Memorial Day weekend deals latest economic blow to travel industry

The travel industry is bracing for a dismal Memorial Day weekend, as many Americans are either unwilling or unable to visit popular destinations around the U.S. because of the coronavirus.

The three-day holiday weekend, which typically kicks off the summer tourist season, is expected to bring in just a third of last year’s revenue, according to data from the U.S. Travel Association.

Those dire figures and the near-collapse of the industry itself are prompting more calls for government aid.

“Our industry is still in what we would call rescue mode. We need help significantly,” said Chip Rogers, CEO of the American Hotel and Lodging Association (AHLA).

The plunge in revenue has some trade executives wondering if the summer travel season can even be salvaged. Leaders are now pinning their hopes on congressional action and more reopening at the state level so the July Fourth weekend can help make up for lost time and money.  

“Time is of the essence. We know that now the next package is not looking imminent in the short term, [but] it’s critical to get something done” before Independence Day, said Tori Emerson Barnes, executive vice president of public affairs and policy at the U.S. Travel Association.

Congress, however, isn’t expected to pass additional legislation anytime soon. 

Senate Majority Leader Mitch McConnell (R-Ky.) has signaled the Senate will move slowly on negotiating a new coronavirus relief package to give lawmakers time to evaluate previous measures that are still working their way through the economy. That follows House passage of a $3 trillion rescue bill on May 15, legislation McConnell has deemed “dead on arrival” in the Senate.

“In the short term, we certainly need help from Congress just to survive so hotels will be there to open up when consumers travel in full force again,” Rogers said.

Some of that help, according to the AHLA, should come in the form of changes to the Paycheck Protection Program (PPP), namely extending the rehiring deadline, eliminating the 25 percent cap on nonpayroll expenses and providing safe harbor provisions and tax credits. The trade group highlighted those requests in a letter to congressional leaders Wednesday.

Sens. Angus King (I-Maine) and Steve Daines (R-Mont.) introduced legislation on Thursday to make similar changes to the PPP, including eliminating restrictions that only 25 percent of the loan can go to nonpayroll expenses and restrictions that limit loan terms to two years. 

The U.S. Travel Association has called for PPP changes as well as a temporary travel tax credit of up to $4,000 per household. Certain purchases over $50 while traveling would also come with tax benefits.

President Trump signaled his support for a tax credit during a meeting this past week with restaurant industry leaders at the White House.

“Create an ‘explore America’ … tax credit that Americans can use for domestic travel, including visits to restaurants. That’s a big deal.” the president said.

Whether Americans will want to travel and spend money is a different question.

“Travelers are really looking for guidance right now as they’re trying to navigate what to do,” Desiree Fish, vice president of global communications at TripAdvisor, said on a webinar on the future of the industry hosted by The Stagwell Group on Thursday.

Only 3 percent of people said they would take a vacation a month from now, according to a recent Harris Poll survey. Twenty-three percent said they would be likely to take a vacation in six to 12 months.

The industry has stressed safety and sanitation in pushing to get people to travel again.

“Most travelers want businesses to have certified cleaning processes, limiting crowd size. I think people will be more in outdoor environments and traveling in smaller groups,” Barnes said.

The U.S. Travel Association predicts Americans will spend just over $4 billion this holiday weekend compared with more than $12 billion during the same period last year.

Air travel is also taking a massive hit — the number of passengers screened at U.S. airports has dropped more than 90 percent compared with last year, according to data from Airlines for America.

Overall, Memorial Day travel this year is “likely to set a record low,” according to AAA.

The AHLA predicted occupancy rates at hotels will be about 25 percent of what they were this time last year.

For Airbnb, occupancy rates are just shy of 38 percent for Memorial Day, compared to more than 56 percent last year, according to data from AirDNA.

But things are starting to look up in some parts of the country as more states reopen and public health officials indicate it’s often safer to be outside.

Americans who are spending their travel and tourism dollars are most likely to be found in states such as Delaware, Florida, Maryland, North Carolina, South Carolina and Virginia that have opened their beaches, with some restrictions.

“The bright spots are places around the Gulf of Mexico, particularly the Panhandle of Florida all the way to Texas, which are doing well because they are beach destinations that typically get a lot of drive-in traffic,” Rogers said. “It’s the old saying: location, location location. If you’re in Destin, Fla., right now, you may have a hard time getting a hotel.”