A trade group representing the hotel industry on Monday asked top U.S. lawmakers to increase the maximum amount that hotels are allowed to borrow in the Paycheck Protection Program, and make other changes to the aid program.
“The maximum loan under the PPP, defined as 250% of average monthly payroll costs for the prior calendar year, is insufficient for the hotel industry,” said the American Hotel & Lodging Association in a letter to the leading Democratic and Republican members of Congress.
The trade group is asking for the limit to be increased to 800% of average monthly costs for payroll, utility bills, and mortgage or rent payments, saying that will let most hotels keep their employees and stay in business.
Along with airlines and restaurants, the hotel industry is among the travel-related sectors that has seen demand evaporate because of the coronavirus pandemic and resulting stay-at-home orders.
The American Hotel & Lodging Association praised lawmakers for establishing the PPP while asking for other changes to the program as well, and it emphasized the massive hit that the hotel industry is experiencing.
“The economic impact of the COVID-19 health crisis on the hotel industry is estimated to be nine times greater than the September 11th terrorist attacks,” the association said in its letter.
“According to Oxford Economics, nearly 4 million hotel employees have been furloughed and the industry is expected to lose nearly fifty percent of its total revenue in 2020 — which could exceed $112 billion.”
Another requested change is letting hotels spend just 50% of proceeds from PPP loans on payroll, down from the current requirement of 75%.
“The remaining 25% does not leave enough margin for owners to also be able to pay their mortgage, utilities, rent and other time-sensitive loan obligations,” said the American Hotel & Lodging Association, whose membership includes public hotel companies such as Marriott MAR, +5.65% .
“Retaining and rehiring employees remains hotel owners’ top priority, but that is only possible if they can retain their physical asset.”
The PPP quickly ran through its initial allocation of $350 billion that came through last month’s $2.2 trillion Cares Act, and then on Friday got an additional $320 billion as President Donald Trump signed into law the $484 billion Paycheck Protection Program and Health Care Enhancement Act.
Operators of large hotel or restaurant chains were specifically given the green light to get PPP loans, though the Treasury Department last week said the program was not intended to help public companies “with substantial market value and access to capital markets” and gave such companies until May 7 to return their money.
U.S. stocks DJIA, +1.50% SPX, +1.47% are trading well below their February peaks because of coronavirus-related worries, but they have rallied from their late-March lows thanks in part to optimism around Washington’s aid efforts. The S&P 500 and Dow closed higher Monday, with analysts giving credit to some lockdowns easing.