It was a different story at the 752-room Westin Michigan Avenue Chicago, where workers are members of hotel service union Unite Here Local 1. To reopen on a limited basis and still follow the rules laid out in its collective bargaining agreement—which prevents doormen and bellmen from doing any part of each other's job, for example—Pebblebrook calculated it would need a staff of at least 85 workers, or 36 percent of its pre-COVID total.
Nine months after the Westin ceased operations, it's still closed. And unless it can open with fewer workers to meet the record-low demand, Bortz doesn't see that changing anytime soon.
"It's just economics," he says. "It's nothing other than that."
Pebblebrook's thinking illustrates one of the biggest problems facing Chicago hotel owners during a crisis that has pushed many to the financial brink: As they search for ways to run more efficiently to weather the historic storm, many say they're not finding a willing partner thus far in unionized labor. Owners who would like to reopen properties with skeleton crews to generate at least some cash flow say they can't justify doing so because their labor pacts mandate certain services and staffing levels that would make it too costly, given meager demand amid a public health crisis.
Yet local union leaders—which represent some 7,600 workers at 51 downtown hotels—appear uninterested in renegotiating any terms of the CBAs they fought for two years ago during a historic citywide strike. They dug their heels in further last month, helping shape a pair of ordinances that Alds. Ed Burke, 14th, and Raymond Lopez, 15th, introduced to the City Council that would beef up union hotel worker protections—including one that would mandate daily housekeeping, a conflict with the city's public health guidelines.
The tension signals more headaches ahead for Chicago hotels trying to tighten their belts to survive the pandemic while also balancing political pressure to use union workers under labor agreements that weren't designed for the worst crisis in modern hospitality history.
"Owners are calculating how much it costs to have that first guest come in the door, and if under a union contract they have to have a houseman, a room attendant, a busser, a bartender, a barback, a front server, a back server, bellperson, door attendant . . . the cost of having that first guest is very high," says Peter Fischer, a Washington, D.C.-based labor attorney at law firm BakerHostetler, which represents more than a dozen hotel owners and managers in the Chicago area.
Hotel CBAs that were inked in 2018 assumed the annual downtown occupancy rate would average at least 55 percent, a standard industrywide break-even point, according to Fischer. But the coronavirus sunk the occupancy rate among downtown hotels that stayed open to single digits in March and April, and it hasn't risen above 27 percent for any week since, according to data from hotel research firm STR. Twenty-three downtown hotels are now closed, including 16 union hotels, according to the Illinois Hotel & Lodging Association and Unite Here. The union says about 7,000 of its members who work at downtown hotels have been laid off since the start of the pandemic.
Owners—many of whom are reluctant to discuss union relations publicly for fear of political retribution—aren't itching to reopen at the moment, given the rising COVID case numbers and cold weather keeping many tourists away. But those who own unionized properties say opening in the spring won't make financial sense unless demand returns to a more normal level to justify the staffing costs.
"Only if hotels are running high rates and occupancies can the whole notion of high-wage, union labor with all the rules and restrictions have a chance of working," says hotel consultant Rob Hunden at Chicago-based Hunden Strategic Partners. He says labor costs at full-service hotels typically account for around 35 percent of operating expenses and estimates a union hotel's bottom line can be up to one-third less than a similar hotel without union labor.
"There's just no room for error. So if you have a situation like COVID, you're probably better off staying closed," he says.
But Unite Here says labor contracts aren't the problem. Collective bargaining agreements "are loaded with flexibility," giving owners the ability to staff based on demand, says Unite Here spokesman Elliott Mallen. For example, "if the hotel wants to open up their restaurant, the contracts allow that flexibility to open up the restaurant. If they don't, there's nothing in the contract that requires them to do so," he says. After all, 13 union hotels that closed at the beginning of the pandemic eventually reopened and 22 more never closed, according to the union.
Mallen declines to comment on whether Unite Here has ongoing discussions with hotel owners about renegotiating any property's CBA. He says the primary reason hotels are closed isn't the cost of labor, but simply the lack of conventions and group business.
But it's unclear how soon that will rebound. Despite imminent distribution of COVID-19 vaccines, event cancellations at McCormick Place have already stretched into the summer. And some experts predict business travel may never return to pre-pandemic levels as virtual meeting tools have become more mainstream.
Another growing labor tension point could play out the next time CBAs expire: The pandemic is forcing hotels to run more efficiently, including more "digitization" of operations, says Gettys Group CEO Roger Hill, an investor in several union and nonunion downtown properties. More guests may be comfortable checking into rooms using a mobile device, which reduces costs "because instead of three people at the front desk, now I can get by with two," Hill says. "You're going to see labor reductions there."
