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COVID-19 Impact on the Hospitality Industry

April 14, 2020
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These are unprecedented times, with information changing daily and multiple emergency executive orders taking effect in response to the coronavirus outbreak. These events are having a devastating effect on all industries including the hospitality-hotel industry.

  • As of April 1, more than seven out of 10 hotel rooms were empty across the country per STR.
  • Since the public health issue began escalating in mid-February in the U.S., hotels have already lost more than $7.5 billion in room revenue.
  • This figure is rapidly accelerating with hotels currently on pace to lose more than $500 million in room revenue per day based on current and future reported occupancy rates.
  • With 70% of direct hotel employees laid off or furloughed, hotel workers are losing more than $2.4 billion in earnings each week.
  • Individual hotels and major operators are projecting occupancies below 20% for upcoming months. At an occupancy rate of 35% or lower, hotels may simply close their doors, putting 33,000 small businesses at immediate risk.

Citrin Cooperman is working diligently to stay on top of industry developments that are affecting our hospitality clients. Below are links to articles prepared by some of the well-known associations in the industry:

Below are links to updates on events that have taken place to date:

BUSINESS CONSIDERATIONS

  • Consider applying for SBA Disaster Assistance Loan.
  • Review your current hotel management, operating, loan or lease agreements to make any necessary adjustments.
  • Discuss payment terms with vendors.
  • Due to the directive by a governmental authority that affects access to an insured’s premises, your business interruption insurance might cover the losses.
  • Consult with your attorneys (employment and corporate) regarding the treatment of employees, contracts and agreements affected by the reduced business operations.
  • Consider current tenants such as retail, food and beverage, and other leased space.
  • Defer new projects and non-essential purchases or contracts.
  • Contact your bankers to discuss covenants that may be affected, deadlines of reporting that may require an extension, and additional financing for cash flow.
  • Contact any pending reservations during the forecasted period of closure.
  • Increase marketing for events later in the year such as Independence Day.
  • File your sales, use and occupancy tax returns timely; if you have difficulty paying the entire amount contact your state to discuss payment plans.

View our recent alert on Business Interruption (BI) Insurance here.