Hotels need cash infusions and forgivable loans

“Why are white circle lines painted in parks to accommodate small group gatherings when we will have more control in a restaurant?” Tony Elenis asks.

TORONTO — On June 4, Tony Elenis, president and CEO of the Ontario Restaurant Hotel and Motel Association (ORHMA) represented the hospitality industry at the Ontario government’s Standing Committee Meeting on Finance and Economic Affairs regarding the impact of COVID-19 on the Tourism sector. He has a laundry list of asks in order for our hospitality industry to survive, including rent relief, property tax deferrals and forgivable loans. Here are his remarks at the virtual meeting.

We recognize and appreciate this committee’s work in managing through these tough times. The hospitality sector has been devasted during this crisis. It has been labelled a health and economic crisis and of course a social crisis. 

The social characteristics of the hospitality are its strengths. We are about socializing, engaging and meeting with people. We have been hit directly in the heart of what makes hospitality successful. 

  • Over 300,000 hospitality employees are laid off or not working any hours. 
  • 50 per cent of Ontario’s hotels have been closed and those staying open operate with skeleton staff largely accommodating essential service needs. We are seeing 94 per cent year-over-year revenue declines. 
  • Nearly half of single-unit restaurants are temporarily closed. 
  • Ontario’s foodservice industry is on track to lose around $7 billion in sales in this second quarter. 
Tony Elenis, president and CEO, ORHMA.

As Ontario has entered the reopening stage, it is of paramount importance that hospitality opens and opens now. We are ready. We are ready to open by following safety protocols and guidelines which have been completed and released. 

I cannot emphasize the frustration I hear every single day. Why are other businesses open? Why are white circle lines painted in parks to accommodate small group gatherings when we will have more control in a restaurant? 

Under the emergency act, restaurants were the first to be mandated to close and many volunteered to close even before the act was proclaimed. Regretfully COVID-19 is here to stay for another 18 months or so. We need to operate and we will operate under safety rules. Its time to open. 

We also need to have a clear sense of a schedule for opening meetings and groups that are reserved for the remainder of the year or there will be further economic implications in cancellation fees for hotels, meeting and social planners. 

Eviction protection, property tax relief needed

Many hospitality operations will not be opening due to liquidity and rent payment issues.

We need to keep in mind that as the opening stages are ahead of us, many hospitality operations will not be opening their doors primarily due liquidity and rent payment issues. The recently-announced Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA) program is not working for many landlords nor tenants. 

  • We are urgently asking you to protect small- and medium-sized businesses from evictions by putting in place temporary commercial eviction protection for tenants who were in good standing with their landlords. 
  • Another lifeline will be in deferring this year’s property tax to be remitted over a longer year timespan. The MPAC’s assessment formula must also change relating to our dismal business performance. 

As hotels and restaurants re-open there will be start-up costs in payroll, food and supplies in addition to paying off government deferral and loan payments. New expenses will be added to deal with sanitization and distancing practices. The issue becomes more dramatic as most businesses will be emerging out of a period without revenues and entering a painfully slow recovery road. Where is the cash coming from? 

A robust plan is needed in order to prepare the industry for success and to enable the re-hiring of the unparalleled number of laid off workers while supporting a huge supply chain. These are extraordinary times that call for extraordinary actions. The traditional hospitality cost model needs support. Many would argue the restaurant model was broken even before the virus came along. 

Restaurant profit margins were already low before the pandemic, especially in Ontario.

It’s not hard to figure it out. In the 1990s, restaurant profit margins performed much higher, in the 6 to 10 per cent range. Over the years the vast regulations, high labour costs, food pricing, utilities, and rents and leases have decreased Ontario’s restaurants profit down to 3.2 per cent, more like 2 per cent for full-service restaurants. For over 15 years, Ontario has continued to perform lower in profit margins than any other province in Canada. 

We believe our recommendations will directly provide much needed support: 

  • High on the list is Beverage Alcohol Wholesale Pricing. Close to 18,000 licensees can benefit from this. In a capitalist society, volume purchasing of goods and services should favourably impact the basic unit price. Why not in beverage alcohol? This is a sticking point when one compares Ontario’s restaurant performance to those in the U.S. That is the reason we don’t see many U.S. full-service brands invest and survive here. We recommend licensees pay a minimum of 20 per cent reduction from consumer prices. 
  • We also recommend making the temporary amendment of selling beverage alcohol with food through take out and delivery permanent. There is no reason why not. 
  • We recommend expansion of the qualification criteria for the existing Ontario Energy Rebate (OER) of 31.8 per cent to ensure that any hospitality business that currently doesn’t qualify will receive this credit. 
  • Furthermore, we support positive changes to the Municipal Accommodations Tax including reimbursing hotels for the credit card processing fees that they are paying on the tax. 

Building consumer trust and confidence will be critical to the economy and to hospitality operations. We all want success in this. Incentivizing business to dine in hotels and restaurants will boost travel and on-premise visitation. 

  • To this we recommend Ontario works with the federal government to allow businesses to expense restaurants meals at 100 per cent from the current 50 per cent. It is an initiative that has been implemented in many other countries. At one time Canada allowed 100 per cent and when the reduction occurred, I recall as a hotel manager, it was a key contributor in “killing” lunch business in many operations. 

Hospitality needs government funding to survive. ORHMA as a pan hospitality provincial association is capable to facilitate and deliver meaningful programs to the sector with success. ORHMA’S full recommendations plan can be viewed here

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