“It's like the first round of a heavyweight championship, everybody's feeling each other out,” says Joe McInerney, president and chief executive officer, American Hotel and Lodging Association, Washington, D.C. McInerney was speaking of the battle brewing between hotel employers and the employees union, Unite Here, over workerthat expire in six major cities in 2006.
First in line is Toronto, where contracts at 23 hotels were set to expire January 31. At press time, negotiations hadn't begun yet and the likelihood of an agreement by deadline is nil, states Paul Clifford, president, Unite Here Local 75, Toronto.
Clifford said it was “far too early to tell” if strikes, lockouts, or picketing will occur in Toronto, adding that hotel management has a “very large hand in determining” if any of that occurs.
Industry experts believe that labor unrest is probable in 2006 in one or more of the six cities where contracts run out in 202 hotels. After Toronto, Honolulu and New York are next (June 30), followed by Chicago (August 31), Los Angeles (November 30), and Boston (November 30). In San Francisco, workers have been without asince September 2004.
“If I were handicapping this, I would put my money on confrontation,” said Peter Hurtgen, a partner with Morgan, Lewis, and Bockius, the law firm representing AHLA. He was one of several speakers at a packed session on hotel labor unions at last month's annual meeting of the Professional Convention Management Association in Philadelphia.
Why is confrontation likely? In 2004, one of the big obstacles was contract length. Hoteliers were pushing for a multi-year deal, while Unite Here, which represents some 260,000 hotel and restaurant workers, sought a two-year deal so that the contracts would be aligned with the cities up for renewal in 2006.
“Our members realized that increasingly, they were not bargaining on a city-by-city basis with local owners and operators when it came time to renew contracts,” says Jason Ortiz, research analyst at Unite Here. “Instead, they realized they were increasingly dealing with billion-dollar multinational corporations, and dealing with them city by city was akin to fighting a heavyweight boxer with one arm tied behind your back.”
In 2006, the major issue, says McInerney, is “card check neutrality,” which relates to the process by which hotel employees become unionized. Currently, elections are held by the employees to determine whether or not they want to be represented by the union, based on at least one-third of employees signing union cards. Under the card check neutrality agreement, elections would be eliminated, he says. Instead, if a majority of employees sign union cards, the union automatically becomes their bargaining agent. Also, if the hotel owner buys or builds another hotel in the geographic area, the new property will be subject to the agreement, he adds. This agreement would make it easier for the union to increase its penetration in the hotel industry, adds Hurtgen.
Hotel employers are opposed to this provision. “We don't want to give up the employees' right to a free election,” explains McInerney, adding that unions win only a portion of the elections.
Planners will be hearing more about the issues from both sides over the next few months as negotiations heat up.
In January, Unite Here released a document, Meeting Planner Resource Manual, which offers advice to “protect your group and negotiate the best reservation agreement possible.” The 17-page guide (see sidebar) for meeting planners includes negotiating tips and contract language recommendations for, relocation, cancellation, and clauses as they relate to strikes, picketing, and other labor-related disruptions. It also recommends that planners put into the contract a clause that requires hoteliers to notify groups within 10 days of becoming aware of the disruption.
The hotel side has been doing its own outreach. Employer groups in New York and Chicago have tapped the public relations firms Burston-Marsteller and Edelman, respectively, to assist with communications. Edelman's Bill Keegan, spokesman for the 24-member Hotel Employers Labor Relations Association in Chicago, says they will communicate information to all stakeholders, including meeting planners. Also, AHLA will communicate to planners through industry organizations like PCMA and offer speakers at industry conferences.
Plan for the Worst
“Plan for the worst and hope for the best” — that's the advice Laurie Sharp, president, Sharp Events, a San Francisco — based meetings management company, has for planners. Planning for potential strikes, lockouts, picketing, boycotts, and other disruptions starts with information, she says. She urges planners to get as much information as possible about the situation (dates, cities and hotels involved, issues, whether or not the hotel is unionized) from a variety of sources, including the employer group, union, CVBs, industry associations, and conferences. “It is up to the planner to do the research and try to balance a perspective from the propaganda coming from both sides.”
It's also critical to determine the culture of the organization and the attitude of attendees on union-related issues. If a large number of people in the organization won't cross picket lines, then it's going to be more difficult to have a successful meeting. Due to the logistical headache of moving a meeting on short notice — and the possibility of paying higher costs in another city or cancellation penalties — relocating is not always the best option, stated Paula Cozzi Goedert, partner at Barnes and Thornburg, Chicago, speaking at the PCMA last month in Philadelphia. “Moving a meeting within six months is like turning an 18-wheeler on a one-way street. You can't cancel in many of these situations and turn that 18-wheeler around.”
For planners, educating attendees is critical. “The fact that someone is picketing won't keep you from meeting. That's a communication remedy,” she said. First, communicate internally with attendees and inform them that there may be some picketing in front of the hotel. Put a positive spin on it, said Goedert; simply tell them that the workers are exercising their First Amendment rights.
She said groups should be prepared to have their own people on the ground in case there is picketing. The representative will not only be there to welcome guests, but will also be there to keep an eye on the demonstration and report any aggressive or hostile activity.
Also, planners should communicate with the hotel to see what kind of plan they have to deal with picketing. For example, will they provide alternate entrances, hotel security, and supplemental staffing, if necessary? Picketing and work stoppages not only impact the hotel workforce, they may also affect workers belonging to other unions who honor the picket lines. So, if there is a dispute, other union members might not show up for work. Planners should address these issues with contractors in advance to see what kind of backup plan they have.
Also, they should be aware that even if the hotel is staffed with replacement workers, service might suffer. “Service certainly can be impacted; I saw it,” says Sharp. “They were doing their best, but it certainly can be impacted.”
