For hotels, restaurants and other hospitality-related businesses, the steep cost of the coronavirus pandemic is spelled out by public health mandates. Stay-at-home orders are necessary to limit community spread of the incurable virus — and especially devastating to businesses that depend on people socializing.
By early March, when the Covid-19 virus had already caused companies to shutter corporate travel, hotels in Charlotte and across the country saw their reservations dissipate almost overnight. For the month, local hotels generated half as much revenue compared with the same period in 2019, according to industry tracking firm STR.
And the immediate future looks just as bad.
“Our hotels literally dropped 90% across the board,” SREE Hotels Principal Vinay Patel told a city task force on small-business recovery this week. SREE is a locally based company that owns 24 hotels, including 12 in the Charlotte region.
To cope, hotels and restaurants have closed, reduced business hours, cut pay, shed jobs, enacted furloughs or a combination of all of the above. Among the local layoffs, according to state filings: BLT Steak, 57 jobs; Crowne Plaza Charlotte Executive Park, 85; Great Wolf Lodge, 254; Hilton Charlotte Center City, 163; and airport concessionaire HMSHost, 815.
Marcus Jones, the city manager, told council earlier this month that hospitality tax revenue will likely be off by 85% through mid-summer, with an anticipated gradual recovery that won’t see a return to normal levels before the spring of 2021.
For the current budget year, ending June 30, the city estimated tourism tax revenue of $60 million, or a 9% gain from $55.1 million in fiscal 2019. Revised figures have not yet been disclosed.
Taxes on hotel rooms, restaurant meals and rental cars are the lifeblood of the Charlotte Regional Visitors Authority. City government and the visitors authority use that revenue to pay for tourism and convention marketing and recruiting as well as construction debt, maintenance and operating costs on various publicly owned venues — all responsibilities that fall to the visitors authority.
Jones did have one piece of good news regarding tourism funds. He told council that reserve debt funds will allow for all existing and approved projects to continue being repaid, including the NASCAR Hall of Fame, the Charlotte Convention Center and the Spectrum Center.
Mayor Vi Lyles has said several times in recent weeks that the hospitality industry is a primary concern for her in economic recovery efforts. Hospitality accounts for one out of every nine jobs in the region, according to federal labor data.
Site selection, corporate relocations sure to change with Covid-19. Could Charlotte stand to benefit?
Murray spoke to the Charlotte Business Journal this week about the challenges ahead, hopes to stage the Republican National Convention as scheduled in August and the importance of regional tourism in a post-pandemic world. Questions and answers have been lightly edited for context and clarity.
What’s your assessment of the industry now and where do you see things going in such an unpredictable time?
It was easy to understand where we would be once we decided that we would ask people to stay at home and shut down business when our business depends on people traveling and getting out to restaurants and bars and meeting in large groups. I don’t think there’s any surprise that we’re operating at incredibly low levels and only essential travel is happening.
Looking through today’s lenses, the statistics show that we shut down the business — and we did. What’s a little surprising is that there are still people staying in hotels and traveling. Those are largely people that are essential travelers, (like) people that are driving trucks and stopping off to stay (overnight). The hotels are running 20% occupancies. There’s very little uptown, it’s more in these economy-type hotels or mid-scale hotels.
The good news is we’re looking into the future now. As the virus becomes more and more contained and as we start easing restrictions, it will start to be easier to see how our business recovers.
What are some of the possibilities?
Probably different parts of our industry will recover at different times. The large groups, meetings and events business, obviously, will be last to figure that out. It’s not sure how fast all that will happen but, at some point, we know that we’ll get back to business as we’ve experienced in the past.
Mayor Lyles has spoken about the need to take additional steps to help hotels and restaurants in particular. What have you heard from her or the city about some possible recovery ideas and plans?
For us, I think what we can do best is be prepared to drive travel once it’s appropriate. We’ve been doing exactly that: The team has been busy gearing up for what will happen after we get through the shutdown, particularly on the marketing end.
