Chip Rogers, AHLA
It’s been a trying few weeks for the hospitality industry as the Coronavirus pandemic continues to spread across the globe. (Check out more of our coverage here.) Many hotels, restaurants, and wellness facilities have shuttered, while companies have furloughed or laid off workers. According to STR, year-over-year occupancy ending the week of March 21st was down to 30 percent. RevPAR declined by 70 percent to just $28.32, worse than those during 9/11 and the financial crisis. To say we are in unprecedented times would be an understatement.
To get a read on where the industry goes from here, we spoke with Chip Rogers, president and CEO of the American Hotel & Lodging Association (AHLA). Rogers detailed the recent $2 trillion relief package recently signed into law by President Trump. To Rogers, the bill is less about stimulus and more about preservation. But he does see some light at the end of the tunnel, and even applauds hoteliers who are allowing their hotels to be used as medical facilities or for quarantine locations during these difficult times.
Stacy Shoemaker Rauen: I’m here with Chip Rogers of the AH&LA. Thank you so much, Chip, for taking the time to join us today.
Chip Rogers: Glad to be here. Thanks.
SSR: Yeah. So between 9/11, the 2008 financial crisis, has this been one of the hardest things you’ve had to navigate in your career. Talking about the Coronavirus pandemic.
CR: And I appreciate you framing it that way. It’s interesting because during the financial crisis, I was not yet in the industry. And I came into the hotel industry about 2010 so it was just after the crisis. During that time period though I was in elected office, and we were dealing with a catastrophe of a whole different realm back then. And I thought at that time that would be the toughest problem that I would have to face, as we were trying to literally cut a state budget by about 18 percent, which is extremely difficult to do. Because in the state budget world you have a balanced budget amendment, so you don’t get the opportunity to just have a lot of debt. You can’t have any debt.
And so I thought that was the toughest, but this is far worse. And from an industry perspective, if you take what happened after 9/11, then take what happened after the financial crisis, if you combined those two and doubled it, you might be approaching where we are now. No one could have predicted this, and no one could have prepared for this, which is the problem that we’re facing. Because you can always prepare for downturns. We all expected a downturn happening soon. You can’t prepare for a cliff, and that’s what this has been.
SSR: For those listening who don’t know what the the American Hotel & Lodging Association is can you give us a quick rundown of who you are, who your members are, and who you’re speaking with mostly?
CR: Well, that’s a great question. So, we essentially represent the hotel and lodging industry, and our members are anybody or any company that engages in hotels and lodging. And so every brand, the top 15 brands are all members, all the household names that you know. Their franchisees are all members, lots of independent hotels, resorts, and then companies that actually service the hotel industry. A great example is someone like Cvent, HBO, folks like this who work directly with our industry, they’re also members of AHLA.
SSR: Let’s start on a macro front. Can you break down, during this pandemic, what are the major pain points for them? Is it cash flow, operating fees? What do you hear as the N0. 1 concern, as I’m sure you’ve been in dialogue with your members these days?
CR: It’s absolutely cashflow because there is none. When you have the occupancy rates falling down across the country by 20 percent, and a lot of your coastal markets down to single digits, there’s just no revenue. And consequently you’ve had thousands of hotels that have shut their doors, hopefully temporarily. Some of them, unfortunately, will be permanent. And then the staffing that is associated with that hotel, what do you do? I mean, you know this because we’ve been on panels together and at conferences together, the topic for the last five or six years is how do you find people. We don’t have enough people. A month ago we were talking about the fact there are still 900,000 jobs open in our industry. And today, one month later, about 75 percent of the people that work in the hotel industry are not working. Now the good thing is most are still employed. So they’re on the payroll. They’re just not getting any pay; they’re getting some benefits. And, hopefully, with the congressional action we’ll be able to get them some pay soon.
SSR: So, that’s a good segue for my next question. AH&LA is very active in the lobby front. Actually, I just read a story that there are more lobbyists than ever before. Part of this is due to the last year of what’s been happening. What are you doing on the lobby front. And what kind of relief package are you looking for to keep the industry afloat?
CR: Well thanks again for asking that, because that’s really important. I think if you go back about three weeks ago, and we began to see this happening, we felt like at that time, ‘Okay, airlines are getting hit first, along with cruise ships, obviously, and hotels and restaurants.’ We kind of felt like that group was the group that was going to need the assistance. Well, as you moved through the process over the last three weeks, what has happened is it’s not just us that needs the assistance; it’s really pretty much anybody in the service sector and most of small business: companies who have kind of a cash reserve that might be a month or less to be able to pay all their bills. And so when we started in this process of lobbying on behalf of our industry and the associated tourism travel industries, we didn’t at that time realize how big and how fast that was going to happen. And so you mentioned a moment ago, there are more lobbyist than ever. Well, when Congress starts talking about a $2.2 trillion package, there are a lot of folks that are going to line up for access to that money. So what once was us at the front of the line, became us as part of a much larger group needing assistance.
