The Travel Industry Is Big In Texas. It Fell Hard After COVID-19.

In this excerpt from Texas Public Radio’s “The Shakeout,” the travel and hospitality industries have been knocked out by COVID-19. In Texas, they may never recover.

By Paul FlahiveDecember 10, 2020 3:29 pm, , , , ,

From TPR:

The story of COVID-19 in the U.S. is inextricably linked to the industries that make up travel. Confirmed COVID cases first appeared in the U.S. via cruise passengers. Two Princess cruises were unloaded at San Antonio’s Lackland Air Force Base. Modern pandemics spread largely through air flights.

Now, seven months later, these industries are feeling the pain with hotel closures, consolidation and millions of workers laid off.

“It’s terrifying,” said Henry Feldman, a San Antonio hotelier. “People all over the world are watching their businesses be absolutely destroyed because of this pandemic.”

The state estimates $80 billion comes from direct travel spending and double that in economic impact — travelers going out to eat, buying souvenirs, using taxis or other transportation, among many other activities.

Last year, Texas Gov. Greg Abbott wrote that if the state didn’t have travel revenue, every one of its 29 million residents would have to cough up an extra $740 in taxes to plug the hole.

Texas relies on travel. Two airlines are headquartered in the state. It has more than 5,000 hotels and 1.2 million jobs connected to the industry.

Over the past three months, TPR spoke with a dozen people across these industries with the hope of finding out where it stands. What it found was an industry in decline and employees just holding on.

Relief funds have run out without any sign of a new congressional deal, debts are piling up, and former employees are struggling to make ends meet. These industries and people are pushed up against the edge of a financial cliff.

COVID-19 Is A Different Animal

The San Antonio Airport is filled with hand sanitizer, plexiglass barriers and self-serve kiosks. But the mid-sized airport is not filled with people.

“Business has picked up, but our numbers are still pretty much cut in half,” said Cathy Chatman, a ticket agent for Southwest Airlines, one of two Texas-based airlines.

Chatman checks luggage and scans tickets at the gate, and she is correct. On April 14, the TSA screened 97% less people than the previous year on the same day. In June, it was still screening 82% less people. In October, it was about 60% less.

Chatman wanted to work for Southwest ever since she saw their commercials as a child. Flight attendants in hot pants walked across a runway or spoke directly to the camera as a massive airliner roared past low overhead.

A terminal at San Antonio airport.

The San Antonio International Airport in August.

The hot pants were gone by the time she arrived, but now she’s been there 20 years.

And throughout the spring, when everything except essential business shut down, she was coming to work.

“It was very stressful for me. As far as coming to work, I wondered, am I going to catch this virus? Am I going to get this virus? Will any of us get it? Will we carry it? Will it be spread through our airport?” Chatman said.

“Our customers would say, ‘Wow, am I the only one on this flight?’ A lot of cases we did have only one passenger on a flight. The flight schedule dropped significantly,” she added. “Back in March and April, we were all concerned, and we all had thoughts that we could possibly lose our jobs because it looked as if there was no need for us to be there.”

The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act money meant they couldn’t lay Chatman off. But that money would expire Oct. 1. Even back in the spring, Cathy started preparing for what might happen.

“When this pandemic started, I made a plan to cut spending and to start paying things off. When I buy something, if I’m spending my money, (I ask myself) is it a need or is it just a want?” she said. “I cut it all out. I cut out the shopping, the hanging out, the eating out.”

Southwest officials said it will not lay anyone off until at least January. Delta made a similar promise and a similarly optimistic projection.

The CARES Act gave the airline industry $25 billion in April, and it came with worker protections that would end on Oct. 1. When it expired, two airlines made huge cuts to their workforce. American Airlines, which is based in Fort Worth, and United Airlines both made layoffs on Oct. 1. Between the two companies, they laid off 32,000 workers.

“You kind of get punched in the gut. That whole day was just like… You know what am I going to do and so forth and so on,” said Ian Lordi, who has been an attendant with American Airlines for three years.

American laid off 8,000 flight attendants. Thousands more took early retirement offers. A huge chunk of the layoffs at airlines have been flight attendants. The number of flight attendants needed is based on planes that are flying, so when air traffic drops, their jobs get cut.

Flight attendants like Lordi watched that Oct. 1 deadline approach with dread.

Many expected Congress to pass more relief. Nobody wanted to imagine what all those layoffs would be like.

“When an agreement can’t seem to be reached, for whatever reasons, they’re putting forward that they won’t, you know, do that. It makes you think, ‘Are you not? Do you not see me? Do you not see us, do you not see what we do?’” he said.

Now, Lordi isn’t sure what’s going to come next. He and his partner built a home in Dallas and were relocating there to be closer to American Airlines. He’s now reevaluating his finances. He lost his health insurance, and the alternative is to pay for COBRA, which he says would cost him $700 a month.

