A statewide association has published survey data showing the “devastating” effect of the coronavirus on the hospitality industry and is endorsing a national organization’s proposed multi-step solution to save the industry.
The Michigan Restaurant & Lodging Association (MRLA) on April 22 released research results tracking the economic impact of COVID-19 on hospitality owners, operators and employees throughout the state and published a one-page report detailing the results.
Key survey results included the following:
- 55% of Michigan restaurants are either temporarily (53%) or permanently (2%) closed for business.
- 88% of Michigan restaurant operators have laid off or furloughed workers since the start of the coronavirus outbreak in March.
- 249,000 restaurant employees have been furloughed or laid off in Michigan.
- Michigan’s restaurants are projected to lose more than $1.2 billion in sales in April.
- Lodging operators have laid off or furloughed more than 87,000 workers since the start of the coronavirus outbreak in March.
- Individual hotels and major operators are projecting occupancy rates below 20% for upcoming months. At an occupancy rate of 35% or lower, hotels may be forced to close permanently (American Hotel & Lodging Association).
Justin Winslow, president and CEO of the MRLA, said Michigan’s restaurant industry is feeling the pain “more acutely” than other states.
“The prolonged closure of Michigan’s economy, while challenging for us all, has taken a particularly heavy toll on the state’s hospitality industry, which continues to suffer untenable losses. The road to recovery will likely be long as an uncertain general public awaits clarity on their safety,” he said.
“People miss restaurants as much or more than anything else when they’re (being asked) what they miss right now from being shuttered into their homes. If we want restaurants and hotels to be there for us on the other side, when we start to re-emerge into something that looks more normal, there’s going to be a need for more flexibility, forbearance and infusion.”
He said those “three F’s,” as he calls them, refer to flexibility on existing loans, forbearance on taxes and other regulatory requirements, and an infusion of dollars to see the industry through.
With that in mind, Winslow and the MRLA are endorsing “a holistic solution to secure the immediate safety and prolonged success of Michigan’s hospitality industry” as put forth by the National Restaurant Association (NRA) and American Hotel & Lodging Association (AHLA).
The plan advocates for the following actions:
1) Enact more flexibility in the Paycheck Protection Program (PPP).
- Allow restaurants and hotels to choose an eight-week loan period that works best for them, that is at least three weeks after the shelter-at-home order is lifted.
- Revise the loan forgiveness restrictions — which currently require 75% of the loan to be spent on payroll — to better reflect the challenge of closures and travel restrictions that have particularly hampered the hospitality industry.
- Restore a 10-year loan repayment timeline for PPP, which was part of the original legislation. “The two-year repayment mandate invoked by the Treasury Department further exacerbates the problem for an industry that will be slow to return to anything approaching normal sales and profitability,” the proposal authors said.
2) Enact the “Restaurant and Foodservice Industry Recovery Fund” (RFIRF)
- The newly conceived RFIRF is a $240 billion grant proposal that would compensate restaurants for capital and workforce expenses necessary to successfully reopen.
3) Create a commercial-backed mortgage securities (CMBS) Market Relief Fund in the U.S. Treasury’s Main Street Lending Program.
- Hotel operators, from the smallest independents to larger, multi-unit operators, are facing an “unprecedented” cash-flow crisis and as such are requesting a $10 billion bridge loan fund to be created within the Main Street program created by Treasury and the Federal Reserve. The financing will allow hotel operators to make debt payments, the associations said in the proposal.
4) Offer tax credits to meet new requirements.
- When given the opportunity to fully reopen, restaurants and hotels will have little or no cash flow and significant new overhead associated with anticipated PPE requirements, increased sanitation and diminished capacity through social distancing. A refundable tax credit, or administration grant program, to help restaurants bear these costs would support the industry in these difficult times, bolster public confidence and enhance the well-being of employees and customers, the proposal said.
5) Provide Federal Unemployment Tax Act (FUTA) forbearance for employers.
- A policy providing forbearance on FUTA taxes in the short-term “would provide needed liquidity support for the hospitality industry,” according to the proposal.
6) Enact the “SNAP COVID-19 Anti-Hunger Restaurant Relief for You Act of 2020” (introduction pending Congress reconvening).
- This proposal would expand the Restaurant Meals Program (RMP) to serve everyone on the supplemental nutritional assistance program (SNAP), waiving requirements to enable states to quickly and easily participate.
Winslow said he is encouraged by early receptivity from Congress regarding the proposals.
“The hospitality industry is simply too big to fail in Michigan. Collectively, we are 18,000 private businesses that employ 1 in 8 Michiganders and generate nearly 10% of the state’s revenue (with 16,500 of those establishments being restaurants),” Winslow said.
“Restaurants and hotels have been there for Michiganders, providing some of our favorite experiences and best memories. Now, in our time of need, we are calling on elected leaders on both sides of the aisle, in Lansing and in Washington, D.C., to focus their energy and resources on saving this industry.”
Winslow said he believes Congress likely won’t vote on the proposal for at least a month.
“There are a lot of unknowns between now and then, and I think it’s incumbent on us as an association and our members to be communicating, to do the grassroots roots work necessary to make sure that they all understand how severe the problem is,” he said.
The full MRLA survey report is available at mrla.org.
The NRA Blueprint for Recovery can be found at bit.ly/NRAblueprint.
Results from a similar national survey by the AHLA are available at bit.ly/AHLAsurvey.