Articles Posted in Coronavirus

Coronavirus alerts for hoteliers

Published on:

27 April 2021

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As coronavirus cases drop and economic activity starts to return to normal, the hospitality industry will soon be able to begin replacing workers who were laid off due to the pandemic. Some cities in California, and now the entire state, have enacted requirements for how hotels and other businesses can fill open positions; my partner, Travis Gemoets, has summarized the new law below.

California hospitality workers laid off during COVID-19 pandemic get rehire rights

by
Travis M. Gemoets, Partner & Senior Member of
JMBM’s Global Hospitality Group®

On Friday, April 16, 2021, Gov. Gavin Newsom put new employer obligations into law by signing Senate Bill 93, requiring hotel, event center, airport hospitality and janitorial employers to first rehire workers laid off during the pandemic when jobs become available, essentially establishing “recall rights” more commonly associated with union collective bargaining agreements. Senate Bill 93 takes effect immediately after quickly making its way through the Legislature as a budget trailer bill and will be in effect until the end of 2024. Gov. Newsom vetoed a more expansive labor-backed bill last year.

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Published on:

19 February 2021

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The Global Hospitality Group® just hosted a very timely webinar discussing the state of the hotel and CMBS industries. Our program featured senior representatives from Argentic, Greystone, and Situs – three of the largest CMBS special servicers with the most distressed hotel debt – as well as leading data and analytics firm Trepp, HREC’s runway capital program, Manhattan Hospitality for hotel industry perspectives, and our own hospitality workouts and receivership expert to break down the current state of the distressed hotels market and CMBS special servicing.

Two of our panelists, Jack Westergom of Manhattan Hospitality Advisors and Manus Clancy of analytics firm Trepp, presented slides packed with useful information, and we wanted to make them available to those who were not able to attend the program. Jack’s update on the state of hotel industry, and Manus’ state of the CMBS industry presentation are both available for download below.

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Published on:

08 January 2021

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We have a new PPP Loan authorization bill out of Washington, after months of political wrangling. Congress could have done more, but they did provide for up to $2,000,000 in additional forgivable loans per borrower, along with provisions which specifically cater to the hospitality industry.

As Jay Thompson and other members of our Corporate team write below, Congress has made obtaining a PPP loan and getting forgiveness for that loan easier. They have also expanded the definition of what can be an “eligible expense” upon which to base a PPP loan, and they have allowed for the issuance of a PPP Loan to a borrower in bankruptcy as part of a restructure of the borrower’s business. The Small Business Administration wasted no time in starting to issue interim rules interpreting the new law, and we will probably see one or two more before they produce a working application form.

COVID Relief Bill: Changes to the Paycheck Protection Program and New Lending Terms

by
Jay Thompson, Vanessa Han and Marianne Martin

On December 27, 2020, the President signed the Consolidated Appropriations Act, 2021 (“2021 Act”), which contains the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”). The acts contain changes to the Paycheck Protection Program (“PPP”) that are intended to limit assistance to small businesses that need the financial support. The following highlights the impact of the 2021 Act and the Economic Aid Act on PPP loans.

Tax Treatment of the Paycheck Protection Program Loans

The 2021 Act provides for special tax treatment in Division N, Section 276 for forgiveness of loans granted pursuant to the original Paycheck Protection Program under the CARES Act (“Existing PPP Loans”) and any new PPP loans (“New PPP Loans”) under the Economic Aid Act.

The Economic Aid Act provides that any loan forgiveness under either the Existing PPP Loan Program or the New PPP Loan Program (collectively, the “PPP Program Loans”) shall not be treated as gross income to the recipient for tax purposes or the recipient’s partners or shareholders. Further, all costs that were considered in calculating a PPP loan (salaries, rent and utilities) are still eligible to be used as deductions against gross income of a PPP loan applicant even if it receives loan forgiveness. The IRS had previously issued a ruling that the costs could not be considered as offsets to income if loan forgiveness had been granted to the taxpayer and those costs were used to calculate the Existing PPP Loan.