“Gosh, you know, God forbid, I get sick with COVID. And I’m one of those people that, you know, has to go to the hospital?” he said.

Losing one’s health insurance is scary and it’s also counterproductive toward stopping the pandemic if people like Lordi can’t afford to go to the hospital.

Tens of thousands are in the same situation, and many more are waiting to see what happens. Delta and Southwest have delayed any mass layoffs, but with air travel still at half what it was and surging COVID cases, airlines are in for an even rockier ride.

For instance, the international Air Transport Association estimated before the current surge it would be 2024 before they got to pre-pandemic levels of travel.

That undoubtedly impacts other parts of the travel economy. These industries are an ecosystem feeding on one another, relying on healthy partners.

Flights feed hotels with travelers. Hotels feed restaurants and cities with visitors and tax dollars.

Hotels In A Financial Pinch, Almost Designed To Destroy Them

Henry Feldman seems tired. He owns the La Quinta Inn and Suites in San Antonio’s Medical Center. He is also a leader in the industry. Like airlines and so many other industries, hotels were caught flat-footed by the total freeze in travel.

“I mean, you can very easily get totally depressed about this. I (have) a responsibility to my staff to keep them motivated and keep them going, because they’re as concerned as I am,” he said. “You’ve got something that is so totally out of your control, and there’s nothing you can do about it.”

The idea of staying in a closed space with a lot of people was anathema for many people over the past seven months. Hotels, like airlines, struggled to convince people their properties were safe. This, despite hotels like Hilton announcing at the White House they had a new partnership with Lysol and the Mayo Clinic.

“The brands have set some very, very high standards on sanitation,” Feldman said.

His hotel staff clean every room, then send an inspector in to make sure it was done correctly. But those measures haven’t made a dent in his occupancy rates.

He needs about 65% of his rooms rented to be profitable. Across the industry the number is somewhere between 20% and 50%.

Without customers, there’s no revenue, and as a result, the whole industry is in the middle of a debt crisis. Hotels really aren’t able to pay their mortgages.

“Well it’s devastating, I mean, the lack of ability to have enough cash to pay your mortgage,” Feldman said. “We’re able to pay our other bills. But where this is going to end, we don’t know.”

Hotels are often financed through mortgage backed bonds that make sense in every scenario except one where no one is traveling. In that scenario, they are terrible because their financing is far more inflexible than a bank loan.

“There’s a possibility that we could lose the hotel if the government doesn’t step in,” he explained.

Feldman and the hotel industry asked for seven-year loans from the federal government. He said it could literally save the industry.

“They’re not going to want to foreclose on 50,000 hotels,” he said.

But it’s unlikely they get relief soon.

There are more than 5,000 hotels in Texas. The American Hotel and Lodging Association said half could close if Congress takes no action.

Three of the Top 10 cities for mortgage delinquencies are Dallas, Houston and Austin.

About 74% of hotels expect to lay off more people in the coming months, and those job losses will fall disproportionately on Black and Brown women.

At his La Quinta alone, Feldman employs more than a hundred workers, including servers, housekeepers and supervisors.

TPR spoke to one of the women laid off from the Grand Hyatt, which is connected to the city’s convention center. Mary Saucedo was one of the dozens of housekeepers laid off from the Grand Hyatt as business dried up.

She liked her job and wants to go back if they let her. It, along with her husband’s job as a mechanic, helped her raise her five kids.

Even worse, her husband contracted COVID and passed away.

“I have to pay the water. I have to pay the lights,” Saucedo said. “Everything I’m behind… The unemployment is not enough.”

She isn’t sure what she is going to do. The industry she worked in for so long is barely holding on.

She said the government has forgotten people like her.

“They don’t care about us because they got money. They got money. They got health insurance. They have all that, and we don’t. We don’t have health insurance,” Saucedo said.

Alan Berube, a senior fellow at the Brookings Institution, agreed.

“We did emergency relief early on, and everybody was feeling the pain, but now that specific kinds of people are feeling the pain, it seems we’re really not doing enough,” he said.

There are four million fewer jobs in leisure and hospitality compared to last year, according to the American Hotel and Lodging Association. With the potential of mass hotel foreclosures, people are expecting tens of thousands if not more in losses. All these impacts trickle down to communities.

Communities Tied To Travel Struggle To Make Do

The empty streets around the Henry B. Gonzalez Convention center were a staple of Summer 2020.

No red double-decker buses packed with elderly tourists passing by. No conventioneers with plastic wrapped badges dangling from neck lanyards desperately trying to figure out where to eat lunch other than the Denny’s across the street.

Seated inside the Convention Center Casandra Matej, CEO of Visit San Antonio, said it’s a tragedy.

“As we’re talking or echoing, right? It is empty, what would otherwise be very full,” she said. She called the 1.6 million square foot facility cavernous. The city lost more than 220 conventions, events and meetings, and it shows on its streets.

It’s a lot different than when she applied for the job nine years ago.

