Tourism Forecast: More Visitors But Storm Cloud Looms

Photo Courtesy of Hawaii Tourism Authority (HTA)/Tor Johnson

Waikiki and other resorts statewide are more crowded these days. Visitor arrivals are up while beaches, stores and restaurants are filling again with tanned people spending their money.

But there is a cloud on the horizon: Union contracts covering most of the major Waikiki hotels and many on the Neighbor Islands expire this month and tourism leaders fear that labor unrest – or, heaven forbid, a strike – will disrupt two huge visitor gatherings and stain Hawaii’s global reputation as a tourist site.

Hotel officials acknowledge they are beginning to turn the corner toward profitability, but they say continued deep discounting and years of unprofitability weigh on them. They say they hope that hotel workers, represented by Unite Here Local 5, will meet them halfway. For its part, the union says it recognizes the industry has struggled in recent years but insists it will not back down on hard-won benefits and work rules.

The stakes are especially high, not just because tourism is starting to recover, but because of two key events: a Nov. 14-17 national convention of employee-benefits managers organized by the International Foundation of Employee Benefit Plans, and the Asia-Pacific Economic Cooperation gathering of Pacific Rim heads of state in November 2011, hosted by President Obama.

“We are not looking to cut wages,” says Keith Vieira, senior VP and director of operations for Starwood Hotels and Resorts. “But we are looking for some kind of cost sharing on things like health benefits.”

Today, the hotels pay 100 percent of the health-insurance costs for unionized workers, although employees must share the cost of family coverage.

Management will also try to create a system of “job combinations” in which, for instance, a parking valet might help with doorman duties when a major group arrives. “We want our employees to be multifunction,” Vieira says.

The union opposes both proposals. Workers are already struggling to get by, the union says, so charging for health insurance is like a pay cut. “And the idea of job combinations sounds to the union like a way to cut back on the overall workforce,” says Eric Gill, financial secretary-treasurer of Local 5.

“We are not going to agree to rollbacks in health or pension benefits,” insists Gill.

“We recognize the difficulty of bargaining in this environment,” Gill says. “We are not minimizing any difficulties here. But we certainly will aggressively defend our standards and benefits. Defending benefits won over the years is one of the key things we are focusing on.

“There comes a tipping point where people can’t afford to buy it. It comes down to food and rent vs. health care.”

Gill says the emphasis on cost sharing on healthcare and job combinations has appeared in other hotel contract negotiations, such as in San Francisco, where hotel workers have been without a contract since August 2009. That has led to boycotts, picket lines and efforts by the Unite Here Local 2 to dissuade people from staying in San Francisco hotels.

Gill says his local doesn’t want to engage in similar tactics, but says it could come to that.

Hotel management is concerned that the benefits-managers convention and the APEC summit could be damaged by labor unrest. Gill points out that many benefits managers are handling union or public-worker pension plans and might be sympathetic to a local union. Local business and government leaders think APEC can put Hawaii on the global map as a congenial place to do business – not just to play – but labor unrest or a strike would cripple that image.

There seems to be a certain amount of aloha spirit and understanding between the hotel managers and the union at the local level. “We’re all from here,” as Vieira puts it.

But both sides wonder if they can decide the issues entirely on their own. Vieira points out that the local union has to listen to what its parent union says and wants.

“If Eric and his team run the negotiations, it can work,” Vieira says. “Unfortunately, some of the Mainland people tend to get involved.”

It works the other way, too, Gill notes. When the union negotiates, it is not just talking to local managers or even Hilton, Starwood and the rest. Hotels are owned by global investment firms, which have skin in the game.

For instance, the New York-based investment giant Blackstone Group owns the Hilton chain, including the mega Hilton Hawaiian Village. Another investment behemoth, Cerberus Capital Management, has a substantial stake in Kyo-ya, which is effectively the Sheraton brand in Waikiki.

These investment companies, while not directly involved in negotiations, do have their interests, Gill says. “We are dealing with the most cynical, least socially responsible people on the planet,” he says.

However, Vieira insists that the owners leave negotiations to the people on the ground.

David Carey, president and CEO of Outrigger Enterprises Group, does not have much involvement in these negotiations. His company has just one unionized property, the Ala Moana Hotel.

But Carey worries deeply about what labor strife, boycotts or pressure to keep people away might do to an industry pulling itself out of a long bad patch.

“I would be really disappointed if they (the unions) played around with this when we’re just coming back,” Carey says. “A food fight is not in the best interest of anyone, including the employees.”

Contract Numbers

5,000
Approximate number of unionized hotel workers in Waikiki whose contract will expire June 30.

7,750
Approximate number of unionized hotel workers statewide represented by Local 5.

10
Major hotels whose union contracts expire on June 30. They are the Hilton Hawaiian Village, Hyatt Regency Waikiki, Waikiki Marriott Resort, Sheraton Waikiki, Sheraton Princess Kaiulani, Westin Moana Surfrider, Royal Hawaiian Hotel, Turtle Bay Resort, Sheraton Maui and Sheraton Kauai.

Source: Unite Here Local 5