by Alex Kloszewski, Managing Partner, Hotel Professionals
Two weeks ago, in my last aviso, I mentioned the Polish government will have to pursue a Memorandum of Understanding with the Polish banks to arrange and agree to postpone (unconditionally) all hotel related loan debts of the hotels in Poland till end of 2020. There is some positive movement on this with banks in Poland. The IGHP and its members are working daily with the Ministry of Development on various emergency acts and motions to address the immediate necessity to protect our employees and staff, as well as methods to minimize the disastrous and unprecedented impact on the hotel sector in Poland and globally.
But I really feel that the unprecedented situation in which we have found ourselves needs a “BAZOOKA” approach to the otherwise tragic outcome. I present such a motion as follows.
The US just passed a 2 trillion USD relief fund, in which the hotel industry there, will benefit from a salvage money of 150 billion USD.
Let’s see how this would translate in numbers. There are (circa) 37,000 hotels in the USA, with roughly 11 million rooms, plus 1,100 hotels expected to open this year. So… the relief will be around 13,000 USD per available room.
Why is this important? Taking into consideration that, as an example, Marriott International (after acquiring the Sheraton hotel chain) has 4,500 hotels operating in the US, and only owns or leases 28 properties there, the rest of the hotels with their various brands, are franchised, meaning other owners, investors, and REITs are most of the debt holders.
The ratio of equity to debt in our sector is circa 35/65, I would estimate the outstanding loans in the USA in our industry would be 1.5 trillion USD.
Here in Poland, if we used the same scenario of the USA, it would be as follows:
We have 144,000 rooms in Polish hotels, out of which (circa) 32 percent are branded, if our government used the same ratio of relief, we should expect circa 2 billion Euros of assistance for the sector.
Of course, the above most likely could not realistically work, however, we should at least expect a fund that would cover the hotel sector debt till the end of the year, as well as cover minimum operating costs i.e. 350 million Euro to cover the debt and 500 million Euro to cover minimum costs for operating the hotel till the end of 2020.
To make the numbers easier to remember, we need 1 billion Euros to save our industry and thousands of jobs and families’ well-being. Not even taking into consideration the flow through to other industries, such as restaurants, bars, MICE, taxis etc.
Now we know the cost, so what can be done? Here is my plan.
• The government issues 1 billion Euros in Hight Quality Eurobonds, 10-year with sustainable fixed rates (called Corona Hospitality Net BONDS). These bonds, of course are issued by the National Bank of Poland.
• The Eurobonds can be financed by two sources: 1 percent added VAT in hotel rooms revenues for 10 years. This will accumulate circa 50 million Euros.
• The hotels participating in the 1 billion relief, will have to commit contractually to purchase the above bonds at 1 percent of all their revenues per month for 10 years. This will equal a factor of recuperation for the government of 500 million Euros in 10 years.
• Of course, the rest, will be recouped by the purchases made by individual and financial institutions, hotel chains, and funds.
These bonds can be explained as the Marshall Plan War Bonds. The hotels will promote and do campaigns in Poland to let the public know these bonds are in fact saving thousands of jobs, and careers and of course the hotels.