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.

Outlines

00:00

📉 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.

05:00

🏥 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.

Keywords

💡CEO

CEO stands for Chief Executive Officer, the highest-ranking executive in a company who makes major corporate decisions, manages operations, and represents the company to the outside world. In the video, David Macomb, the CEO of Best Western Hotels and Resorts, discusses the impact of the crisis on the hotel industry, illustrating the leadership role of a CEO in navigating through challenging times.

💡Unprecedented

The term 'unprecedented' refers to something that has never been done or known before, or is beyond comparison. In the context of the video, it is used to describe the scale of the impact on the hotel industry due to the crisis, with revenue being down by 90 percent, which is a level of decline never seen before, even surpassing the 2009 industry decline.

💡Crisis

A 'crisis' is a time of intense difficulty, trouble, or danger. The script refers to the current situation as a 'crisis' affecting the US and global operations of Best Western, indicating a severe and challenging period for the hotel industry, with significant drops in revenue and numerous hotel closures.

💡Revenue

Revenue is the total income that a company receives from its business activities before any deductions are made. The script mentions that Best Western's revenue has dropped by almost 90 percent, highlighting the financial strain and economic impact of the crisis on the hotel industry.

💡Global Operations

Global operations refer to business activities that span across different countries and regions worldwide. The script mentions that Best Western has been dealing with the crisis longer than the US due to its global presence, indicating the widespread nature of the impact.

💡Government Directives

Government directives are official orders or instructions issued by a government. In the video, many hotels are closed not by choice but due to government directives, such as stay-at-home orders, which are part of the measures taken to combat the spread of the virus.

💡Laid Off

To be 'laid off' means to be dismissed from a job, typically as a result of a reduction in the workforce. The script discusses the unfortunate reality of employees being laid off as hotels close, which is a direct consequence of the crisis on employment within the hotel industry.

💡CARES Act

The CARES Act is a stimulus package passed by the US Congress in response to the economic impact of the COVID-19 pandemic. The script mentions the CARES Act as a form of relief for businesses, including hotels, to help with payroll costs and incentivize rehiring of employees.

💡Deputy Secretary of Treasury

The Deputy Secretary of the Treasury is the second-highest-ranking official in the United States Department of the Treasury. The script refers to a call with the Deputy Secretary, Mr. Kucinich, indicating the level of engagement between the hotel industry and government officials in navigating the economic challenges.

💡Vaccine

A vaccine is a biological preparation that provides active acquired immunity to a particular infectious disease. The script suggests that the development of a vaccine for the virus is crucial for the recovery of the hotel industry, as it would help restore consumer confidence and encourage travel.

💡New Normal

The 'new normal' refers to a situation that has become typical or expected following a significant change. The script discusses the need to find a 'new normal' in the context of the hotel industry, implying that the industry will have to adapt to lasting changes in consumer behavior and operational practices due to the crisis.

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]