Labor Updates of the Hotel Industry Meghan Clark & Olivia Kobayashi Michigan State University

Topics  Nature of the Industry  Employee turnover rates  Government Regulation  Immigration  Minimum wage  Healthcare  Taxes  Union Contracts  State of the Economy  “Fiscal Cliff” 1

Hotel Labor Costs: 30-35% of Total Revenue 2

Nature of the Hotel Industry 3  High employee turnover rates: 78.3% %  Seasonal business  Low pay rates (52% below the average hourly wage) ***Hospitality is considered high-risk for wage violations  Student employees  Unskilled labor pool  Employees unfit for customer service  Results in higher training and hiring costs "Introduction." Motivation in the Hospitality Industry. The Incentive Research Foundation, n.d. Web. 19 Nov

 Improved interview process to gauge willingness to work in customer service  Increase hourly wages  Offer employee incentive programs  Could improve operational income by 19.2%  Show strong, supportive leadership from management  Improve employee-manager relationships  Open communication policies  Provide professional development for employees  Job enrichment, team building opportunities 4 Combat Labor Costs by Focusing on Employee Retention

Governmental Policy  Misclassification of Employees  Affordable Care Act: full time = 30 hrs/wk, violations of healthcare coverage results in extra taxes  Fair Labor Standards Act: employers who misclassify employees independent contractors must pay for benefits, overtime pay, and fines 5

Healthcare 6

Immigration Reform  Significant changes to the I-9 form  Massive overhaul of format and instructions  Fines as high as $1,100 per employee for violations  Public investigations damage reputation  Hospitality employers at highest risk to inspections  Abstain from hiring unauthorized workers  Provide 1-9 training to HR department  Implement comprehensive immigration compliance policy and investigation response protocol 7 Baffa, David, Nicole Bogard, Daniel Hart, Alexander Passatino, and David Pilson. "Five Key Labor And Employment Issues Hospitality Employers Need To Be Aware Of This Quarter." Seyfarth Shaw LLP. N.p., n.d. Web. 13 Nov

Labor Unions Hotel Industry is attractive for unionization  UNITE HERE focuses on the hospitality industry with card-check neutrality  Unions can form in hotels where majority of employees sign for union representation  Right-to-work states are becoming more prevalent  Could be a cost savings for employer 8

Effects of the Economy  “Fiscal Cliff”  Budget Control Act of 2011 changes went into effect: payroll tax cuts, healthcare taxes  Spending cuts  Tax rate increases  No consumer spending, low government spending  What’s Next: Debt Ceiling 9

Future Payroll & Benefits  Labor costs average 43.7% of operating expenses and increase annually 4.3%  Limited recently by increased productivity, controlled benefits, and high levels of unemployment  Projected growth of only 2.4% and unemployment of 9.9%  Higher skilled employees working for less 10 Mandelbaum, Robert. "Hotel managers labor to control labor." Hotel News Now. N.p., 3 Feb Web. 19 Nov

Conclusions  Need to prepare for the future in order to curb labor costs  Stay up-to-date with laws and other regulations  The future acts of government and the state of the economy will have a significant impact  Hoteliers can offset predicted changes by preparedness  No way to predict what will happen, but can stay well informed