Reprinted with permission from ProPublica
In March, as lawmakers raced to put together a massive stimulus package to cope with the pandemic-related shutdowns sweeping the country, a New York company that invests in hotels deployed a Washington lobbyist for the first time. The lobbyist's mission was to secure an exception in the emerging relief program for small businesses so that hotel chains would become eligible.
The company, EOS Investors, had more than 500 employees, putting it above the limit in the original proposal by Sens. Susan Collins (R-ME), and Marco Rubio (R-FL). But if the cap for hotels were set for each location instead of companywide, then EOS could benefit at several of its properties, like the collection of resorts that EOS had recently acquired in Kennebunkport, Maine.
The lobbyist whom EOS called on for help was Michael Bopp, a former longtime aide to Collins, according to a congressional disclosure form. Bopp was Collins' legislative director and general counsel from 1999 to 2003 and chief counsel to the Senate homeland security committee from 2003 to 2006, while Collins was chair. He has also served as outside counsel to Collins' campaign.
As it turned out, by the time Bopp joined the cause, there was already a bandwagon of powerful interest groups advocating for the same change in order to get a slice of the $349 billion in small business aid (later increased to more than $500 billion). A spokesman for Collins identified the International Franchise Association, the American Hotel and Lodging Association, the National Association of Broadcasters, the National Restaurant Association, the U.S. Travel Association and others.
One of the main criticisms of the relief, known as the Paycheck Protection Program, has been that it ended up favoring well-connected businesses over mom-and-pop concerns with scarce access to other resources. Overall, the March stimulus bill was one of the most-lobbied pieces of legislation ever, including many clients like EOS that had never had a registered lobbyist before. It led to record lobbying spending in the first three months of the year.
“Is it really surprising that a Senator who represents 'Vacationland' would try to help the hospitality sector and all of the workers it employs?" Collins' spokesman, Christopher Knight, said in a statement, referring to Maine's nickname. “During the drafting process, our office was contacted by hundreds of small business owners, small business organizations, and others who were concerned about the impact that mitigation measures to contain the virus would have on their businesses and their employees."
As a result, the final version of the PPP that became law contained an exception for hotel and restaurant chains. Those companies could apply with up to 500 employees per location, even if they were much bigger overall.
Collins took credit for the change, telling a Maine radio host: “I was able to get an exception included in the bill. And I think it's made a real difference to some of our restaurants and hotels in Maine that are locally owned and needed that kind of relief."
While Collins and other advocates say the exception for hotel chains prevented layoffs in a badly battered industry, it became one of the most controversial features of the PPP. Some firms that initially received PPP funds volunteered to return them because of the public backlash, such as Shake Shack and the Ashford hotel group.
Economists have credited the program with blunting the economic impact of social distancing, but the effects were uneven. A July paper from the National Bureau of Economic Research concluded that the program's reliance on private lenders helped the money get out quickly but ended up favoring companies with established lending connections; meanwhile, the most severely impacted companies were approved at lower rates. In particular, a survey found that small businesses owned by Black and Latino people are facing closure after most struggled to benefit from the PPP.
“Firms with stronger connections to banks were more likely to have their applications approved, while firms more negatively affected by COVID and with less cash-on-hand were less likely to be approved, suggesting that lending to bank customers in better financial positions may have been prioritized, possibly crowding out less connected firms that would have had greater benefits from the loans," researchers from Harvard and the University of Illinois at Urbana-Champaign wrote in the NBER paper.
Lawmakers are now considering how to better target assistance for small businesses as they negotiate the next round of possibly trillions more in stimulus funding. There are a variety of proposals, but congressional leaders and the administration are stalled over other disagreements such as unemployment benefits and aid for state governments.
Recent disclosures from the U.S. Small Business Administration, dislodged after ProPublica and other news organizations sued, reveal the scope of the change to accommodate hotel chains. At least 59 large hotel companies were approved for more than 600 forgivable government loans totaling up to $1 billion despite having more than 500 employees overall, according to the data.
Bopp's client EOS was among them. On the second day of the program, EOS' Maine-based bank approved the company for loans totaling between $6.1 million and $13.35 million, according to the SBA data. The disclosures say that the loans to EOS supported a total of 780 jobs, including 250 at the company's resort collection in Kennebunkport.
EOS paid Bopp's firm, Gibson Dunn & Crutcher, $10,000 for his lobbying work, according to the lobbying disclosure form. Bopp said he did not have permission from his firm to discuss the work, and EOS didn't respond to requests for comment.
Just as chains tended to have an easier time getting PPP loans, they're also more likely to have other resources that independent small businesses don't, according to Adam Zuckerman, the director of the Maine Small Business Coalition, a progressive group of 4,000 companies in the state, most with fewer than 20 employees.
“In an ideal world, the program would be based on who has the least amount of access to capital, and many of these companies already have a great amount of access to capital," Zuckerman said in an interview. “Especially owner-operated small businesses have close connections to employees — they're like family. It's different for a large corporation where the CEO is sitting in a boardroom in another state. A lot of small business owners are appreciative of PPP over nothing, but I don't think it's really the best fit for a lot of them."
The biggest beneficiary of the hotel chain exception was Omni Hotels & Resorts, owned by Dallas billionaire Robert Rowling. The upscale chain was approved for $50 million to $116 million at 30 locations, according to SBA data. The company didn't respond to requests for comment.
The Kentucky-based Columbia Sussex hotel chain, whose hotels operate under the Marriott, Renaissance, Hilton and Hyatt brands in 22 states, was approved for $29 million to $63 million at 17 locations. The company, which has almost 6,500 employees overall, didn't respond to requests for comment.
The Sydell Group, a New York-based luxury hotel operator known for its NoMad and Line marquees, was approved for $17 million to $40 million at eight properties employing more than 2,000 people, according to the SBA disclosures. The Sydell Group also didn't respond to requests for comment.
The SBA disclosures show loans above $150,000 that were approved by banks; not everyone necessarily received the money, and specific dollar amounts weren't released.
“The program was undermined by large restaurant chains, hotels, and other huge publicly traded companies that received PPP loans that were intended to benefit small businesses," Sen. Elizabeth Warren (D-MA) and House small business committee chairwoman Nydia Velazquez (D-NY) said in an April letter asking government watchdogs to investigate.
Hotel lobbyists countered that even though some chains wouldn't ordinarily be eligible for SBA loans, their participation in the PPP was still consistent with the program's goal of saving jobs at risk from the pandemic.
“We were one of several associations that lobbied for the PPP exemption so that these businesses could be eligible for loans, with the goal of protecting as many jobs as possible," Brian Crawford, executive vice president of government affairs at the American Hotel & Lodging Association, said in a statement to ProPublica. “PPP was designed to provide aid as quickly as possible, to as many small businesses as possible, and it was passed with broad, bipartisan support."