News for the Hospitality Executive
Three Years After Union Workers at Chicago's Congress
Plaza Walked Out
in a Contract Dispute, the Sides Remain Deadlocked
|By Russell Working, Chicago
Knight Ridder/Tribune Business News
No room for settlement
June 23, 2006 - It's 6 a.m. and waiters Efrain and Leticia Cortina are starting their shift at the Congress Plaza Hotel & Convention Center on South Michigan Avenue.
They shoulder their picket signs and begin circling outside the lobby. This has been their routine for the last three years at the Congress Hotel, where housekeepers, dishwashers, bartenders and other employees are engaged in one of the longest-running ongoing strikes in the nation.
The third anniversary of the walkout passed this month. The Cortinas, like other workers, have been forced to hold down second jobs while logging 25 hours a week on the picket line.
But with the owners apparently intent on weathering the strike, no happy ending appears on the horizon any time soon for either side in this little-noticed labor drama being played out in one of the most public areas of the city.
Led by the Nassers, a publicity-shy New York textile family with global business interests, the Congress' ownership group faces a union campaign to drive away guests at a time when tourism is up, the hotel business is booming, and the Millennium Park neighborhood rebirth should mean a bonanza for business.
For the workers, who could only watch with envy last month as Chicago construction laborers won a quick victory in a separate labor dispute, the impasse at the Congress Hotel underscores how far their fast-growing service unions still need to go before they can match the clout of more traditional manufacturing and trade unions.
Nasser family members declined interview requests. But what appears clear from outside the 113-year-old landmark property is they have a strategy for surviving the strike. Congress Hotel's rates are among the lowest downtown, which explains the recent crowds checking in and out of the hotel.
Hotel contracts expiring
Yet, the hotel employee's union, Unite Here Local 1, won't back down, partly because hotel agreements for 60,000 workers at other hotels begin expiring in Chicago and across North America this summer and fall. Settling without a raise would signal weakness.
"If they break the union, we look weak, and other hotels take advantage of us," said Efrain Cortina.
The strike began after management cut wages 7 percent, froze health-care contributions and demanded the right to contract out jobs. The hotel rescinded the pay cut after the National Labor Relations Board filed a complaint alleging it had been improperly implemented.
But the owners continued to reject any wage increase, and a spokesman says the independent hotel cannot afford the salaries the union negotiated with two dozen area hotels, most of them international chains, in 2002.
Local 1 President Henry Tamarin expressed frustration.
"Whatever we have done has not yet overcome the balance of power between the wealth of the owner and his disregard for the community on one side, and the working people on the other side," said Tamarin. "If they were interested in running a successful hotel, the strike would've been over a long time ago based on the impact on the business."
A hotel representative said the union is using the strike for leverage in contract talks with national hotel chains.
"We feel we have been used as more of an example to the other hotels," said the hotel's attorney, Peter Andjelkovich. "Their contract expires this August. They are the big fish. And this is a national campaign. ... They're looking at bigger issues than the Congress Hotel."
Even before the strike, wages paid at the Congress Hotel lagged behind those of other Chicago union hotels and national levels. Housekeepers earn $8.83 an hour compared with $12.10 elsewhere in the city.
The strike has taken its toll on Congress Hotel workers. Although they voted 113-1 to walk out, just 65 active strikers remain, hanging on with the help of second jobs and a $200-a-week strike benefit. Others have left town for other jobs or drifted away.
Labor experts say the dispute appears to be one of the longest-running current strikes in the country, though data isn't tracked for smaller walkouts. The Bureau of Labor Statistics says the longest current strike involving more than 1,000 employees is a 19-month United Steelworkers of America walkout against Ormet Corp. in Hannibal, Ohio.
Built for the 1893 World's Columbian Exhibition, the once-luxurious Congress Hotel has housed such presidents as Grover Cleveland, Teddy Roosevelt and Franklin Roosevelt. Its lobby is topped with ornate arches.
Room problems disputed
But the hotel long ago stopped courting an elite clientele, and Local 1 describes the property as an embarrassment. On its Web site, it has posted hundreds of complaints it says it collected from departing guests: bad smells, dirty rooms, cockroaches on walls and blood on the sheets of a made bed.
Andjelkovich calls these allegations false. Inside, the hotel is adding new marble floors in the lobby and bar, and one guest said the bathrooms had been redone since she last stayed there three years ago. While the Congress lacks the bustle of the nearby Chicago Hilton, with its stylish bars and shops, a crowd of customers was checking in recently.
The union estimates the strike has cost the hotel $69.9 million in lost revenue due to patrons who won't cross a picket line. Andjelkovich disputes this but won't estimate the strike's financial impact.
Regardless, it can't be a financial boon to have a union posting ads in O'Hare International Airport warning visitors away from the Congress Hotel. So the question, the union says, is how are the owners paying their overhead with reduced revenue?
The answer may lie in the resources at the Nassers' disposal.
"One should understand that the Nasser family is like a huge tribe, and most of them, all of them, maybe, are well-to-do," Amnon Shiboleth, a Nasser lawyer and business partner, once said in a deposition.
Albert Nasser, whose company owns a majority of the Congress Hotel, was born in 1926 to a Jewish family in Aleppo, Syria, that immigrated to what is now Israel. In the early 1950s, Albert and two brothers, Jack and fellow Congress Hotel investor Morris Nasser, fanned out across the globe "and established a tri-continental business empire stretching from the Philippines to Brazil," according to a Jerusalem Post obituary of Jack, who died in 1996.