Ultimately though, what they passed—I don’t want to call it a stimulus package, I hear a lot of people say that—it’s not going to stimulate anything. This is a a preservation package, right? This is preserving the jobs, or at least most of the jobs, that are in the industry and preserving those businesses, hoping, just hoping we can make it past it, and then we’ll need a stimulus after that. So when people look at this and say, ‘Well that’s the big deal,’ well, yes, it’s $2.2 trillion, the biggest ever. There’s going to be legislation after this that also impacts it, which goes back to your original point on, there are so many people lobbying for this making their case to Congress, and we had to make our case to Congress that, again, 9/11, the Great Recession, combine them and double it, that’s what we’re facing.
SSR: What was it like going down and actually lobbying for this? You went in and spoke on behalf of an industry that we all love. What was that experience like? I know you’ve lobbied before and been in politics. But for us design folk out there, what was that like?
CR: Well, I’ve been on both sides of the table many years as an elected official getting lobbied, and now many years on this side advocating for our industry, so I feel like I kind of know it. But this is much different because oftentimes you’re trying to really hone in on, ‘If we could make this tweak, our industry would do better. It would result in more revenue, more revenue to the government, more jobs would be created.’ And this time what we were lobbying for really was the survival of the industry, letting them know that when you go from 67 percent occupancy nationwide down to, even if you went down to 50 percent, that would cause billions of dollars of losses and millions of jobs lost. But to go from 67 percent all the way down to where we are, in the 20s, that’s just devastation. That means the whole industry is going to go away.
So the lobbying was much different. It was interesting. I spent 90 minutes with myself and the CEOs of all the major brands with President Trump, just hanging out in his office talking for 90 minutes. The first 30 minutes was with the media, and then they left. And so we had another hour with him in a very, how do I say this, relaxed atmosphere. He was just hanging out, talking to us, kind of going back and forth. And it was interesting because he certainly understands the industry. He knows hotels, which is very helpful. When we’re bringing up problems of occupancy rates and RevPAR and things like that, he knows all that; that’s his business. And that was very helpful.
After that though, what’s interesting is we did have a few more meetings, in person meetings, and then the Capitol got shut down, so everything after that was phone calls. We spoke to Speaker Pelosi, Senator Schumer, Leader McConnell, pretty much anybody that was involved in this process, we lobbied them directly.
SSR: And how was this proposed package going to help. Do you think it’s going to help? And if so, what are some of the major implications, key points. I know there’s tax savings, a renovations clause, small business benefits. Can you talk a little bit about how this will help an all-encompassing atmosphere?
CR: Let me start from the smallest to the largest. I think with the smallest, actually, is a correction to, if you go back a couple of years ago when we passed the big tax package, the tax cuts, there was a mistake that was made. The mistake dealt with expensing when you are essentially upgrading your properties. When you have these capital expenditures on your properties for restaurants and hotels, the idea was to have immediate expensing where you could write it off in that year. They accidentally put in 39 years of expensing, which is ridiculous. For two years they’ve tried to correct that. The Republicans said, ‘Look, it was a mistake. We’ve got to fix it.’ The Democrats said, ‘Well, we believe there are other parts of that bill we don’t like, so we’re not going to give you that correction unless you agree to these other things.’ The Republicans were like, ‘No, we’re not going to agree those other things. We just want to correct this one mistake.’
Well, luckily, in this bill, they corrected the mistake, so that’s good. That will help the design industry for sure, because financially, it makes more sense to be able to write it off in a year, to be able to do improvements and upgrades. That’s on the small end. Let’s go all the way up to the large end. Yeah, there are other tax policies that are written into this package that will help with expensing, help with investments, help with delays in paying taxes, help with getting credits for the payroll taxes you’re paying, all that’s wonderful.
The really big area comes in the small business administration loans. As bad as this is, let’s see if we can work through existing programs to get the money out to people. Under the SBA program, they classify a small business as any business with 500 or fewer employees. You would think, in the hotel industry, well that’s easy, because almost all hotels have under 500 employees. However, under the SBA, if you’re an owner and you have multiple hotels and the combination of all those employees exceeds 500, you would have been ineligible to receive the benefits. The biggest and best change that we got was that they changed the legislation to say that every individual property will be treated as one. You will not be affiliated with the other properties, even if you’re under the same ownership. That was incredibly important. Had we not changed that, the effectiveness would have been almost nothing.
