COVID-19: Tax revenue will fall US$16.8B | | A U.S. domestic travel credit?

U.S. hotel tax revenue will decline US$16.8B in 2020

As a result of the sharp decline in travel demand from COVID-19, state and local tax revenue from hotel operations will drop by US$16.8 billion in 2020, according to a new report by Oxford Economics. Some of the hardest-hit states include California (down US$1.9 billion), New York (down US$1.3 billion), Florida (down US$1.3 billion), Nevada (down US$1.1 billion) and Texas (down US$940 million). These impacts represent the direct tax revenue decrease from the severe drop in hotel occupancy, sales and gaming taxes. The figures do not include the potentially significant effects on property taxes supported by hotels (nearly US$9 billion).

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A shot in the arm for U.S. travelers

Lobbyists continue to work with Congress and the Trump administration on a US$4,000 tax credit that American households can use for domestic travel, including restaurant visits. The U.S. Travel Association said the concept is modeled after a tax credit for first-time homebuyers that Congress passed in response to the housing bust and financial crisis from 2007 to 2009. The Orlando Sentinel reports that early drafts of the Explore America credit could be worth up to 50% of a household’s spending on expenses like airfare, rental cars, hotel rooms, tickets to attractions and dining at restaurants that are at least 50 miles away.

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Restaurant group ruled exempt from rent during pandemic

A federal judge ruled that a Chicago-based restaurant group was not required to pay rent during the pandemic. That decision is significant in the context of the treatment of leases during the COVID-19 era, as it is one of the first examinations by a court of a force majeure clause’s applicability to governments’ Stay at Home orders, according to an article from the law office of Paul Hastings. While the decision is not binding on other courts, it may have a substantial impact on other cases — particularly because U.S. state courts often look to federal courts (including bankruptcy courts) for precedent.

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U.S. hotel performance up slightly

U.S. hotel performance data ended June 13 showed another small rise from previous weeks and less severe year-over-year declines, according to data from STR.

June 7-13 (percentage change from comparable week in 2019):

•   Occupancy: 41.7% (-43.4%)

•   ADR: US$89.09 (-33.9%)

•   RevPAR: US$37.15 (-62.6%)

Expedia partners on new travel campaign

A marketing agency has created a campaign designed to inspire the return to travel post-COVID-19. MMGY Global’s “Where can travel take you,” which was created in part by Expedia Group’s media department, is intended to share “a message of positivity” and remind U.S. travelers of the power of travel. The digital campaign will run in June and July this summer and will be featured on connected TV, video and social platforms.

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Hyatt’s added safety standards

Chicago-based Hyatt Hotels Corp. is collaborating with medical experts and industry advisers to fine-tune reopening and operating procedures such as employee reorientations and enhanced cleaning and safety protocols, as well as a “Hygiene and Wellbeing Leader” at every property. Some new employee standards include:

•    Daily temperature checks of all employees upon arrival to the hotel 

•   Wellbeing check reminders sent to employees prior to arriving at work 

•   Personal protective equipment like face coverings required by all employees

•   Social-distance guidance and additional hand sanitizer stations in employee areas

•   Complimentary access to Headspace for Hyatt employees to practice mindfulness and self-care if needed 

Design Hotels lays out financial cost of virus

Berlin-based Design Hotels AG has provided an update on its operations and financial guidance. Of note:

•   Design Hotels members have been confronted with an unprecedented reduction in business. This, in turn, has had a major impact on revenues accruing to Design Hotels from transaction fees and marketing and consulting services.

•   The most severe impact so far was recorded in May, with revenues down by approximately 99% compared with the prior year. For the full fiscal year, the company now anticipates a revenue decline of over 60%, with most of the revenues for the year booked during the first quarter, prior to the impact of the pandemic.

•   By the end of May, weekly bookings through the company’s system were off by approximately 90% over the prior year. While a gradual and modest improvement has been recorded since then, as of mid-June the booking pace remains off by around 76% over comparable periods.

•   Currently, 215 of the 334 member hotels in the Design Hotels system are closed. The company expects a gradual reopening over the next several months, as countries loosen their respective travel restrictions. However, it is not possible at this point to project how many of the hotels in the system will re-open, even when permitted. In addition, the global economic impact and health and safety related behavior changes caused by the pandemic are expected to have an impact on booking patterns.

•   In light of the significant decline in revenues, the company has aggressively moved to reduce expenses. Design Hotel’s CEO Peter Cole has followed the lead of its majority shareholder on executive compensation and has taken a salary cut of 60% for the remainder of the year. All staff have agreed to accept either reduced salaries (27% of staff) or have agreed to short-time work (73% of staff). The company has also worked with its vendors and has reduced payments to third parties for rent and other fixed costs.

Elsewhere: The hotel destination for Trump donors

Amelia Island in Nassau County, Florida, will be U.S. President Donald Trump’s re-election campaign’s preferred hotel site for top-dollar campaign donors during the Republican convention in late August. “Trump Victory” sent out invitations Tuesday about convention-related perks based on a different levels of support for Trump’s campaign, going as high as US$1.1 million for the “Presidential Trust” package. The invitations do not name the hotels on Amelia Island, which is home to the Omni Amelia Island Resort and the Ritz-Carlton, Amelia Island. The hotels will have daytime convention-related activities, the invitations say.

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