6 legislative issues on the radar for hotels
12 JANUARY 2016 8:10 AM
An entire slate of pending legislative decisions have hoteliers on alert in 2016 for how their conclusions could influence the hospitality industry.
REPORT FROM THE U.S.—New year, similar challenges. That’s what many in the hospitality industry are saying about legislative issues on the horizon this year.
From controversial hotel minimum-wage ordinances to drive-by lawsuits that critics say make a mockery of the Americans with Disabilities Act, legislative battles promise to continue on a number of contentious topics that have become priorities for hotel owners and managers.
Under a Los Angeles law that took effect in July 2015, hotels with at least 300 rooms in the nation’s second-largest city are required to pay their employees a minimum of $15.37 per hour—more than 50% higher than the state-wide minimum. The measure expands to hotels with 150 or more rooms this July. The industry argues that leaves the Los Angeles hospitality industry at a disadvantage in light of the fact that hotels of neighboring cities, such as Beverly Hills, Santa Monica and West Hollywood, are not included within the law’s jurisdiction.
City officials argue Los Angeles has made significant financial investments in creating a climate that has allowed the hospitality industry to thrive—revenue per available room was at a 14-year high for Los Angeles when the ordinance was passed, the city says, yet the L.A. Economic Development Department found 43% of the people who work in Los Angeles hotels earn wages that put them below the federal poverty line.
“Wages paid to hotel employees are economically restrictive and prevent many hospitality employees from exercising purchasing power at local businesses, which takes a toll on the local economy,” the ordinance states. “According to research based on modeling by the Economic Policy Roundtable, increasing wages for hotel workers could generate more than $70 million in economic activity for Los Angeles.”
An ordinance includes an exemption for hotels with unionized workers that has led to a pending lawsuit from the Asian American Hotel Owners Association and the American Hotel & Lodging Association.
“We’re seeing this issue starting to spread, and where it does spread, it will have a significant impact on operating costs,” said Jim Butler, chairman of the Global Hospitality Group for Jeffer Mangels Butler & Mitchell.
“We are not in a position to pay an unskilled, uneducated worker high wages,” said Robert Rauch, president of RAR Hospitality, whose 15 hotels in California and Arizona include Hilton, Marriott, Radisson and Country Inn & Suites. “In addition, when we pay these employees minimum wage we are also paying for most of their rapidly rising health care costs. It’s a huge burden.”
- Looking for more on minimum wage? Read about how hoteliers can be ready for it.
The definition of a brand manager
H.R. 3459, also known as the Protecting Local Business Opportunity Act, would essentially override a recent National Labor Relations Board decision involving Browning-Ferris Industries regarding contract workers. The NLRB found that Browning-Ferris was a joint employer with Leadpoint, the company that supplied employees to Browning-Ferris to perform various duties, including cleaning and sorting recycled products. The NLRB reasoned that the company controlled, or reserved authority to control, essential terms and conditions of the employees supplied by Leadpoint.
Chirag Shah, VP of government affairs and policy counsel for AAHOA, said the decision could have a profound impact on the hotel industry by defining those employed by franchises as employees of the brand.
“That would result in far more liability for a brand and force them to take more control over a franchise,” Shah said. “Small business owners would essentially become nothing more than de facto hotel managers.
“This issue is so large, it could change the entire state of the lodging industry.”
- Read more about how the Browning-Ferris ruling could affect hoteliers.
The ADA Education and Reform Act (H.R. 3765), co-sponsored by Rep. Ted Poe, R-Texas, would limit the ability of attorneys to sue businesses for minor violations of the Americans with Disabilities Act—a tactic that critics say is meant solely to force small businesses to reach out-of-court settlements that can cost thousands of dollars.
“Most of these business owners believe that they are in compliance with the ADA and have even passed local and state inspections,” Poe said in a statement released by his office. “However, despite their best attempts, certain attorneys and their pool of serial plaintiffs troll for minor, easily correctable ADA infractions so they can file a lawsuit and make some cash.”
