
to close and what has it meant from an
employment perspective I know a lot of
these owners of your hotels I mean these
are small businesses
as well what have you heard in terms of
how many people have had to be laid off
the hotel is closed and those employees
are laid off and thanked thankfully we
have the cares Act that was passed by
Congress that's gonna help because the
hotels that are open will get some
relief and we'll give them incentive to
hire people back although I would be
quick to add that the amount of loan
that's available is not very high it's
two and a half times the payroll cost
and it has a restricted usage and so if
you think about the expenses at the
hotel whether it be the best service or
insurance or estate taxes those things
are not considered and and therefore
it's some relief but not enough how far
does that get you though when we talk
about what set-aside in that rescue bill
rescue package are we talking a month of
the current operations are we talking
two months can you give us any specifics
on that it's two and a half times of the
payroll cost and so it's not gonna go
very far and I was fortunate to be on a
call with Senator Marco Rubio yesterday
and he talked about this is intended to
ties over and they already thinking
about the fourth relief package and he
recognized that it's not enough money at
the same time we all recognize that it's
not intended to replace our lost revenue
or lost profit we all recognize that
it's it's a relief that ties over but he
does recognize it's not enough and he's
trying to help with the forth package
we've we've heard the White House say
repeatedly there are phases of stimulus
that are coming you talk about the
conversation you've had with senator
Rubio what specifically would you like
to see in this next phase as it relates
to the hotel industry well first of all
I think the amount made available to us
needs to be increased significantly to
cover the debt service and where I say
taxes
and insurance and all the things that
the hotel owned asked has to find a way
to pay how much specifically do you see
when you say significantly we are
senator rubio if he would consider four
times the payroll cost for us to just
pay the essential bills that we need to
pay and what conversations have you had
with the white house i know you were in
that meeting with President Trump
several weeks ago have you had any
follow-up conversations with the
President or the vice president not with
the president vice president what did
have conversations with the Treasury
Department yesterday we were on a call
with the Deputy Secretary of Treasury
and mr. Kucinich and he was very helpful
although yes we can all imagine they
have to come up with the guidelines and
it's really hard to trade this because
this is solely unprecedented and it's
difficult for them to write their
guidelines properly so it's taken a
little bit of time but for as long as
they are taking that's the time that all
telling us don't have and make ends meet
so they recognize it's urgent and they
recognize it's complex and they're
trying to do the best they can and we
appreciate that effort let's talk about
what the hotel industry has done to try
and help with this effort to combat the
virus and a lot of hotels here in the
u.s. especially in New York City have
offered up their space for hospital
workers and others who are looking to
quarantine away from their families as
well what conversations have you had
directly with the federal or local
government to use some of the best
western facilities as an alternative
space we we haven't had those direct
conversations with the states or various
municipalities because it's really an
action that the hotel owners and
operators they to take themselves it's a
decision a need to make we did provide a
very thorough protocols that days
consider like how they should clean a
room and you know for example if there's
a healthcare work staying at the hotel
maybe don't need to clean the room daily
and and and those workers can simply put
their linen in the back and we can take
it on laundry and clean it for them and
so they are precautionary steps that we
can take to safeguard everyone's good
health and we've done that but I also
want to take this opportunity to thank
the many healthcare workers putting
their lives at risk and their families
at risk to help us as well the first
responders you think about the law
enforcement and EMT and fire
firefighters and the like a lot of these
people are putting their lives at risk
and we're so grateful for their service
and finally David um I've heard some
pretty grim predictions for the hotel
industry over the last few weeks you
know millions of jobs that are likely
going to be lost coming out of this I
heard the CEO of the hla say that he
thinks 50% of the hotels may not survive
as you look at the broader landscape
right now what do you see on the other
end I think it's gonna be a bit of a
challenge in terms of recovery and
senator Rubio recognized it as well he
said what I wanted to say which is for
for us to recover you have to overcome
this consumer confidence challenge and
it's going to depend a great deal on how
the virus pans out going forward and if
we can find a cure for it I'm optimistic
that we would find a cure for it soon at
some point in the future we need a
vaccine so people feel comfortable about
traveling this virus is gonna forever
change our lives and it's about finding
a new normal and what we need to do to
make sure people are comfortable
traveling again is staying in hotels
again and as well because there's so
many layoffs right now people have to
feel good about their job security and
companies that they feel good at
the confidence going into into the
future so there are a lot of factors to
consider but that 50% loss is that a
realistic number to you I can begin to
to do a forecast on that it's much
depends on how long this crisis
continues okay David really appreciate
your time today thank you very much
[Music]
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