The Rise of the ‘New’ Traveler is Transforming the Industry

The hotel industry will continue moving toward recovery in 2022, but the path will be uneven and potentially volatile, and full recovery is still several years away, according to the American Hotel & Lodging Association (AHLA)’s 2022 State of the Hotel Industry Report.The report, which reveals shifts in consumer and business sentiment, was created in collaboration with AHLA Silver Partner Accenture and is based on data and forecasts from Oxford Economics and AHLA Platinum Partner STR.

The top findings of the report include:

• Hotel occupancy rates and room revenue are projected to approach 2019 levels in 2022
• The outlook for ancillary revenue, which includes food & beverage and meeting space, is less optimistic
• Hotels lost a collective $111.8 billion in room revenue alone during 2020 and 2021
• Leisure travelers will continue to drive recovery: in 2019, business travelers made up 52.5% of industry room revenue; in 2022, it is projected to represent just 43.6%
• Business travel is expected to remain down more than 20% for much of the year, while just 58% of meetings and events are expected to return; the full effects of Omicron are not yet known
• Changing traveler segments, including the rapid rise of bleisure travelers—those who blend business and leisure travel—are impacting how hotels operate. In fact, one study of global business travelers found 89% wanted to add a private holiday to their business trips in the next twelve months
• In this new environment, technology will be even more critical to a property’s success, according to AHLA Platinum Partner Oracle Hospitality—with hotels investing in technology to meet the needs of both guests and employees today and in the future

“Hotels have faced enormous challenges over the past two years, and we are still a long way from full recovery. The uncertainty about the Omicron variant suggests just how difficult it will be to predict travel readiness in 2022, adding to the challenges hotels are already facing,” said Chip Rogers, president and CEO of AHLA. “The slow return of business travel and fewer meetings and events continue to have a significant negative impact on our industry. The growth of leisure and bleisure travel represents a shift for our industry, and hotels will continue evolving to meet the needs of these ‘new’ travelers.”

“Travel and hospitality brands still face an uncertain marketplace, but all these changes also herald a new era of opportunity to drive long-term customer loyalty. They should flex with demand and respond to the added complexities and volatility in travel by delivering a ‘travel partner’ mentality to their leisure and business customers,” said Liselotte De Maar, managing director in Accenture’s travel industry. “Travelers are now not only focused on price and quality of a location, but also on cleanliness and sustainability values and impact, and expect a clearer, more digital service. Companies will need to continue to digitally transform, reinvent their loyalty model, as well as rethink the employee proposition, if they wish to thrive.”

Like other industries, hotels have been dealing with a major workforce shortage which could impact recovery. The AHLA Foundation is launching a new, national, multichannel ad campaign to help fill the hundreds of thousands of open jobs in the hotel industry. The pandemic wiped out 10 years of job growth. This multi-year effort, “The Hotel Industry: A Place to Stay,” aims to helpjob seekers discover the 200+ career pathways and many perks that the industry offers, including competitive wages, benefits, flexible schedules, and travel opportunities. Ads will begin running in Columbus, Dallas, Denver, Miami, and Phoenix on Facebook, Google, and Youtube in both English and Spanish.

Download the report here.

“AHLA thanks the General Services Administration (GSA) for setting fair FY2022 per diem rates that recognize the devastating impact COVID-19 continues to have on hotel employees and small businesses. This is a big win for hoteliers across the country, as government travel supports tens of thousands of jobs and billions in travel spending, and many private sector organizations also base travel reimbursements on federal per diem rates. Freezing per diem rates at pre-pandemic levels is vital to the hotel industry as we continue down the long and uneven road to recovery. We are grateful for GSA’s work to ensure reasonable per diem rates for FY22, and we look forward to welcoming back our government guests as travel resumes.”

BACKGROUND ON PER DIEM RATES

Each year, the General Services Administration (GSA) sets a per diem rate to reimburse employees’ lodging expenses for official travel within the continental U.S. Normally, GSA calculates per diems based on the average daily rate (ADR) from the previous fiscal year, less five percent.

As a result of pandemic-related shutdowns, capacity restrictions and safety precautions, calculating per diem rates the normal way would have led to an artificially low rate that would have only exacerbated the economic crisis facing hoteliers.

The FY22 CONUS per diem rate is $151, which includes $96 for lodgingand $55 for meals. This is the same as FY21. The FY22 rates will be available on the GSA website tomorrow morning.  

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This introduction comes at a pivotal time for our industry and is the result of months and months of effort between AHLA and UH. The pandemic has been devastating to the hospitality industry workforce, wiping out 10 years of hotel job growth. Leisure and hospitality has lost 3.1 million jobs during the pandemic that have yet to return, leading to an unemployment rate more than double that of the U.S. economy overall, according to the Bureau of Labor Statistics. Even more stark, the unemployment rate in the accommodation sector specifically remains 330% higher than the rest of the economy.