Now, as long as you’re a hotel that has 500 or less in a single spot, single building, single property, then you’ll qualify for the lending. What is the lending? Well, the lending is a maximum of $10 million or two-and-a-half times your average monthly payroll. You get that money in a loan from the SBA, and if you spend it on payroll, debt service, interest on debt service, I should say, rent or utilities, then the loan is forgiven. It’ll act like a grant. That’s really helpful and that’s going to be the key to keeping people employed, is that if I borrow the money and pay my people that work for me, then I know that I don’t have to pay that loan back.
SSR: That’s kind of amazing. Do you think that’s the majority of hotels? What about those that have more than 500 hundred. Do you have any kind of sense of what the percentage is or is that too hard [to figure out]?
CR: Well, we think as far as the number of actual hotels that have more than 500 employees in a single hotel, it’s probably 1 to 2 percent, but it’s a lot of employees, because obviously you’re talking about large numbers. It’s going to be the MGM Casinos of the world, the very large resorts. There’s another part of this legislation that allows those companies to access funds, but it’s zero and low-interest loans that would have to be paid back. There’s other opportunities for them. Under the small business part, it’s any hotel that has 500 or less.
SSR: I’m sure you saw, but Arne Sorenson recently released a somewhat sobering video message about the impact of the virus on Marriott, which we know is one of the largest hotel companies in the world. How is this affecting brands from your point of view, since your members are also people on the brand side. Does this help them at all? Will the proposed plan kick in with brands in some way. I know a lot of them are franchised. What’s kind of the effect on the brand side?
CR: Yeah, the brands are certainly facing a serious problem. Massive layoffs, as you’ve seen in the news, the video by Arne, if you didn’t shed a tear or feel something in that video, then you’re probably not human. By the way, he’s a wonderful guy. I know pretty much everybody in the industry has known him or at least met him through the years. He was with us at the White House, and to see what he was doing, fighting for his industry, given the personal health challenges that he himself is facing, was nothing short of inspiring.
Because he’s probably not in a position, I’m sure his doctors weren’t telling him to get out and do all these things, and yet he was out there doing them, so we certainly thank him for that. There are parts of the bill, again for these larger companies, that can help them, help them get past this, low-interest or zero-interest loans they can take out that don’t have to be repaid for for quite some time, but it’s not as forgiving as the small business part. We get a lot of questions about that. Is anything happening for the small businesses?
I would argue that a vast majority of the relief is actually targeted toward small businesses and their employees, which is the most important part. Now, one other thing that I would say is that if you’ve noticed a lot of discussion around this centered on unemployment insurance and what’s happening with that? Well, typically when you lose your job and you go apply at your state level for unemployment, you have to wait two weeks to begin receiving the benefits and then those benefits, they vary from state to state, but it’s not a lot of money. In this package, you get whatever your benefits would have been plus $600 more per week, and you get immediate access to that. We think that’s going to really help a lot of people.
SSR: So do you think if all this gets passed it will provide the stimulus that is needed to help get the industry through this uncharted territory until, hopefully, hospitality goes back to what it used to be?
CR: Yeah, I think, and what we’re seeing on the news, is a lot of people call this a stimulus package. I don’t think it’s a stimulus package at all. There will need to be a stimulus package at some point. I think what this is, is kind of a survival package? How do we make sure that these businesses survive and the people that work for them survive. So if we can get past this virus in the next eight to 12 weeks, I think this will be sufficient. If we don’t get past it in the next eight to 12 weeks, they will have to be another significant infusion of resources because this is only designed to carry us for eight to 10 weeks. So if people still aren’t traveling come June or July, we’re probably in big trouble.
SSR: Speaking of that, when people ask you how long will this last, what are you saying? I know everyone hopes they have their crystal ball but from everyone that you’ve spoken with and everything you’ve seen, how long do you think this is a reality?
CR: It’s so hard because as we look at the other countries that were hit by this earlier, we can take some information out of that and try to place that on the U.S. model and see if that works or not. I don’t know that we can get a lot out of China and the reason being is, first of all, I don’t know that they’re facts and figures are accurate. They haven’t really been that honest since the beginning of this, so I’m not sure we could use them. South Korea did a really good job of getting this under control. It’s a much smaller population in South Korea, and they’ve dealt with these type viruses before, so I think they were better prepared. If we follow the South Korea model, which is the best example or best-case scenario, we would be out of this in the next few weeks. I think as you look here, the Italian model of course is much worse. They didn’t take it nearly as seriously, they haven’t had experience with this before, and consequently this is lasting a lot longer and a lot deeper in Italy.