Specifically, the PPP Program Loans are subject to the following tax treatment:

  • No amount shall be included in the gross income of a recipient by reason of forgiveness of a PPP Program Loan.
  • No deduction shall be denied, no tax attribute shall be reduced and no basis increase shall be denied as the result of the exclusion of the forgiveness amount under a PPP Program Loan from the recipient’s gross income.
  • Neither the partners in a partnership nor the shareholders of an S corporation shall have to recognize any gross income by reason of forgiveness of a PPP Program Loan.
  • The partners in a partnership and the shareholders of an S corporation shall be entitled to their distributive share of any costs giving rise to forgiveness under either of the PPP Program Loans.

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Published on:

20 December 2020

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Hotel Lawyer: What stance should hotels take on mandatory COVID-19 vaccinations?

Most of the world has been anxiously waiting for the “silver bullet” of an effective COVID-19 anti-virus vaccine to save lives, reopen business, save severely damaged hotels and restaurants, and restore public confidence. The FDA approval of the first two US vaccines and the massive distribution immediately thereafter is projected to provide sufficient doses of the vaccine for about half the US population by March 2021 and 100% of the population by the Summer of 2021.

But almost before the anti-virus vaccine distribution started, a significant faction of anti-vaxxers started challenging the effectiveness and desirability of taking the vaccine. Many such advocates said they do not want to take the vaccine, or at least want to wait. Some raised questions about the vaccine’s effectiveness and side effects. Issues of allergic reaction and religious conviction (against the vaccine) were raised. “Social control” issues started to shape the debate and the controversy. It is ironic that so many are fighting for priority to get the vaccine first while others fight attempts to force vaccination.

So, what should hotels do to protect their employees and guests? Can – or should – hotel employers mandate vaccination for their public-facing workforce? What are the important legal and business considerations in charting the right course? CONTINUE READING →

Published on:

19 November 2020

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Hotel Lawyer: Is the hotel industry on the verge of salvation, or precipice of despair?

We are less than a week from Thanksgiving and a lot of new data has been released in the past few days, with important implications for the hotel industry and the economy. Some highlights discussed below are:

  • An American Hotel & Lodging Association survey taken November 10-13, 2020, provides a grim short-term forecast for the hotel industry, saying 71% report they can last only 6 months more, and 34% can last only 1 to 3 more months.
  • A City National Bank (CNB) report provides a November 18 update that new COVID vaccines now claim 90% or higher effectiveness; they might become available in December and be widely available by spring 2021.
  • The same CNB report projects short-term pain (rising COVID cases, deaths and hospitalizations) a decrease in consumer activity, and contraction for the economy (driven by COVID) – but projects a strong economic recovery starting with the second half of 2021.
  • CNB Report warns that its projected recovery in for the economy and markets is “unconditionally dependent on [the COVID] vaccine ending the pandemic.”

The AHLA Survey

The American Hotel & Lodging Association (AHLA) issued a press release on November 19, 2020 with the results of a survey taken November 10-13, 2020 with 1,200 respondents. The survey indicates widespread hotel closures and failures unless there is significant federal economic relief to survive the devastating loss of travel and tourism.

  • 71% of hotels report they will only be able to last 6 more months at current projected business, and 34% say they can last only 1 to 3 months longer.
  • 82% of hotel owners say they cannot obtain additional debt relief from their lenders beyond the end of the year.
  • 59% of hotels says they are in danger of foreclosure by their lenders due to COVID-19.
  • 52% say they will close without additional federal assistance, and 98% would apply for and use another round of Payroll Protection Program (PPP) loans.