We’re excited about that travel demand because of our history of being able to drive demand through our marketing. [The visitors authority will focus on 12 cities within a 250-mile drive, including Nashville, Tennessee; Raleigh; Durham; Greenville, South Carolina; Spartanburg, South Carolina; Columbia, South Carolina; Charleston, South Carolina; Atlanta and Richmond, Virginia. Two-thirds of leisure visitors already come here from within a 300-mile radius.]
Research tells us that people will be more likely to drive than fly and we are more likely to benefit from the market that we normally speak to, a 250- to 300-mile drive radius. Last year, 2019, our marketing drove $670 million of impact into our market. We know we can do that.
What about conventions?
Our sales team has been working really hard at rescheduling business that was scheduled for the end of March, April and May and re-booking into this year. The good news for us is, today, if all the business that we have booked into the future shows up and the virus goes away, we will exceed our long-range forecasts for this year given that we expected to be down a bit because we’re under construction (as part of a $127 million expansion).
Just about all of our space in the fall is full. We’ll have to judge and see whether people are willing to travel to meetings by the time the fall comes around but when travelers are ready, we’ll have a good head start. In the longer range, our booking pace is ahead of where we were historically and part of that has to do with the new meeting space we currently have under construction (scheduled to open in 2021).
What will conventions look like going forward?
Our team is thinking about how we would set up rooms (if social distancing is required), how we would serve food, how we would protect employees, how we would protect customers. My guess is we’ll transition slowly over the summer and, at some point, those measures may no longer be required. Hopefully, that is by the fall, but we’ll see.
With the hospitality taxes going down, how does that affect the visitors authority?
The way we model tourism taxes into the future takes into account black swan-like events in terms of major crises. And all of the research that we’ve done tells us we will come out of this crisis like we have with other major ones.
There were some pretty impressive tax collections prior to this and those will be offset by the losses we’re having in the March-April-May-June (period) and maybe even into the fall.
The funds will be strong into the long term. In the short term, the collections will be down, but these funds are not about three months of collections or six months of collections.
From us, we take a small portion of the funds for the convention center, for operations and for marketing our city. There are also investments we make into capital. We’re under construction with the convention center expansion and we’re just finishing up The Connector facility (a $20 million, 35,000-square-foot addition that bridges Bojangles’ Coliseum and Ovens Auditorium).
Any layoffs or pay cuts?
To date, we have retained all of our full-time employees and the large majority of them are working from home. Our sales team has been inundated with new business but also dealing with rescheduling old business and our marketing team has been working on our efforts to come out of this.
So, for the most part, the full-time are being paid. The part-time employees are being paid as part of a temporary pay plan that takes their average hours over the last six months and pays them a portion of those hours. [CRVA has 1,200 full- and part-time employees.]
Will you need to dip into your reserves because of this?
As far as the strength of the CRVA’s balance sheet, the good news is that we’ve had a good run over the last number of years and we’ve built up a reserve like the city has done, which is 16% of operating costs.
But then we went beyond that and built up a rainy-day reserve fund. We’ll definitely eat into that reserve substantially, but we still think we’ll be able to have the fund balance above 16%. [The fund balance was $21 million at the end of February and projected at that time to decrease to $15 million, or $1.5 million below earlier forecasts of $16.5 million, by the end of fiscal 2020 on June 30. A 16% reserve is equal to $10 million.] I think we’re in good financial position.
What’s your confidence in the RNC taking place as scheduled in August?
It takes an incredible amount of prior planning and a lot of that has happened to date. The teams are all working diligently as if this is going forward. (The RNC) has suggested it is full steam ahead and they expect to have it. I can’t predict what the virus will do, but I would hope that if we recover quickly it might be a way for us and Milwaukee (the Democratic National Convention site) to show that large-scale meetings can be healthy again. That’s an opportunity and if it’s possible, I think that will certainly be a big boost to the industry. August is still some bit away and things are changing dramatically. If we’re able to have meetings, our books are full … We’re waiting till the experts tells us that it’s okay to move forward.