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COVID-19

With the slowdown in travel, many hotels are in a financial squeeze

Justin Ho Aug 20, 2020
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Employees are ready to receive guests at a hotel in Las Vegas. The industry is struggling during the pandemic as many people have canceled travel plans. David Becker/Getty Images
COVID-19

With the slowdown in travel, many hotels are in a financial squeeze

Justin Ho Aug 20, 2020
Heard on:
Employees are ready to receive guests at a hotel in Las Vegas. The industry is struggling during the pandemic as many people have canceled travel plans. David Becker/Getty Images
HTML EMBED:
COPY

Fewer of us are traveling these days, and there’s new data showing how that’s affecting the hotel industry. The research company Trepp found that more than 23% of commercial mortgage loans taken out by hotels are at least 30 days delinquent as of July. That’s the biggest delinquency rate since Trepp started tracking this in 2009.

Hotel owners often take out a lot of debt to buy a hotel or build one from scratch. Paying back that debt is a big cost.

“Really, payroll is one huge expense, and the other big expense is your debt service,” said Shaiza Damji, an owner of 360 Degree Hotel Group, which runs six hotels in Washington state near the Canadian border.

Damji said paying back her debt is getting harder. The Canadian border is closed to nonessential travel, and tourism revenue is drying up.

“No conferences, no conventions, the tech industry’s not traveling, so it’s just really soft,” Damji said.

She said she’s been able to tap reserves she keeps with her lender to meet her payments.

Manus Clancy, a senior managing director with the research company Trepp, said that’s what a lot of hotel owners are doing, even though reserves are usually used to fix carpets and broken TVs.

“If your occupancy is 20% right now, the likelihood of you breaking a lot of TVs or staining a lot of rugs is not very high,” Clancy said.

But those reserves can only go so far.

Damji said she can only use her reserves for three more months.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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