A UNITE HERE Local 11 analysis finds that many hotels appear not to qualify for loan forgiveness and 4% of hotels received nearly half of CA hotels’ $950 million PPP windfall
As Congress continues to debate further Paycheck Protection Program aid, UNITE HERE Local 11’s analysis of internal hotel worker employment levels in Los Angeles County, Orange County, and Phoenix from May to October reveals that the PPP failed in its primary goal of returning workers to their jobs, and instead bailed out large hotel chains on a massive scale.
The pandemic has devastated tourism and travel more than any other economic sector. Unemployment remains near 90% and with further restrictions of hotel use as the pandemic worsens, it appears even fewer jobs will exist in the next six months.
Local 11 analyzed new data released on December 1 and found that 4,064 California hotel borrowers collected $950 million in PPP loans. However, because large hotel chains won an exemption from SBA rules enabling them to apply for loans at multiple properties, the 190 hotel borrowers that were approved for loans of over $1 million raked in $450 million, or over 47% of the total amount of loans received by California hotel borrowers.
Local 11 represents workers at 24 hotels that were collectively approved for $40 million in Paycheck Protection Program loans. This group of hotels are owned by global private equity firms, foreign companies and hotel operators worth billions, but their hotel workers remained laid off en-masse despite the PPP, and many hotels even refused to make payments necessary to cover health insurance benefits for laid-off workers.
Internal Local 11 membership data reveal that 10 out of 24 hotel borrowers appear not to qualify for loan forgiveness based on hotel worker employment levels during the SBA’s covered period for PPP loans. Per SBA rules, borrowers had until the end of the 24-week covered period following loan disbursement to spend 60% of their loan on payroll if they intended to seek loan forgiveness. However, 10 of the 24 hotel borrowers averaged less than 25% of pre-pandemic employment from May to October, the covered period following when most loans were approved and disbursed in mid-to-late April.
Borrowers were approved for loans based on 2.5 times their monthly pre-pandemic payroll, and had to spend 60% of this amount on payroll during the covered period—an amount equal to 1.5 times pre-pandemic monthly payroll—to qualify for loan forgiveness. However, because these 10 borrowers averaged less than 25% payroll per month, they would not have been able to pay the amount necessary to get loan forgiveness. Overall, all 24 borrowers averaged only 27% of pre-pandemic payroll over the covered period. Struggling laid-off hotel workers are left to wonder whether hotel owners used the rest of their PPP loans to line their pockets.
"Our members are facing a tsunami of evictions because there is no work and because the PPP loan program went into the pockets of large hotel companies, not workers. Workers need immediate relief to avoid homelessness. Congress should not include PPP in future pandemic stimulus and instead offer direct aid to laid-off hotel workers and others in need during this difficult time," said UNITE HERE Local 11 President Kurt Petersen.
The DoubleTree Santa Monica is one of the 10 hotels that based on Local 11’s analysis that appears not to qualify for loan forgiveness. Westmont Hospitality Group, which employs Doubletree workers and owns the property with $8 billion private equity firm Square Mile Capital Management and insurance giant USAA, was approved for 12 PPP loans totaling nearly $11 million for different hotel entities registered to its Houston, TX, headquarters that were reportedly tied to the retention of 1,521 jobs. Meanwhile, the Doubletree averaged only 10% of pre-pandemic employment during the covered period.
"The billionaires that own my hotel got millions from the PPP, but almost all of my coworkers and I have been laid off for six months wondering what happened to all this money. Congress needs to go after companies that took advantage of the PPP at our expense," said Maria Cortez, a housekeeper at the Doubletree Santa Monica.
Columbia Sussex, which owns and operates the JW Marriott, was approved for 20 PPP loans totaling nearly $50 million for different hotel entities registered to its Kentucky headquarters that were reportedly tied to the retention of 3,886 jobs.
Some members of Congress have begun insisting on improved PPP oversight; in October, Rep. Katie Porter (D-CA) and seven other members of Congress wrote a letter calling on the Small Business Administration to investigate whether Columbia Sussex properly spent its PPP loans, stating "We are disturbed by the possibility that Columbia Sussex may be using taxpayer funds to defray financial losses, rather than to help keep employees tied to their jobs and benefits. This would violate Congress’ intent and potentially the letter of the law." The full letter is available here.
View source version on businesswire.com: https://www.businesswire.com/news/home/20201216005943/en/
Jordan Fein, Lead Research Analyst
UNITE HERE Local 11