Every hotel owner or manager is in a different situation, however the one common denominator for the hospitality & leisure industry, is the epic negative impact this epidemic has had on the travel industry, with less people flying for both business and leisure, which has resulted in the vast majority of hotels across top 25 markets to experience never before seen low occupancies. As of the latest STR data available, only 10 of the top 25 markets had an occupancy above 30%. Currently, many hotels are basically empty.
At this time hotels seem to be one of the preferred asset types with the most rapid potential to be converted or adapted to temporarily serve at some capacity as a medical facility. The reason for this is that most often hotels have self-contained a/c units that may be adjusted to create negative pressure inside the room, much like hospitals do in order to minimize potential cross-contamination. Hotel owners / operators would need to consider a few things.
At what capacity can an individual asset or hotel company / portfolio able to assist?
1. Analyze the hotel’s current situation and willingness to assist.
a. If the hotel is empty, thinking about assisting may make sense considering the alternative would be to shut down the operation which would require furloughing or firing of the staff. Staying open at some capacity would provide some sort of a “lifeline” to the hotel and its workforce.
b. If the hotel has a low volume of guests who may be weathering out the storm, then to what extent is the hotel willing to assist before it may put its guests’ well being in
jeopardy or start creating potential negative PR with its current guests. If this is the case, something to consider and looking into would be some sort of waiver or release. (AHLA’s sample waiver and release of liability by hotel guests).
2. To what capacity is the asset able to assist?
a. “Full / Partial Transformation” of the hotel into medical facility to handle infected patients. If the hotel has sufficient meeting/conference space, it may consider providing its meeting space to create a pop-up / temporary medical area.
b. “Patient Shelters” to assist coronavirus patients with mild symptoms or to isolate those who may have been in contact with confirmed cases. OR used to house patients who are not COVID-19 patients, but regular patients at hospitals who do not need the types of intensive care that would require a vast area of hospital equipment so as to free up space for those who do need a more intensive level of care in hospital.
c. “Housing for First Responders” by potentially providing free of charge or at a discounted rate for hospital workers who are exposed to patients daily and may need a safe place to rest and shower to their work. More importantly, provide a safe place for front line health care workers who are at a higher risk of contracting the illness and subsequently passing it on to their families or fellow commuters a place to stay in the meantime.
What are some of the considerations to think about?
1. Operational considerations include, but are not to be limited to the following:
a. Ensuring staff safety. Even thoug a main reason to assist would be to keep its current staff employed, guaranteeing their safety should come first. Would need to understand and clearly define the following:
i. Limit the access of hotel staff to certain areas of the hotel, with trained health professionals required to interact with patients.
ii. Define how is “housekeeping” and laundry to be handled and to what standards should the rooms be cleaned and sanitized.
iii. Will food service be required and if so, who will provide this service and more importantly who will deliver to medical staff or patients.
b. Pro-bono vs Reduced Rate. Will rooms be complimentary or available at a steep discount and yet more importantly what will be the length of agreement term and payment methods (in-advance or arrears) between the government and hotel owner.
c. From an insurance perspective who will take the claims exposure, and will insurance policy cover this new activity?
d. Potential future PR impact. It is a crisis and there is a social responsibility to help that every individual and business entity has. However, the reality is that this could
potentially create a negative stigma with future guests negatively associating the hotel with the virus. However, on the flipside, this could eventually turn out to be a great
marketing campaign. An important thought to keep in mind is that whether it is through donations whether it be money, food, time, rooms, etc. every organization can find ways to help in situations like this.
How to understand whether your situation allows your hotel or portfolio to help?
- A good source of information to help owners or operators understand the needs and requirements in your markets would be to visit the American Hotel & Lodging Association (AHLA) website. They have launched a campaign, with its own independent landing site called Hotels for Hope, which is basically a national database to help connect hotel properties with the health community in order to assist meet their growing demands.
- The site provides a ten page “EMERGENCY TEMPORARY OCCUPANCY AGREEMENT” template. This provides an “on-demand” template listing the terms of how these local governments and health authorities are willing to work with private sector hotel owners or operators.
- More importantly, there are many state hotel & lodging associations, much like the Texas Hotel & Lodging Association (THLA), that are accepting volunteers to enter into lease or other occupancy agreement with the government. The THLA’s website stated that the nature of this lease would vary depending on local needs, but in many cases, it would involve a request to quarantine individuals with a pending or positive COVID-19 test.
This Legal Alert provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.