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What Are Hotel Employees Worth?
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by Joseph M. Gravish, April 2006

It’s 4:56 AM and Isabella clocks-in. She’s done so every workday since the beginning of 2006, precisely at the same time. Well, almost every workday – at least 67 of the last 70 workdays. I presume she’s been doing that for years; there’s no need to check further. Isabella’s worked here for 25 years. She cleans the hotel lobby, public areas and restrooms. She makes slightly more than $10 an hour.  Nothing more – no health benefits, no vacation time, no paid-time-off, no 401(k), no STD or LTD insurance, no educational tuition assistance, no employee assistance programs, no child care. Never had them. When she “retires”, according to past practice, we’ll have a nice luncheon for her, give her flowers, thank her for her decades of service, and wave goodbye.

Margarita works in housekeeping. Like Isabella she’s been here for decades, serving  faithfully. She makes about $11 an hour.  She may also “retire” soon – as if these types of people actually retire. When she’s gone we’ll remember her fondly and often. Like Isabella and all the other 90 line-level staffers she doesn’t have, nor was ever offered, any type of benefits.

I wonder how frequently this scenario occurs in the hospitality industry.

Just yesterday the lead story in the Money Section of the USATODAY addressed executive compensation. Median 2005 pay for those in charge of the nation’s largest 100 companies rose 25% compared to 3.1% for typical American workers. But Isabella and Margarita are employed in the hospitality industry and their last pay raise was is 2002 – hardly typical. Hospitality jobs, including some restaurant jobs in the hotel, occupy six slots among the 25 lowest paid jobs in my state. The CEO of one of the largest hotel franchisors made $15.6 million in salary and bonuses and exercised another $117 million in stock options in 2005. He also received over $49,388 for aircraft use and $49,986 for cars and drivers. Let’s be clear here. The CEO and most hotel owners and management executives are probably worth what they’re paid. But what are Isabella and Margarita worth? 

Every dedicated hotel worker like Isabella and Margarita creates both tangible and intangible value for the company. Intangibles make up the difference between book value – what the company’s hard assets are worth – and market value – what someone would pay for the company as a whole. Intangibles are the hidden value – the price multiplier. According to Jonathan Low, senior fellow at Cap Gemini Ernst & Young, “Value in this economy is increasingly being driven by employees and their ideas, as opposed to hard assets. So you not only have people creating a lot of value, but they are highly valued themselves…” Researchers at CGEY found that half of IPO companies going public from 1986 to 1997 failed because the employees’ interests were not aligned with corporate strategy.

Successful, award-winning companies today understand that corporate strategy must include social responsibility, or corporate citizenship. The World Business Council for Sustainable Development defines this as the business’s commitment to the quality of life of employees and their families. Successful companies have shifted their core business strategy from solely a profit-oriented outlook to one which targets the competitive edge – and more revenue – while at the same time contributing to those that maintain the company’s or brand’s reputation – its employees. 

It’s time franchisors, owners, operators and hotel senior executives learn the lessons of many of their less profitable competitors. It’s time national, regional and local hospitality associations, for the good of their members, listen to the voice of employees, those creating intangible value day-in and day-out. It’s time – no, it’s long overdue the time – that something be given back to those who are often paid poverty-level wages and little if any benefits.   
      
I’ve never asked Isabella or Margarita about their dreams. But I’d bet that they’ve love a small fraction of the CEO’s quality of life or the security even an annual cost-of-living raise might provide. Better yet, they’d love to have even the tiniest, very tarnished golden parachute when they retire. After 25 years aren’t they worth it?

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Contact:

Joseph M. Gravish
St. Louis, Missouri
(work) 636-938-6661 x7709
(email) jmgstlouis@hotmail.com

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Also See: Hotel Labor Union Negotiations - a Perspective / Joseph M. Gravish / April 2006
Determining Assessable Hotel Real Estate Value / Joel Rosen / July 2003


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