BROOMFIELD, Colorado—Conventional wisdom dictates that unionized hotels are more expensive to operate than their non-unionized counterparts because of higher payroll costs. But is this really the case? A detailed look at data behind the question provides the answer.
In undertaking this analysis, STR Analytics, sister company of Hotel News Now, first obtained a list of unionized hotels from UNITE HERE's website. Then, we cross-referenced those properties with those reporting income and expense data for STR's 2014 HOST program (using 2013 year-end financial statements).
We focused solely on upper-upscale and luxury hotels within the markets of New York City, San Francisco, Chicago, Boston and Los Angeles. We then compared the results from the unionized hotel set to a comparative set, comprised of properties within those same markets and classes but not listed as unionized hotels on the Unite Here website.
Overall, our analysis comprised 138 unionized hotels and 144 non-unionized hotels (comparative set). The average property from each sample had the following characteristics:
Because the unionized hotels tended to be clustered in the central business districts of the markets, they were larger and more convention center-oriented than their non-unionized (comparative set) counterparts. They also exhibited average rates nearly 30% higher than the comparative set hotels, which is likely a result of being located in a more centralized, pricier area of the markets. Due to these rate premiums, unionized hotels also commanded higher overall total revenue than the comparative set hotels, specifically $372 per occupied roomnight annually on average versus $309 per occupied roomnight, respectively. Total revenue on a per-available-room, annual basis for union hotels was $111,238. For the comparative set, it was $88,954.
Departmental expenses notably were higher for the unionized hotels, while undistributed expenses were similar for the two groups.
As a result, for these sets of properties the average unionized hotel earned approximately 3 cents less in house profit for every dollar in revenue than the average comparative hotel.
Drilling more deeply into departmental expenses, greater differences between the two groups were unearthed in the analysis of rooms and food-and-beverage payroll.
Rooms payroll was approximately 30% lower for the average comparative property and 36% lower for food and beverage. After adding in the payroll from the undistributed expenses (e.g. marketing, administrative and general, maintenance), total payroll for the average comparative hotel was about 19% lower than its unionized counterpart.
Finally, we broke payroll down into its two classifications: salaries & wages and taxes & benefits.
In doing this, it became clear that taxes & benefits exhibited the greatest degree of difference between the groups, with unionized hotels spending 66% more—on a per-occupied-room basis—than the comparative set hotels.
Whether these differences are due to unionized hotels averaging higher wages than the comparative hotels, or simply having a higher staff-to-room ratio, is not something readily apparent in these numbers.
But whether unionized hotels spend more as a percent of revenue on payroll than their counterparts, the answer, at least in this analysis, is yes.