IN CASE YOU DIDN'T KNOW IT, there's an elephant in the hotel. It even has a name - labor - and in 2006 it could turn into an 800-pound gorilla.

Next year, hotel contracts expire in several major cities. In Chicago, New York, Boston, Toronto, Honolulu, Sacramento, and Monterey, Calif., contracts are up at most of the major hotels, while contracts are also up for some hotels in Cincinnati and Detroit, one in Seattle, and one in San Francisco. All told, employee contracts at more than 400 hotels will be up for renewal next year - more hotel contracts at more hotels than the industry has ever seen.

Many fear that current labor disruptions in San Francisco and Los Angeles are the tip of the iceberg compared to what could happen in '06. David Scypinski, senior vice president, industry relations, Starwood Hotels and Resorts, compared the economic effects to the downturn after 9-11. "It could create a chain of events that hurts the industry and hurts the economy," he says.

No Accident

It's no accident that the stars have aligned this way, says John Wilhelm, president, Unite Here, the union that represents hotel and restaurant employees. "We thought, if we line up as many contract expirations as possible in one year, they're going to have to pay attention. That may be naive on our part; perhaps they will continue to have the same kind of head-in-the-sand approach with workers as they are apparently exhibiting with customers," he says, citing that many hotels are imposing stiff penalties for reduced attendance or cancellation.

While negotiations have not yet started for next year's contracts, Wilhelm says he is concerned about 2006 based on what has transpired in San Francisco and Los Angeles. In San Francisco, hotel labor and management at 14 hotels have been at odds since last September after a worker strike and subsequent lockout. Employees went back to work in November when the two sides agreed to a 60-day cooling period, which ended in January. Employees are back at work, but no contracts have been signed, and the picketing and boycotting continue. Just last month, in the most visible protest yet, 37 union members were arrested for civil disobedience while picketing in front of the San Francisco Hilton.

"In San Francisco, there aren't currently any negotiations," says Wilhelm. "There's no reason for optimism that I've heard about." Among the hotels involved are the Hilton San Francisco, Four Seasons, Fairmont, Sheraton Palace, Omni Hotel, Grand Hyatt Union Square, and Westin St. Francis. Several large groups have moved their meetings from the boycotted hotels.

Wilhelm is more optimistic about Los Angeles, where two major hotels - the Beverly Hilton and the Bel Air - broke ranks and signed two-year contracts with the union. Contracts at eight hotels within the multi-employer group - including the Westin Century Plaza, Sheraton Universal, Hyatt Regency Los Angeles, Hyatt Regency West Hollywood, Millennium Biltmore, Regent Beverly Wilshire, Westin Bonaventure, and Wilshire Grand Hotel - remain unsigned. The union says 114 meetings, worth $13 million, have been relocated from the boycotted hotels.

As to whether the negotiations could drag out for another year and a half, Wilhelm says, "I guess that's possible, but that would be foolish in the extreme. The boycotts will continue and the business uncertainties will continue, but I can't control what the employers do, so I don't want to say it's not possible."

Back to the Table?

Scypinski is hopeful that the disputes in San Francisco and Los Angeles will be resolved soon, but he is not holding his breath. "If they were serious about negotiations, they would be at the table right now," he says. "We've given them a fair package. The problem is, they just want to go ahead and play it out until next year, when they have this huge amount of potential leverage, and suddenly, they come to us with the hammer."

In San Francisco, the two sides have met about 45 times over the past nine months, but talks have stalled. "We want to get back to the table as soon as possible," says Steve Trent, general manager, Grand Hyatt Hotel, San Francisco, and spokesman for the multi-employer group, which represents the 14 hotels. But, he says, the union has shown "no indication that they are willing to work on this."

One of the major stumbling blocks in the negotiations involves the length of contract. The union wants a two-year contract that would expire in 2006, putting the two California cities on similar schedules as the other cities that are up for renewal in 2006. The hotel group wants a deal similar to the past two contracts, which had five-year terms. Health care, pensions, and workers' rights are other sticking points. With regard to health care, the union wants to maintain the coverage that it has had in the past. The hotel group says its proposal would not change eligibility for regular employees, only some part-time workers.

Joe McInerney, president of the American Hotel and Lodging Association, is optimistic that the two sides can reach an agreement in San Francisco and Los Angeles and avert further strikes in 2006. "If they want to cripple the industry, so be it. But there are reasonable people on the union side, and they are trying to work for their members. They are not going to do anything that will affect the livelihood of their membership."

Center of Attention

What does all this mean for meetings? In San Francisco, Mark Theis, vice president, convention division at the CVB, stresses that it's not as bad as it seems. "There might be some random demonstrations that last an hour or two every other week, but nothing like there was before Christmas." As far as widespread cancellations and moved meetings, Theis says most groups have held their meetings in the city as scheduled.

What hurts the city is the unsettled nature of the dispute. "It just creates a layer of ambiguity and grayness on San Francisco as a desirable meeting destination." To counter that, the CVB is calling clients six to eight months out to keep them abreast of what is happening.

