COVID-19

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

Justin Ho Aug 20, 2020
Heard on: Marketplace Morning Report
HTML EMBED:
COPY
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
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

Are states ready to roll out COVID-19 vaccines?

Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.

How is the service industry dealing with the return of coronavirus restrictions?

Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.

How are hospitals handling the nationwide surge in COVID-19 cases?

As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.

Read More

Collapse

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.