Year End Labor Review

By Robert Murphy
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2004 was a tumultuous year for labor relations in the Hospitality Industry, particularly in the hotel sector, with H.E.R.E.-U.N.I.T.E. squaring off against multi-employer groups in Los Angeles, San Francisco and Atlantic City. Most published reports cite the rising cost of health insurance as the principal issue in dispute, but that is misleading. The question of how much, if any, of the rising cost of insurance should be paid by employees, is certainly an issue for the industry, but it is the union's insistence on having all major contracts expire at or about the same date in 2006 that has led to the impasse in bargaining.

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New Supply Additions Continue to Decline in the 25 Largest Markets. '05-'06 Forecast Points to an Accelerated Operating Recovery for the Industry.

Reprinted with permission of Lodging Econometrics

PORTSMOUTH, NH - Lodging Econometrics (LE), the Industry Authority for Hotel Real Estate, has announced that New Supply Growth in the nation's 25 Largest Markets will fall to 127 hotels/16,278 rooms in '04, down from 147 hotels/26,227 rooms in '03 - a 42% Year-over-Year room count decline.

Patrick Ford, President, stated, "It's the sixth consecutive annual decline from the peak reached in 1998, when 474 new hotels with 57,994 rooms were added."

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Recent Occupancy, ADR Growth, Still Do Not Spell Post-911 Relief

Reprinted with permission of Rick Swig, president of RSBA & Associates.

The Hotel Real Estate sector is abuzz with enthusiasm about year-over-year growth in occupancy and average daily rate. Many are acting as if the recovery is reaching a climax, as rumors persist that the nation's economy is far improved. Although there are some grounds for optimism, let's not get carred away with excitement.

Demand for hotel rooms was slipping well before 9/11. Through June 2001, Smith Travel Research reported that occupancy on a year-to-date basis had dropped by 2.7%, while ADR levels had shown a modest gain of 2.3%. Major markets were showing far greater annual occupancy declines, including San Francisco (-13.9%), New York City (-8.3%), Boston (-7.9%), Dallas (-7.7%), Chicago (-07.6%) and Orlando (-7.1%). What's more, this was only the beginning of the down cycle. Hotels then began the process of discounting room rates in an effort to either stimulate non-existent demand or poach market share.

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Health Care

Health care costs for U.S. employers are expected to increase 11.3 percent in 2005 - a lower increase than the 12.3 percent rise in 2004, Hewitt Associates reports. The average employee contribution for health insurance in 2005 will be $1,481, representing 19 percent of the overall premium - up from $1,288 in 2004.

EEOC Guidance Addresses ADA Issues for Restaurants, Food Service

New guidance issued by EEOC, with input from the Food and Drug Administration, aims to assist restaurant and other food service employers with complying with Title I of the Americans with Disabilities Act. The guidance addresses the particular problems facing the food service industry, such as how the FDA Food Code provisions restricting sick employees interact with the ADA; types of reasonable accommodation in the food service workplace; and how an employer should respond when a discrimination charge is filed. In its 17-page question-and-answer guide, the commission provides examples of situations in which health or safety concerns of both the employee or co-worker may have an impact on a food service organization's decision to make an employment decision involving an employee or job applicant with a disability.

"Both food service employers and industry workers frequently contact EEOC with questions about how the ADA interacts with the Food and Drug Administration's safety and health provisions for employees who work around food," says Commissioner Silverman in releasing the guidance.