Big hotels grab aid as small firms lag behind
Chain used network to get $68M in PPP
During a brief window in the first round of business aid through the CARES Act, major hotel chains used networks of affiliated companies to draw tens of millions of dollars in low-interest loans, contributing to the quick depletion of the funds.
The program’s initial $349 billion ran dry within 13 days, locking out many small businesses from the aid needed to keep workers employed, and the Small Business Administration recalibrated and imposed a $20 million limit on businesses owned by a single corporate entity.
For many small businesses, however, the adjustment came
too late, leaving them to struggle for weeks before Congress authorized more money for the program. By the end of April, nearly a month after the Paycheck Protection Program launched, 40 percent of Houston-area small businesses who had applied for the loans had yet to receive them, according to a survey conducted by the Greater Houston Partnership, a business-financed economic development group.
And when their loans were finally approved after Congress allocated more funding, some received only paltry sums. In Houston, 193 businesses received less than $800 each to keep employees on the payroll throughout the pandemic. One Jersey Village medical laboratory with 10 employees received $35. A chiropractor in the Lawndale neighborhood received $1.
Dallas-based Omni Hotels & Resorts, on the other hand, applied for the low-interest loans through a network of at least 28 companies that either shared the address of Omni’s umbrella company or listed its executives as officers, according to filings with state secretary of state offices. The related companies received some $68 million.
To the chiropractor, Dr. Susana Dommar of Amazon Chiropractic Clinic, the stark contrast between her small business’ $1 loan and a major hotel chain’s $68 million was distressing.
“By now,” she said, “I’m traumatized by the news of all the people that don’t need or deserve the help (receiving) funds that seem unavailable to me.”
Capped too late?
The disparities caused by failing to limit lending to properties affiliated with the same business was one of several hiccups in the rollout of the PPP. Unclear rules created confusion about who qualified for the funds, and glitches in the federal electronic system accepting applications slowed down the process.
The eventual $20 million cap on corporate groups was designed to limit the total PPP funds hotels or restaurants with multiple
properties could receive, said a spokesperson for the U.S. House Committee on Small Business. But by that time, loans well past that amount associated with major chains such as Omni had already been approved. The cap grandfathered in loans that had already been fully disbursed as of April 30.
In an emailed statement, Peter Strebel, Omni’s president, said, regarding Omni’s use of PPP loans: “All PPP funds have been used for approved expenses as outlined in the legislation, and more than $51 million, the vast majority of the loans, have been paid out as payroll and benefits to thousands of associates. … It has been instrumental to our survival during this pandemic, enabling us to safely re-open hotels and bring several thousand associates back to work.”
Other hotel chains also obtained multiple loans through subsidiaries before the cap was imposed. Columbia Sussex, based in Kentucky, used a network of 17 companies, all of which shared the company’s corporate address, to receive a total of $50 million. Westmont Hospitality, based in Houston and Toronto, applied through 23 businesses — either located at 5847 San Felipe St. or listing officers who were —
to receive $30 million in aggregate.
Columbia Sussex and Westmont Hospitality did not respond to requests for comment.
When loans aren’t forgiven
Hotels have also drawn scrutiny from employees and a union for their use of the funds. Unite Here, a union that represents hotel workers, says many hotels were not using the funds for payroll.
Quilcia Moronta, 42, greeted guests, sold memberships and cleaned exercise equipment for the expansive gym at the Omni in Providence, R.I., for 21 years — since before the property was bought by Omni in 2012. Last year, on a March day like any other, she told her coworkers she’d see them the next morning and headed home, where she received a call. She had been laid off due to the pandemic.
She was so shocked, she recalled, that all she said was thank you. Then understanding set in: After more than two decades of steady work to support her family, she suddenly needed to scramble for a way to stay afloat during a public health disaster.
“What hurt me most was that Omni always said we were part of the family,” Moronta said. “But at
the moment we needed them most, they turned their back on me.”
The hotel laid off all its workers when it closed in March. It has yet to reopen, according to Unite Here. The hotel, one of those that lists Omni’s umbrella company’s address as its principal office, has used none of the more than $2 million it received through the PPP to bring people back onto payroll or extend their benefits, said Marty Leary, the union’s director of research.
If less than 60 percent of a company’s PPP funds are used for payroll and benefits, the loan cannot be forgiven, according to the law, meaning that company would have to pay the money back over a two- to five-year period at 1 percent interest.
Compared with other sources of debt, that’s a deal. When Tilman Fertitta, the billionaire owner of the hospitality company Landry’s, made plans in the spring to shut down every dining room, gaming table and amusement park ride in his portfolio, he agreed to pay lenders close to 13 percent interest to borrow $300 million to have on hand in case the pandemic lasted through the end of the year.
Strebel did not address the layoffs at the Omni in Providence but said that in aggregate, the majority of the PPP loans the hotel group has received have gone toward payroll and benefits. He also pointed to the Omni’s charitable foundation, which he said had provided more than $3 million in grants to employees affected by the recession.
“Any statements that falsely accuse Omni of misusing the funds or failing to use any of the loan proceeds for payroll costs appear to be designed solely to harm Omni’s business, which will only further harm our associates,” he said.
Hopes for better luck
A mother of two, Moronta began making calls after realizing she had lost her job, reaching out to her church and food pantry for help. She attempted to pick up inhalers for her two children, 12 and 16, who suffer from asthma, only to learn her health insurance was already terminated.
In August, when it became public that the Providence Omni had received upward of $2 million in PPP money, Moronta felt a surge of hope. “We’re going to get some help,” she thought. “We’re going to keep our benefits for a while.”
But time passed, and Moronta and her former coworkers heard no news from Omni. In the week before Christmas, she was rationing her unemployment benefits to cover her most important bills and explaining to her children that the holidays would look different.
“My question is: Where is that money being invested?” she said, regarding Omni Providence’s PPP funds. “Why are you not distributing that money and using it to help your own employees?”
Answering such questions is not a prerequisite for companies that have already received PPP funds to apply for more under Congress’ new stimulus bill, which authorized another $284 billion for the program. Businesses began applying for second PPP loans last Wednesday.
Among their ranks was Dommar, the chiropractor. “Hopefully,” she said, “I’ll have better luck.”