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67% of hotels will last only 6 months without relief: AHLA

As the number of coronavirus cases continues to grow, the hotel industry has continued to feel the impact. According to the American Hotel & Lodging Association, 67% of hotels predict foreclosure after 6 months without government aid. President and CEO of the American Hotel & Lodging Association Chip Rogers joins The Final Round to break down the details.

Video Transcript

MYLES UDLAND: All right, well few industries hit as hard during the pandemic as the hotel business. What does the future of this industry have in store? Joined now for more on that by Chip Rogers. He's the president and the CEO of the American Hotel and Lodging Association.

Chip, thanks for joining the show. So let's just start with a survey that you guys conducted earlier this month about what your respondents, your members are saying about the future of their staffing levels, what their occupancy has been like, and how they're feeling heading towards the winter.

CHIP ROGERS: Well, they're not feeling good. You know, in our industry, the summertime is when you make your profit, and then you try to survive through the fall and into the winter. And this summer, leisure travel was OK. It certainly wasn't great, nothing close to what last year was, but I think it was as good as we could have expected for leisure travel.

The problem is there's no business travel and there's absolutely no meetings, conventions, and conferences. And because of that, as you can see from the survey, we're looking at about 3/4 of hoteliers saying, if there's no additional fiscal stimulus from Congress, then they're going to have to lay more people off. And they've already laid off a good portion of the industry. Keep in mind, our unemployment rate in our industry is at 35% right now.

I think the scarier number, if you look at this survey that we did, is that about 2/3 of hotels said the maximum they can make it is about six months. If things don't change within the next six months, 2/3 of them say they can't make it. That is really scary.

MYLES UDLAND: And Chip, I just want to follow up quickly on the conference, convention business, and how important that is for hotels. Obviously, it's going to depend on where you are based geographically, but I think, you know, from the outside, you say, well, if people are going and staying in hotels, that's enough. But how big a part of the business for many of these hotel operators is that kind of bulk convention business, weddings, conferences--

CHIP ROGERS: [INAUDIBLE] conferences. And because of that, as you can see from the survey, we're looking at about 3/4 of hoteliers saying, if there's no additional fiscal stimulus--

Got a little feedback there.

MYLES UDLAND: Yeah, I think we're all right now, Chip. Sorry about that.

CHIP ROGERS: Yeah, so look, it's obvious places like Orlando--

[INAUDIBLE]

--if you look at this survey--

Sorry about that. I'm not sure what's happening. Places like Orlando and Las Vegas are obvious that, if they don't get convention business, they can't survive. But it's not just places like that. Chicago, New York City, these are places that thrive on the convention business. And when you look at those convention center hotels, they're typically the largest hotels. They have the largest food and beverage operation.

So there are so many jobs tied up in those urban city center hotels, that's why we're seeing these enormous unemployment rates. If you look at the interstate hotels or, over the last three months, if you look at the hotels related to some of your outdoor activities, whether it be beaching or hiking in the mountains, they're doing OK. They're not at breakeven, but they're doing OK. But it's really those urban city center hotels that employ so many people that are being hurt the worst.

DAN ROBERTS: Chip, Dan Roberts here. It's interesting to hear you mention that what's more important and more crucial is business travel coming back first. We had a representative on one of our live shows earlier today from the airline industry, she was saying the same thing. It's not about people choosing to fly for pleasure. Business travel needs to come back first.

But to bring up the idea of people traveling for pleasure, I would just want to ask you anecdotally, I've reported on the Safe State program that you guys did. And that is, you know, expecting every hotel that participates to have the same kind of cleanliness regimen amid COVID. And personally, I feel pretty safe staying in a hotel right now. I mean, there aren't that many guests. It's clear that most of them are taking every measure to make it clean.

I spent one night in a hotel recently for pleasure with my wife, and we heard from someone that was shocked that we stayed in a hotel. How could you stay in a hotel during this time? You know, and I said, well, they're taking extreme measures to make sure it's clean. And that person said, I don't know if you can trust that. I mean, they might say they are, but how do you know. What would you say to those people to tell them that actually it's perfectly OK to be in a hotel right now, and that hotels participating in the program are taking all the right measures?

