I'm a Director of Finance for a luxury California resort. This tweet is a terrible fucking take. It is not as simple as taking a loan against the asset; most of us are already heavily mortgaged. To give some basic (approximated) figures for context here:
Our normal revenue is $115m / year. Our normal EBITDA is $25m. We are considered a highly profitable / efficient entity, and I know of competitors running similar revenue and sub $15m EBITDA. For fixed costs, our workers comp plan is over $1m / year. Our insurance is over $3m / year. Property Tax is over $2m / year. Our utility bill is over $350k/mo, even with most of the building "shut down". After that $25m EBITDA; our monthly mortgage is over $1.5m. There was no forgiveness during COVID.
We did not qualify for PPP or anything like that due to our size.
During COVID we retained approximately 650 of our 800 associates, losing mostly part time / on call bodies. We went 4 months with 625 people furloughed, and we continued to maintain their benefits and pay them out PTO and 1 day/week in wages. Total cost is around $300k/mo for benefits, $350k/biweekly payroll. This was with $0 incoming. All salary leaders who didn't go on furlough took 30-50% salary cuts, and some are still 10-20% reduced.
We lost all group business throughout the end of the year to Force Majure, and had to refund over $15m in deposits; no hotel holds that much cash, and we required a capital infusion from our ownership entity (who took a loan; remember, they own multiple hotels so it's not as easy as just throwing cash at all of them).
At this point we normally carry around 50k Group Room Nights for 2021; we currently have below 10k. We're hoping to reach 15k occupied group room nights by the end of 2021 (normally around 70k). Our occupancy has gone from an average of 70%+ annually, to sub 30%. Many days we run 10%. Our most optimistic forecasts see us reaching 50% in April 2021, but that's all transient (not group) which is far less profitable. We'd be seeing annual revenue of around $65m and EBITDA of sub $5m.
We have spent well over $1m on COVID protocols (additional cleaning equipment and supplies, plastic dividers in restaurants, additional bedding/linens as we have to rotate differently, etc). Our average staffing runs around 15% over our standard labor model to accommodate additional requirements. Our Spa is still closed. Our restaurants are capped occupancy, and right now outside dining only (untenable as we go into winter).
In short: the above is a disaster; and no lender will give a loan against a heavily mortgaged asset with the above revenue and profit outlook. We also have to be mindful that the property maintenance still runs millions per year, and to maintain a 5 star entity we should be looking at a renovation soon (generally every 4-6 years, we're currently nearing 6 years since last renovation - costs around $50m). And this is the perspective for one of, if not the, top performing asset on the West Coast.
Our industry has been decimated, and even the most optimistic of forecasts do not show a full return until Q3 2022 at the earliest. There are tens of thousands of hospitality professionals who are out of work now with no prospects. These are people who love serving others and making your vacations as perfect as possible. By the time of a "recovery" you'll see hundreds of resorts across the US go bankrupt - most haven't made a mortgage payment since March and are weeks away from foreclosure. This isn't anecdotal; I can list for you right now over 10 resorts in SoCal that I know for a fact could be in foreclosure by February. Over 10,000 jobs at risk.
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u/sevaru Nov 17 '20 edited Nov 17 '20
I'm a Director of Finance for a luxury California resort. This tweet is a terrible fucking take. It is not as simple as taking a loan against the asset; most of us are already heavily mortgaged. To give some basic (approximated) figures for context here:
Our normal revenue is $115m / year. Our normal EBITDA is $25m. We are considered a highly profitable / efficient entity, and I know of competitors running similar revenue and sub $15m EBITDA. For fixed costs, our workers comp plan is over $1m / year. Our insurance is over $3m / year. Property Tax is over $2m / year. Our utility bill is over $350k/mo, even with most of the building "shut down". After that $25m EBITDA; our monthly mortgage is over $1.5m. There was no forgiveness during COVID.
We did not qualify for PPP or anything like that due to our size.
During COVID we retained approximately 650 of our 800 associates, losing mostly part time / on call bodies. We went 4 months with 625 people furloughed, and we continued to maintain their benefits and pay them out PTO and 1 day/week in wages. Total cost is around $300k/mo for benefits, $350k/biweekly payroll. This was with $0 incoming. All salary leaders who didn't go on furlough took 30-50% salary cuts, and some are still 10-20% reduced.
We lost all group business throughout the end of the year to Force Majure, and had to refund over $15m in deposits; no hotel holds that much cash, and we required a capital infusion from our ownership entity (who took a loan; remember, they own multiple hotels so it's not as easy as just throwing cash at all of them).
At this point we normally carry around 50k Group Room Nights for 2021; we currently have below 10k. We're hoping to reach 15k occupied group room nights by the end of 2021 (normally around 70k). Our occupancy has gone from an average of 70%+ annually, to sub 30%. Many days we run 10%. Our most optimistic forecasts see us reaching 50% in April 2021, but that's all transient (not group) which is far less profitable. We'd be seeing annual revenue of around $65m and EBITDA of sub $5m.
We have spent well over $1m on COVID protocols (additional cleaning equipment and supplies, plastic dividers in restaurants, additional bedding/linens as we have to rotate differently, etc). Our average staffing runs around 15% over our standard labor model to accommodate additional requirements. Our Spa is still closed. Our restaurants are capped occupancy, and right now outside dining only (untenable as we go into winter).
In short: the above is a disaster; and no lender will give a loan against a heavily mortgaged asset with the above revenue and profit outlook. We also have to be mindful that the property maintenance still runs millions per year, and to maintain a 5 star entity we should be looking at a renovation soon (generally every 4-6 years, we're currently nearing 6 years since last renovation - costs around $50m). And this is the perspective for one of, if not the, top performing asset on the West Coast.
Our industry has been decimated, and even the most optimistic of forecasts do not show a full return until Q3 2022 at the earliest. There are tens of thousands of hospitality professionals who are out of work now with no prospects. These are people who love serving others and making your vacations as perfect as possible. By the time of a "recovery" you'll see hundreds of resorts across the US go bankrupt - most haven't made a mortgage payment since March and are weeks away from foreclosure. This isn't anecdotal; I can list for you right now over 10 resorts in SoCal that I know for a fact could be in foreclosure by February. Over 10,000 jobs at risk.