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Friday, Dec 1, 2023

Hotels on Hold in a World Without Travel

By ANDREW FOERCH Staff Reporter While many hotel operators fear the COVID-19 outbreak could spell doomsday, developer Tahir Mian sees it as an opportunity to rehab his properties. Mian Cos. is based in Texas but owns several hotels in the Conejo Valley and Ventura County. The company is taking advantage of the slowdown in occupancy to complete renovations at its Hilton Garden Inn franchise in Calabasas and Homewood Suites, another Hilton franchise, in Oxnard. “(The outbreak) looks like a very bad situation. What can you do to convert that bad situation into a good situation?” Mian asked the Business Journal. “We’re going full speed on construction.” With his properties suffering occupancy rates in the low double-digits, Mian said closing for renovations now doesn’t hurt business any more than the coronavirus already has. The Hilton in Calabasas has been operating at about 10 percent capacity since late March, Mian said. He’s shutting that hotel down for a few months to refinish guestroom bathrooms, replacing about 90 bathtubs with sleek new showers. He’ll also redo the ceilings in 52 rooms, as well as some of the landscaping surrounding the hotel. At the Homewood Suites in Oxnard, where occupancy rates are hovering around 22 percent, Mian plans to upgrade the cable televisions, wallpaper and tiling in the hotel’s guestrooms, and to overhaul its common areas. “In three months, we’ll finish this stuff. And if I have a crystal ball, I think all this (coronavirus) stuff is going to be over in three months,” he said. “When the market gets open, I believe all of our properties are going to be in a very good position because everything will be up to date.” Mian owns another Hilton Garden Inn franchise in Oxnard, which he has kept open and operating despite drawing a dismal occupancy rate of around 12 percent for the last several weeks. “It’s very difficult to even pay the electric bill,” he said. “I see a lot of other hotels have already shut down. I’m hoping some of those excess rooms – five rooms here, five rooms there – I hope I can capture that. Maybe I can start running 35 percent occupancy.” Remaining open with such low numbers in recent weeks has forced Mian to reduce his operating costs dramatically. At most of his hotels, that has resulted in widespread layoffs. For example, where the Hilton Garden Inn in Oxnard typically relies on a staff of 70 to manage the front desk, kitchen and 170 guest rooms, its payroll during the outbreak has been reduced to 12. “It’s different,” general manager Scott Paolella said of the hotel’s operations. “(Managers are) doing the daily tasks like checking people in and out. Housekeeping managers aren’t running orders or managing staff, they’re actually cleaning rooms themselves. The kitchen managers are working double time doing all of the cooking and dishwashing because we don’t have dishwashers or servers anymore.” Hotels all over the Valley region are adjusting to life in a world temporarily without travel. In North Hollywood, The Garland hotel has been closed since March 25, but its restaurant The Front Yard remains open for take-out and delivery customers. “The decision to keep The Front Yard open was less about making money and more about servicing the community,” General Manager Scott Mills told the Business Journal in an email. Positioned in the shadow of NBCUniversal’s Universal Studios Hollywood and Universal CityWalk shopping center, The Garland is one of the Valley’s most popular hotels for both business travel and Hollywood tourism. Mills said the property was lucky because the first three weeks of March were busy before business began to nosedive. Nonetheless, the outlook going forward is severe – upon closing, The Garland’s ownership decided to furlough the majority of the hotel’s staff. “It has been devastating to say the least. We are a family-owned business and this will certainly have lasting impacts,” Mills said. “That said, we … plan to bring everyone back once it’s deemed safe to reopen.” Economic impact According to a study released in March by the American Hotel and Lodging Association, California, which has the most hotel-related jobs of any state in the U.S., will be hit particularly hard by hospitality sector layoffs in this health crisis. The study projects California will lose more than 125,000 of its roughly 285,000 hotel jobs between March and May as a result of travel restrictions and social distancing recommendations. It estimates the state will lose 414,000 of its 1 million hotel-supported jobs, which include supply chain and guest spending positions. Nationwide, the study predicts “44 percent of hotel employees in every state are projected to have lost or lose their jobs in coming weeks.” Already, Marriot International Inc. has furloughed around two-thirds of its 4,000 corporate employees in Bethesda, Md., as well as about 10,000 hotel staff around the nation, including housekeepers and managers. Hilton Worldwide Holdings Inc., too, announced it has furloughed roughly 10,000 hotel staff. Those two brands alone have more than a dozen hotels combined in the Valley region. Heather Rozman, director of the Hotel Association of Los Angeles, echoed the study’s assessment that California’s hospitality industry has lots to lose. “In Los Angeles in particular, we’re such a fantastic destination that hotels were seeing 75 percent occupancy on a bad day. Right now we’re seeing occupancy rates in the single digits,” she said. Despite the massive layoffs, Rozman said she isn’t concerned about the stability of the hospitality workforce in the long term. “Hotel jobs are great jobs. Some of the longest tenured staff have spent 30 years at a property,” she said. “I don’t think anyone’s worried about a shortage.” What Rozman is worried about, however, is the dried-up stream of transient occupancy taxes which would otherwise feed directly into the city’s general fund. Commonly known as a “bed tax,” Los Angeles County collects a fee of 12 percent of the rent charged to guests in hotels or motels. In the City of Los Angeles, that fee is 14 percent. Those taxes are used to fund city services like paving potholes, trimming trees and vegetation in public spaces and paying police and fire departments. “This isn’t just a direct hit to the industry, but to all city services,” Rozman said. “San Francisco just announced a $1.7 billion projected shortfall (in its general fund) due to the lack of transient occupancy taxes coming in. Governments are going to be looking for creative ways to make ends meet as that major source of revenue has gone offline.” According to Rozman, there is one geographic area where hotels are still making money: around airports. Because the commercial air travel industry has largely shut down, pilots, flight attendants, airplane mechanics and other airline workers are stuck in place. Rozman said many of them are temporarily living in hotels in or around airports until the outbreak subsides and normal business resumes. “Those hotels are doing quite well,” she said. Patient beds Rozman said The Hotel Association is working with the L.A. County Department of Public Health, the California Governor’s Office of Emergency Services and the Federal Emergency Management Agency on an initiative asking hotels to volunteer to temporarily house COVID-19 patients, medical professionals, homeless and at-risk populations during the crisis. “Federal grants and various funding sources have been pulled together,” she said. “As of (late March), we had at least 115 hotels respond. That’s 10,000 available rooms for the county to identify for contracts.” Rozman said the grants won’t be enough to account for lost revenue, but they’re something. “Hotels are coming up with extremely discounted rates. In some cases, they’re not even breaking even. Many are doing it at a loss,” she explained. She added that most of the volunteering hotels aren’t online yet because they’re still working out the lending and insurance details in their contracts with the county. As hotels settle into their role combating the coronavirus, the industry has asked Congress to step in once the pandemic wanes. In March, hotel industry advocates and trade groups collectively asked the Trump administration for a $150 billion bailout in the form of grants to keep staffers employed. The federal government responded by passing the $2 trillion Coronavirus Aid, Relief, and Economic Security – or CARES – Act, which includes $500 billion in low-interest loans for small businesses, including many hotels. American Hotel & Lodging Association Chief Executive Chip Rogers put out a statement applauding Congress for passing the CARES Act, and called it a “critical first step to provide immediate support for American workers.” However, Rogers said the industry will need more from the federal government to fully recover from the coronavirus. “We are disappointed that Congress was unable to increase the limits on Small Business Administration loans so that they would be more workable for our industry,” he said in a statement. “Under the current limits, hoteliers will only be able to meet their payroll and debt service obligations for an estimated four to eight weeks.”

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