If you look here in the U.S. what happened in the state of Washington, they were really the first ones to get hit. They took it very seriously and you’re seeing Washington itself may be over the curve, whereas the United States in general is not. I’m not a doctor, obviously, you know that. I do have a pretty good mathematics background and if I just look at the facts and figures, it seems to me from a curve standpoint that within the next four to six weeks we will have reached the top and be on the other side of that, and I think that is critical because the question is not whether we start traveling after the viruses gone because the reality is that this thing’s just going to turn into what the flu is, right? There will be a vaccine, there will be treatments for it, but it’ll always be here. The question is when do we get past the fear of the virus, and I think that if Americans begin seeing the number of cases dropping off and the number of people sadly dying from this dropping off, then I think they began to say, ‘Okay, it’s starting to get safer to go back to my normal life.’
SSR: AH&LA is also in the events business. We at HD are also in the events business. It’s that unknown. Will people actually want to get back in a crowded room together? People keep calling it social distnacing, but we call it physical distancing because I feel like people need to be socially connected more than ever. When will this new normal wear off?
CR: Well, if you knew that you could be like that, what is that investor that he invested a couple of weeks ago $220 million in the stock market betting against the market and he made $2.5 billion dollars because he figured it out. Right? So if we had that foresight, we could all be very wealthy and retire.
SSR: Profit off of people’s losses. On the one question I do have for you, what do you think the fallout will be. How many people do you think will lose jobs in the hospitality industry? I feel like the numbers keep rising, unfortunately.
CR: So I think the question is when do we set the marker to say, ‘Okay, this is what we’re comparing it against.’ So if we go back to a month ago and we know how many people were working in hotel-related jobs, about 8.3 million, and then we see it today, 75 percent of people aren’t working. They’re not necessarily out of a job, but they’re just not working. How long will it take to get back up to 8.3 million? I would expect that’s going to probably take a year only because as you know, Stacy, the leisure market will come back first because people have pent up demand, they’re going to be past being scared and they want to go on vacation. The business travel will pick up second as companies become more confident in the economy and are willing to invest back into business travel.
The last one though, unfortunately, I think is going to be meetings and events only because as you pointed out, this physical distancing standard that we’re setting for ourselves, how long does that last? And it will take the leisure segment, the business segment, and the convention meetings and conference segment to all be back to full force before we get back to 8.3 million people working in this industry.
SSR: You broke up a little bit. You said 75 percent are not working right now.
CR: Yes, we estimate about 75 percent, they’re either out of a job or they’re furloughed. The good thing is most are furloughed so they can come back to work when things get better. I mean with so many hotels being closed, and even the ones that are open, really just a few people working, the numbers have dropped significantly.
SSR: I get so saddened every time I get an email from one of the hotels saying we’re closing indefinitely. I feel like they just keep increasing.
CR: Well, perfect example, one of our best members, which the company that owns the Sea Island Resort off the coast of Georgia, and the Broadmoor in Colorado Springs, two of the finest resorts in the world. When you hear places like that are closing, I mean, iconic that the world comes to see, it’s pretty sad. You’re right.
SSR: So, in Wuhan, they are seeing some recovery. They also made hospitals or shifted hotels into hospitals. Do you see that happening here to help? How else do you seem some interesting efforts by individual hotels or brands helping out this cause?
CR: Glad you asked that because last week we started a program called Hospitality for Hope. It does exactly that, it seeks to connect hoteliers who have hotels that they’re willing to allow to be used for either semi-medical facilities or for quarantine locations. We went out a week ago and started asking our members, ‘Would you be willing to have your hotel be used for that purpose?’ We expected a few hundred. I’m proud to announce we have over 12,000 that have already volunteered. What we’re doing is connecting those hoteliers with the state and local government officials. Now we’re going through the Department of Health and Human Services, the federal government, to help create this program. But the decisions are really being made at the local level. So we’re connecting those hotels with their states and cities to say, ‘Hey, if you have a need, here’s hotels in your area that are willing to allow their properties to be used for this.’ That program has just taken off. So it’s happening. It’s happening in a very big way. Hopefully that need won’t be there for long. But while it’s here, hotels are stepping up.
SSR: That’s great. I don’t know how much communication you’ve been in with the workers who are out of work or who have lost their jobs. What are you saying to them. Have you been seeing the industry step up to help them as well.
CR: Oh, it’s just been amazing. You would be surprised to see, probably not. You know the great people in this industry. How many of them are saying, ‘Look, I am willing to sacrifice just about everything to keep paying my workers as long as I possibly can.’
