The Labor Pains of Hotel Closings
By Marta Fernandez Senior Member Global Hospitality Group, Partner Labor & Employment Group, JMBM LLP | November 17, 2009
Hotel closings are hitting record levels, but for all the right reasons! Unlike closings caused by the "great real estate depression" of the early 1990s, hotels are closing today in record numbers for major rehab and construction projects, conversions to condo hotel or residential condos, and expansion. The robust recovery in the hotel industry has brought plenty of business and leisure travelers willing to pay for a better hotel experience, or wanting to get in on the condo hotel boom. Hotel developers and owners increasingly find that construction is so extensive that it is advisable to close the hotel while the work is being performed.
The First Steps in Closing
If there is even a remote possibility that you may need to close your hotel for renovation or construction, you cannot make the decision without first considering the labor and employment implications. A few of the key items we help our clients to focus on early in a possible hotel closing scenario are: facilitating construction, avoiding costly missteps, and ensuring that they take full advantage of valuable opportunities.
At least three months before closing for renovations you and your labor counsel need to analyze the following issues applicable to your situation and consider the most optimal strategies.
Workforce Termination Issues
The first issue to consider is whether you will engage in a partial or full closure of the property. Aside from the operational and customer relations issues, you will need to consider the impact on your labor force. While there may be some advantages to keeping the hotel partially open during construction, the downside from the labor perspective may be great. If you are a union hotel you will have to follow the seniority provisions of the labor contracts when reducing hours or engaging in partial lay-offs -- this might not leave you with the most optimal workforce. In the non-union scenario, you will have to develop an objective criteria for reduction decisions in order to avoid discrimination or disparate treatment claims. Health and safety issues will need consideration as well. The cost of ensuring a workplace environment that complies with OSHA requirements for those employees that remain during construction might not be worth the investment. Finally, you may miss an opportunity to start with a "clean slate" of employees upon reopening.