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Published on:

15 September 2020

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Boutiques may be adapting faster than other hotel sectors, but still hurting

The theme of the Boutique Lifestyle Leaders Association’s (BLLA) upcoming Boutique Lifestyle Digital Summit is “Dare to Adapt” and there are some compelling arguments as to why the boutique space may be able to adapt to the current economic crisis faster than other sectors in the hotel industry.

“Boutiques can pivot easily,” said Frances Kiradjian, Founder and CEO of the BLLA. “They can make decisions quickly without checking in with brands.”

Take cleaning, an area of great to concern to guests in the current COVID-19 environment. As new information and cleaning methods come to light, boutiques can implement them quickly. As Kiradjian said, “By design, some boutiques have a smaller footprint and fewer rooms, smaller elevators, smaller public spaces, and dedicated staff members who care about delivering a customized experience for each guest.”

Guy Maisnik, Vice Chair of JMBM’s Global Hospitality Group, who will moderate the panel “Protecting Your Assets Amid a Pandemic” at the BLLA’s Digital Summit, agrees that boutiques have great flexibility, and being nimble and able to change quickly is critical in this market.

“For one thing, many hotels have gone toward smaller guest rooms and larger indoor communal public spaces,” he said. “Obviously, such configuration does not work in this environment.”

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Published on:

13 May 2020

Click here to see How JMBM’s Global Hospitality Group® can help you, here for the latest articles on the coronavirus and here for the latest materials on loan modifications, workouts, bankruptcies and receiverships.

COVID: First of kind Wisconsin Supreme Court decision strikes down state’s stay-at-home order by vote of 4 to 3

Wisconsin Governor Tony Evers issued his stay-at-home order for nonessential businesses on March 18. On April 16, he extended the order until May 26. Reports say that the governor declined to negotiate with legislators two weeks ago on a compromise to the terms of the restrictive order, preferring to see what the court decided.

It was a winner-take-all decision. This evening, that order was invalidated and the court refused the state’s request for a six-day stay to allow GOP lawmakers and the governors to work out new rules. As a result, all state restrictions are now removed on social gatherings or business.

After a 90-minute online video conference hearing before the Wisconsin Supreme Court last week, the court today issued a decision striking down the governor’s order.

The court ruled that the government exceeded the statutory authority granted during an emergency, characterizing the order as “confining all people to their homes, forbidding travel and closing businesses.”

Justice Rebecca Bradley was one of the concurring justices. During oral arguments last week, she asked the attorneys defending Andrea Palm, Wisconsin’s top health official the following question:

Isn’t it the very definition of tyranny for one person to order people to be imprisoned for going to work, among other ordinarily lawful activities?

The state argued that the legislature gave the health department officials such power, and said people will die if the court strikes down the order. CONTINUE READING →

Published on:

30 April 2020

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Click here for the latest articles on the coronavirus.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

Hotels have seen substantial losses in revenue in the wake of the coronavirus, and face the uncertainty of an economy which may take months or years to recover. For many, insurance payments may assist in keeping their business afloat, but few hotel owners or lenders are making claims. JMBM partner Guy Maisnik explains how some hotels may qualify for Business Interruption insurance coverage for COVID-19.

– Jim

Business Interruption Insurance may cover hotel losses
from COVID-19 shelter with judicial claims

Many coverage exclusions focus on disease, not government shelter orders

by
Guy Maisnik

Hotel owners and underwriters have seen the economic prognosis for hotels for the next twelve to twenty-four months, and it does not look good. Modern America 2.0 will not be the America of January 2020 for a long time.

The “V” uptick in the U.S. and world economy will come when the world can pass the “middle aisle test,” as in when will you comfortably: 1) take the middle seat in public transportation and travel; 2) sit on a bar stool or restaurant counter between two others; and 3) attend sports or entertainment events or other public gatherings. Until then, the bottom of the economic “U” may feel like an eternity.

A mistake not to pursue claims

So, what does this have to do with insurance? Everything. Because insurance payments might sustain your business until your guests can pass the middle aisle test. By now, you have read a number of articles written by lawyers and consultants on business interruption insurance – some more measured and analytical and others more aggressive.

