Recession widens chasm in hospitality contract talks

By Danielle Douglas
Monday, November 15, 2010

District hotel workers are pressing their employers for wage increases and better benefits packages as the hospitality sector begins to improve. Lodging operators argue, however, that the recovery is tepid at best, making such demands unreasonable.

Contract negotiations are always rife with tension, but the ordeal of the recession, with workers asked to do more as management grappled with waning profits, has left both sides especially uneasy.

The hotel talks got underway over the summer, with both sides agreeing on little beyond the health care plan. The existing contract was set to expire Sept. 15, but a six-month extension was granted. Last week, members of the union marched on Farragut Square to bring attention to their grievances.

Among the biggest points of contention, according to John Boardman, head of Local 25 of the national union Unite Here, is management's refusal to contribute more to pension plans, a first-year wage increase of less than 1 percent and the outsourcing of some 10 percent of the workforce.

Emily Durso, the outgoing president of the Hotel Association of Washington, D.C., which is involved in the negotiations on behalf of the hotel operators, said what is currently on the table is merely an opening offer. "We put a low number. [John] put a really high number," she said, expecting to meet in the middle. "This is standard bargaining."

There is speculation that the terms presented by the operators are the result of pressure from some hotel owners, who are trying to extract as much value as possible from properties struggling with debt.

"Are some of the owners pressuring operators to push for a hard deal? Yes, but we haven't really talked about a deal yet," Durso said.

Operators, she points out, are coming off of one of the worst years in the hotel industry, when dwindling occupancy and flat-lined room revenue became the norm. The District fared better than comparable markets, but still witnessed a lull in demand.

Leisure and business travelers have been making their way back to the city, where in the first nine months of the year the average occupancy hovered at 66.7 percent -- a 4-point increase year over year, and room rate revenue rebounded 1.7 percent to $99.60, according to Smith Travel Research.

"People are making money here. Operators are not in trouble anymore," Boardman said. "The workforce was compressed, companies did not hire and occupancy rates did not decline significantly, but productivity was up. Workers feel squeezed."

The plight of the hospitality industry is reflected in many sectors that are starting to regain footing, and as a result feeling pressure from a recession-wary workforce. Anirban Basu, chairman and chief executive of Sage Policy Group, a Baltimore economic and policy consulting firm, advises employers to maintain control of their labor costs in the midst of economic transition.

"In many industries, there is still excess capacity, which means competition will continue to take place largely on the basis of price," he said. "Those employers who see fit to grant generous increases in compensation to make up for the last two or three years may find themselves at a competitive disadvantage vis a vis firms that are more successful in containing costs."

Boardman said he and his 4,500 members are aware of the recovery's frailty and hopeful the economy will continue to strengthen through March. "We think we can get to a fair deal, if we have time to examine some of these complex issues," he said, "but we're not going to lock in what in essence is a recessionary package."

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