The bill would allow businesses to receive notice of a violation and fix the problem before having to go to court.
“Our members strongly support the Americans with Disabilities Act,” Shah said. “We think it is a very important piece of legislation. But in this case, you have people who have lawyers filing lawsuits for no other sake than to extort money from small businesses. That needs to stop.”
“There is a huge number of disabled people in our country, many of whom are military veterans, and certain barriers need to be removed,” Butler said. “But what is happening with these lawsuits is abusive, and reforms are necessary.”
The sharing economy
“The online rentals and other sharing economy businesses are here to stay,” Rauch said. “We should embrace them but hold them accountable to pay their taxes and provide safe accommodations, hence leveling the playing field a bit more.”
Shah said commercial interests are establishing what amounts to illegal hotels, going so far as buying condominiums for the sole purpose of renting them out via Airbnb or similar avenues.
Vanessa Sinders, SVP and department head of government affairs for AH&LA, agreed with treating Airbnb users more like hoteliers.
“We’re an industry of fierce competition, and we embrace innovation, but this isn’t about private homeowners who are renting out a spare bedroom,” she said. “This is about the emergence of commercial operators who are buying multiple properties and establishing illegal hotels.”
A New York State Attorney General’s Office report, for example, found that 6% of hosts on Airbnb dominated the site, generating nearly 40% of total revenue. The same report found that nearly three-fourths of Airbnb rentals in New York City were illegal.
Congress is on track to change the rules for developers raising capital through revisions in the EB-5 visa program. Created in 1990 to stimulate the economy through foreign investment, the program allows up to 10,000 foreigners annually to secure residency in the United States if they invest a minimum amount of dollars and create at least 10 new jobs. The minimum amount will be raised to $800,000 from the current $500,000, an increase that Butler said is not enough to deter investors. Reforms were expected to be announced on 11 December as part of the omnibus appropriations bill, but a week later Congress instead extended the EB-5 program in its current form through 30 September 2016.
“No one knows how long the good times that the hospitality industry has enjoyed will last,” Butler said. “New development to date has brought in limited supply, so this is the time to strike if you’re looking to develop in the hospitality industry and the EB-5 program provides a valuable financing vehicle.”
Somewhat related to the EB-5 visa program, the H-2B visa program allows U.S. employers who meet specific requirements to employ foreign nationals to fill seasonal nonagricultural jobs.
To the hospitality industry, the program can be vital, and the omnibus spending bill approved by Congress includes language that could quadruple the number of visas for unskilled foreign workers seeking jobs at hotels, theme parks, ski resorts, golf courses, restaurants, landscaping businesses and more by excluding any worker who has received an H-2B visa in the past three years from the annual cap of 66,000 H-2B visas that are granted.
According to a statement from Brian Crawford, VP of government and political affairs at AH&LA: “Lodging industry employers always look first to the U.S. workforce to fill critical job functions during peak seasons at hotels, but in many instances there are no workers available. The H-2B program provides valuable support for businesses looking to supplement their workforce with temporary seasonal employees.”
But caution is the key. Rauch agreed that hoteliers would benefit from the bill.
“However, it is crucial that H-2B workers not be used to displace domestic workers in an attempt to find a loophole that would combat wage increases,” Rauch said. “While hoteliers are concerned about profitability, taking advantage of employees is not the way to do it.”
How can hoteliers make a difference in any of these issues?
“It is extremely important to build relationships with your elected officials,” Shah said. “In many cases, that has not been happening. We really encourage our members to invite elected officials to their hotels, to meet with staff, to come to community meetings, and share their experiences and their stories so our lawmakers can understand our business and the challenges we face.”
“Our mission is to keep our members informed and active on the issues,” Sinders said. “We need to make sure our members are at the table talking to their elected officials about the issues that are affecting them.”