How Federal Staff Changes Could Impact Your Rural Hotel

Federal workforce reductions are underway. Rural hotel owners may feel pressure from the fallout in the immediate future until efficient systems are set in place.

Hoteliers in rural areas may experience delays in loan approvals, longer response times for federal assistance, and added uncertainty in an already challenging economic environment.

GEM Journal compiled a guide on steps to take today if you rely on USDA-backed financing or other federal support. Below, you’ll find how these staff changes could affect your business ––and steps you can take to mitigate potential risks in your day-to-day operations.

USDA’s role in rural hotel financing

For decades, the U.S. Department of Agriculture (USDA) has provided financial assistance to businesses in rural areas through its Business and Industry (B&I) Guaranteed Loan Program. This initiative helps lenders offer more affordable loans to businesses, including hotels, by guaranteeing a percentage of the loan amount.

The program has been instrumental in keeping many rural hospitality businesses afloat, particularly in regions where private financing options are limited.

However, recent staffing reductions at the USDA could complicate access to these critical resources. In 2024, the department began implementing workforce cuts as part of broader federal budget reductions.

These layoffs, coupled with voluntary resignations prompted by a return-to-office mandate, have left many agencies – including the USDA – short-staffed. The impact is already being felt, with reports of delayed loan processing and increased difficulty in reaching USDA representatives for guidance.

What Federal Layoffs Mean for Rural Hotels

While loan programs remain active, staffing shortages may cause longer wait times for approvals and fewer personnel available to assist business owners through the process. In practical terms, this could mean:

• Delayed Loan Applications – Business owners seeking USDA-backed financing may face extended timelines, making it harder to secure funding for renovations, expansions, or operating costs.
• Reduced Assistance – Fewer employees mean limited support for navigating loan requirements, potentially creating obstacles for first-time applicants.
• Shifts to State and Local Levels – As federal resources become more strained, rural businesses may need to rely more heavily on state-level programs and private funding sources.

Steps Rural Hotel Owners Can Take Now

If your hotel is in a rural area and you were considering USDA-backed financing, it’s essential to plan ahead and explore alternative options:

1. Explore Other Financing Sources – Look into Small Business Administration (SBA) loans, local community banks, and regional development grants to ensure you have multiple funding avenues available.
2. Strengthen State and Local Business Ties – State hotel associations and economic development organizations may offer alternative resources or guidance on navigating federal funding challenges.
3. Maintain Relationships with Lenders – If you already have a USDA-backed loan, stay in close contact with your lender to remain informed of any changes in processing times or requirements.
4. Stay Updated on Federal Policy Shifts – Keep an eye on updates from the USDA and your state’s economic development agencies to adjust your strategy as needed.

The Bigger Picture: Economic Ripples from Federal Staffing Changes

In addition to impacting loan access, federal workforce reductions may have other unintended consequences for rural hospitality businesses. Some former federal employees may relocate in search of new job opportunities, potentially increasing demand for short-term stays at rural hotels. Conversely, fewer federal contracts and support services could hurt small towns that depend on government-driven economic activity.

There is also a potential secondary effect on local supply chains. Hotels that rely on federal programs for infrastructure improvements, such as broadband expansion or rural development grants, may experience delays in service enhancements. This could impact everything from digital marketing efforts to guest experience, particularly in remote areas where connectivity is already a challenge.

Another consideration is workforce retention. If local economies experience strain due to reduced federal presence, hiring and retaining qualified hospitality staff could become more difficult. A shrinking labor market might require hotels to reassess compensation strategies, invest in employee training, or look for new ways to attract and retain workers in rural communities.

For now, the best approach is to stay informed, proactive, and adaptable. While federal staffing cuts may create hurdles, rural hotel owners who diversify their financing strategies and strengthen local business connections will be better positioned to weather the challenges ahead.