Last week I talked about preserving cash, perhaps the most critical factor to make it through this. But there is much more – the human side is near and dear to my heart, so here is my 5-Point Plan for recovery, not from COVID-19, but from the economic wounds it is causing.

Human Side

The most difficult part of this is the layoff of staff. They must fully understand that there will be schedule reductions and furloughs or layoffs. If we are able to keep their insurance intact with hopes that they can return to work relatively soon, they will be grateful. There are so many resources for them from the government and from us in the form of information. We are considering a gift card that our team members can use while navigating this crisis. The single most critical point I’d like to make here is compassion. Stay in touch with your team and be honest in your assessment. On March 13, I told all our team members at each hotel that I thought April 30 would be a good estimate of when we might be able to bring them back. We made sure each employee was counseled by Human Resources about their available Paid Time Off and any hours that we might be able to give them.

Preserve Cash

The most critical first step, if not already taken is to project our expenses for the next 90 days. This requires contacting the lender and asking for some type of relief. A forbearance letter requesting a 90-day period of no payments is a good first step and additional requests for relaxed debt-service coverage ratios and others are logical as well. Ensure that your request to the lender includes your commitment to the hotel, a new forecast for the balance of 2020 and history of your guest service scores, quality assurance reviews and a reminder of your timely payment record. If you have a CMBS loan, you are not likely to be successful with forbearance but should be able to get relaxed terms on use of reserve and other funds. Principal and interest must be paid this month until such time that there is government intervention on this.

Most franchise companies will be open to some type of relief and we will need that. IHG, Hilton and Marriott have all offered some sort of relief on fees and services and some have offered deferral of fees until July. Federal, state and city officials, vendors, utility companies and all in-house contracts should be contacted for relief. That includes landscaping and trash removal, copiers and any services. Prioritizing vendor payments must be done to preserve cash.

Identify Government Resources for COVID-19

The next opportunity for hotel owners to get some relief starts tomorrow with the opportunity to file an application for the Payroll Protection Plan (PPP). This is a loan to help pay operating expenses and it will be forgiven if 75% of the loan is used for payroll.

The loan size is generally measured by taking the total payroll including payroll taxes and benefits for the past 12 months (I believe lenders will allow total 2019 payroll) and divide it by 12 and multiply it by 2.5 to get to 2.5 times your average payroll. A payroll of $1.2M would be $100,000 per month average times 2.5 or $250,000 for the hotel.

I highly recommend you do this—brokers may be used and they are compensated by the federal government as part of this CARES Act but you may apply directly using your preferred lender—just check with them to ensure they are participating.

Apply as a Single Purpose Entity and use the funds for your mortgage, payroll or utilities, again, 75% must be for payroll if you’d like it to be forgiven. The latest word I heard is that if you do not qualify for forgiveness, the interest rate might be as low as .5% or as high as 4%.

Another loan opportunity is the Economic Injury Disaster Loan (EIDL) – this is up to $2 million dollars and includes a cash advance of $10,000 that is not repaid, even if your loan application gets denied. After that free $10,000, the loan appears set to come in at 3.25% but that is a moving target not to exceed 4% interest. The details of how you might qualify for both loans needs further clarification but apply when this becomes available. There are tax credits to look into as well.

Demand Generation

Reach out to local community organizations to see what is going on in the community. While we may be told that social media should go silent, I say engage! We are part of the fabric of our community. Contact churches and other non-profits, local health care providers and hospitals to see if there are partnership opportunities. Contact universities for students unable to stay in dorms and those working remotely to see if they would like the convenience of a room that provides WiFi, no clutter, a desk, a place to lay down and rest, a fitness room, pool, food, beverage, adult beverage, basic retail services and in some cases much more. The market will start coming back in at levels that only feel good because of where we are today.

Operational Efficiencies, Cost Cutting and Organizational Flattening

We can reduce the size of our hotels by closing off a wing or floor, saving on utility consumption, staff services and supplies and completing maintenance work that is difficult to do when we are full. Housekeeping services can be offered to guests on a request-only basis.

We can re-evaluate our cost of guest acquisition and start going after guests who are a better fit for our hotels. Part of revenue management is finding the right guest – once we do that, we need to find the best channel to use. It’s not the average rate, rather it is the net profit that is important. This industry has become much more of a science and while it will always be an art, digital marketing, artificial intelligence and a flattening of the organization will allow us a quick recovery.

Let’s get our managers back out front where they are now and keep them there!

At the end of the day, this is about compassion for employees and surviving the worst economic challenge many of us will ever face together. We will survive and must remember those who are victims of this virus. May our luck turn for the better and soon!