Coronavirus Alters Outlook for U.S. Hotel Sector as Investors Cautious, Face Significant Short-Term Headwinds; New Federal Stimulus Package Delivers Lifeline to Severely Impacted Sector

Growing heath crisis pauses economic growth.
The rapid and unanticipated spread of the new coronavirus (COVID-19) has significantly disrupted everyday life. Interruptions to global supply chains and the closure of many businesses nationally will curb consumer spending and lead to higher unemployment in the short term, weighing on GDP in the second quarter and possibly longer. Past pandemics such as SARS and H1N1 “swine flu” suggest that the coronavirus could take up to six months to stabilize unless the known facts drastically change. The leisure and hospitality sector will be disproportionately affected as many of the precautions being taken directly impact travel and hotel use. In response to these costs, multiple arms of the federal government are enacting new policies to bolster the economy, highlighted by a major new stimulus package.

Landmark fiscal stimulus bill to bolster hospitality sector.
Congress is poised to pass the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest federal aid package ever approved. The legislation offers a number of initiatives aimed at shoring up the economy, including loan programs for both large and small businesses, corporate tax relief, expanded unemployment benefits, and direct payments to individuals. About $425 billion has been allocated to the Federal Reserve to support struggling businesses, with an additional $75 billion set aside specifically for the industries most impacted by the virus. Hotels of a certain size can also seek fiscal aid through a new SBA program to help them meet immediate payroll, healthcare, and mortgage obligations.