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July 27, 2021

Barragán & Colleagues Urge SBA to Improve Transparency of PPP Loan Forgiveness for the Hotel Industry

FOR IMMEDIATE RELEASE

July 27, 2021

 

Washington, D.C. – Today, Congresswoman Nanette Diaz Barragán led 12 of her colleagues in urging the Small Business Administration to improve transparency of the Paycheck Protection Program loan forgiveness for the hotel industry.

While Paycheck Protection Program (PPP) loans were expected to be used to keep workers on the job or bring them back to work, the data shows that has not been the case at hotels which have taken advantage of the PPP. Despite hotels reporting 97 percent of PPP loans were assigned to payroll costs, the number of U.S. hotel jobs has been slow to rebound from the sharp drop in hospitality employment caused by the pandemic.

“Congress intended the PPP be used as a lifeline for small businesses to retain employees, not as a bailout for wealthy corporations. It is important that this funding is used to protect the jobs of hotel workers, as it was intended. We need additional transparency to make sure that is the case for those hotels accessing these loans,” Congresswoman Barragán said.

According to the hospitality union UNITE HERE Local 11’s analysis of employment data, 10 Southern California hotels would not appear to qualify for full loan forgiveness for loans their owners or operators received in 2020.

“Although Congress intended PPP funds be used to return workers to payroll, the number of U.S. hotel jobs from May 2020 to June 2021 averaged only 20% greater than the number of hotel jobs in April 2020 after the pandemic caused a sharp drop in hotel employment,” the lawmakers wrote in the letter to SBA Administrator Isabelle Guzman.

The program has also enabled large hotel chains with more than 500 workers to collect first draw PPP loans for multiple locations. The lawmakers believe there needs to be a greater understanding of how these PPP loans are being used, and whether loan forgiveness is warranted.

“I have been out of work for over a year now and have been struggling to make ends meet during the pandemic,” said Elba Hernandez, who has worked as a hotel housekeeper for 30 years in Santa Monica and is a proud member of UNITE HERE Local 11. “Thousands of hospitality workers like myself continue to be out of work across the country, while hotel corporations received billions in federal relief through the so-called Paycheck Protection Program. We have a right to know where that money went.”

Congresswoman Barragán was joined on the letter by: Rep. Greg Stanton (Ariz.), Rep. Ted Lieu (Calif.), Rep. Alan Lowenthal (Calif.), Rep. Ruben Gallego (Ariz.), Rep. Julia Brownley (Calif.), Rep. Salud Carbajal (Calif.), Rep. Raúl Grijalva (Ariz.), Rep. Lou Correa (Calif.), Rep. Linda T. Sanchez (Calif.), Rep. Mark Takano (Calif.), Rep. Adam Smith (Wash.) and Rep. Mike Levin (Calif.).

Please find analysis by Unite Here Local 11 here.

Full text of the letter is below:

 

July 27, 2021

 

Isabella Casillas Guzman

Administrator

U.S. Small Business Administration

409 3rd St, SW. Washington DC 20416

 

Dear Administrator Guzman,

We are writing to ask you to improve the transparency of the Paycheck Protection Program (PPP) loan forgiveness for the hotel industry. U.S. hotels have received $13.9 billion in Paycheck Protection Program (“PPP”) loans from the Small Business Administration (SBA), in part through exemptions that made large hotel chains eligible for taxpayer aid. However, although Congress intended PPP funds be used to return workers to payroll, the number of U.S. hotel jobs from May 2020 to June 2021 averaged only 20% greater than the number of hotel jobs in April 2020 after the pandemic caused a sharp drop in hotel employment[i].

While hotels have not brought the majority of their employees back to work, in data reported to the SBA on July 1, hotels reported 97% of PPP loans to U.S. hotels were assigned to payroll costs at loan origination.[ii] Hotels were required to spend 60% of PPP loan proceeds on payroll costs to qualify for full loan forgiveness[iii] and as of July 1 the SBA has forgiven a total of $4.2 billion in PPP loans to U.S. hotels. However, according to hospitality union UNITE HERE Local 11’s analysis of employment data, ten Southern California hotels would not appear to qualify for full loan forgiveness for loans their owners or operators received in 2020.

The owners and operators of this group of hotels—global private equity firms, foreign companies and hotel operators collectively worth billions—collected over $73 million through dozens of entities connected to their hotel properties and corporate offices, but the ten properties on average employed less than 25% of their pre-pandemic workforces from May to October 2020, the covered period during which borrowers were required by the SBA to spend 60% of loan proceeds on payroll costs in order to qualify for full loan forgiveness[iv].

Greater transparency and accountability for how these loans are being used is especially important because the program has enabled large hotel chains with over 500 workers to collect first draw PPP loans for multiple locations—and enabled large hotel chains with over 300 workers to collect second draw PPP loans for multiple locations—netting hotels $1.3 billion unavailable to non-hospitality borrowers. Congress intended the PPP be used as a lifeline for small businesses to retain employees, not as funding a bailout for wealthy corporations.

The SBA’s June 8 disclosure of PPP loans only added “Forgiveness Amount” and “Forgiveness Paid Date” fields. For every hotel PPP loan, the SBA should disclose whether a loan forgiveness application has been received, provide a copy of the application, and detail the loan forgiveness application’s breakdown of how the loan was used in addition to the amount forgiven by the SBA. This disclosure should be updated weekly. This will enable workers and taxpayers to compare how hotels claim they used PPP funds to how they were actually used, before SBA grants further loan forgiveness to hotels that do not retain or rehire workers.

Thank you for your consideration of this request. We look forward to working with you to ensure the PPP program for hotels is having its intended impact.

Sincerely,

SIGNATORIES

[i] Data for the “Accommodation: NAICS 721” sector from the Bureau of Labor Statistics, available at https://data.bls.gov/timeseries/CES7072100001?amp%253bdata_tool=XGtable&output_view=data&include_graphs=true. Data for May 2021 and June 2021 is marked “preliminary” by BLS.

[ii] Loan amounts and percentages are based on PPP data created by the SBA on March 2, 2021 and updated July 1, 2021. The raw data are available here: https://data.sba.gov/dataset/ppp-foia.

[iii] “PPP loan forgiveness,” Accessed June 21, 2021, https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program/ppp-loan-forgiveness

[iv] SBA Loan Forgiveness Guide (See Page 14 for 24 week covered period and Page 15 for 40% maximum non-payroll costs) https://www.sba.gov/sites/default/files/resource_files/PPP_Loan_Forgiveness_as_of_September_30_2020.pdf