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CNN.com, February 23, 2005
LOS ANGELES, California (Reuters) -- Protracted hotel labor disputes
in San Francisco and Los Angeles could be a preview of troubles for
other chains nationwide as unions grow more determined and organized
in pressing wage and benefit demands.
Union actions have failed to sour a strong profit recovery in the
hotel industry, where revenue has been lifted by a comeback in tourist
and business travel after a three-year slump.
But wage increases being sought by unions are looming as one of the
biggest challenges facing hotel operators in the coming year, Deutsche
Bank analyst Marc Falcone said.
"The biggest single risk to hotel stocks today is higher labor
rates," Falcone told the Reuters Hotels and Casinos Summit on
Tuesday.
Convention business is already starting to suffer at some affected
California hotels where unions are staging boycotts, and labor turmoil
shows no signs of easing.
Fourteen San Francisco hotels remain locked in a six-month dispute,
while Los Angeles workers and hotel operators are still at odds after
year-long contract talks.
Problems could spread in 2006 when contracts expire in Boston, New
York, Chicago, Sacramento, Hawaii and Toronto.
Depending on the magnitude of wage increases achieved by unions, "it
may take a little off the bottom line," Falcone told the summit,
held at Reuters offices in Los Angeles.
Hotels affected by California's labor disputes include Starwood Hotels
& Resorts Worldwide Inc.; Hyatt Hotels; Hilton Hotels Corp.; Marriott
International Inc.; Four Seasons Hotels Inc. and Fairmont Hotels &
Resorts Inc.
Labor is the biggest cost for most operators, making up 45 percent
of hotel operating expenses, according to the Atlanta office of hospitality
consultants PKF Consulting.
Labor expenses - payrolls, benefits and training - are already rising
far above inflation rates, PKF said, with labor costs per available
room climbing to an estimated $13,834 in 2004 from $12,540 in 2002.
Rising revenue will give hotels wiggle room to make wage concessions.
Nationwide, revenue per available room surged rose 7.5 percent last
year, according to a PricewaterhouseCoopers study.
Still, hotels are not in a position to absorb surging employee health-care
costs, the most contentious issue at the bargaining table.
Historically, few industries have been more expert at managing labor
issues than hotels, where profits depend on impeccable service and
good labor management.
"Labor is a big expense and also, being the hospitality industry,
tends to be an integral part of the product and experience at a hotel,"
said Robert Mandelbaum, director of research information services
at PKF Consulting's Atlanta office.
Negotiations are now being complicated by unions' attempts to organize
nationally as international hotels grow.
Unionized workers in San Francisco, Los Angeles and Washington, D.C.,
for example, had sought contracts that would all expire in 2006, putting
them on the same timetable as other major markets to boost their bargaining
power.
Workers in the District of Columbia, however, have settled for a longer
contract, and workers in San Francisco and Los Angeles have softened
their demands.
So far, hotels have curbed financial fallout from strikes and lockouts
by hiring temporary workers or bringing in replacements from non-union
hotels.
But some groups are pulling out events in response to boycotts. The
Organization of American Historians last week moved its meeting to
San Jose from the Hilton San Francisco after three-quarters of members
polled said they would not cross a picket line.
"Their source of bargaining power is an extremely committed and
disciplined membership which has kind of stolen the hearts and minds
of San Franciscans," Carol Zabin, a labor economist at the Center
for Labor Research and Education at the University of California at
Berkeley, said in an interview last week.
Copyright 2005 Reuters
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