The Save Hotel Jobs Act will provide critical support to hotels and their workers during this crucial period. Senator Schatz has requested the bill text remain under embargo until the press conference this morning, but key provisions include:

·         Direct Support for Hotel Workers:

o   Up to 3 months’ worth of pre-pandemic payroll for a qualifying hotel with a revenue decline of 40% or more.

o   100% of the grant would have to be used for payroll and benefits over a covered period of nine months.

o   The legislation would require grantees to give laid-off workers recall rights to ensure those who lost their jobs due to the pandemic are able to return to work.

·         Allow the Utilization Of Worker-Friendly Tax Credits

o   Provides a hotel with a Personal Protective Equipment Tax Credit to promote worker safety measures.

o   The tax credit would cover up to 50% of costs associated with the purchase of personal protective equipment, technology designed to reduce the impact of the pandemic, increased testing for employees, and enhanced cleaning protocols that do not negatively impact the level of work for housekeeping staff.

o   The maximum value of the credit would be $25,000 and would cover expenses purchased after December 31, 2020.

The American Rescue Plan was signed into law by President Biden on March 11, sending $350 billion to states, local and tribal governments to address the fiscal impacts of the COVID-19 pandemic. The ARP stipulates that 25 percent of those funds be devoted to hospitality industry relief efforts, but the legislative text is not specific in how states and local governments should meet that goal.  This represents a once-in-a-lifetime opportunity for the hotel industry to tap into significant pool of federal funds to help alleviate the economic losses sustained through the pandemic.

According to the American Hotel & Lodging Association’s State of the Industry Report, the hotel industry and its employees will continue to feel the adverse effects of COVID-19 for years to come.

• Hotel employment is not expected to rebound until 2023 
• Business travel is not expected to return to pre-pandemic levels until 2024 
• State and local tax revenue generated from hotels fell by one-third in 2020 and will not rebound until at least 2023

The impact of the pandemic on hotel jobs in South Carolina has been devastating. Click here to view the data.

NOW IS THE TIME TO ACT

It is incumbent upon state and local leaders to place a high priority on the lodging industry as ARP funds are applied to public policy solutions. Below you will find several examples of hospitality-specific provisions implemented by state and local governments to provide relief to our industry.

Direct Financial Relief

Maryland Grant Program – Governor Hogan has announced a $50 million grant program for hotels. The funding will be distributed by local jurisdictions to go toward payroll expenses, rent, and utilities in order to keep operations going while travel is restricted.

North Carolina Hospitality Assistance  - Providing direct stimulus to NC restaurants, bars, and hotels that have experienced a 15 percent decline in annual taxable sales revenue for at least one quarter in 2020 (compared to 2019)

District of Columbia Hotel Bridge Fund, which resulted in payments to hotels of approximately $1,400 per room) The Hotel Relief Fund was open to businesses that met the following criteria:

• Operators must have a current Hotel, Bed and Breakfast, or Inn and Motel Business License
• 80 percent of the award must go towards payroll and benefits including healthcare
• Temporarily closed hotels are eligible but must commit to reopen by March 31, 2021.
• Montgomery County, Maryland Hotel Relief Grant Fund - Eligibility requirements for local assistance included the following:
•  Except as provided below, have at least 10 sleeping rooms.
• If the accommodation is a bed and breakfast establishment, have at least 5 sleeping rooms.
• Demonstrate a reduction in year-over-year gross revenues of at least 25% for the period of April 2020 – November 2020 compared to the gross revenue of April 2019 - November 2019.
• Be open to the public for the provision of accommodations by no later than March 31, 2021.

Florida provided short-term loans up to $50,000 to any small business with two to 100 employees affected by COVID-19. These loans were interest-free for up to one year and were designed to bridge the gap to either federal SBA loans or commercially available loans. To be eligible, a business must have been established prior to March 9, 2020 and demonstrate economic impacts as a result of COVID-19.

The Hospitality Emergency Loan Program (H.E.L.P.) in Delaware offered assistance to businesses that had been in operation for at least a year and had annual revenue below $2.5 million.

