The Effects of Covid-19 and Civil Unrest on Hotel Operations: A Reinvestment Decision

Alix had considered her city’s downtown a gem and her investment in a hotel there a home run. But with Covid-19 and the frequent protests by opposing political groups that occurred during the years 2020 and 2021, the city had deteriorated. Homeless tents had overtaken the sidewalks, and stores closed, boarded up with plywood. The hotel also closed, a temporary response to the lack of hotel guests. Alix was concerned that her investment had lost significant value with the decline of the city. She wondered whether she should invest additional funds in the hotel in hopes of helping it reclaim its former glory or just walk away from her investment. To determine this, Alix needed to analyze cash projections for the hotel operations, understand tax implications from investing in the hotel and the tax consequences from not doing so, and identify other important considerations for her reinvestment decision.