Hawaii’s lodging industry workers missing out, expert says

Spending is up only if you own a hotel, not if you work there.

That was the opinion of Paul Brewbaker, principal of TZ Economics, who presented data at the Pacific Asia Travel Association Hawaii chapter’s economic outlook on Jan. 31 that showed gross lodging receipts’ share of total visitor expenditures rose to 40% from 25% over the past 20 years.

Brewbaker said real revenue per available room, or RevPAR, increased on average 2% per year over the 20 years and would have been higher if resort fees were included. RevPAR, an important performance measure in the lodging industry, demonstrates a property’s ability to fill its available rooms at an average rate.

Meanwhile, he said lodging industry jobs haven’t changed since 1990, that workers’ average weekly hours in the lodging industry have declined slightly since the early 2000s and that average hourly earnings adjusted for inflation, while varying over time, are no different now from the average for the past 20 years.

“Real average hourly earnings were $25 in 2022 and were $25 in 2007, in 2022 dollars. Real earnings were $24, in 2022 dollars, 20 years ago,” Brewbaker said.

He said hotels may have taken off historically because government-imposed barriers to entry enable the exercise of market power, which supports returns for the lodging industry. More recently, Brewbaker said, hotel yields have amplified due to a post-pandemic recovery pattern dominated by travelers from North America — primarily the mainland — who tend to stay longer, and a strong rebound in luxury hotels.

While there were gains from the standpoint of hotel workers’ real earnings from 2019 to 2022, Brewbaker said all that happened was to reverse the erosion that had happened during the 12-17 years preceding the pandemic, from workers’ standpoints.

“Simply put, rounding, from 2019-2022 urban Hawaii consumer prices rose 12%, hotel wages rose 18%, hotel room rates (and RevPAR) rose at least 30% and the hotel rental general excise tax base rose 21% from what is the equivalent of the state of Hawaii’s fiscal year 2019 to fiscal year 2022,” he said. “Hotels did all right, hotel workers not so bad, if getting what you already had in real terms is all you’re going to get.”

Brewbaker’s analysis of Hawaii economic data comes at a time when visitor arrivals are down but nominal tourism spending, which has not been adjusted for inflation, is up significantly over pre-pandemic times. The Hawaii Tourism Authority and others in Hawaii’s visitor industry are using this example to make the case that tourism management efforts are paying off.

His interpretation also comes as Hawaii’s visitor industry is still paying a premium to attract and retain workers, and its major hotel brands are gearing up for another round of labor negotiations in 2024 with Unite Here Local 5, which represents thousands of hotel workers.

Local 5 spokesman Bryan de Venecia said the union secured two extensions to its 2018 contracts at all the big hotel brands in 2022, which included “raises and contributions to our health and welfare fund to replenish funds that were depleted during the pandemic.”

The extensions also brought back daily room cleaning at hotels, where cuts were made to the highly labor-intensive housekeeping departments during the pandemic.

De Venecia said the union standard is now $27.28 an hour for housekeepers; however, even that is not enough to satisfy the 2018 union campaign, “One job should be enough.”

In 2018, when Local 5’s Marriott and Kyo-ya workers went on a 51-day strike to achieve a better contract, de Venecia said the union had deemed $33 an hour as a livable wage.

“Now it would be more like $44 an hour,” de Venecia said.

Jason Maxwell, a bartender at the Waikiki Beach Marriott, said, “It’s the same as it ever was.

“Everything goes up, but the wages didn’t go up to match everything else,” he said. “I’m fortunate because I have a union job. Friends in other properties not tied to the union are much worse off.”

Maxwell said another issue is that at this stage of the pandemic, properties have not brought back all of their staff or reopened all of their food and beverage venues or all of the services, such as room service. He said such practices have increased workloads and frustrated guests.

Maxwell said he cut down to two hotel jobs from three in 2016 to spend more time with his family. But now he’s feeling the strain of having only one job while he waits for The Modern to reopen The Study, which was one of three of the property’s four bars to close during the pandemic.

Maxwell said Brewbaker’s analysis resonates with him and other Local 5 members; however, key leaders in Hawaii’s lodging industry strongly disagree.

Mufi Hannemann, president and CEO of the Hawaii Lodging &Tourism Association, called Brewbaker’s findings befuddling.

