NYC Hotels Battered by Pandemic Face Rift Over Safety Rules

(Bloomberg) -- The coronavirus hammered New York City hotels, pushing struggling properties to the brink of insolvency and presenting grave challenges to a local economy that depends heavily on tourism.

Now, with international flights canceled and Broadway on ice, lodging owners and a hotel workers union that has seen 95% of its members laid off are sparring over how to implement safety protocols that both sides see as a necessary step to luring tourists back.

The fight has parallels across industries, as companies seek to balance safety against the need to cut costs, and furloughed workers struggle with their own financial pressures and fears of contracting the virus.

The stakes are especially high in New York, where hotels are facing a long recovery. Tourists supported 400,000 jobs and generated $70 billion in economic activity in 2019, according to the city’s tourism agency.

New York officials are projecting hundreds of millions of dollars in lost hotel taxes, a number that doesn’t account for revenue generated when tourists dine in restaurants, shop at brick-and-mortar stores and frequent cultural institutions.

“I’m extremely worried because tourism has become a real driver for New York’s economy,” said Jonathan Bowles, executive director of the Center for an Urban Future. “It’s vital to the city’s future for policymakers to figure out how to restart tourism again, and I have a strong feeling that it will have to start with safety.”

The battle over work rules has been brewing for months. In March, the New York Hotel & Motel Trades Council, which represents workers at three-quarters of the city’s hotel rooms, reached an agreement on safety protocols with more than 150 properties, including the New York Hilton and the Grand Hyatt.

That pact reduced the number of rooms that housekeepers are required to clean during a shift and created new positions for staff dedicated to cleaning public spaces. At the time, few people were staying in hotels: occupancy rates in New York plummeted to 15% in the week ending March 28, down from 84% in the same period in 2019, according to lodging data provider STR.

New Proposal

As Americans start to travel again and Manhattan limps back to life, the union has circulated a new proposal for keeping workers and guests safe. The document, a copy of which was obtained by Bloomberg, calls for plenty of measures that are uncontroversial, like providing masks and hand sanitizer to workers and guests, and enforcing social-distancing in lobbies and elevators.

But owners are rankled by union demands that would increase labor expenses, including a requirement that guest rooms be cleaned every day, whether or not guests want daily service. Another would give workers paid time to change into uniforms, which the union says would help prevent them from bringing the virus to work.

“The majority of owners and operators are shocked and are clueless as to how they can reopen a closed hotel with the very costly and very cumbersome new union demands,” said Jonathan Falik, chief executive officer of JF Capital Advisors, which works with hotel owners. “It will force many of the existing hotels to remain closed, file for bankruptcy or convert to other uses.”

Owners themselves have been more circumspect, declining to comment on the record for fear of upsetting a 40,000-member union with deep ties to Mayor Bill de Blasio and a track record of moving favored legislation through the city council.

Vijay Dandapani, CEO of the Hotel Association of New York City, said the ownership group was engaging with the union on safety protocols but declined to comment on the substance of the proposal.

Push Back

Lodging owners have also pushed back on safety measures from hotel brand companies. In April, Marriott International Inc. said it planned to use tools called electrostatic sprayers to sterilize rooms, but delayed implementing them widely after some owners complained the devices would damage fabrics and inflame allergies, according to people familiar with the matter.

Marriott declined to comment. The company’s shares have slipped 39% this year.

New York hotel owners were hurting before the pandemic, hit by a glut of new rooms and the rise of Airbnb listings. Even with occupancy rates near all-time highs, operating profit dropped 14% last year, according to STR.

Hotel executives are predicting that at least 10% of the city’s existing rooms won’t reopen after the pandemic, said Patrick Scholes, an analyst at SunTrust Robinson Humphrey Inc. The closings have already started -- billionaire Robert Rowling’s Omni Hotels informed loyalty members on June 11 that it was permanently closing a nearly century-old hotel on East 52nd Street.

Union officials concede that the pandemic spells hard times for New York hotel owners, but argue that operators have thrived over the past decade, and can afford to embrace measures that protect workers and promote travel.

“We can’t allow owners to use the pandemic as a Trojan horse to slip in workforce reductions just to increase their profits while decreasing the safety of guests and workers,” Peter Ward, president of the Hotel Trades Council, said in an email. “If the industry won’t thoughtfully regulate itself, then policymakers and elected officials need to step in and take real action.”

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