Detour: Hotel industry lobbying group wants to redirect federal funds meant for workers to banks and bondholders

The lobbying group for big hotel companies like Marriott, Hyatt and Hilton has come up with another bailout request they’ve named “Roadmap for Recovery”. The group claims they’ve put the plan forward in large part to help the 4 million hotel workers who have lost their jobs – and in many cases their health insurance – because of the pandemic.

It’s true that hospitality and leisure industry workers have been hit hard by the global collapse of the travel and tourism economy.  Workers in these industries suffered a significantly higher proportion of layoffs than those in any other industry. In fact, AHLA members laid-off more than 70% of their employees – and in many cases cancelled their employer-sponsored health insurance – before the ink on the first CARES Act had dried.

The obvious way to help the workers the AHLA purports to care so much about is to use the CARES Act programs and tax credits Congress already created to provide idled employees with income and health insurance throughout the pandemic, and recall rights once business returns.

But the industry’s new Roadmap (and the AHLA’s much more specific wish list sent to congressional leadership on Wednesday) is instead a thinly disguised effort to redirect federal resources away from helping workers and towards banks and bondholders.

The first stop along AHLA’s roadmap implores Congress to extend – from 8 weeks to 24 – the time period during which Paycheck Protection Act loans must be spent. This by itself could arguably be marginally beneficial to hospitality workers, assuming hotels and restaurants are more amenable to rehiring their workers in June and July than they were in March, April and May.

But most of the industry’s other Congressional asks, if granted, could be quite detrimental to the very workers they claim as the putative beneficiaries of their proposals. For example, the AHLA wants Congress to eliminate the SBA requirement that recipients spend at least 75 percent of PPP funds on payroll costs to receive full forgiveness.

It is a valid critique that the PPP has not led to widespread job retention, perhaps because the pandemic has lasted considerably longer than Congress expected when they passed the CARES Act in late March. But eliminating the 75% rule would create a disincentive for employers to retain or rehire workers.

Large corporate hotel owners, many of which are tax-advantaged real estate investment trusts or private equity firms, want Congress to expand the PPP and eliminate the requirement that they use the 75% of the funds for payroll so they can instead pay their lenders and bondholders, not to mention franchise fees to the brand companies like Marriott, Hilton and Hyatt. Rather than fixing the inadequate job-retention incentives built into the PPP, the AHLA asks Congress to jettison the job retention goal altogether and transform the program into a slush fund for over-leveraged hotel REITs, banks, bondholders and franchisors.

The AHLA Roadmap also calls for “Keep[ing] hotel doors open by providing relief for hotel commercial mortgages” – a veiled reference to their earlier request to the Federal Reserve and Treasury for a bailout of the $86 billion in hotel loans packaged into commercial mortgage-backed securities (CMBS). This proposal too seeks to direct federal emergency dollars to banks and bondholders.  For more about why a bondholder bailout would do nothing to help unemployed hotel workers, see our earlier post: will the Fed bail out CMBS loans?

All of this begs the questions, to whose recovery does the Roadmap lead, and will hospitality workers end up as roadkill along the way?