Letter to Isabella Casillas Guzman, Administrator of Small Business Administration - Barragan & Colleagues Urge SBA to Improve Transparency of PPP Loan Forgiveness for the Hotel Industry

Letter

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,