Springfield Business Journal_2020-04-06

SPRINGFIELD BUSINESS JOURNAL · 25 APRIL 6-12, 2020 “The decrease will widen the last three days of the month,” Kimberlin said via email. “April numbers will look like the numbers from the week of (March 22- 28) for the entire month.” Data show the occupancy rate plum- meted to 25.5% during the seven-day span. That compares with a citywide oc- cupancy rate of 88.7% during the same week of 2019, according to the CVB. For the month of March, occupancy was 44.2% through March 28, Kimberlin said. The drops have impacted the local economy as a whole, he said, as city and county hotel sales and room taxes dropped to the tune of $406,814 through March 28 compared with a year earlier. “The total loss of taxes from the drop in visitor spending is at least double the amounts ... and the tax losses will be even greater in April,” Kimberlin said. On the national level, the American Hotel & Lodging Association estimates that 3.9 million jobs have been lost amid COVID-19, and it anticipates this num- ber could reach 5.2 million as the crisis continues. Cara Walker Whiteley, president of the Springfield Hotel Lodging Associa- tion, said the industry has been “uproot- ed.” Whiteley said she didn’t know with certainty how many layoffs and fur- loughs have occurred as a result of the coronavirus pandemic, but she said “it has happened to hundreds of hotel employees and will continue to happen as hotel occupancy drops into the single digits.” “The SHLA has 50 hotels in its membership and ev- ery hotel has experi- enced the sudden and drastic decline in hotel occupancy,” she said. Whiteley cited travel restrictions and canceled events for a drop in the typi- cally fruitful month of March. The Q Hotel & Suites, Greenstay Court- View and Bass Pro Shops Angler’s Lodge have shuttered temporarily, she said. Ruthie Javier, acting general manager at SpringHill Suites, said the hotel had laid off at least 10 employees as it works to fill a fraction of its 92 rooms. The ho- tel opened in October 2019 with 25 em- ployees. “We’re not getting more than 10 rooms a day filled,” she said. “We’ve had quite a few layoffs, but we’re still work- ing through that.” Javier declined to comment on wheth- er the management team, Dallas-based Hospitality Manage- ment Corp., would be applying for a busi- ness loan to help re- cover. Hotel Vandivort General Manager Zackary Oxley said both of its restau- rants have closed and that “business is slow.” He declined to disclose specifics on occupancy and staffing but said the hotel has been filling in the “neighbor- hood” of 10 of its 98 rooms. The hotel’s $9.75 million V2 expansion opened in September with 48 new rooms adjacent to the existing downtown lodging cen- ter. Springfield Business Journal reached out to multiple hotels in an effort to gauge the impact of the coronavirus pandemic on the hospitality industry. Other hotel operators did not return re- quests for comment by press time. Springfield hotel operators O’Reilly Hospitality Management LLC and EAS Investment Enterprises Inc. pre- viously disclosed temporary layoffs. Earl Steinert of EAS Investment En- terprises estimated he let go half of his roughly 160-employee workforce among the three Hampton Inn & Suites and a Home2Suites by Hilton Springfield North, according to past reporting. O’Reilly Hospitality Management LLC CEO Tim O’Reilly also told SBJ in mid-March that he had made an undis- closed number of temporary layoffs due to the coronavirus impact to the indus- try. O’Reilly Hospitality’s website lists 20 hotels and 11 restaurants and bars un- der its management across nine states. Payroll protection Through the Paycheck Protection Pro- gram, employers of 500 people or less can apply for a loan of up to 2.5 times a business’ average monthly payroll costs. The loans, which can’t exceed $10 million, may be forgiven if the busi- nesses maintain their payrolls dur- ing the COVID-19 crisis or restore their payrolls after- wards, according to information from the U.S. Chamber of Commerce. Bor- rowers who laid off workers are still eligible for the program, which is operated through the U.S. Small Business Administration, but they must reinstate jobs and salaries by June 30 to recover credit toward loan forgiveness.  