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Best Western CEO on hotel industry: ‘total devastation’

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Yahoo Finance’s Akiko Fujita sat down with Best Western CEO David Kong to discuss how the coronavirus has impacted the hotel industry and will shape it in the future.

Video Transcript

BRIAN SOZZI: I want to get right to Akiko Fujita, who's been following the hospitality industry for us and had a interesting interview. Akiko?

AKIKO FUJITA: That's right, Brian. I spoke with the CEO of Best Western Hotels & Resorts, certainly one of the many hotels that have been hit hard by all the cancellations of those travel plans. He's got 5,000 hotels worldwide and roughly 2,000 here in the US-- just about 300 closed so far. He, of course, is looking to the government for additional aid, but right now he says a lot of what they are trying to do in terms of planning for the turnaround is not going to be specifically something that they can control. Take a listen.

DAVID KONG: 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 will 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 going to forever change our lives. And it's about finding the new normal and what we need to do to make sure people are comfortable traveling again and staying in hotels again and as well because there are so many layoffs right now. People have to feel good about their job security, and companies have to feel good about the confidence going into-- into the future. So there are a lot of factors to consider.

AKIKO FUJITA: Talking about what he's seen so far, called all of this "total devastation" in terms of the declines they've seen so far. And just some context here-- during the financial crisis, Best Western saw a revenue decline of roughly 16%. He says so far into this crisis, he's seen revenue slashed by 90%.

ALEXIS CHRISTOFOROUS: Oh, wow. Akiko, you mentioned that he said he might have to go to the government for some more help. We know those small business loans started to kick in today. What is he looking at from the government?

AKIKO FUJITA: Yeah. So when you look at that Payment Protection Program that's in place now, they're looking at 2 and 1/2 months of payroll that, at most, these small businesses are eligible for. David Kong says he has spoken directly with Senator Marco Rubio about expanding that, and he says he will need four times the amount that the government is currently offering for a lot of these hotels to just pay essential bills. That is a significant increase beyond what's there right now.

He says he is confident that lawmakers are listening. And just keep in mind that he was also part of that group a few weeks ago that met with the White House, met with President Trump as well as Vice President Mike Pence. So he believes that he's got the ear of the lawmakers, but certainly still a lot of additional steps that are needed to get the hotel sector back on its feet.

BRIAN SOZZI: Yeah, Akiko, you hear what-- you were just saying in that interview, Marriott furloughing workers, Hilton under severe pressure. You really get the sense it's going to be some time until the travel industry comes back. And look, Airbnb reportedly took a big valuation cut yesterday.

AKIKO FUJITA: Yeah, no question about it. You know, AHLA CEO Chip Rogers last week was saying that he thinks that just about half, 50%, of these hotels could survive on the other end of it. That's a significant, significant cut.

And just, you know, we're talking about names like Marriott and Hilton, but David Conn yesterday just reminding me that a lot of their hotels are owned by small business owners. They don't have a massive footprint right now. And so he is lobbying the government on their behalf right now to get additional stimulus.

ALEXIS CHRISTOFOROUS: And you know what? Hey, guys, Brian, I just want to bring up with you, Akiko just said some of these-- these hotel companies may not even be able to survive. It begs the question, what happens to those workers, right? Where are they [INAUDIBLE]--

AKIKO FUJITA: And so he believes [INAUDIBLE]--

ALEXIS CHRISTOFOROUS: --which goes to the question, you know, how much greater will the unemployment rate rise? We had Beth Ann Bovino of S&P [INAUDIBLE] saying it could be up as much as 13%-- up to 13 and 1/2% in just a couple of months.

BRIAN SOZZI: Yeah, look, Alexis, we had leisure and hospitality jobs down 459,000 in the month of March-- hard to imagine that improves, at least looking out over the next three months. Akiko Fujita, thanks so much-- really good interview. You can catch the full interview on YahooFinance.com or our YouTube channel.