Pandemic cuts into seasonal hotels’ limited time
Pandemic cuts into seasonal hotels’ limited time
17 APRIL 2020 7:46 AM

As many hotels across the U.S. have closed because of the pandemic, properties that open specifically for the spring and summer months are worried how much business they will lose during an already shortened season.

REPORT FROM THE U.S.—Under normal circumstances, this is the time of year when seasonal hotels that operate in the spring and summer start to open. Instead, hoteliers at these properties have had to postpone their openings because of the pandemic, and while they have an opening date in mind, they know that could change any day.

The coronavirus (COVID-19) pandemic has led to most state governors issuing shelter-in-place orders, which paired with travel restrictions, mean the demand for U.S. hotels overall is down significantly.

However, for hoteliers at properties open for the spring and summer, the pandemic and shelter-in-place orders are cutting into an already limited amount of time for them.

Opening day
The ambiguity is the toughest thing, said Phil Baxter, who owns the Sesuit Harbor House in Cape Cod with his wife, Silvia. The 21-room property typically opens on 1 April and ramps up to its busiest part of the season that runs from 20 June, when schools usually let out, through Labor Day, he said. April isn’t a busy month, but the property normally hosts some guests while the staff continues to prepare the property, he said.

Because Massachusetts’ governor has issued a shelter-in-place order until 4 May, the property’s opening is delayed and it has a number of suspended projects they are working on when they can, he said.

“I'm thinking we have to kick it into high gear in the next couple of weeks big time, kicking into high gear and accelerate and get this place ready for the middle of May and then cross our fingers and see what happens,” he said.

Marshall Hotels & Resorts has hotels in Ocean City, Maryland, and Virginia Beach, Virginia, that are seasonal and have had their openings affected by the pandemic, said President and CEO Mike Marshall. All were open in early March but had to close because of their state governor’s orders to shelter in place, he said. Ocean City should reopen 1 May, but Virginia’s orders are in place until 10 June, he said.

“We're coming out of the winter, where we're relying on advanced deposits to get us through February and March as we reopen,” he said. “We’ve had to go and return all these advanced deposits. All these people have canceled for the late spring season into the early summer. You’ve got all these hotels that are sitting with no cash, but they also have no employees, but we’ve still got to keep the lights on, and we still have to have a skeleton of staff for insurance purposes, which we would do through the winter anyway.”

The Chebeague Island Inn in Chebeague Island, Maine, and The Beach House Inn in Kennebunk, Maine, were scheduled to open in early May, but that may change if the governor extends the shelter-in-place order beyond 4 May, said George Soderberg II, SVP of operations at Hay Creek Hotels and Restaurants.

“Our thought process right now is, do we go to 15 May?” he said. “Do we go to Memorial Day or 1 June? What are we doing here? We’re hoping to make that decision in the next week.”

Those properties intend to get in touch with guests with reservations in the early part of May and move those reservations out, he said. The plan is to then watch to see if there’s any change in the situation and then determine a new opening date, whether that’s in May or 1 June, he said.

Tighter seasons
Things are already tight because deposits received in the year are spent in the year, Baxter said. A big hotel might have a couple hundred thousand dollars with deposits on the books, but they don’t necessarily have that in the bank, he said. As cancellations come in, the hotel’s bank account is going down, so it’s a balancing act to figure out how to manage cash flow, he said.

If they lose June and July, part of that cash flow burden will fall onto the bank, which is already giving them some leeway on mortgage payments, but there are still utilities and vendors to pay, he said. Taking another line of credit is an option, but that just adds on to the property, and even though he expects his property to come through fine and perform well in the future, it’s still something to work through, he said.

“The ambiguous thing is that you end up with a lot of scenarios,” he said. “You've got an endless supply of scenarios to figure out what you're going to do with what-ifs. You just play them and sort it out.”

Seasonal beach properties, specifically in the Mid-Atlantic and even up into New England make 55% to 60% of their revenue in a seven-week period in the summer, Marshall said. Hotels typically lose the last week in August because of schools reopening, he said.

“That is going to become 80% to 85% this year, if we do get back open again,” he said.

Soderberg said two weeks ago he would have said of all Hay Creek’s properties that June was the fireline and nothing was shifting. Reservations were solid starting in June, and while May was doing well, it was starting to fall apart, he said.

Weddings this year are outpacing 2019’s numbers, which actually saw a dip because many couples wanted to get married in 2020 instead of 2019, much like those who waited through 1999 to get married in 2000, he said.

Now some people are starting to get a little anxious in early June, and the seasonal properties have seen some cancellations for events such as rehearsal dinners and some weddings were rebooked to later this year or in 2021, he said. A handful of groups are keeping the hotels on notice about their decision-making process, he said.

