How Government Loan Assistance Has Helped Prop Up Hotel Profitability
By David Eisen, Director of Hotel Intelligence and Customer Solutions for HotStats
The tidal wave of COVID-19 has left many in the hotel industry gasping for air amid choppy financial waters. Luckily, governments across the globe have tossed hotels a much-needed financial floatation device.
Wondering how government loan assistance is helping hotels get back on solid financial ground? We've mapped out how governments across the globe are using funding to jump-start hotel profitability.
How Has Government Assistance Helped the U.S. Hotel Industry?
In the U.S., hotels have been hit hard financially, and revenue losses are expected to continue throughout the year. According to Statista, U.S. hotel sales losses for 2020 could streak past $925 billion.
However, the U.S. government has opened up funding to counter hotel losses. Here are some programs built to keep hotels afloat amid heavy financial losses:
Paycheck Protection Program
The Paycheck Protection Program (PPP) was designed to help businesses reduce furloughs and employee cuts. It set aside forgivable loans to cover specific spending needs, such as payroll, rent and utility costs.
The Coronavirus Aid, Relief and Economic Security (CARES) Act laid out $2 trillion in financial aid for workers and businesses throughout the U.S. The package includes tax deferrals, loans and payroll support. It also extends the PPP to help businesses that have been hit hardest economically, including those in the hospitality industry.
Economic Injury Disaster Loan
The Economic Injury Disaster Loan lets businesses apply for a forgivable cash resource of up to $10,000. It was created to help companies that lost revenue because of the pandemic, and it also includes working capital loans designed to offset a company's initial revenue losses.
What Government Funding Is Available Across the Globe?
Globally, hotels face an estimated $2.7 trillion GDP free fall throughout the rest of the year. That has inspired governments across the world to step up with financial assistance. Here are a few places where governments have used funding to lift up the flailing hospitality industry:
The Canadian government set aside more than $149 billion for businesses affected by COVID-19 as part of its COVID-19 Economic Response Plan. The country's Regional Relief and Recovery Fund (RRRF) also provides $962 million to those industries hit hardest, including tourism.
Following the initial outbreak, China's government carved out $394 billion for infrastructure spending. It also made efforts to free up lending, pouring a $79 billion stimulus into the economy for businesses bearing the financial brunt of COVID-19.
In addition to its initial recovery plan, Italy dedicated 3.6 billion euros to industries that have been crippled by the virus, including the tourism sector.
German officials decided to take on debt in order to secure a 750 billion euro cushion to offset the impact of COVID-19. It also set aside 600 billion euros in loans and assistance for companies directly affected by the virus.
In addition to offering several broader financial relief programs, the U.K. has also designated money specifically for retail, hospitality and leisure businesses. Its Retail, Hospitality and Leisure Grant Fund (RHLGF) lays down 330 billion pounds in government loans and grants total with up to 25,000 pounds per small business.
How Are Hoteliers Using Financial Assistance to Lift Profit?
Although different government loans come with different stipulations, there are common ways that many hoteliers are using relief funding to increase profit. Here are a few of the most important ways hoteliers are spending much-needed cash:
1. Keeping the Lights On
With travel demand fizzling, the hotel industry is scrambling to reset its profit strategies. For hoteliers, that means understanding their hotel's financial break-even point, digging into ongoing costs, and restructuring for more profit. As hoteliers work to improve operational efficiency, they're using funding as a buffer to keep the hotel essentials running.
2. Rehiring Workers
The pandemic has ripped a hole in the hospitality industry's labor force. In fact, Statista predicts the global travel and tourism industry will rack up more than 75 million job losses this year. With extra funding, hoteliers can start rehiring employees and make strategic payroll decisions that feed into the operation's bottom line.
3. Revamping and Remodeling Hotels
The COVID-19 crisis has done more than damage hotel financials. It's changed the concerns and habits of global travelers. That's why many hoteliers are using funding to cover essential COVID-19-related remodeling costs, including adding more space, putting up barriers between workers and visitors and germ-proofing shared areas.
4. Refocusing Cleaning Routines
The health of visitors and employees has become a critical priority during the pandemic. Many hotels are pouring cash into deep cleaning, new sanitation routines and setting up fresh safety measures. These investments are meant to improve visitor safety and provide guests with much-needed peace of mind.
How to Use Government Funding to Drive More Profit
As hoteliers tap into government funding, it's important that they use it wisely. And that requires a broader hotel performance strategy.
If hoteliers want new income to drive profit, they should first dig into hotel benchmarking, get a firm grasp on where money is most needed and put a profit-focused plan in motion. With the right figures backing every decision, hoteliers can stay afloat during the pandemic and propel their operation toward a brighter financial future.
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