Can New York’s Hotel Industry Survive the Latest Union Victory?

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Numerous New York City hotel owners are struggling to stay alive and their workers’ union isn’t exactly making it easy for them. In fact, there is a good chance that for many workers, their union has just put their employer out of business.

That’s because the unions representing workers at 75 hotels just won a $500 million severance payout from an arbiter, reports The Wall Street Journal. The funds are meant to compensate workers who lost their jobs. The reason why this happened is not some callous decision by the owners. It is because the tourism and hospitality industry in New York City has collapsed because of restrictions imposed due to the COVID-19 outbreak. The hotel owners didn’t want to send the workers home, but when their businesses are running at an estimated 10 percent capacity what other choice did they have?

The unions’ job is to represent the workers, not the owners, of course, and their members are hurting, so it is not surprising that they would try to get as much as they could. Still, a payout this large carries a very real risk of making some of the businesses shut down entirely, so the members may not have a job to return to when the crisis passes. Some of the city’s largest hotels like the Roosevelt and the Hilton Times Square have already announced that they will closed permanently. Others are sure to follow.  “Any hotel without access to capital will collapse over the next few months,” hotel owner Richard Born told the Journal.

Hotel Trades Council President Rich Maroko, who represents most of the workers, had an interesting response to the hotel owners’ concerns. He told the Journal that while it was true that the hotels “are closed because there are no guests,” the payout shouldn’t cause any problems because the owners can make it in installments. “If anything, paying severance over time gives hotels an incentive to reopen so they can cease making payments,” Maroko said.

Exactly how the hotels are supposed to do that without guests to serve was not clear.