Congress is expected to approve an additional $360 billion
in coronavirus relief funds for small businesses, but if the last round of
funding was any indication, travel agencies face an uphill battle to get
approval for what many are calling a lifeline amid the pandemic.
In late March, the $2 trillion Coronavirus Relief and
Economic Securities (Cares) Act was signed into law. The aid package included
several provisions for businesses with fewer than 500 employees, including the
Small Business Administration’s Paycheck Protection Program, funded with $349
billion. Under the act, small businesses could also qualify for SBA Economic
Injury Disaster Loans (EIDL), including an initial $10,000 grant regardless of
whether they ultimately qualified for an EIDL.
But by mid-April, those funds dried up before many agencies
even heard whether they had been approved. In most cases, it appears that those
who had received funds were successful because they went through banks with
which they had prior relationships. Others were left without answers,
struggling to stay afloat.
“The whole industry is pretty much in the same boat, where
so many people’s livelihood and major asset -- meaning their agency, it’s their business -- is
at risk because of the lack of funding,” said Roger Block, president of Travel
Leaders Network.
The latest round of funding was passed by the Senate on April 21 and awaits House approval. According to ASTA, it would fund
the PPP with an additional $310 billion and provide an additional $50 billion
for the EIDL program plus an extra $10 billion for grants provided in advance of
the EIDL loan approval.
“While these programs are far from perfect, they have
provided financial relief to some of our members, and the additional funding
will mean more relief for more travel agencies,” the Society said.
Eben Peck, ASTA’s executive vice president of advocacy, said
travel agency approval will likely still hinge on the bank that agencies use to
apply for the funds, adding that “there are no magic bullets here” to secure an
approval.
Before additional funding was announced, few
agencies had received approval or funds from either the PPP or the EIDL
program.
An ASTA survey administered from April 17 to 20 found that
66% of the nearly 700 respondents had applied for a PPP loan, and 20.1% had
been approved. Meanwhile, 63.7% applied for an EIDL, and only 7.1% had been
approved.
Respondents reported that applying to both programs was at
least somewhat difficult, and 38.4% of those who applied for a PPP loan had
trouble finding a financial institution willing to accept their application.
A Travel Leaders Network survey painted an even bleaker
picture: Of the 472 agency owners who responded, 36.7% had applied for the PPP,
and 94.8% said they had not received funds. Around 60% applied for EIDLs, and
98.9% had not received funds.
Since the survey was administered, Block said he had heard
of a handful of agencies who had received funding, “but still, I have to say it’s
less than 15%.”
Block said those who were successful in securing a loan were
able to do so because they had existing relationships with their bankers. Their
applications were among the first processed and approved. Secondary clients
weren’t a priority, he said.
John Werner, president and COO of the MAST Travel Network,
said members reported similar results with loans. Those who got funds quickly
were largely dealing with smaller community banks where they had relationships.
It’s been a frustrating process for those who haven’t heard
about their loan status.
“They’re all looking at this as their lifeline to get them
through between now and, let’s say, September, thinking that there will be some
more travel in the fall and some commissions coming back into the agency,”
Werner said.
Advisor looks ahead
A “lifeline” is exactly what the PPP represents for Kristy
Osborn, owner of a Travel Leaders agency in Loveland, Colo.
Osborn has been in travel for 32 years and has weathered
many storms. Thanks to that experience, she has kept her 10 agents working at
their existing salaries since the spread of Covid-19 began, but without the PPP
she likely can keep that up for only another four or five months.
“I’ve done this long enough to know that our type of
business is driven by the economy, and in good years, you have to save,” she
said. “I just didn’t know that my rainy day was going to be coronavirus.”
Osborn applied for the PPP in early April. She’s been with
the same bank for 32 years, but it has been bought and sold several times in
recent years, leading to high turnover -- and
no personal relationship with bankers.
As of April 17, she had no indication of whether her loan
had been approved.
But there are some bright spots on the horizon. Last week,
Osborn said, her agency had begun to see some inquiries for future travel on
its website. She also has a plan for reopening in a responsible manner.
Kristy Osborn, owner of a Travel Leaders agency in Loveland, Colo., will use her office’s drive-through window to conduct business while practicing social distancing.
When her agency first opened, she had a drive-through window
installed in the building so clients could pick up paper airline tickets
without having to leave their cars. As ticketing has gone digital, the window
hasn’t been used in years. That will change when the agency can safely reopen to
clients.
“We are going to start using that drive-up window again,
that way our agents can have social distancing and our clients can have the
opportunity to come and visit with us physically at the window, grab brochures,
talk to our agents,” she said. “Hopefully, we’ll begin a new era with our
travel agency.”