Are Las Vegas Hotels the Next to File Bankruptcy Due to COVID-19?

Experienced Bankruptcy Attorneys Discuss Recent Hotel Bankruptcies In Nevada During The Pandemic

If you remember the spike of bankruptcy filings after the recession in 2008, you’re probably expecting a similar phenomenon due to the coronavirus pandemic. While consumer bankruptcy filings haven’t reflected the same spike from 2008, it seems like almost every since the pandemic started, there is news of another major business filing declaring bankruptcy. Hospitality is one of the industries hit hardest by the pandemic, with thousands of restaurants already filing for bankruptcy or going out of business. With travel rates decimated, hotel owners are starting to follow suit. COVID-19 has reduced hotel usage in numerous ways.

Remote Work & Work From Home

Millions of offices in the United States and thousands of Nevada businesses have shifted to remote work since March 2020. Working remotely, also means most work functions and conventions have also been switched to remote attendance. Conventions used to allow hotels to book hundreds of hotel guests for multiple days in a row, including less popular weekdays. Some businesses are seeing the advantages of remote work and plan to implement these strategies after the pandemic. Only the future can tell how much permanent negative impact this will have on conventions, and in turn, hotels.

Cancelled Weddings

Some weddings have been cancelled due to state restrictions on gathering sizes, while other couples have cancelled their weddings to avoid spreading the virus. Whether or not the wedding is being held at the hotel, weddings used to be a boon for hotel customers. Until large gatherings of people are deemed safe again, weddings (and other parties) won’t be a steady stream of income for hotels.

Travel Advisories & Restrictions Due to COVID-19

Traveling by plane is risky in terms of COVID-19 exposure, and also because some state and national governments have enacted lockdowns during the pandemic. Some people who were travelling around March 2020 ended up stuck in their destination location for days or even weeks, waiting for travel restrictions to be lifted. Most people have cancelled and stopped buying airline tickets. In fact, over the summer of 2020, the average price of a one way domestic ticket fell to $135, which is the lowest average price seen in more than 20 years. In the summer of 2019, the average price of a one way domestic ticket was $198. International travel has slowed at even more dramatic rates. Less overall tourism means less people staying in hotels.

Indoor Dining & Nevada Coronavirus Restrictions

Many hotels have bars and restaurants inside of them that are just as much of a destination as the hotel itself. During the pandemic, several state governments restrict dining to take out and delivery only, or only allow for outdoor dining. Restaurants and bars are an opportunity for hotels to draw in local guests, who now have no reason to visit or spend money at hotels.

Hotel Bankruptcies So Far Impacting Other States, Is Nevada Next?

There were zero hotel bankruptcy filings in both 2018 and 2019. Coronavirus changed this in 2020. One hotel in New York, Martinique New York, filed Chapter 11 bankruptcy in September 2020. Two more New York hotels filed in December 2020. Marriott Wardman Park in Washington filed bankruptcy in January 2021, followed by a unit of Eagle Hospitality Real Estate Investment Trust. With hotel bankruptcy rates for January 2021 already at the levels of the year 2020 overall, it goes to reason that hotel bankruptcy filings will continue to increase in 2021.

What is Chapter 11 Bankruptcy?

Most people are only familiar with Chapter 7 and Chapter 13 bankruptcy, which allow consumers to liquidate debt and reorganize debt into a payment plan, respectively. Chapter 11 is also available to individuals, but is more often used by businesses that are struggling with debt. There are special provisions available for small businesses, but its procedures are also designed to assist larger businesses in restructuring debts.

When a business declares Chapter 11 bankruptcy, its creditors are not only notified of the filing like in Chapter 7 and Chapter 13. The company’s top creditors will form a panel that has authority over business decisions and the company’s proposal to emerge from bankruptcy. While ordinary business operations will remain in the hands of the company, major decisions like opening and closing locations, downsizing, and more will need approval from the creditor panel.

The company will need to submit a proposal to emerge from bankruptcy. This usually includes converting debts into ownership shares, major downsizing, finding new financing, selling the company, or some combination of these. The creditor panel will vote on the plan, which also must be approved by the court. The company will be protected from creditor collection methods like foreclosure and repossession while the bankruptcy is in good standing.

Hotel Strategies to Survive Besides Declaring Bankruptcy

Hotel owners will need to be creative to survive the economic impact of coronavirus. One strategy is only being open for business on weekends. For example, MGM Resorts has closed Mirage and Mandalay Bay Monday through Thursday to reduce costs. During the pandemic, the amount of people booking hotel rooms on weekdays isn’t worth keeping the lights on and the hotel staffed for those days. Las Vegas has COVID-19 restrictions that are far more lax than other areas, so it is still worth it for these hotels to operate on weekends.

Many hospitals are understaffed in the wake of the sudden influx of coronavirus patients, requiring some nurses and medical professionals to travel to other areas temporarily. Other medical professionals are concerned about spreading the virus to their families after potential exposure day in and day out. Some hotels offer free or discounted stays to medical professionals during the pandemic. This allows for at least some income in some cases, and good exposure for the hotel when the rooms are free for medical professionals.

Other Major Businesses to Declare Bankruptcy During the Pandemic

Restaurants, retail, and fitness are some of the top Chapter 11 filers since the onset of the pandemic. Companies that were struggling with debt before the pandemic were especially vulnerable to the economic effects of COVID-19.

Some of the household name companies that have filed bankruptcy during the pandemic include:

• JCPenney
• California Pizza Kitchen
• Neiman Marcus
• Men’s Wearhouse
• Chuck E. Cheese Pizza
• Brooks Brothers
• GNC
• J. Crew
• Gold’s Gym
• Sizzler USA
• Ruby Tuesday
• 24 Hour Fitness
• National Rifle Association (NRA)
• Modell’s Sporting Goods
• Tuesday Morning
• Guitar Center

What’s Next for The Hotel Industry In Las Vegas?

So far some of the hotels in Nevada have either continued to be closed due to the impact of the Covid 19 pandemic or have decreased the days that they are operating. A few of the MGM and Wynn properties have chose to only be open on the weekends or on a Thursday through Sunday basis. These cutbacks cause trickle down impacts on the many Las Vegas residents who are employed by the hotel industry in Las Vegas.

If you are finding yourself caught up in the financial downturn in the Nevada economy or are facing bills you can not pay due to a loss of income, consider giving our Las Vegas Bankruptcy Attorneys a call. We offer free debt evaluations and consultations for any Clark County residents in need of a “Fresh Start”. Our Vegas Debt Relief Team can help you get on the path to financial freedom.

Las Vegas Bankruptcy Lawyers

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Las Vegas, NV89128
Office: 702-879-2499
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HENDERSON
1489 W Warm Springs Rd. Ste 110
Henderson, NV 89014
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