As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.
Of all the industries hit hard by the COVID-19 pandemic, the tourism industry—including airlines, hotels, and restaurants—has arguably been the hardest hit. Many restaurants are still closed for business after five months of shut down—or, if they are open, are operating at limited capacity. Stay at home orders and travel restrictions have kept people from business travel or taking vacations, which has caused a serious decrease in airline and hotel bookings. According to the Bureau of Transportation Statistics, at the end of April, there was a 96 percent reduction in U.S. airline passengers when compared to last year—an unprecedented hit to domestic travel. According to the Organisation of Economic Co-operation and Development, there has been a 60 percent reduction in international travel/tourism in 2020—a number that could jump to 80 percent if pandemic/economic recovery is delayed through the end of the year. And according to the International Air Transport Association—also known as IATA—global revenue losses are projected to be between $63 and $113 billion in 2020.)
The tourism industry is already in a challenging place. And with cases still rising across the country and what could be an extremely fall and winter season ahead, the tourism and travel industries are facing an uncertain future—at least for the remainder of 2020 and into 2021.
Government emergency relief funds have provided some relief to the travel industry; the Paycheck Protection Program issued forgivable loans to help cover payroll and certain operational costs for small businesses in the industry, while the Trump administration granted the airline industry (including major airlines like Delta, American, and Southwest) its own multi-billion dollar bailout.
But industry groups say that the relief hasn’t been enough to address the growing uncertainty in the travel industry—and are lobbying for more targeted relief programs to address the unique challenges facing travel companies, travel agents, airlines, hotel companies, and restaurants.
Let’s take a look at what the different sectors of the industry are pushing for in terms of financial relief (so they can get successfully navigate the coronavirus outbreak and emerge on the other side):
Relief for the airline industry
As mentioned, in response to the pandemic’s initial near shutdown of air travel, the aviation industry received its own targeted coronavirus bailout in April—$32 billion of the CARES Act $2.2 billion stimulus package as payroll support for airline workers.
As part of that aid package, airlines weren’t permitted to make any job cuts or reduce pay for their employees through September 30. But because demand for air travel has yet to bounce back, the airline industry started lobbying for an extension of that $32 billion aid package—as well as pushing for additional relief to support operations through the rest of the crisis. “Airlines are doing their best to stay afloat as they perform the vital task of linking the world’s economies. As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times,” said Alexandre de Juniac, Director General and CEO of IATA, in a March IATA press release.
Relief for the hotel industry
While existing emergency aid programs (including the Paycheck Protection Program) have provided some support to the hotel industry, for many hotels—particularly large hotel chains—the aid simply hasn’t been enough. And with high vacancies and low occupancy rates expected for months to come, the hotel industry is starting to lobby Congress for additional funding.
Major hotel groups (think the Hiltons and the Marriotts of the world), in partnership with major finance firms (both private equity firms and hedge funds), are pushing for their own coronavirus aid package in order to weather the pandemic. Their main argument has to do with commercial mortgage-backed securities—or CMBS. According to lobbyists, high vacancy rates could cause hotels to default on their real estate loans, which could cause a wave of commercial foreclosures, forcing hotels to close their doors—and hotel workers to lose their jobs.
Hotel industry lobbyists are seeking a $14 billion bailout to cover CMBS loans that are near default.
(It’s important to note that one of the big arguments against this relief proposal is that a CMBS-related bailout wouldn’t provide direct support to hospitality workers impacted by COVID-related issues.)
Relief for the restaurant industry
The restaurant industry was among the hardest hit by COVID-19—and they were also one of the industries that struggled the most with getting adequate financial support. While many independent restaurants received loans through the Paycheck Protection Program, the criteria for loan forgiveness didn’t take into account the ongoing challenges restaurants faced in reopening their doors (including social distancing measures that limit serving capacity).
And there’s a lot at stake in keeping the restaurant industry afloat. According to the Independent Restaurant Coalition (IRC), in the US, there are approximately 500,000 independent restaurants that employ 16 million industry workers—with revenue from the industry making up a whopping 4 percent of the United States’ GDP. And a huge majority of those restaurants (85 percent, according to the IRC) are at risk.
The restaurant industry has struggled to get the relief they need to weather the coronavirus pandemic. But they’ve responded by coming up with their own relief proposal to take to Congress, President Trump, and the White House—the RESTAURANTS Act of 2020.
The initiative, which is being spearheaded by the Independent Restaurant Coalition, would establish the $120 billion Independent Restaurant Revitalization Fund, an emergency relief fund aimed towards helping independently owned restaurants and bars navigate COVID-19 and the resulting slow downs (or, in many cases, lockdowns).
What’s next for these at risk travel industries?
There’s denying that the travel industry is at risk. But what does the next phase of the pandemic look like for travel? That remains to be seen—although it seems social distancing measures will be limited tourism operations for the foreseeable future.
There’s no way to know exactly what’s next for the travel industry. But hopefully, the government will provide some sort of additional financial recovery to help tourism weather the storm until people can get back to regular traveling—whether that’s jetting to Singapore, staying at a luxury resort in the Caribbean, or eating their way through the best restaurants in New York.