Other relief concepts:

• Rent or mortgage payment forbearance/abatement
• Bans on commercial evictions
• Business insurance relief

Job Protection and Labor

• Move hotel workers to phase 1c (or the corresponding “essential worker” phase) for vaccine distribution
• Replenish Unemployment Insurance trust funds
• Employee Reinstatement Credit – to expedite the process of bringing associates back onto the payrolls (adapt from federal employee retention credit language)
• Deferred implementation of new business mandates (e.g. predictive scheduling)
• Workforce development

Recovery Incentives

• Meeting and events incentives – Colorado legislature recently passed a $700 million stimulus package that included $10 million for a “meeting and event incentive.” This incentive would include a 10 percent credit against the hard costs of hosting a meeting or event through 2021. Hard costs could include hotel rooms, food and beverage, and audiovisual expenses.
• Health Workplace Tax Credit (adapt from bipartisan federal legislation)
• Temporary travel tax credit for both business and leisure travel
• Sales tax exemption for purchase of Personal Protective Equipment (PPE) and Structural Enhancements
• Destination marketing fund enhancement
• Expand broadband access

Legal

• COVID-19 exposure liability protection
• Indemnification for hotels (owners, operators and brand franchisors) used for alternative uses as well as other tort protections vis a vis coronavirus
  

One year into the coronavirus pandemic, safety and cleanliness remain the top concerns for hotel guests and employees. This is why our Safe Stay  initiative continues to be a leading priority for AHLA and our industry. We are pleased to share a new version of our Safe Stay  protocols, which include:

• Updated CDC guidance  on employee vaccination resources, workplace health and safety, and indoor air quality information;  
   
• A  Meetings and Events Checklist as a tool for long-term planning to ensure the best public health practices are utilized by businesses, organizations hosting future meetings and events; and 
   
• A  Safe Stay One-Pager with an overview of the industry’s commitment to health and safety protocols for employees and guests.

Please join us in amplifying our efforts to welcome back travelers and work to resume our business operations as safely as possible.  And, we will continue to leverage the expanding support for our Safe Stay initiative from the public health community, frequent travelers and the general public to highlight the strength of our ongoing industry efforts during this recovery and reopening process.
 
Thank you for your ongoing support.

Sincerely,

Chip Rogers

WASHINGTON (December 21, 2020) – The following is a statement from Chip Rogers, president and CEO of the American Hotel & Lodging Association, on the coronavirus relief package.

“On behalf of the hotel industry, we applaud the House and Senate leadership, along with the Administration, for reaching a bipartisan compromise on this COVID economic relief package. This short-term relief package is a vital step toward helping the hotel industry survive this crisis. The proposed measure provides temporary relief over the next few months and will help thousands of hotels stay open and retain employees.

“For months, the hotel industry has been imploring lawmakers to help the people and industries that have been most affected by this crisis. After more than 250,000 individual grassroots actions taken by AHLA members, we are pleased to finally see a long-overdue agreement.

“The legislation contains many of the provisions AHLA has advocated for, including a second round of Paycheck Protection Program loans, increasing the size of PPP loans to 3.5 times payroll, and making PPP loan expenses tax-deductible. This will provide a critical lifeline for hotels and other businesses that have been decimated by the pandemic. Other hotel industry priorities include a one-year extension for Troubled Debt Restructuring (TDR) relief so that banks can continue working with borrowers to gain additional forbearance and debt relief, business meal deductibility through 2022, and expanded Employee Retention Tax Credit.

“We look forward to working with Congress and the new Administration on a longer-term stimulus package that will ensure our industry survives and is well positioned to help the country recover economically once the public health threat subsides.” 

About AHLA

The American Hotel & Lodging Association (AHLA) is the sole national association representing all segments of the U.S. lodging industry. Headquartered in Washington, D.C., AHLA focuses on strategic advocacy, communications support and workforce development programs to move the industry forward. In the wake of COVID-19 pandemic, the hospitality was the first industry impacted and it will be among the last to recover. That is why AHLA is committed to promoting safe travel while also creating a standardized safety experience nationwide through the Safe Stay initiative. With an enhanced set of health and safety protocols designed to provide a safe and clean environment for all hotel guests and employees, hotels across America are ready to welcome back travelers when they are ready to travel. Learn more at www.ahla.com.

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Following up on the discussion on Commercial Mortgage-Backed Securities, this article outlines the impact expected on our industry:

• Hotels and retailers not paying rent due to the coronavirus pandemic spikes in April, Trepp says - CNBC, Monday, April 13, 2020 

• Increased funds for distressed sectors, from $150 billion to $500 billion, of which the hospitality industry would have access to $425 billion in loans.
• The small business (SBA 7(a)) loans section allows for $350 billion in total loans with loans up to $10 million. The new language includes a provision that AHLA pushed for which allows hotels to receive financial assistance if the hotel employs not more than 500 employees per physical location.
• AHLA advocated for increased Unemployment Insurance benefits for our impacted employees, which will be immediately accessible for those eligible without the two-week waiting period and for up to 39 weeks.  
• AHLA supported tax relief measures including: 

• Delay of employer payroll tax (if not receiving SBA or stabilization funds from Treasury)
• Net operating loss (NOL) carryback 
• Qualified Improvement Property (QIP) fix 
• Increase in interest deductibility in 2019 and 2020 to 50% of interest expense (vs 30%)

• Section 4013 provides flexibility for banking and financial institutions to suspend requirements under U.S. Generally Accepted Accounting Principles for loan modifications related to the coronavirus pandemic.  AHLA continues to press for further administrative actions around loan flexibility and debt forbearance.