Over the years, Albert Nasser has drawn heavily on family funding for his ventures. His cousin, Argentine construction and real estate investor Albert Nasser Shayo, has loaned millions of dollars to a corporation through which Albert Nasser does much of his business.
Another reported family business associate was Edmond Safra, a Lebanese billionaire who founded Republic National Bank of New York and who died in a 1999 arson fire in Monte Carlo. Republic loaned the Nassers and their partners $12 million to buy the Congress Hotel in 1987.
At least three Nasser-affiliated companies have filed for bankruptcy, including the Congress Hotel in 1995. In a down market that year, the hotel was appraised at just under the value of its $20 million mortgage.
But two years later, after unsecured creditors agreed to settle for 20 cents on the dollar, a lawyer discovered that the Nassers had contracted to sell the hotel without telling the court. They had failed to disclose that they were receiving offers of up to $70 million.
The lawyer, David Neff, called the Congress Hotel's bankruptcy attorney and suggested that he tell the judge, who referred the matter to prosecutors to investigate for potential fraud.
The hotel quickly agreed to pay off creditors 100 percent plus interest, and no charges were filed.
In a deposition, Albert Nasser insisted he had just been curious about the hotel's worth.
"You have a watch," he said, "you would like to know the value of your watch, but I don't think you want to sell your watch."
Since 1991, the hotel's mortgage has been held by companies owned by the cousin, Nasser Shayo. One of the companies loaned the money to cover a $1.1 million overdraft the Congress had run up at Republic, title records show.
The hotel has acknowledged financial problems, trying to use its debt load to play on union sympathies in 2002. In a letter to Local 1, the general manager said the hotel owed more than $50 million and "has been unable to make a payment to the lender for approximately a year."
The hotel was burdened by high taxes and the cost of extensive repairs, Andjelkovich said. But asked whether the Congress is making any mortgage payments, he said, "How the company handles its finances is not something we're going to discuss in the newspaper."
In today's market, the hotel is probably worth about $50 million, said Ted Mandigo, a hotel consultant based in Elmhurst. The owners have sunk so much money in it, they probably couldn't recoup their investment by selling, he said, and potential buyers may balk at further costly renovations required in a property where rooms are two-thirds the size of those of contemporary hotels. The owners seem disinclined to pump more money into settling a strike.
"They're putting a little bit of investment in it just because the complaints were so heavy. ... They're doing what we call `paint the pig,' dressing up the property a little bit," Mandigo said.
If a business falls behind on payments to a bank, it runs the risk of foreclosure. But when a family member holds the mortgage, the situation may be different, he said. If Nasser Shayo forgave the mortgage debt, the IRS might count it as income and stick the owners with a large tax bill. All this, Mandigo said, leaves the owners "in a real-estate black hole."
Others say the Congress Hotel's problems can be worked out in a hot market. Chicago has seen unprecedented growth in hotel sales in the last four years, said Arthur L. Buser Jr., managing director of Jones Lang LaSalle Hotels in Los Angeles. And the Congress sits at the heart of that resurgence, on the Michigan Avenue near Millennium Park.
"Given that location, it absolutely has a future, which means there will be an economic solution to whatever it's facing," Buser said.
The Congress is but one Nasser family real-estate investment. Albert Nasser was a partner in a $140 million Warsaw mall and entertainment complex that opened in 2004, Polish media reported. Shiboleth, the Nassers' lawyer, told a British real estate magazine that investors spent $75 million upgrading the mall.
Other holdings targeted
The Nassers also hold textile investments that have been the target of a Local 1 campaign in an attempt to leverage pressure for the hotel strike. Nasser companies own 73 percent of Gelmart Industries, which has produced apparel for its own label as well as retail giants such as Wal-Mart and Kmart, according to documents filed with New York City.
Gelmart's Philippine plant has seen strikes and unrest over the outsourcing of jobs to factories with allegedly substandard conditions. Gelmart workers have at least twice stormed Philippine labor department offices, most recently in August.
These battles are a long way from Michigan Avenue, where striking Congress Hotel workers like the Cortinas walk the line.
Efrain Cortina holds down a second job at a South Side Tootsie Roll factory, while his wife works in another hotel's banquet room.
Every workday, Efrain Cortina rises for work at either 2 a.m. or 3:15 a.m., depending on his shift at the candy factory. Leticia Cortina often gets up by 5 a.m. in order to be out in front of the hotel by 6. After work, Efrain comes to the picket line straight from the candy factory, his hands stained green or brown or blue, depending on the flavors he is working with.
"I go with my dad and my mom down to the strike," said the Cortinas' 12-year-old daughter, Yadira. "Every day, every day. I like it because my parents go there. I play hide and seek with my walker."
But after three years, the Cortinas' exhaustion is beginning to show. Efrain Cortina and their 17-year-old son, Efrain Jr., volunteer twice a week to teach tae kwon do to community children, but he has dropped an English class he was taking. On the picket line, he is sometimes too tired to walk back and forth with his sign. Instead, he sits on a planter outside the hotel.
Still, he has no intention of giving up.
"This strike, it doesn't matter how long it takes to win, we will be on the picket line," Efrain Cortina said. "It might take us five, six years. But some workers, they are working at the hotel 30 years, 32 years. This is no time to quit the strike."
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