In reading the great body of speculation and predictions of how the hospitality industry may fare over the next few years, it is difficult to reach a conclusion. The range of views among “those in the know” goes from “recovery is in sight” to “we’re not even close to the bottom.” I suppose this is the reason one particular “what if” scenario keeps coming to my sleep mind.
If the government could, effectively, take over banks and car companies, why not hotel companies? Aren't some “too big to fail?” Shouldn't some in the industry be getting bailout money? Since only about 10 percent of the stimulus money has been spent, a huge pot of largesse is available to save hotels and all those jobs.
Our elected officials would never let a crisis go to waste, so why not save an industry critical to the American economy? It could all be done in the blink (or is it wink?) of an eye, with even a 1,000-page bill passed without a single legislator actually reading it. Who says Congress isn't efficient?
I see it all clearly. The announcement comes that the Hotel Asset Investment & Restructuring program is ready. So fast-tracked is the HAIR program that not only has the bill been passed and signed, but also the president has announced a HAIR czar (who is fully qualified for the position because she stayed at a Holiday Inn Express), and several assistants have been identified to work on immediate and full implementation of HAIR.
As promised, HAIR money is made available to hotel owners and operators struggling to make mortgage payments to banks that have received bailout money. Companies in other industries receiving bailout money are required to hold quarterly meetings at hotels with meeting facilities. Congressional hearings move from Washington, D.C., to five-star hotels all over the country and, during winter months, the Caribbean. Congressional committee members and their staffs are mandated to pay rack rate.
All this comes at a price, as I watch HAIR let down those who had such high hopes. Taxpayers now own 60 percent of the stock in hotel brand companies and a like amount in the entities that own the hotels and resorts. In some states, unions own another 20 percent. What about the people who bought condo-hotel units, fractionals and timeshares? Congressional leadership patiently explains that America cannot guarantee success. Failure is an important part of the capitalist system. Not everyone can be bailed out.
Surprisingly, the HAIR program is a little rocky at first. Calling for a reservation means being put on hold, only to be told after a half-hour wait to leave a message and someone would be back in touch within a month. On the other side, however, the sometimes-difficult choice among brands and price competition is eliminated. All rooms have the same price and you get whatever room is assigned to you, eventually. We are promised significant improvement over the next decade.
All purchases by a hotel company that received HAIR money must be from American vendors certified by the HAIR czar, even if the hotel or resort is not in the U.S. The first certifications are expected to be completed in the next six months.
Layoffs of hotel workers are not permitted, except for executives, GMs and department heads with records of success. Some already have been replaced by people who have lost their jobs in other industries because of bankruptcy or government takeover. If they’re patient, they’ll get new jobs in industries that are taken over by the government in the months and years to come. The government announces that experience is greatly overrated. Seasonality is excluded as a basis for determining the proper number of employees or rate adjustments. Tipping is prohibited, but the HAIR czar, a veteran of the cornflake industry, does not expect any diminution in the quality of guest services. In-room movies will be only permitted if it’s on the list published by the czar. Food must come from an organic menu selected by the czar. It’s part of keeping people healthy to control health-care costs, although sugar-frosted flakes are included.
The concept of individual brand standards has been replaced by governmentally adopted standards for rooms and amenities determined by a new, temporary (its continuing need will be re-evaluated in 50 years) enforcement agency called the Office of Hospitality Norms and Organization. OH NO will be responsible for deciding what guests should want in a hotel stay.
Some industry wags start condemning the entire scheme as unrealistic, unworkable and downright socialistic. “Look at anything the government runs, like the post office, Medicare, Social Security, any of it,” they say. “Nonsense,” is the reply, “if the government didn’t provide these services, people would have to go without. Do you expect us to stand by and not have everyone entitled to stay in fine, government supervised hotels, whether they can afford it or not?”
Suddenly, I see the future. I think I'm looking at Manhattan streets where I know I can find luxury hotels and boutique masterpieces. Something is wrong with the picture. While some buildings are familiar, the whole place reminds me of Havana today. Was that a DeSoto that just drove by? Time flashes ahead again. The last operating hotel is about to be torn down to make room for a sports complex.
I wake up. It’s only been a dream, or was it a nightmare? The foregoing delusion is solely that of the author, who may need a warm glass of milk before retiring for the night.
Jim Norman is Co-Chair of the Global Hospitality, Resorts and Timeshare practice of Holland & Knight LLP.
