Marriott, Hilton furlough employees as COVID-19 closes hotels

New York Hilton Midtown
With occupancy falling, hotels like the New York Hilton Midtown are beginning to furlough employees. Photo credit: Hilton

As the COVID-19 coronavirus pandemic continues to spread, with the World Health Organization reporting 184,976 confirmed cases and 7,529 people dead so far (3,536 cases and 58 dead in the U.S. alone), travel-related industries are hurting.

According to a report in the Wall Street Journal, Marriott International is starting to furlough what could amount to "tens of thousands of employees," from general managers to housekeepers.

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A Marriott spokesperson told the paper the company had started closing some managed properties last week, sending the workers at these hotels home. (Other companies, including MGM and Disney, are doing the same.) While the hotels are closed, the employees will not receive paychecks but will continue to receive healthcare benefits—paid for by the hotel owner, the spokesperson said. 

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While Marriott has not laid off or furloughed any employees at the corporate level, the possibility is “under discussion,” the spokesperson added, and once the outbreak is contained and travel resumes, Marriott expects to bring back "as many of the furloughed employees as possible." 

Marriott said it expected to bring back when the novel coronavirus is contained and business returns. In the U.S., about 130,000 employees work in more than 5,300 properties. 

A Marriott spokesperson confirmed to Hotel Management that the WSJ story was accurate, and offered the following statement:

"As travel restrictions and social distancing efforts around the world become more widespread, we are experiencing significant drops in demand at properties globally with an uncertain duration. We are adjusting global operations accordingly which has meant either reduction in hours or a temporary leave for many of our associates at our properties. Our associates will keep their health benefits during this difficult period and continue to be eligible for company-paid free short-term disability that provides income protection should they get sick. We are working quickly to mitigate the impact to our business while also focusing on assisting our associates, our guests and our owners. While the ultimate impact is difficult to predict at this time given the fluidity of the situation, we remain confident in our long-term prospects." 

A spokesperson for Hilton, meanwhile, told Hotel Management that the company's hotels and franchise owners are "assessing staffing needs based on a forward view of bookings and the local business environment." Some properties, she said, are implementing various actions to mitigate the damage, including adopting flexible hours, use of paid time off, shorter weeks, job rotations—and, in some cases, furloughs. "What this means for the hotel and team members will be different in each situation, and will be driven by business needs, collective bargaining agreements and local regulations," she said.
 
Two Hilton-managed properties in the U.S.—the Capital Hilton in Washington, D.C., and the New York Hilton Midtown—also temporarily suspended operations. "There are various reasons behind those decisions, but we are committed to fully restoring operations and welcoming back guests/team members as soon as the business environment allows."

Peter Ward, president of the Hotel Trades Council—the union for hotel and gaming workers in New York and northern New Jersey that represents about 40,000 hotel workers—told the New York Times that more than 20,000 of the union's members have been laid off. Beyond the employees of the Hilton, all 6,000 of the members of the union’s casino division were laid off when the casinos across the state closed over the weekend, he said.

Downturn

The decision comes after sustained downturns in occupancy, rate and revenue across the country. According to the latest stats from STR, the U.S. hotel industry reported negative year-over-year results for the first full week of March across chain scales, classes and location types. Compared to March 3-9, 2019, occupancy dropped 7.3 percent to 61.8 percent. Average daily rate declined 4.6 percent to $126.01 and revenue per available room fell 11.6 percent to $77.82. 

“The question over the last several weeks was ‘when,’ not ‘if’ this impact would hit—well, when has arrived,” said Jan Freitag, STR’s senior VP of lodging insights. “Like so many other areas of the world, concerns around the coronavirus outbreak have now hit U.S. hotel occupancy hard. Not a surprise given the amount of event-related news we have seen, but group cancellations were felt across the markets and classes in addition to consistent declines in the transient segment. ADR is starting to decline as well, rapidly in the case of San Francisco. This is quite likely the beginning of a bad run that will get worse before it gets better.”

On Friday, the London-based World Travel & Tourism Council suggested that up to 50 million travel-related jobs could be at risk due to the pandemic.

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