The labor market has long posed a challenge to the hospitality industry, and now employees are forcing the issue.
Thousands of hotel workers voted in October to walk away from their posts at 21 Marriott properties across the U.S. in a bid for increased wages and benefits, job security and better health care. While nothing new for the industry, these demands show an increased desire for job satisfaction among hotel employees amid a favorable labor market. And in today's employment environment, employees have more power to make their demands a reality.
“At the line level, these issues strongly correlate with unemployment trends,” said David Mansbach, managing director at Aethos Consulting Group. “The lower unemployment rates are, the more we compete with other segments such as retail and restaurants. It leads to a lack of consistency when trying to find career builders growing in the industry. At the lower levels, they are typically going to follow the money.”
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There also remains an ongoing disconnect about how well the hospitality industry pays its employees. Mansbach argues that hospitality traditionally is an underpaying industry up and down the organizational chart. Meanwhile, the American Hotel & Lodging Association touts on its website that hospitality has been making a concerted effort to make paychecks more attractive by “[increasing] wage and salary income by $18.5 billion over the past decade, paying employees $74 billion.”
Harriet Lipkin, partner at law firm DLA Piper, points to the larger costs associated with employer contributions, particularly as a result of collective bargaining agreements, as a reason for the difficulty in raising employee compensation.
You do the math: In Las Vegas, under collective bargaining agreements, hotels currently pay $4.79 into worker health insurance for every hour worked. This is in addition to $1.20 per hour for pensions, as well as contributions for training, tip earners and housekeeping. If a hotel employee works 2,080 hours per year—a standard 40-hour work week—that comes to $9,963.20 per worker per year just for health care, which can be a significant hit to the labor line-item.
To Lipkin, the conclusion is simple. “The biggest issue with the electorate is health care,” she said. “Maybe there are ways to address it, but there may be better ways to do it.”
All Together Now
It’s no surprise that Lipkin used Las Vegas as her example. The city’s Culinary Worker’s Union Local 226 is one of the largest and most powerful in the U.S., and it successfully managed a strike for better benefits earlier this year. To Rachel Gumpert, press secretary for Unite Here, the organization behind the Marriott and Las Vegas strikes and a labor union with more than 265,000 active members in the U.S., the question is not about costs, it’s about standards.
“Too many U.S. workers live in poverty, whether they have a union or not,” Gumpert said. “This is a rare moment where people in low-wage jobs have the power to get things done.”
Gumpert said Unite Here recognizes the fiscal challenges that come with providing health care to employees, but she also pointed to the hotel industry’s record profits as evidence that hotel companies can afford it. She also highlighted the necessity for employer-provided health care as premiums continue to rise.
When considering whether or not wage increases are feasible or sustainable in the long term, Mansbach said they are—as long as hotel companies prioritize them. This moves beyond pay, he said, and includes well-rounded career progression for employees. Without this, Mansbach said hospitality will continue to be presented with a transient employee base.
“We’ve heard so much about artificial intelligence, revenue management and other trends, but we don’t discuss human capital all that often,” Mansbach said. “We are just now seeing a trend where the top hotel management companies and top owners, through their own due diligence, are seriously looking at wages and making sure people are paying at the top of the market so they don’t lose out on talent to competitors.”
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This is all easier said than done. As Lipkin pointed out, the U.S. added 250,000 new jobs in October, and with the economy as strong as it is today prospective employees are free to take their pick of the litter in terms of jobs.
“When you factor in those jobs, that means the competition for new employees becomes far more challenging,” Lipkin said. “The way you compete is by giving them the economic relationship that attracts them, and job satisfaction is bigger than what’s in my paycheck. It can be other perks, other aspects of the job, but the paycheck is still a big part of what attracts employees to a position.”
If there is to be any reconciliation over wages, it will take work on behalf of both hotel companies and their employees at the bargaining table. Gumpert pointed to a strike at the Renaissance Center Marriott in Detroit, which began Oct. 7 and concluded Nov. 4. She said the hotel’s employees agreed to a pay freeze during the Great Recession, and over the past eight years their wages have increased just 70 cents per hour.
“Rank-and-file hotel workers are expected to share in the sacrifices when times are tough in order to keep their business’s doors open. Now they haven’t seen a bounce in the wages they should have from the recovery, they haven’t been rewarded from when times were tough,” Gumpert said.