Michael Collins, executive vice president of LA Inc., the CVB, does not doubt Unite Here's estimates of the economic impact of the boycotts. "What we find difficult to quantify is the business that we have not been asked to bid on," he says. "What is the business that we haven't even seen that we've lost?" While many meetings have moved, he says, the majority of them have moved to other hotels within greater Los Angeles. Of the eight hotels that are being boycotted, six are in downtown Los Angeles - and, Collins points out, those six, while very large and important hotels to the meeting market, represent a fraction of the hundreds of hotels in the city.

For now, corporate planners, for the most part, are moving forward with their meetings. Corporate planner Michael Schron, partner, Robert P. Schron Associates, New York, held a meeting for a corporate client at a picketed hotel last fall, and, despite the noise factor, the meeting went smoothly, with minimal disruptions. "Unfortunately, labor unrest is increasingly a fact of life," says Schron. "Almost everyone connected to the hospitality industry has felt some pressure the last few years, but to satisfy the corporate client, the show must go on."

For more information, go to www.sfmeg.com for the hotel perspective and www.hotellaboradvisor.info for the union side.

The Industry Takes a Stand

The contentious dispute between hotel management and union labor has become more controversial over what some industry groups, including the Convention Industry Council, say are the union's "unfair and illegal tactics" to influence meeting planners to boycott hotels.

Since the dispute began last fall, the union has been reaching out to meeting planners to inform them of the situation through phone calls and a Web site (www.hotellaboradvisor.info). "We've tried as hard as we can to speak to issues that are important to meeting planners and get that information out to folks quickly," says Jason Ortiz, research analyst at Unite Here, the union that represents hotel employees. This includes letting them know about cancellation clauses, giving updates on the issues, tips on how to handle labor disputes, and if there is the potential for labor activity in the form of picketing, boycotts, or strikes.

But Mary Power, president of the CIC, says there is a fine line between informing planners about the situation and the potential of picketing and threatening them that picketing will occur if they don't move or cancel their meeting. "They can picket the hotel, that's not a problem, but if they do anything that would threaten [to create] problems, then it becomes a secondary boycott," says Power. Because CIC had received calls that the latter had occurred, the organization decided to issue a statement condemning the practice.

The Professional Convention Management Association, Meeting Professionals International, and the American Society of Association Executives have also spoken out against any efforts to cause disruption of meetings. "We were not pleased to see the direction that some of the approaches were going," says Deborah Sexton, president and CEO of PCMA. "A lot of stories were coming out of the San Francisco marketplace with threats on disrupting the meetings, and we do not feel that that is an appropriate approach."

Protect Yourself

Despite the uncertainties surrounding the hotel labor situation, there are precautions and steps that planners can take:

First, there is the matter of hotel contracts. Strikes, threats of strikes, even picketing are covered in force majeure clauses, but there has to be a reason to exercise the clause to cancel the meeting. Keep in mind, however, that if performance is not an impossibility, the clause may be challenged by the hotel if it states that the defense to performance is limited to "impossibility" and does not provide for the defense of commercial "impracticability."

With regard to hotel cancellation clauses, planners should review contracts carefully with counsel to ensure maximum protection in the event of cancellation. Also, contracts should require hoteliers to provide "a reasonable estimate of the actual damages the hotel will suffer" if the group cancels.

Strikes and threats of strikes are also covered in cancellation insurance. However, coverage is not available if the buyer knows that the strike is coming.

In the RFP process, planners should ask pointed questions about labor unions at hotels, says Tim Brown, partner, Meeting Sites Resource, Irvine, Calif. His company has a Web-based RFP system where customers can inquire if the hotel is unionized and when the contracts expire. Knowing when contracts are up for renewal may allay fears.

Planners are also advised to be proactive in communicating with the hotel and the union to get specific information on how the meeting might be affected. Also, work with the hotel to find out how it can accommodate the group if there is a disruption. "Even if there is a labor action, we'll be able to provide them with the service they're accustomed to receiving," says Joe McInerney, president of the American Hotel & Lodging Association.

CVBs are knowledgeable about the labor environment in a given city, so they may be able to provide valuable advice and resources. If circumstances dictate that you can't hold a meeting at a particular hotel, ask the hotel about moving the meeting to another property within the chain. Meeting professionals can also exert pressure by making their concerns known to CVBs, local government officials, hotel owners and management companies, unions, and industry associations. Labor is a hot topic among industry organizations, so stay tuned for informational forums and white papers.

If unwanted solicitations come from union representatives, CIC recommends that planners take notes and get the contact information from the caller and forward the information to management or counsel.

Finally, don't avoid cities that have new contracts due in 2006, says Deborah Sexton, president and CEO of PCMA. "Planners have to continue to make decisions that are good for their organizations, understanding that they may have to make last-minute adjustments."

More News About the Los Angeles Hotel Workers' Struggle for a Fair Contract >>