I had a hotelier that I was talking to a couple of nights ago from down in Jacksonville, Florida. And he said, ‘Look, I’ve got about $2 million in reserves,’ and he owns four hotels. He says, ‘I’ve got $2 million in reserves. I will exhaust that entire $2 million to continue to pay my people as we make our way through this.’ And you’re seeing that happen everywhere.
I know they get a lot of grief sometimes, but I think virtually every brand’s CEO has forgiven his or her salary for the rest of the year. At Hilton, all of the executives have forgiven their salary for the rest of the year to help out, and you’re seeing that pretty much everywhere. It’s really heartwarming. The reality is, that can only last so long. We’ve got to get past this and get back to normalcy.
SSR: One quick question. When you said before that leisure would come back first, and then business, which completely makes sense, are you lobbying to the big companies about that or is that something you have to think about down the line? I know Google stopped travel, then Amazon. Once they each start reinvesting in business travel, then I think it trickles down. I don’t know if that’s part of your plan at AH&LA.
CR: We tried that when they started announcing that they weren’t traveling. We weren’t very successful at it. But we will continue to try, and I think what you hit on is really important. And that is, and I don’t know this to be the fact, but I believe this is the case. When Amazon and Google and some of the very large, well-respected global tech companies announced they were stopping travel for their employees, I think a lot of other companies just said, ‘Hey, if they’re doing it, we’re going to do it.’ Right? I don’t know that they looked into the science of it or the cost of it, they just realized if Google’s doing it, they must know something I don’t, so let’s stop travel.
So the inverse of that may work as well. If Google were to come and say, ‘Okay, we’re traveling again,’ and Amazon were to say, ‘Our workforce is back out in hotels and in the skies and we’re traveling again.’ I think you’ll see a lot of other companies say, ‘Oh, okay, if they’re doing it, I’ll do it.’ And we’re certainly hoping for that.
SSR: Let’s end on a positive spin. Thinking about all of this, especially on the design front, how do you think the Coronavirus will ultimately change the industry? How do you think it will ultimately effect it in years to come, or if you’ve even though about that past the day-to-day?
CR: Unfortunately, I think some of the things that you think about could have a lasting impact. We talked about physical distancing, it’s not something that we want. I know this has been hyped up more than ever before, look, if you just go back to the Swine Flu that was a few years ago, up to this point, it was far more deadly in the U.S. than Coronavirus. Far more deadly. The flu remains far more deadly. [Editor’s Note: According to The New York Times, COVID-19 seems to be more deadly than the flu, which kills about 0.1 percent of people who become infected. The lack of testing in the U.S. means the true case count and number of deaths are not known for sure, writes the paper.]
So what I hope will happen is that people will begin to treat this like the flu and say, ‘There’s a vaccine, there are treatments for it. If I take the vaccine, I probably won’t get it, but if I do get it, I know there are treatments that can help me out.’ And then people will go back to normal life. I think that’s the best we can hope for. We can’t live our life scared. We can’t live our life without human contact.
I mean, you and I go to most of the same conferences and most of them you look forward to, right? If you ask people in our industry what’s the single best thing about coming to your events, or any event, it is the networking. And I don’t want people to have to give that up, and I don’t think they will give that up, as long as they feel safe and realize that there is a chance that I might get sick just like I might get the flu. But I also know that there are ways that I can handle it.
SSR: I was watching a conversation with Danny Meyer, the restaurateur, and he said the hardest thing about this is it takes away, and I’m paraphrasing, everything that’s essential to hospitality, like connecting, experience, being together, and traveling. That’s been one of the hardest parts about this is that, again, you said no one could predict this, but just the ultimate effect it has on hospitality at as whole.
CR: Yeah, but that extends beyond just the obvious. I think that also extends to what we like to talk about so much, whihc are experiences. And for example, all my family’s together now, because my kids from college are home. They don’t have classes and my other two younger ones that are still in grade school and high school, they’re home. So everybody’s home, and we have a favorite neighborhood restaurant, and we did takeout last night and the food was just as good as it always is. That’s wonderful. But the experience is not the same, because you like hanging out in the little neighborhood restaurant, and we need to get back to that. We don’t need to give that away.
SSR: Thank you for so much for taking the time. I feel that we will come out stronger on the other end. I know with people like you, we definitely will, at least we being the hospitality industry. So, thank you for all that you’re doing and all that you’re supporting. You play such an amazing role in all of this. Thank you for taking the time to spend a few minutes with us.
CR: Glad to do it. Thanks.