“From a cancellation standpoint, it has been very minimal,” he said.

Staffing issues
During the season, the Sesuit Harbor House has about nine employees, including four housekeepers and a supervisor, Baxter said. Two of the employees are a young couple on J-1 visas from Macedonia who are queued up to come back this year, but they’re in limbo at the moment, he said. He, his wife and his daughter work there as well, but depending on the situation, his daughter may end up having to transition from teaching tennis to helping clean rooms, he said, adding he might hire some of her friends as well.

“We should be all right,” he said. “We'll be hit a lot less than the seasonal clam shacks and stuff like that that need 25 J-1s to run them.”

The seasonal hotels are working with skeleton crews who are answering calls, hopefully taking reservations for July and August but also having to do refunds of advance deposits, Marshall said. Because of having to return those deposits, they are counting on the federal Paycheck Protection Program through the recent stimulus bill passed to stay afloat over the next month or two, he said.

The hotels should be receiving their PPP funding over the next few weeks to help fund employee wages for the next eight weeks, Soderberg said. That means from the middle of June or early July, one way or another, there will be staff working the properties, he said. If something goes awry and the shelter-in-place orders go beyond June, they’re hoping there’s government intervention extending the number of weeks for the program, he said.

Some of the hotels’ employees come through H-2B visas from Eastern Europe and Jamaica, he said. He hasn’t heard that they aren’t able to come yet, but they’re getting close to that point, he said. It’s been impossible finding locals to do the same work, so they rely on the H-2B visa employees, he said.

“Frankly, we're just kind of holding our breath at this point,” he said. “There's nothing we can do if the pin goes out as far as bringing those folks in.”

The company has a relationship with some resorts in Florida that can help flip-flop the time for some H-2B visa workers, Soderberg said. The employees work at the Florida properties over the winter, but when it gets too hot and the demand slows, they move the employees up to work in Maine, he said.

To retain these employees, the company will host them at a house on the Kennebunkport property that would normally house the H-2B visa employees who are still overseas, he said.

Immigrant labor
H-2B visas allow U.S. employers to hire non-agricultural seasonal employees from other countries, said Amanda Franklin, attorney at Moore & Van Allen law firm. The number of H-2B visas allowed by the U.S. is capped for each fiscal year, broken up into 33,000 for start dates in the fall and 33,000 for start dates in the spring, she said.

There are several hurdles U.S. employers must jump to be allowed to hire H-2B labor, she said. For a spring start, employers must apply in January and February. First, the region in which the employer wants to hire H-2B labor has to undergo a labor test to make sure there aren’t enough qualified or willing workers, she said. Then they have to file a petition with the U.S. Citizen and Immigration Services to review the temporary labor certification the U.S. Department of Labor has approved. From there, the employer has to identify the employees and determine a certain number to hire for the season, she said.

The pandemic has closed embassies around the world, meaning potential H-2B visa employees can’t get in-person interviews as part of the process, she said. Even if there is a waiver and they could receive a stamp on their visa, looking at the prospects of getting a stamp on their passport to enter the U.S. is not going to happen for a lot of people she said.

“It's going to significantly affect industries that rely on their seasonal workers, their H-2B workers, who come in for the summer season,” she said.

A seasonal hotel’s opening date could affect how much of an impact this could have on their operations, Franklin said. Not being able to hire the workers in time could mean a delayed opening. Other properties that aren’t opening because of the lack of demand and/or it’s not safe to won’t feel as much of an effect until they can open, she said.

“It's going to depend on one of those two paths of how the business decides to proceed in light of the pandemic,” she said.

H-2B visas are only available for a certain amount of time, Franklin said. It’s uncertain if the Department of Labor and Citizen and Immigration Services will make employers redo the entire exercise for testing labor markets and file petitions or allow an extension, she said.

“Say that they only requested three months on their petition, and if their peak was April to June, then they only would have their petition be valid from April until June, but what if they don’t open until June?” she asked. “Are they going to have to redo everything? That’s a real question for folks that have already undertaken the exercise of testing the labor market.”

U.S. hoteliers who opened their properties for the season and had H-2B employees on property before having to close because of the pandemic are still responsible for those employees, Franklin said.

“You have to notify Citizenship and Immigration Services that you’re no longer employing them and then have obligations related to pay and transportation (to return them home),” she said.

However, those H-2B employees could potentially work for someone else, she said. While not a requirement of employers, they can assist these employees to find work with a business that is open and in need of H-2B labor, she said. The new employer would have to have their H-2B petition approved already, she said.

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