“It was like a Tuesday, and I was sitting on the River Walk thinking, ‘Look at all these people!’” she recalled.

When visitors talk about San Antonio, it’s often a convention that brought them here. More often, the one place they never forget is the San Antonio River Walk, particularly the two miles of it snaking through the city crowded with bars and restaurants. It is often the destination for weary conventioneers and travelers pouring out of nearby hotels after a long day of networking, sales or trying to find the Alamo.

People walk the narrow trails alongside the tree-lined river, and revelers float by on water taxi tours.

It emptied out when COVID hit, and it has struggled to come back since.

“In the summertime, we are the leisure travel destination for the state of Texas. On an annual basis we welcome around 39 million people to San Antonio, of which a big portion of that is conventions and meetings,” Matej explained.

It only recently received some help from conventions, which have started coming back.

About $60 million in hotel occupancy taxes and facilities revenue evaporated this year. City projections show it only anticipates making back about a third of that in 2021.

The taxes pay back debt the city took out to build the $325 million convention center and fund Visit San Antonio and improvements downtown. But the bleeding doesn’t end there.

“I think people forget about the domino effect,” Matej said. Those same people staying in hotels are going to restaurants or going shopping, or going to our museums. They’re paying sales tax, which (goes) into our general funds of our city. So impact the streets, safety, etc.”

San Antonio cut $80 million from its budget in April, including $50 million for roads, and a million from domestic violence. A million dollars sounds small, but the city has some of the highest rates of domestic violence in the state.

A chart showing the hotel occupancy tax revenue amounts and estimates from 2015-2021.

María Villagómez (CMO)

People have already resumed personal travel to a larger extent, Matej said. Next year they don’t know what to expect on business travel. But she was certain people want to meet in person.

“We still have a lot of clients that are telling us that they want to hold their meeting,” she said. “If I had a crystal ball, I will tell you, it’s gonna be probably a hybrid situation where maybe they were supposed to have 10,000 people, and now it may only be 5,000.”

“You know, our industry is estimating that we probably will not be at pre-COVID levels as far as meetings, hotel occupancy, until the end of (2023), maybe even the beginning of 2024,” she added.

In the meantime, the effects of the downturn are felt even more in cities tied to these industries.

“The cities and the regions that (are) tied up in travel and tourism are among those that have experienced the most severe job losses and economic impacts,” said Brookings’ Alan Berube.

The effects are especially present in San Antonio. High unemployment, small business closures and more of a need for emergency assistance have all become normal.

Some cities are trying to help people hold on. San Antonio is trying to prepare them for life after hospitality through training programs. The city launched several free programs funded with federal dollars for people who lost jobs due to COVID-19.

Geronimo Moreno teaches one of the courses at Port San Antonio, inside a one-time fitness center, now a makeshift training center for the San Antonio Museum of Science and Technology.

“Always. Be. On. Timeeeee. Always be on time. When going to an interview. Always. Be. On. Time,” Moreno extolled, in a lesson designed to bolster confidence.

He and only one other person were in the room. The other 10 or so people were connected to the course on video conference. His enthusiasm came through, despite the distance.

The courses are designed to help students get jobs in one of two areas, Human Resources and as a helpdesk worker for IT issues. They also provide stipends so people can afford to go without work. City leaders hope it paves the way for a very large future investment.

“The most important thing that we can do is invest in our people in our human capital,” said Ron Nirenberg, mayor of San Antonio.

In just a few days, the city votes on a measure that would direct an estimated $154 million to programs similar to this one.

Hospitality employs the fifth largest percentage of people in San Antonio. A few are in the courses the city has already launched.

Trish Johnson worked at a call center for a major hotel chain for seven years. She and 500 others in San Antonio handled the company reward program.

“We did reservations. We did cancellations. We also took escalated calls. So we did a little bit of everything,” she said. “It was calls, like, back to back to back. We’ve never had a breather.”

But in March things changed.

“They were calling a lot to cancel the reservation. And then the calls slowed down. We get like a call every maybe 5–10 minutes. And Marriott, they want to pay us just to sit there,” Johnson said.

They were furloughed. Then a few weeks later, they were fired. She said the health insurance has run out, and the severance was about $100.

“We might have nothing to eat because unemployment is very, very little,” she said. “And we need some kind of assistance to help us with that. Because at the end of the day, it’s not our fault. The COVID-19 came in. Treating us like secondhand citizens is what I see.”

Now, halfway through her HR certification, she hoped she can get a job when it’s over, but people need help right now.

“On top of that, we have loved ones dying, and people still dying from COVID-19. And the government is sitting up there sliding feet, won’t give us relief when we really need this relief. And come on. Give us the $600 — we need it,” she said.

There are millions like Johnson across the industries that make up travel.

There wasn’t any real sense that the government can sustain airlines and hotels and cities and communities until the industry comes back.

These industries — like many people — are waiting for a vaccine. But even when there is a vaccine, it’s not clear if people will feel safe.

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