“Here locally, with what our (hotels) have had to face due to the cost of doing business in Hawaii, they are barely getting by,” said Hannemann, who was recently appointed to the U.S. Travel and Tourism Advisory Board, which advises U.S. Secretary of Commerce Gina Raimondo and the Commerce Department on issues and concerns affecting the nation’s travel and tourism industry

“During the pandemic, no one was coming in. But we had to pay for electricity and maintenance and keep a skeletal staff, and once we reopened we had to follow all of the requirements put on us by state government to stay open,” Hannemann said. “I don’t know where he came to that conclusion given all that we went through in 2020 and 2021.”

Kekoa McClellan, principal of The McClellan Group and American Hotel &Lodging Association Hawaii spokesman, said comparing overall leisure and hospitality wages to hotel RevPAR is like “comparing papaya with pipikaula.”

“The numbers don’t speak to each other,” McClellan said. “You can’t aggregate everyone affiliated to tourism and base what happened to their wages against what hotels are making. Our employees are making more than they’ve ever made before.”

Jerry Gibson, president of the Hawaii Hotel Alliance, called a 2% RevPAR gain marginal and said rising hotel costs also must factor into the equation. Gibson said utility costs have gone up fourfold in 20 years, and renovations have gone up more than threefold, while broad labor costs have risen.

“When you look at the benefits — medical, dental, pension — that’s all gone up more than threefold over the last 20 years,” Gibson said. “The salaries have more than doubled over 20 years for management, and the collective bargaining agreements and benefits have skyrocketed.”

McClellan added, “Our AHLA properties, especially in Hawaii, have invested in gateway programs for our employees to grow within the industry. These are great jobs.”

Gibson, who started his career in 1977 by walking into the Airport Ramada Inn fresh off a plane from the East Coast and getting hired as a dining host, attributes his success to opportunities found in Hawaii’s hotel industry.

“We have some of the finest hotels in the world, and the team members are in that setting,” he said, adding that many hotels also provide workers with a range of lesser-known benefits such as free work meals to complimentary vacation nights to tuition assistance.

Is there a divide between hotel performance and worker well-being, and if so, why should people care?

Brewbaker said, “The fact that the benefits don’t seem to be accruing to workers and do seem to be accruing to owners from this broader economic justice viewpoint and the idea that the fabric of society in some sense is rooted in perceptions of social justice is of concern to me.”

He added that some Hawaii residents, although he is not among them, really care about the fact that the lodging owners aren’t from here, and their sentiment has become a political force in Hawaii.

Indeed, de Venecia said one of the union’s latest campaigns seeks to inform guests that they are paying much more for rooms compared with during the height of the pandemic, but all those profits go somewhere else.

“The only money that stays in Hawaii is workers’ wages,” he said. “This is really a time to rethink how we want tourism, and that’s why we want people who work in the industry to have a say.”

The perception of a possible divide might be a reason that visitor industry households did not rate tourism much more favorably than nonvisitor industry households in the state Department of Business, Economic Development and Tourism’s Fall 2022 Resident Sentiment Survey, released Wednesday.

The mean score on the question, “Tourism has brought more benefits than problems,” was just 6.1 out of 10 for visitor industry households, compared with 6 for nonvisitor industry households.

HTA president and CEO John De Fries said he didn’t know what to make of the rating for tourism by residents who worked in the visitor industry, but that over the next few weeks HTA would probably gain more insight.

“The workplace in general is still trying to stabilize itself. I know there have been some reemployment challenges that each of the major enterprises have dealt with that could be leading to added hours, added stress, more coverage or expanded responsibilities,” he said.

North Shore resident Choon James said the rating did not surprise her, as she has a lot of conflicted friends who work in the industry.

“It’s actually a personal tug of war because we have put so much of our eggs into the tourism basket that people don’t have much choice in trying to make a living,” said James, who had hoped that the tourism shutdown during the pandemic would have led Hawaii to make greater strides toward economic diversification.

She said film and music have promise.

“The Korean drama and the K-pop are taking off because their government invested in them and backed its own people up,” she said. “In my opinion, Hawaii could diversify into these two industries pretty easily, as we have lots of talents here.”