Hotel operators are about to be hit with significant increases in their wage and benefit expenses. Given the industry’s record-breaking success during this decade, it will be difficult to gain public sympathy for their plight.
The “wages and benefits” category is typically the largest expense for a hotel, so any changes in that dynamic can have a critical effect on a property’s bottom line, its valuation and its owner’s ability to renovate, expand or even sell.
Thus, many in the United States hotel industry are watching proposals and actions in Washington, D.C., and in state capitals and city halls as politicians, legislators and bureaucrats mull proposals that could significantly add wage expense to the profit-and-loss statements of many hotels. But paradoxically, it won’t be easy for hotel owners and operators to fight these measures—or at least to get officials and the public to feel much sympathy for them.
Proposals to raise the federal minimum wage from its current $7.25 an hour to as high as $15 has been an issue in the presidential election campaign. That same idea has gained traction in many states and cities, and in reality that’s where changes will probably be made rather than in Washington.
Today, 29 states, plus D.C., impose minimum wages higher than the federal standard. The District of Columbia leads with a $10.50-per-hour minimum, followed by California and Massachusetts at $10. That standard is about to change in several jurisdictions. California, New York State and Seattle have new laws that will raise the minimum wage to $15 an hour over phased-in periods.
While nationwide change in minimum-wage standards is no sure thing, hotel owners and operators will need to face new rules from the Department of Labor that in many cases will have an impact on property bottom lines. The rules, which were announced in May and take effect on 1 December, change the threshold for determining which workers must receive time-and-a-half overtime pay when they work more than 40 hours a week.
Under the current standard, workers who make more than $23,660 a year are exempt from the overtime pay provision. In December, that mark more than doubles to $47,476 a year. In addition, every three years the cap will be adjusted for inflation, and one estimate puts the threshold at $51,000 at the first adjustment in 2020.
At many hotels large and small, there is often a cadre—or even just one in a small property—of department heads and assistant managers who make $30,000 or $35,000 a year. And, also in many of these cases, these managers are expected to work long hours—50 or 60 or more hours a week is not uncommon—without receiving any overtime pay.
And here is where I have a moral rather than business concern. An assistant manager making $33,000 a year who works 55 hours a week (and assuming a two-week vacation) is being paid $12 an hour. If that is what’s happening at your hotel or hotels, can you justify that from a human point of view? Sure, it’s great for your bottom line, but it’s being done on the backs of some hard-working managers who probably would jump industries if they could receive better, more-equitable positions.
A story last month on Hotel News Now recounted the concerns of hotel executives about the new rule. Not surprisingly, they couched their comments in terms of how the rule would hurt their workers—i.e., some would be laid off, some would receive raises to above the standard but be expected to work even longer hours, etc.
To me, these were code phrases to really mean the rule is going to hurt these owners’ and operators’ bottom lines. And from the perspective of the public and even government officials, it is difficult to feel sorry for an industry that has seen record-breaking occupancies, rates, revenues and profits for the past six years since the end of the recession.
That will be a tough case to make in the court of public opinion. And the same goes for resistance to increases in the minimum wage. These owners will get little sympathy from the public, nor from me.
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