CHIP ROGERS: Without being flippant, I would say become educated. Look, the science is quite clear. In fact, there was a group of doctors recently that said staying in a hotel is as safe as going outside and playing golf. And so when you think about the cleaning protocols that are in a hotel in normal times, like before the pandemic, and now you think about the additional steps that have been taken, including the requirement to wear face masks in the indoor public spaces, I don't know what else we can do, what else we can say.

I mean, our safety and cleaning standards have been reviewed by the CDC. So people that do that, maybe they need to look for a different news source or something. But whatever it is they're watching and it's clamping down and making them so fearful of life is something maybe they need to look inwardly at, because the science and the data is quite clear. Staying in a hotel is very safe. And by the way, the prices are really good right now. So if you did want to take that vacation, now would be a perfect time to do it.

SEANA SMITH: Hey Chip, I want to ask you what the government's role is in all of this, because I know in your survey you said that 74% or 75% of the respondents will be forced to lay off more employees that we don't see more government assistance. What exactly are you looking for? What does the industry need at this point? And if you don't get any government assistance, how many closures are we potentially looking?

CHIP ROGERS: Yeah, that's a really good question. And I don't know that anyone knows exactly, but that statistic that I talked about a moment ago, where 2/3 of our members, which represents the entire industry, say that they can't make it more than six months if they don't get some assistance, if things don't change, that's a pretty good indicator you're going to have thousands and thousands of hotels close.

And what happens, which is really sad, and what we're trying to avoid, is once that hotel closes down, of course all the economic activity that surrounds that hotel goes away with it. But it's not like investors are looking to come back in anytime in a short period of time, and the hotel begins to fall into disrepair, you obviously have to come in and change out basically everything to kind of start over again. You've got to hire an entire staff. So what could be a six-month or nine-month problem, if we could just get to next spring, turns into a three or four-year problem for that specific property.

And that's why we think it's important for the government to assist hotels in not going into foreclosure. Now, when we talk about assistance, no one's saying give us a handout that's anything different than anybody else. In fact, the Main Street lending program was designed to provide those low-interest loans. But it has been a failure. It doesn't work. No one's getting those loans. The money is just sitting there, and we have an entire industry that is saying, hey, we'll take those loans if you'll let us. But the way the rules are written, they won't let us.

MELODY HAHM: And Chip, as you think about the changing tastes of consumers during this time, especially as we see reports from the Airbnbs and VRBOs that are saying people want the treehouses, they want to be able to have a cabin in the woods, they want to stay in a yurt, you know, that's sort of the antithesis of what a hotel can provide, that consistency that business travelers, as we were talking about, really rely on. How do you anticipate innovation really being started during this time, as we know a lot of creativity comes from chaos?

CHIP ROGERS: Yeah, that's a really good point. First, I don't know how much stock I would put into those suggestions from Airbnb and VRBO and the like. I mean, look, they're always going to benefit off of leisure travel, as are hotels. And right now, that's all we have, is leisure travel. I don't know too many business people that do want to stay in a hut or anything like that. And until we get back to business travel, this industry, and all of travel-related industry, is going to be really hurt.

But you're right, there are things that are going to change. Contactless is the new buzzword throughout just about everything, but in particular in our industry, virtually every major brand has contactless check-in and check-out. So ultimately, the design of hotels are going to change. You know, before the pandemic, there was a really big push to have smaller rooms and larger common areas, because that's what people wanted. I think that some of the designers are kind of rethinking that.

Interestingly enough, the old motel, which has the exterior corridor, has become in vogue lately. People want that exterior corridor so they don't have to go into a lobby, and that the heating and air conditioning units are individual to that single room. So a lot of those things are kind of back. But all we've seen recently in the last few months is leisure travel, and so yes, leisure travel is important, but business travel is what really keeps this industry alive.

MYLES UDLAND: All right, Chip Rogers with the American Hotel and Lodging Association. Chip, thanks so much for joining the show. We'll be in touch.

CHIP ROGERS: Yeah, thank you.