In case you didn't know it, there's an elephant in the hotel. It even has a name — labor — and in 2006 it could turn into an 800-pound gorilla.

Next year, hotel contracts expire in several major cities. In Chicago, New York, Boston, Toronto, Honolulu, Sacramento, and Monterey, Calif., contracts are up at most of the major hotels, while contracts are also up for some hotels in Cincinnati and Detroit, one in Seattle, and one in San Francisco. And after the recently settled dispute in Los Angeles, where a two-year contract was agreed upon, add that city to the list. All told, employee contracts at more than 400 hotels will be up for renewal next year — more hotel contracts at more hotels than the industry has ever seen.

Many fear that current labor disruptions in San Francisco and, until recently, Los Angeles, are the tip of the iceberg compared to what could happen in '06. David Scypinski, senior vice president, industry relations, Starwood Hotels and Resorts, compared the economic effects to the downturn after 9-11. “It could create a chain of events that hurts the industry and hurts the economy,” he says.

No Accident

It's no accident that the stars have aligned this way, says John Wilhelm, president, Unite Here, the union that represents hotel and restaurant employees. “We thought, if we line up as many contract expirations as possible in one year, they're going to have to pay attention. That may be naive on our part; perhaps they will continue to have the same kind of head-in-the-sand approach with workers as they are apparently exhibiting with customers,” he says, citing that many hotels are imposing stiff penalties for reduced attendance or cancellation.

While negotiations have not yet started for next year's contracts, Wilhelm says he is concerned about 2006 based on what has transpired in San Francisco and Los Angeles this year. In San Francisco, hotel labor and management at 14 hotels have been at odds since last September after a worker strike and subsequent lockout. Employees went back to work in November when the two sides agreed to a 60-day cooling period, which ended in January. Employees are back at work, but no contracts have been signed, and the picketing and boycotting continue.

This spring, in the most visible protest yet, 37 union members were arrested for civil disobedience while picketing in front of the San Francisco Hilton.

In San Francisco, “there's no reason for optimism that I've heard about,” says Wilhelm. Among the hotels involved are the Hilton San Francisco, Four Seasons, Fairmont, Sheraton Palace, Omni Hotel, Grand Hyatt Union Square, and Westin St. Francis. Several large groups have moved their meetings from the boycotted hotels.

In Los Angeles, contracts at eight hotels within the multi-employer group — including the Westin Century Plaza, Sheraton Universal, Hyatt Regency Los Angeles, Hyatt Regency West Hollywood, Millennium Biltmore, Regent Beverly Wilshire, Westin Bonaventure, and Wilshire Grand Hotel — were unsigned for more than nine months until a settlement was reached in June. During that time, some 114 meetings had been relocated from the boycotted hotels, according to the union. In June, a two-year contract was reached, which means the two sides will be back to the table again in 2006.

As to whether the negotiations in San Francisco could drag out for another year and a half, Wilhelm says, “I guess that's possible, but that would be foolish in the extreme. The boycotts will continue and the business uncertainties will continue, but I can't control what the employers do, so I don't want to say it's not possible.”

Back to the Table?

Scypinski is hopeful that the dispute in San Francisco will be resolved soon, but he is not holding his breath. “If they were serious about negotiations, they would be at the table right now,” he says. “We've given them a fair package. The problem is, they just want to go ahead and play it out until next year, when they have this huge amount of potential leverage, and suddenly, they come to us with the hammer.”

In San Francisco, the two sides have met around 45 times over the past 10 months. “We want to get back to the table as soon as possible,” says Steve Trent, general manager, Grand Hyatt Hotel, San Francisco, and spokesman for the multi-employer group, which represents the 14 hotels.

The major stumbling blocks in the negotiations include the length of contract, health care, pensions, and workers' rights. With regard to health care, the union wants to maintain the coverage that it has had in the past. The hotel group says its proposal would not change eligibility for regular employees, only some part-time workers.

Joe McInerney, president of the American Hotel and Lodging Association, is optimistic that the two sides can reach an agreement in San Francisco and avert further strikes in 2006. “If they want to cripple the industry, so be it. But there are reasonable people on the union side, and they are trying to work for their members.”

Center of Attention

What does this mean? In San Francisco, Mark Theis, vice president, convention division at the CVB, stresses that it's not as bad as it seems. “There might be some random demonstrations that last an hour or two every other week, but nothing like there was before Christmas.”

As far as widespread cancellations and moved meetings, Theis says that most groups have held their meetings in the city as scheduled.

What hurts is the unsettled nature of the dispute. “It just creates a layer of ambiguity and grayness on San Francisco as a desirable meeting destination,” Theis says. To counter that, the CVB is calling clients six to eight months out to keep them abreast of what is happening.

HOW TO PROTECT

Your Meetings

Despite the uncertainties surrounding the hotel labor situation, there are precautions you can take.

First, there is the matter of hotel contracts. Strikes, threats of strikes, even picketing are covered in force majeure clauses, but there has to be a reason to exercise the clause to cancel the meeting. Keep in mind, however, that if performance is not an impossibility, the clause may be challenged by the hotel if it states that the defense to performance is limited to “impossibility” and does not provide for the defense of commercial “impracticability.”

With regard to hotel cancellation clauses, planners should review contracts carefully with counsel to ensure maximum protection in the event of cancellation. Also, contracts should require hoteliers to provide “a reasonable estimate of the actual damages the hotel will suffer” if the group cancels.

Strikes and threats of strikes are covered in cancellation insurance. However, coverage is not available if the buyer knows the strike is coming.

In the RFP process, planners should ask pointed questions about labor unions at hotels.

Be proactive in communicating with the hotel and the union to get specific information on how the meeting might be affected. Work with the hotel to find out how it can accommodate the group if there is a disruption.

CVBs are knowledgeable about the labor environment in a given city, so they may be able to provide valuable advice and resources. If circumstances dictate that you can't hold a meeting at a particular hotel, ask the hotel about moving the meeting to another property within the chain. Meeting professionals also can exert pressure by making their concerns known to CVBs, local government officials, hotel owners and management companies, unions, and industry associations. Labor is a hot topic among industry organizations, so stay tuned for informational forums and white papers.

If unwanted solicitations come from union representatives, CIC recommends that planners take notes and get the contact information from the caller and forward the information to management or counsel.

Finally, don't avoid cities that have new contracts due in 2006. Planners have to continue to make decisions that are good for their organizations, understanding that they may have to make last-minute adjustments.