Many hotel owners (or their lenders, surprisingly) are not bothering to make insurance claims at the advice of their insurance agents or counsel. These advisors believe there is a low likelihood of making a successful claim based on the 2006 Insurance Services Office (ISO) circular – Form CP 01 40 07 06, which excludes from coverage the loss or damage caused by “virus, bacteriaum or other micororganism that induces or is capable or inducing physical distress, illness or disease.”

In our view, this is a mistake. We believe hotel owners and capital providers should carefully review their insurance policies and coordinate with their consultants, lawyers and brokers to determine whether an aggressive approach is possible.

Policy exclusions are narrowly construed

First, all business interruption insurance policies are not the same. A sophisticated buyer of insurance services – and its legal counsel – will have their policies carefully analyzed. Depending on the policy and applicable law, there can be meritorious arguments in support of coverage, even if a hotel is open and operating.

Second, history and case law are replete with apparently so-called airtight policy exclusions only to find a court holding an insurer liable for coverage. Katrina is the most notable example, with insurers paying out approximately $900 million in coverage notwithstanding flood exclusions. Recently, the Seventh Circuit held that a manufacturer’s insurer must cover its insured, a designer and builder of anaerobic digesters, under its errors and omissions policy for claims alleging breach of contract, despite an express exclusion in the policy for claims arising out of a breach of contract. Similarly, the Ninth Circuit held that a war exclusion did not apply when an entertainment production company incurred damages as a result of Hamas rocket attacks.

The point is that insureds who purchased business interruption insurance and paid expensive policy premiums, should strongly consider pursuing coverage, even if not apparent under the precise language of a policy, particularly taking into account the policy terms, applicable law – both case and statutory – and prior judicial decisions.

The case for income loss coverage

The coronavirus pandemic caused states, cities and counties throughout the U.S. to impose social distancing measures in the form of stay at home, shelter in place and other executive type orders, and required businesses to close and remain closed until otherwise directed. Excluded from such orders were so-called essential businesses, which often included hotels. Regardless of whether a hotel is open or not, such closure and limited closure requirements seriously crippled virtually all hotel revenue demand drivers (i.e., businesses, restaurants, entertainment venues, schools, and so forth). This has had led to disastrous consequences for hotel businesses, severely reducing demand, disrupting operations and supply chains, causing a loss of income. The income losses will extend well beyond the date such orders are removed.

Hotels are suffering damages in a variety of ways as a result of COVID-19 and the shelter orders, most notably income loss, fixed expenses during partial or total closure, structure contamination, reputation damages and third-party claims.

Insurers will aggressively defend

True, there are hurdles to overcome. Given the state of the insurance industry and the large number of claims being made, it is unlikely that your insurance company will simply roll over and write a check. The insurer’s first (and not only) defense will likely be “virus, bacteriaum or other micororganism” exclusion from coverage under its policy, and that further the 2006 circular specifically addresses loss of business income. Hotel policies may also explicitly exclude coverage for property damage and loss resulting from viral and bacterial contaminants such as SARS, MERS, avian flu and the coronavirus. Insurers may even bring their own claim in a separate suit for declaratory relief that there was not an insurable event, which under a business interruption policy is generally defined as a direct physical loss or damage. Regardless, courts may well determine that business interruption and losses were caused by governmental order and not a viral pandemic.

