Luxury Hotel Executive Biggest Winner of U.S. Small-Business Relief
A Dallas hotel executive whose empire includes luxury resorts has emerged as the biggest winner from the coronavirus bailout for small businesses.
A combined total of $59 million from the small business lending package went to three lodging companies chaired by Monty Bennett, according to regulatory filings. The money went toBraemar Hotels & Resorts, which owns luxury properties including the Ritz-Carlton in St. Thomas in the U.S. Virgin Islands,Ashford Hospitality Trust Inc., which owns more than 100 hotels around the country, and the firm that manages both.
The PPP has come under fire after big restaurant chains likePotbelly Corp. and Ruth’s Chris Steak Housegot loans, while many mom-and-pop firms were left stranded when the initial $349 billion in funding for the program ran out of money last week. The House is expected to vote Thursday on a bill approving an additional $320 billion for the initiative.
The loans to Ashford underscore how large companies were able to take advantage of the small business program because of a loophole nestled in the bailout package that allowed companies with multiple locations to apply for loans that can convert to grants if they maintain employees and payrolls at certain levels.
That provision was inserted after lobbyists for hotels and restaurants pleaded with lawmakers designing the program, especially Republican Senator Marco Rubio of Florida, for special consideration. The carveout allowed hotels and restaurants to apply for the funds regardless of how many workers they had, so long as each location employed fewer than 500.
Ashford said in a statement that PPP “is working exactly as intended by providing much needed capital to small businesses and larger businesses that have been the hardest hit — hotels and restaurants” with fewer than 500 employees per location.
Ashford said in a regulatory filing Tuesday that it expects to receive additional loans. The $30 million it received — the most money disclosed by a public company yet– was in 42 PPP loans to company affiliates that own hotels. Braemar, which also owns the Ritz-Carlton in Lake Tahoe, California, received $15.8 million in eight loans. Ashford Inc., which manages properties for Ashford and Braemar Hotels, got six loans totaling $12.8 million.
Major hotel brands likeMarriott International Inc.,Hilton Worldwide Holdings Inc., andHyatt Hotels Corp. didn’t apply for the small business loans. The companies make most of their money by selling brand licenses and services to the investors who own hotel properties.
Restaurants and hotels together account for less than 10% of the PPP loans, according to the SBA, which administers the program. They’ve said the requirement to use the money in eight weeks to get loan forgiveness isn’t long enough and the program’s emphasis on keeping workers employed doesn’t give them enough flexibility to cover other costs.
Brian Crawford, the executive vice president of government affairs at the American Hotel & Lodging Association, said funds are going to industries that have suffered fewer consequences from the pandemic.
“Seemingly healthy industries are taking advantage of this program and that’s why we’re running out of money,” Crawford said.
A spokeswoman for Marriott, which owns five hotels in the U.S., said that while it didn’t apply as a corporation, some of its franchisees, which could qualify as small businesses, are pursuing loans.
Marriott, which has temporarily closed about 1,000 U.S. hotels and furloughed thousands of workers, has had little trouble accessing credit markets. On April 14, Marriott raised $1.6 billion in five-year bonds in a move the company said would substantially replace a $1.5 billion revolving credit facility that the company announced earlier the same day.
Hilton and Hyatt have each raised hundreds of millions of dollars in debt since theFederal Reserve pledged to support the corporate bond market earlier this month. The hotel brand companies have a menu of options for raising cash, including selling loyalty points or borrowing against real estate portfolios.
A Hilton spokesperson said that the company, which owns no U.S. hotel properties, has no plans to seek financial support from the U.S. Treasury Department. A Hyatt representative also said it has no plans to apply for any small business loans under the SBA program, although some third-party owners of properties it operates have.
“What they did was the least expensive, least restrictive option: a simple unsecured corporate bond offering,” said Michael Bellisario, an analyst at Robert W. Baird & Co.
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