Hotels in Distress: Surviving an Economic Downturn Through Non-Traditional Contracting

Abstract

The hospitality industry is no stranger to market fluctuation, but with the onset of a global pandemic, 2020 left its mark as the worst year on record for the industry. With vacancy permeating hotels across the nation, hotel owners faced a year of tough financial decisions, while the unrelenting demands of mortgage payments and operating expenses loomed in the background. Uncertainty became the new normal, and the term “unprecedented” became commonplace as the pandemic lingered beyond initial expectations. The one-year anniversary of the 2019 novel coronavirus (“COVID-19”) pandemic passed without effect as the crisis situation spilled over into a new year. Struggling to survive the economic devastation accompanying the pandemic, many hoteliers pursued alternate income sources. However, alternate usage is not an entirely foreign concept in the hotel industry. While the emergency response to COVID-19 has been by far the largest scale the nation has experienced, it is certainly not the first. Hotels across the country have contracted in the past to provide emergency response in disaster situations, such as hurricanes, wildfires, floods, and for non-disaster housing for the homeless. As of the time of publication of this Comment, the pandemic itself has waned, but the economic effects remain. Although no one can truly predict when the pandemic will fully subside and the economy will return to normal, the current situation is surely a temporary one. What can hotel owners learn from the global pandemic, and will this crisis permanently change owners’ business models? The most resilient of business owners will glean valuable lessons, adapt their approach, and press forward. This Comment highlights key areas of concern with alternate usage and provides practical guidance for hotel owners struggling to survive the pandemic’s crippling effect on the economy and implement plans for the future.