Weathering the Storm
So far, Sharp says clients aren't choosing to avoid cities where labor disputes are brewing. In San Francisco, she says, group business hasn't stayed away.
Since contracts expired in San Francisco, seven large conventions canceled at an economic impact of $50 million, says Mark Theis, vice president, convention division, San Francisco Convention & Visitors Bureau. San Francisco was able to make up the deficit through new bookings. “We ended 2005 healthy, and as we look at 2006, we have over 15,000 more room nights on the books with the conventions alone, not to mention the in-house meetings, which are already stronger than they were in 2005.”
The bureau had to reach out to planners who thought the city was “turned upside down” by a strike, Theis says. The strike lasted only two weeks, and since then employees have been working without a contract, so the challenge was in educating clients that service levels were intact. “The bureau is an apolitical organization, and we're not taking one side or the other,” Theis continues. “But when it directly impacts the visitor potential, then we have to get involved. We had to be more proactive in educating clients that San Francisco is open for business and that the hotels are delivering the service that they would expect and need.”
When the dispute started, bureau officials were contacting group clients three months out, but the timetable was then moved to one year out. In some cases, Theis says, the union had already contacted them. “Our approach was merely to convey both sides, give them the issues coupled with the fact that it affected only 14 hotels.” Equally important, they directed them to the union Web site and the employer group Web site for additional information.
Although the issues aren't resolved in San Francisco, the city weathered the storm and is preparing for the potential of another in 2006 — only this year, “a slew of cities will be in the boat with us.”
Unite Here's Contract Clauses:
Should You Follow Them?
We asked well-known meeting industry lawyer James M. Goldberg of Goldberg & Associates, Washington, D.C., to take a look at three key contract clauses put forth in Unite Here's newly released resource manual (www.hotellaboradvisor.com) and tell us what language to include and what would likely be rejected by hotels.
Clause: Excused Non-Performance
If either Hotel or [your Group] is prevented from or delayed in performing any act required of it hereunder and such prevention or delay is caused by disruption due to construction activities, strikes, labor disputes, Acts of God, government restrictions, judicial orders, fire or other casualty, civil commotion, or causes beyond its reasonable control, or if performance hereunder would foreseeably involve either party in or subject it to the effects of a labor dispute and the party therefore withholds or delays performance, it shall have no liability there from. This agreement shall be construed and enforced in accordance with the laws of the State of [Group's home state here].
GOLDBERG: The proposed language by Unite Here is an expansion of the type of force majeure clause commonly found in most hotel meeting contracts. The language only requires that the enumerated causes prevent or delay a party from performing its contractual obligations, a standard that is broader than that agreed to by many hotels, i.e., that the listed causes make performance “illegal, impossible, or commercially impracticable,” all terms which have a well-established legal meaning. As such, it might be rejected by many hotels.
The term labor disputes is vague. The term is defined in the National Labor Relations Act, the federal law that covers collective bargaining situations, but without a specific reference to that definition, the term could be misconstrued to include disagreements between individual employees and management.
Clause: Cancellation of Commitment
Notwithstanding anything in the Agreement to the contrary, if within two (2) weeks prior to the commencement of, or at any time during, the event, the Hotel is being picketed or is involved in a labor dispute, [Group] may cancel this commitment by giving written notice of cancellation to the Hotel. In the event of such cancellation, neither [Group] or its members shall have any future obligation under this Agreement, and any deposits or other payments made to the Hotel by [Group] or its members to reserve rooms or other space for use, and/or for services to be provided, shall promptly be refunded to [Group] or its members. This Section shall supersede all other provisions of this Agreement.
GOLDBERG: This provision gives the Group the unilateral right to terminate a contract without liability if, within two weeks of or during the meeting, the hotel is being picketed or is involved in a “labor dispute.” The problem with the definition of “labor disputes” persists.
In addition, the language presupposes that a group will want to, let alone be able to, cancel its meeting within two weeks of its start in the event of any picketing.
This agreement may be canceled by mutual written agreement at any time. In the event of cancellation by [Group] for a reason not set forth in [reference the “Excused Non-Performance” or “Force Majeure” and/or “Cancellation of Commitment” clause(s)], [Group] shall owe liquidated damages to Hotel as set forth below:
More than one year prior to event: No damages due Six months to one year prior to event: 50 percent of estimated lost profits Six months or less prior to event: 75 percent of estimated lost profits
Estimated lost profits shall be calculated as follows: (room nights minus resold rooms nights) × (group room rate x 60%) + (minimum banquet revenues × 25%)
Hotel agrees to make all reasonable efforts to resell canceled rooms. Resold rooms shall be credited against any liquidated damages owed by [Group], as set forth in the estimated profits formula above.
Liquidated damages, if any, shall be payable 30 days after the final scheduled day of the Event, provided that Hotel submits to [Group] adequate proof of its efforts to mitigate damages. [Group] shall not owe any liquidated damages if Hotel meets or exceeds its average occupancy level over the preceding two years of [state average occupancy level] for the dates of [Group's] event.
GOLDBERG: Unlike many proposals from hotels, which present cancellation damages as a percentage of anticipated hotel revenues, the union proposal takes what is a more proper approach to liquidated damages by specifying that the damages are computed on the basis of lost profits. However, the reference to profits being an estimated 60 percent of room revenue substantially understates the average hotel industry profit margin on sleeping rooms, which is estimated by Smith Travel Research to be between 70 percent and 75 percent.
The reference to 25 percent being the estimated lost profit on food and beverage revenues is more in line with industry averages. The proposal to eliminate all cancellation damages if the hotel meets or exceeds its average occupancy level for the same period as the meeting — what some call the “no harm, no foul” approach — is a good idea, even if many hotels will probably reject it.