Hotels, Workers Feeling the Pain

For Elena Duran and Matthew Adams, the three-week-old lockout of union workers at 14 prominent San Francisco hotels comes at a bad time.

Duran, who buses tables in a hotel restaurant, was building a college savings fund for her three teenage sons. Her family now must live on strike pay from the Unite Here union. Nothing’s left to add to savings.

Adams, an executive at the Hyatt Regency San Francisco and a spokesman for the hotels’ bargaining group, had begun to see a resurgence in visitors after one of the Bay Area’s worst tourism slumps. Now the lockout threatens to discourage visitors during a prime season for meetings and conventions.

But even with a lot to lose -- in a city whose economy suffered mightily from the dot-com crash, the 2001 recession and the 9/11 attacks on the East Coast -- both sides are willing to endure a prolonged lockout and are digging in their heels.

“It’s going to be hard,” Duran, 40, said of a long lockout. “There will have to be some sacrifices, but someone has to do this. They are offering a small raise and a big jump in healthcare costs. I don’t think we can manage that.”

The hotels characterize the lockout as an unavoidable consequence of the union’s decision to launch a two-week strike Sept. 29 at four of the 14 hotels. That meant the possibility of rolling strikes occurring without warning. The hotels say they won’t settle for less than a three-year contract (versus the union’s demand for a two-year deal) and say their costs must be controlled.

“Our recovery was just beginning,” said Adams, the Hyatt Regency’s vice president and managing director. “Our business has to become healthy.”

The union, however, describes the dispute as a fight for respect for their members’ jobs and for low-cost healthcare.

The union wants a two-year pact so it can line up contract expirations in several cities across the country, giving the union more bargaining clout and a greater capacity to deal with issues on a national basis.

Unite Here’s Local 2 said it decided on a two-week walkout to give the hotels a taste of what it would be like to carry on without union workers. The union said it didn’t expect a lockout.

Union locals in Los Angeles and Washington also have been involved in protracted contract talks over wages, benefits and contract length, with little progress reported. But the San Francisco local has been the only one to stage a strike.

Among the three cities, San Francisco has taken the worst hit to its tourism sector -- the city’s biggest industry.

Behind the visitor downturn was a massive loss of jobs in the Bay Area’s signature high-tech sector. Between 2000 and 2003, the number of convention visitors sank 20%, and their spending fell 18%. Room rates plunged while vacancy rates rose.

Revenues at the 14 hotels -- the Argent, Crowne Plaza Union Square, Fairmont, Four Seasons, Grand Hyatt, Hilton San Francisco, Holiday Inn Civic Center, Holiday Inn Express and Suites, Holiday Inn at Fisherman’s Wharf, Hyatt Regency, Intercontinental Mark Hopkins, Palace, Omni San Francisco and Westin St. Francis -- fell 19% between 2000 and 2002. Those hotels account for about one-fourth of guest rooms in the city.

Meanwhile, costs rose. At the Hyatt Regency, workers’ compensation expenses jumped 57% between 2002 and 2004, and healthcare benefit costs ballooned 64% between 1999 and 2004, Adams said. Insurance premiums tripled after the 2001 terrorist attacks.

“Before 9/11, you were worried about earthquakes, fires,” he said. “Now, you have to be insured against terrorist attacks.”

Occupancy and room rates in San Francisco had been rising in recent months but the lockout could dampen that progress.

PKF Consulting, a leading hospitality consulting firm, predicts the lockout will knock 2 to 3 percentage points off the 73% room occupancy rate the city would have had. Still, that would be an improvement over 2003’s rate of 67.9%, -- another reason the hotels are willing to continue the lockout.

Nonetheless, the hotels “are losing business,” said Kenneth Kuchman, a vice president at PKF. “The overall effect on the city will be a downer.”

The lockout won’t save the hotels money because they have too many fixed costs, he added.

The hotels also risk alienating guests who expect top-notch service from the 14 hotels, among the city’s ritziest.

During a recent weekend at the Argent, for example, room service meals were replaced by dining room buffets, which acquired a picked-over look as the days progressed. The dining room was mostly empty.

But the biggest differences came in the basics. It took four phone calls, including one to the general manager, to get one room cleaned and its linens and towels replaced. The manager apologized, saying he had to focus on cleaning rooms of departed guests.

Tourists were perhaps more likely to be miffed than business travelers.

“No one warned us about any of this,” said one vacationer as she took an elevator down to the Argent’s lobby and prepared to pass a gauntlet of pickets.

Restaurant worker Duran and her partner, Carlos Narvaez, 50, who works in the Palace Hotel’s stockroom, hope such ill will could prompt an end to the lockout and a favorable contract settlement. They said the lockout was a mistake.

The couple, their three sons and Narvaez’s mother live in an $800-a-month walk-up apartment in the city’s Mission district. Before the lockout, the two together brought in about $850 a week. They say they can’t afford what the hotels are demanding.

As often as possible, Narvaez brings their sons to the picket lines to teach them about what they are fighting for.

“This is part of our lives now,” Narvaez said.