Tourism Industry Losing Sleep as Hotel Strike Looms
From his office just outside the nation’s capital, Steve Schultz is planning a trade show that would fill the Los Angeles Convention Center with electrical contractors for several days in November.
However, with a strike or lockout threatening to idle thousands of Los Angeles hotel workers, Schultz may be looking for a new venue or, at the very least, other places for his conventioneers to spend the night. His group, the National Electrical Contractors Assn., is made up primarily of business owners who employ union members -- and are sensitive about labor issues.
“I don’t know if they will cross picket lines or not,” said Schultz, head of convention planning for the Bethesda, Md.-based NECA. One option: moving his event and its 6,000 attendees to another city.
“I don’t want to say yes or no yet,” Schultz said this week. “We don’t know what is going to happen.”
But one thing is clear. The possibility of a hotel workers strike has many analysts concerned that it would be another blow to L.A. County’s $11-billion tourism and convention industry, now in the early stages of recovery from a dramatic downturn after 9/11.
“It’s bound to be a problem,” said Patrick Ford, president of Lodging Econometrics, a hotel industry data firm in Portsmouth, N.H. “If we’re going to end up in a strike, we’re just hoping it will work out quickly.”
Nearly 2,000 waiters, housekeepers and other union workers at nine Los Angeles County hotels voted this week to authorize their leadership to call a strike if contract talks collapse. The hotels’ 5,600 rooms represent nearly 10% of the upscale lodging in the area. Four of the hotels are just blocks from the convention center and make up about 53% of the upper-end lodging in downtown L.A., said Bruce Baltin, a senior vice president at PKF Consulting.
Negotiations are on hold, and federal mediators have been called in to try to settle the dispute, which centers on healthcare benefits and the length of the new contract. In the meantime, the situation remains volatile. On Thursday, 17 laundry workers at downtown’s Wilshire Grand were locked out and their jobs quickly filled by replacement workers. The union filed a complaint with the National Labor Relations Board, contending that the lockout was illegal.
Hotel owners have vowed to operate with replacement workers during a strike or a lockout, but labor strife at some local hotels could persuade some travelers from outside California to avoid Los Angeles altogether.
“A labor dispute can’t do anything but hurt the way delegates” view Los Angeles as a convention city, said Michael Collins, executive vice president of LA Inc., the city’s convention and visitors bureau.
Although no one can quantify the effect of a work stoppage on the L.A. economy, Collins noted that “none of this is good for our tourism industry.”
L.A. County’s tourism and convention business plummeted more than 30% after the Sept. 11 attacks. Tourism has rebounded this year. As of July, hotel occupancy was up 10% over last year at 75.3% and room rates are up. The occupancy rate for downtown hotels is up about 10%, but that brings it to only about 58%.
A strike “could be very damaging,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. “We’ve seen some improvement this year, and this strike could blow it all up.”
Even before the terrorist attacks, Los Angeles struggled to attract big conventions, hampered by downtown’s reputation for being short on hotel rooms and attractions. The convention center expects to play host to 15 big conventions this year, down from 16 last year and fewer than half the 35 held in 2001.
The nine hotels affected are the Hyatt Regency Los Angeles, Millennium Biltmore, Westin Bonaventure and Wilshire Grand downtown; the Regent Beverly Wilshire in Beverly Hills; the St. Regis and Westin Century Plaza in Century City; the Hyatt West Hollywood; and the Sheraton Universal in Universal City. NECA members plan to stay at the Wilshire Grand and Millennium Biltmore as well as other downtown hotels.
Analysts don’t expect major conventions or key business conferences scheduled for Los Angeles to be canceled if there’s a strike or a lockout. But leisure travelers may go elsewhere, they said. Discretionary business travel would be most affected.
“Our corporate travel managers are closely monitoring the situation,” said Caleb Tiller, spokesman for the National Business Travel Assn., an Alexandria, Va.-based trade group that represents more than 2,500 corporate travel managers.
A strike might prompt business travelers to postpone trips, bypass L.A. for nearby cities or settle for videoconferencing or conference calling, said Jack Riepe, spokesman for the Assn. of Corporate Travel Executives, another trade group for corporate travel managers. Of particular concern, he said, would be that the hotels wouldn’t be able to offer the same level of service for large meetings.
“One of the lessons business travelers have learned since 9/11 is that not traveling is not the end of the world,” Riepe said.
Local hotels would also feel the pain. Although hotels are expected to stay open and hire workers to cross picket lines, much as supermarkets did during the strike and lockout that ended in February, strike-related expenses would rise.
“Obviously the hotel companies will take a hit,” depending on how long a labor stoppage would last, said Craig Parmelee, a director with Standard & Poor’s.
He’s not alone. Travel agents who have spent weeks answering nervous questions about hurricanes have a new potential headache to deal with.
“When I first heard about [the possibility of a strike], my first thought was, ‘Gosh, here we go again,’ ” said Pamela Epting, a travel agent with the Automobile Club of Southern California.
“All we need is another hiccup in this industry.”