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Published on:

01 April 2020
Click here for the latest articles on Labor & Employment.
Click here for the latest articles on the coronavirus.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

Following the enactment of the Families First Coronavirus Response Act on March 18, 2020, the Department of Labor has clarified which employers will be impacted by the Act and how they can comply with its mandates. Marta Fernandez, hotel lawyer and a partner in JMBM’s Labor & Employment department, has answered some of the most frequently asked questions by employers about the Act which goes into effect on April 1, 2020.
What hotel owners and operators need to know
about employee rights under the FFCRA

by
Marta Fernandez

Frequently Asked Questions or FAQs about employee rights under the Families First Coronavirus Response Act

Effective April 1, 2020 and continuing through December 31, 2020, covered employers need to begin complying with the mandates of the Families First Coronavirus Response Act (“FFCRA” or “Act”). You can find our original article explaining the FFCRA here. Since the law’s enactment on March 18, 2020, the Department of Labor has clarified and expanded upon what precisely is required under the Act and of whom it is required. Below are some of the questions we have been receiving from clients. The answers provided reiterate some of the previously announced requirements, and incorporate the additional guidance that has been issued by the Department.

#1 What obligations do covered employers have under the FFCRA?

Covered employers must provide eligible employees with up to 80 hours of emergency paid sick leave and up to 12 weeks of emergency family and medical leave.

#2 When is an employee eligible to receive paid sick leave under the FFCRA?

Under the FFCRA, a full-time employee may qualify for 80 hours of paid sick leave (or, for a part-time employee – the average number of hours that the employee works over a typical two-week period) where the employee is unable to work, or telework, due to a need for leave because the employee:

  1. Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  2. Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
  5. Is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
  6. Is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

#3 How much compensation is an employee entitled to receive under the paid sick leave provisions of the FFCRA?

Employees taking leave for reasons 1, 2, or 3, noted above must be paid at either their regular rate or the applicable minimum wage, whichever is higher, with a cap of $511 per day and $5,110 in the aggregate.

Employees taking leave for reasons 4, 5, or 6 above must be paid at two-thirds their regular rate or two-thirds the applicable minimum wage, whichever is higher, with a cap of $200 per day and $2,000 in the aggregate.

The Department has now clarified that an employee’s regular rate of pay is the average of the employee’s regular rate over a period of six months prior to the date on which he or she takes leave.

#4 Can I require employees to substitute any accrued paid time off for the emergency paid sick leave?

No. While employees may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for the emergency paid sick leave, you cannot require employees to do so.

#5 What if I’ve already provided my employees with paid leave for a COVID-19 related reason?

The emergency paid sick leave is to be provided in addition to any other paid leave that an employer has already provided to its employees. Thus, leave taken prior to April 1st does not count towards the leave required under the Act.

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Published on:

26 March 2020

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Please join me and my esteemed co-panelists for an online presentation sponsored by NEXT Events and ICD Publications, titled “Hospitality in the Time of Coronavirus: Solutions for Our Industry.” The program will take place online on Thursday, April 2nd, from 2:00 PM EST – 3:00 PM EST.

The panel discussion will be followed by a question-and-answer period. Online participants will be invited to submit questions online.

Moderated by my friend, Christina Trauthwein, Editor-in-Chief at Hotel Business, the panelists include:

  • Jim Butler, Partner, Chairman, JMBM’s Global Hospitality Group®, represents hotel owners, developers and lenders.
  • Chip Rogers, President/CEO, American Hotel & Lodging Association (AHLA), previously served as the President and CEO of the Asian American Hotel Owners Association (AAHOA)— the largest U.S. hotel owners association.
  • Jamie Lane, Senior Managing Economist of Econometric Advisors and CBRE Hotels Americas, manages CBRE’s team of economists for all property types and specializes in forecasting of the hospitality industry.
  • Melissa DiGianfilippo, Co-founder/President of public relations, Serendipit Consulting, spearheads public relations and communications efforts, leading to positive press coverage across international, national and local media outlets.

Harry Spirides, President, Spirides Hospitality Finance Company, specializes in providing financing to hotel owners and developers for hotel development, acquisition and debt refinancing projects.
Register Now
Register here with a $25 suggested donation benefiting Hospitality Cares.

All proceeds of the program will benefit Hospitality Cares’ Coronavirus Fund with a $5,000 matching donation from NEXT Events.

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