Business owners can use the costs to cover rent, utilities, mortgage interest and payroll, exclud- ing individual wages of over $100,000. It’s a move to keep people employed, especially with unemployment claims reaching 3.3 million in late March – smashing a decades- long record. The St. Louis Fed- eral Reserve recently estimated the U.S. unemployment rate could hit 32% with 52.81 mil- lion unemployed workers by the second quarter. The February unemployment rate was 3.5%. “The typical knee-jerk reaction is to let your staff go,” said John Everett, Legacy Bank and Trust Co. CEO and president. “The ability to keep your staff paid for eight weeks and keep that cash flow going for them, … that’s problem No. 1 for small busi- nesses right now.” The application process to divvy out the $350 billion in federal loans started April 3, and Everett anticipated the funding would run out quickly. He said every local busi- ness client he’d been in contact with was interested in applying for the program, and most businesses in Springfield fit the re- quirements. “It’s going to give an immediate boost to cash on hand, but this isn’t going to solve all of their problems,” Everett said. “This is maybe a week or two late. Most businesses can’t go two weeks with virtually no mon- ey coming in, and the reality is ... we don’t know when they’ll get it.”  Employers can file for both the paycheck program and an SBA economic disaster loan, which is available at up to $2 million, but Everett said they cannot receive both loans.  Bill Dunton, managing partner of Abacus CPAs LLC, said even with payroll assis- tance, some businesses won’t make it through the crisis. He said the rule of thumb for many is to have at least three months of overhead costs saved for an emergency. “Not everybody had that or could have that money saved, so times like these flushes out those businesses,” he said.  Mullins pointed to a nation- wide trend that could be the demise of some businesses. “If you didn’t have the cash on hand saved a month ago, you don’t have that right now,” he said. “We’ve lost the national need to prepare for these black swan events that will happen. “As a culture and a society, we haven’t set up an economy that’s geared to think- ing about the next crisis; it’s about what my earnings per share will look like at the end of the next quarter.” Mullins pointed to a lack of inventory for face masks and toilet paper at stores and hospitals as examples. Aside from the financial impacts, Everett sees a corporate cultural shift coming, such as businesses adopting their temporary on- line or consumer-catering business models. “Some businesses won’t be able to come back, consumer behaviors will change and we’re going to be in a new economy after this,” Everett said. Tax credits, unemployment Businesses that don’t get a loan through the Paycheck Protection Program are eligible for a re- fundable payroll tax credit if they retain workers among the COVID-19 pandemic.  The credit is equal to 50% of quarterly employee wages, or up to $10,000 per worker, and it can be claimed against quarterly payroll taxes. Eli- gible employers also must have been fully or partially suspended per a government order or they must report a 50% reduction in quarterly receipts because of COVID-19.  Owners with 100 or fewer full-time em- ployees can claim the credit for all paid staff, and employers with more than 100 full-time workers can claim a credit for those who were furloughed, according to information from the Treasury Department. The CARES Act also allows employers of small businesses to defer their portion of the Social Security payroll tax, which is a 6.2% rate. Though the act is aimed to keep people em- ployed and businesses operating, Congress also included $250 billion for an extended unemployment insurance program that of- fers unemployed workers an additional $600 per week for four months to what they’re al- ready receiving from the state.  Dunton says this could affect business owners because some employees may choose not to rejoin the workforce as quickly.  Additionally, the Families First Corona- virus Response Act, which took effect April 1, requires em- ployers provide two weeks of additional paid sick leave to all employees that are either quarantined or have to care for someone in quaran- tine. Accountant Matt Clark of Abacus CPAs said the mea- sure allows employers to keep an employ- ee on payroll, but the payroll costs will be alleviated by the Social Security Adminis- tration. “The employer will recover the funds through their normal payroll tax filings,” Clark said. “At the end of the day, the em- ployee will get to still have a paycheck and the employer will not bear that burden.” FROM THE COVER Stimulus: Unemployment rate could reach 32% by the second quarter Continued from page 1 Hotel: American Hotel & Lodging Association estimates 3.9M jobs lost Continued from page 1 Bill Dunton: Employers should have at least three months of overhead costs saved. Some businesses won’t be able to come back, consumer behaviors will change and we’re going to be in a new economy after this.” —John Everett Legacy Bank & Trust Co. Steve Mullins: The $2 trillion package is the first step for U.S. economic recovery. 72.4% Drop in Springfield hotel room revenue March 22-28