Hotels on brink of bankruptcy - Plead for 90-day layoff extension to stave off collapse

WESTERN BUREAU:

Weeks after Jamaica reopened its borders to travel markets, tourism interests argued on Tuesday that strained cash flow threatened to send some hotels into bankruptcy amid the looming prospect of mass redundancy payouts.

Glenn Lawrence, CEO of Couples, has warned that a rejection of the Jamaica Hotel and Tourist Association’s (JHTA) proposal of a 90-day extension to the four-month layoff period that triggers redundancy payments could decimate the tourism industry.

“Redundancy claims from potentially 100,000 people would deliver a devastating blow to the industry,” Lawrence said on Tuesday.

Trade unions have so far have rejected advocacy for an extension, but the hoteliers have said they are buying time for the recovery of the industry.

Tourism workers began being laid off in mid-March as COVID-19 swept the globe and governments locked down ports of entry to incoming passengers to stave off infection.

Protracted closures could allow furloughed hospitality staffers to request payouts under the Employment (Terminations and Redundancy Payments) Act after 120 days.

“We need to make it clear that the JHTA and its members fully respect the importance of the law, and under normal circumstances, these redundancy claims would be reasonable,” said Lawrence, adding that the global pandemic had brought the industry to its knees.

The JHTA had pressed the Office of the Prime Minister, and the labour, tourism, and finance ministries to consider an extension.

President of the JHTA, Omar Robinson, speaking at a press briefing at The Jamaica Pegasus hotel on Tuesday, said that the drought in revenue for the last four months would affect payments to staff or creditors.

“The cash-flow situation across the industry is dire and many companies are struggling to keep up with their financial obligations to their banks and other creditors,” Robinson said.

“There is also the real possibility that if this drags on much longer, quite a few of our sectors will fail to reopen with many more Jamaicans being out of work.”

NOT OUT OF THE WOODS

Robinson warned that the reopening of hotels and other tourism accommodations should not be misconstrued that the sector was back on its feet again. Most businesses need at least 60 per cent occupancy to break even, said Robinson, adding that capacity was currently between 10 and 35 per cent.

“The average cost to keep a small hotel closed ranges between US$30,000 to US$50,000 per month. Medium-sized hotels under 500 rooms ranges from US$300,000 to US$600,000 on a monthly basis, and large hotels, over 500 rooms, anywhere in the ballpark of US$500,000 to US$850,000 simply to keep the business going, even though it’s closed ... ,” said Robinson.

“All this is happening when there is no cash flow,” he added.

JHTA director Wayne Cummings said the organisation has been in talks with the Jamaica Bankers Association since the beginning of the COVID-19 crisis domestically in mid-March. The hotel lobby is seeking an extension of the moratorium on payment of mortgages and lines of credit, which stand at J$56 billion as at March 2020.

Cummings also sought to explain why the sector was struggling, arguing that all financial partners are needed on board to “provide the certainty of working capital”.

“For decades, those operating in the tourism sector have operated a system of forward bookings and advanced payments … ,” he said. “Those funds become the business’s immediate cash flow.

“In normal times, as a way to protect bookings, our cancellation policies would include penalties limiting how much we would have to refund and with that a certainty of a strong level of funds. However, the pandemic has decimated this type of system,” he said.

Cummings also cited the failure of tour operator partners to pay over hundreds of millions of dollars to Jamaican tourism businesses as a big problem.

“Some of these operators have literally folded. Others have filed for bankruptcy protection. ... Tourism businesses that would normally be more than solvent, literally overnight, have had the financial wind sucked out of their sails,” he said.

janet.silvera@gleanerjm.com