The full text can be found in these links – Part A and Part B and the summaries from Capitol Hill can be found in these links – CARES, Appropriations, HELP.     

We are continuing to hear that there is not bipartisan, bicameral agreement on this legislation. An expected procedural vote scheduled to begin at 3:00 pm has been postponed until 6 pm. House and Senate Leadership continue to negotiate on this package and expect to see the Senate take up this legislation in the coming hours with the goal of final passage by no later than Tuesday. Speaker Nancy Pelosi has indicated that she may introduce her own version of the bill if a broader agreement cannot be reached which would prolong the legislative process.   

AHLA is in constant communication with leaders in Congress and the Administration.  One area of focus is to increase the amount of funding available through the SBA loan program. 

As the this critical economic stimulus package works its way through the legislative process, I urge you to continue your outreach – it is critical that Members of Congress continue to hear from our industry leaders and employees! The talking points and Hotels ACT call to action we provided late yesterday have been included below. 

Thank you for your ongoing engagement. We will continue to keep you apprised of this fluid situation.

1. Hospitality Workforce Relief Fund ($100 billion)
2. Provide Flexibility in Lending ($50 billion)
3. Access to Loans for Hotel Owners

With the Senate in session and the House likely to come back soon, your urgent outreach to your Senators and Representatives is appreciated. Please engage any connections with elected officials and their staff, and also use AHLA’s HotelsAct call to action for Congressional engagement. (link here: www.hotelsact.org)

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Dear Members of Congress,

On behalf of the American Hotel & Lodging Association (AHLA), the sole national association representing all segments of the U.S. lodging industry, including iconic global brands, hotel owners and franchisees, REITs, management companies, independent properties, bed and breakfasts, state hotel associations, and industry suppliers, I implore Congress to protect the more than 33,000 small business hotel properties and the millions of hard working hotel associates they employ as it drafts legislation to address the burgeoning economic crisis being caused by COVID-19. 

The COVID-19 health crisis has already had a more severe economic impact on the hotel industry than 9/11 and the 2008 recession combined.  Statistics indicate impacts are worsening by the day:

• Hotel occupancy has fallen to staggering levels between 10-12% in markets nationwide, which we expect would mean 140 million rooms or more could be empty in the next 30 days alone. Occupancy generally runs above 65% in normal circumstances.

• The hotel industry is currently estimating a loss of nearly 4 million jobs with the current projection of a 30 point decline in hotel guest occupancy for the year.  That equates to $180 billion in wages and a $300 billion hit to the GDP – crippling the hotel industry, the local communities they serve and the U.S. economy. 

To that end, the hotel industry made the following policy recommendations today during a meeting at the White House.

1. Hospitality Workforce Relief Fund ($100 billion): Congress should provide grants to businesses for the purpose of employee retention and rehiring. The unemployment rate will dramatically increase in the next month unless Congress prevents millions of hotel workers from being furloughed or laid off. The fund would help employers meet their payroll obligations, slow the growth of rising unemployment numbers, and help keep employees on employer provided health insurance, lessening the impact on the Unemployment Insurance program.
2. Provide Flexibility in Lending ($50 billion):  Congress must act to facilitate forbearance of principal and interest payments on debt during this health crisis, and make federal funds available to owners to cover such debt.  Small business hotel owners that are facing severe economic circumstances who are able to have debt canceled should not be required to pay taxes on this Cancellation of Debt (COD) income.
3. Access to Loans for Hotel Owners:  Congress must ensure that hotel owners have immediate access to capital to make their payroll and mortgage payments.  Congress should establish a voluntary liquidity facility program to provide zero interest in secured/unsecured loans or zero interest secured/unsecured loan guarantees to hotel owners. Many hotel owners do not qualify for small business loans and for those who do, the lending process will take too long to provide meaningful relief.

Again, I thank Congress for their immediate attention to the COVID-19 health crisis which impacts not only the health and well-being of the American people, but also our nation’s economy. On behalf of the domestic lodging industry, I urge your consideration of provisions which will help mitigate the economic impact for our nation’s small business employers and their employees.

Respectfully,

Brian Crawford

Executive Vice President, Government Affairs

American Hotel & Lodging Association