CEO David Kong says the current situation for the hospitality sector is unsustainable.

Travel, tourism, and hospitality have been among the sectors hardest hit by the COVID-19 crunch, and workers in these industries have little option other than to wait on Washington to approve another round of rescue funding for the economy, according to an interview David Kong, CEO of Best Western, gave to CNBC.

Millions of workers continue to be unemployed while hotel and motel owners fight to keep their businesses open. Owners are now acting as desk clerks and cleaning crews while millions of workers remain sidelined with deeply uncertain futures, Kong said. 

“It’s really hard to say when a recovery is going to be. This situation we are in now, it’s not sustainable. It’s really bad,” he elaborated. “As people use up all their savings and reserves, they’re going to default on their loans. And then what?”

The hospitality sector saw 9.1 million layoffs in March through August with the unemployment rate for the sector peaking at 39.3% in September. While 4.9 million workers have been called back, that still leaves 4.2 million displaced and a jobless rate of 19%, more than double the national level of 7.9%, according to the US Labor Department. Meanwhile, according to the American Hotel & Lodging Association, about 38,000 of the nation’s 57,000 hotels will close within six months without further government assistance.

A few hospitality-related businesses have taken advantage of federal loans targeting Main Street but businesses and banks alike have voiced concerns over the regulations tied to the program.

Federal officials have talked about altering the terms of the Main Street program, which has already undergone multiple changes since it was first introduced. For example, Congress could release funds separately from the omnibus negotiations, though Nancy Pelosi has resisted such a piecemeal approach. President Donald Trump last week said he’d be willing to go bigger than either of the parties on the next round of coronavirus aid, though he did not specify a number and his statement came just days after he ordered White House negotiators to stand down on talks over a fresh economic rescue package.

Notably, Tom Porcelli, chief US economist at RBC Capital Markets, believes that legislators may not need to go as high as current proposals to get much needed help to the economy, stating recently that just $700 billion would likely provide enough support to an economy that he, like many Fed officials, thinks is growing at a healthier pace than expected. Yet the fact remains that some sectors, such as the hospitality industry, are in a far worse situation than others, suggesting a targeted approach is what is needed from the next round of aid. Glenmede strategists point out that activity in the “high-contact” portion of the economy, which would include hotels and restaurants, is only about 46% of pre-COVID levels.

“You’re talking about people that worked 25-30 years in our industry who are laid off. There’s no safety net, no insurance,” David Kong said recently as he highlighted the urgency of the situation. “Hotels are the heart and soul of any community, and hotels are small businesses. These are hard-working people trying to make an honest living.”


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Anthony Moran
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