Empire State Today

Although equally devastated, brands such as Marriott and Hilton are doing what they can to assist their hotel owners and franchisees, according to the managing partner of a prominent private equity real estate firm that focuses on hospitality.

“We're all in survival mode trying to hang on for dear life,” said Kenneth Fearn, founder of Integrated Capital (IC). “That's where we sit. As a franchisee, I'm a small player. It's really difficult for me. The brands are large multibillion dollar entities that can tap into lines of credit that as a franchisee, I don’t have access to.”

More than eight in 10 hotel employers have had to lay off or furlough workers, according to an American Hotel & Lodging Association (AHLA) survey, and only 37 percent have been able to rehire any staff through economic relief measures such as the Paycheck Protection Program (PPP).

“I work with Marriott and Hilton brand hotels,” Fearn told Empire State Today. “Some of the brand requirements have been reduced, which has been really helpful. We’ve been able to use our reserves for hotel property, furniture, fixtures and equipment to cover some operating expenses and that's been helpful. I’m very appreciative of those efforts.”

The Coronavirus Aid, Relief and Economic Security (CARES) Act provided $350 billion in forgivable loans called PPP, which permitted businesses to apply for up to 2.5 times their monthly payroll with a $10 million cap. 

“We need a program that allows us to tap into sources of capital that can help us to survive the pandemic because when PPP was envisioned and put together everyone thought this crisis would work its way through by June but the big brands themselves have extended their furloughs to October,” said Fearn in an interview. “All of the business that we had on our books that we pre-booked and worked so hard for have canceled through most of 2020. Revenue has been decimated to an unprecedented level and there's nothing but operating losses.”

IC’s portfolio of six hotels include a Marriott in Atlanta and Miami as well as a Sheraton and two DoubleTree hotels in Myrtle Beach, Florida, and Pittsburgh. 

“We formerly offered food and beverage in a buffet but it is no longer a brand requirement,” Fearn said. “We had concierge floors with lounges for reward members, which are largely closed. Brands make their money off franchise fees and we don't have any revenues. So, there's no franchise fees.”

Fearn is also chairman of the National Association of Black Hotel Owners, Operators and Developers (NABHOOD), whose challenges are intensified because of the stigma attached to being a franchisee.

“All the media focus has been on black owners who run independent hotels,” Fearn said. “It's as if we are cursed because we are black franchisees. No one has focused on the fact that we exist and that we're still pushing forward, trying to survive as well.”

According to Fearn, among 60,000 U.S. hotels, 35,000 are owned by members of NABHOOD, the Asian American Hotel Owners Association (AAHOA) and the Latino Hotel Association (LHA), a combination that employs about 1 million workers

"Many of us may not survive and as a result, the heartbeat of American ingenuity and entrepreneurship in minority communities could take a real hit because we don't have access to capital, which will allow giant private equity funds that have access to billions of dollars of capital to buy our assets for pennies on the dollar and there's not a thing we can do to stop it," he said.