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Hotel job losses will double without more federal help, operators warn

Michael Jacobson, president of the Illinois Hotel & Lodging Association, is pleading for help from Congress and urging Illinois and Chicago to relax a 50-person ceiling on gatherings as a way to boost hotel room stays.

When plans were announced to convert the old Cook County Hospital into hotel rooms, no one was thinking a pandemic might wreak havoc on the lodging industry. An official ribbon-cutting at the site was Tuesday, Sept. 29, 2020.
When plans were announced to convert the old Cook County Hospital into hotel rooms, no one was thinking a pandemic might wreak havoc on the lodging industry. An official ribbon-cutting at the site was Tuesday.
Anthony Vazquez/Sun-Times

Illinois hotels and companies that support them have already laid off 67,588 employees during the pandemic, but those job losses will nearly double — and half of the state’s hotels will be at risk of foreclosure — without more federal help, an industry leader warned Tuesday.

Michael Jacobson, president and CEO of the Illinois Hotel & Lodging Association, is not just pleading for another life raft from Congress. He’s also urging Gov. J.B. Pritzker and Mayor Lori Lightfoot to relax the 50-person ceiling on gatherings.

While hotel occupancy in other major cities has recovered to roughly 50%, Chicago is stuck at 20% due to those “overly burdensome restrictions,” Jacobson said.

“More than half of our total revenue for many of our hotels is reliant on meetings and events — what we call group travel. So until those restrictions get eased, we’re gonna be in a world of pain. … There isn’t going to be a significant recovery,” Jacobson said.

“Leisure travel can only help us so much. People doing staycations [and] the regional people driving to some of our markets can only go so far.”

The old Cook County Hospital, 1835 W. Harrison St., has been renovated and converted into two Hyatt hotels.
The old Cook County Hospital has been renovated and converted into two Hyatt hotels.
Anthony Vazquez/Sun-Times

During a conference call with his counterparts across the nation, Jacobson noted downtown hotels are “on the hook for incredibly high property taxes payments.” That was a problem before COVID-19 brought convention and tourism to a virtual standstill. It’s an even bigger problem now.

“Some of our downtown Chicago hotels pay over $30,000-a-day in property taxes. They have to sell over 200 rooms to break even each day, just on property taxes. Without further help, the consequences will not only be dire. Many of the losses will be permanent,” Jacobson said.

“Job losses, as of September, are already at 67,000. Potential job losses without congressional aid are going to nearly double. … Half of our hotels are at risk of foreclosure. That was evident here in Illinois recently, with the foreclosure proceedings that began with the Palmer House, one of our largest and most historic hotels in Illinois. Other of our hotels have tried to re-open, but have already shut down again for the winter because of the restrictions that are in place and the lack of demand.”

Bob Habeeb, founder and CEO of Maverick Hotels and Restaurants, thought some of his hotels had turned the corner near the end of the first quarter. That’s when the so-called “Payroll Protection Plan” provision of the CARES Act allowed him to bring back some employees.

“We started to see a little bit of light from that traditional summer travel season. Now, that light at the end of the tunnel appears to be a train headed in our direction,” Habeeb said.

“Our PPP money is long gone. Summer travel season is exhausted. And we’re being forced to go back and look again at laying off our team members, many of whom have been serving guests for decades. There’s no question that a vaccine in 2021 is gonna come far too late for many hotels and restaurants that are now piling up tons of debt and falling further and further behind with their creditors.”

The Palmer House Hilton
The Palmer House Hilton, like many hotels, has struggled to fill rooms during a pandemic.
palmerhousehiltonhotel.com

Hotel operators and trade associations in California and Florida sang a similarly sad song.

In California, where wildfires have put yet another nail in the coffin, job losses without federal help also will double — to 200,000 — and there will be “significant permanent closures,” officials said. Already, nearly 6,000 hotels have either closed or “been foreclosed on,” said Lynn Mohrfeld, president and CEO of the California Hotel & Lodging Association.

“If that happens, our recovery, which is expected to occur not until 2023, will take years to realize. We’re looking at a decade out,” Mohrfeld said.

Chip Rogers, president of the American Hotel and Lodging Association, said he understands the arguments on both sides that have stalemated negotiations on the next round of stimulus funding.

But he pleaded with Congress to put aside the contentious debate about replacement revenue for state and local government and “agree on the things they can agree on.”

“There seems to be widespread agreement on the re-funding of the PPP. Having it directed toward those businesses that have been hurt the most,” Rogers said.

Another federal effort, the Main Street Lending Program, offered 4-year loans to small- and mid-sized businesses. But it “has been a failure to this point,” Rogers said, so it “needs the administration to re-write the rules … to make sure that any real-estate-backed or asset-backed business that was written out of the first round … was eligible to receive those loans in the same manner that they would from a traditional lender. That would go a long way toward helping a lot of business.”

Rogers noted $150 billion from the first round of Payroll Protection funds went unused because of restrictions. If that unused money went to hotels, restaurants and other travel-related businesses “hurt the most,” they “could possibly survive until next spring,” Rogers said.