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Minimum Wage Madness

Current minimum wage initiatives could force small hotel owners out of business. Here’s why and what you can do about it.

Monday, August 25, 2014
Bakulesh Patel
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As a hotel owner and chairman of the IHG Owners Association -- which represents thousands of InterContinental Hotels Group (IHG) owners and operators worldwide, and monitors important governmental issues on their behalf -- I speak on behalf of small business owners everywhere who are facing the threat of the increased minimum wage.

We say “no” to increasing the minimum wage to unparalleled levels. While many of the jobs in our industry are entry-level, hospitality offers good jobs at good wages, with opportunity for rapid career advancement. There are countless stories of an employee entering into the workforce at minimum wage and quickly advancing, while building a career.

The IHG Owners Association is sensitive to the needs of our employees, but some of the extreme wage initiatives popping up in cities around the country will make it very difficult or impossible for small hotel owners to continue to operate. For example, 60 percent of Holiday Inn Express® operators own just one hotel. As single asset owners, such pay increases will be so costly that many will be forced out of business, and the only way others will be able to continue will be by completely changing the way their business is done.

My colleagues concur. For example, Kerry Ranson, President of Expotel Hospitality Services, has numbers to support how much a minimum wage hike for a typical select-service 130-room hotel will cost.

Kerry explains that if the minimum wage were to go to $10.10 in one of his markets, it would cost his company about $312,000 in additional expenses in a market where they are very competitively positioned in wage scale. He may not cut any jobs because they would still need to clean all the rooms and staff the desk 24-7, but they could potentially close because the profit could be all but gone and would not be meeting his debt conveyance with the lender.

In the hotel industry in particular, minimum wage jobs often create a pathway of success where one can learn the business from the ground up and move up the ladder quickly. Kerry made his way by first waiting tables, to managing a restaurant, becoming a general manager, working for a brand, and then owning his own company.

In my case, I was born in Zambia, Africa. My journey is one from a small village working in my father’s supermarket, to public boarding school in London, to immigrating to Oregon in 1988 where I was able to obtain financing to construct and operate my first motel (and I did every job in that motel), to heading up a company that owns and operates properties throughout the northwest and mid-western U.S.
According to a report earlier this year by the nonpartisan Congressional Budget Office, increasing the federal minimum wage to $10.10 would cost 500,000 jobs by 2016. The last federal minimum wage hike, in 2007, resulted in 550,000 fewer part-time jobs. This time around, the losses from minimum wage increases could be rampant – from lost hotel jobs and annual guest room revenues, to lost hotel occupancy taxes and hotel values.

Since January, thousands of hotel industry employees have already received ramped-up minimum wage benefits in states boosting the wage far beyond the federal level. For example, in Los Angeles, hotel workers’ pay may increase to $15.37 an hour, twice California’s current minimum wage. Unionized hotel employees in New York City have been offered a series of raises so that a maid's annual pay will be almost $70,000 in 10 years, and hotel workers who receive tips will also receive annual raises. Seattle will gradually raise the minimum wage to $15, the nation’s highest, and treat franchises (small businesses) like huge companies. Providence, Chicago, Michigan, the District of Columbia, Connecticut, Maryland and Minnesota are also among those raising the minimum wage.

With a long and distinguished career in the hospitality industry, Bakulesh “Buggsi” Patel is chairman of the IHG Owners Association and the first Asian American to lead the association. He has held leadership roles in numerous lodging associations including the American Hotel & Lodging Association (AH&LA), Asian American Hotel Owners Association (AAHOA), Washington Lodging Association and Oregon Lodging Association (OLA). He is president of Oregon-based BHG Hotels.
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Bakulesh Patel    Bakulesh Patel
Chairman
IHG Owners Association

Bio: With a long and distinguished career in the hospitality industry, Bakulesh “Buggsi” Patel is chairman of the IHG Owners Association and the first Asian American to lead the association. He has held leadership roles in numerous lodging associations including the American Hotel & Lodging Association (AH&LA), Asian American Hotel Owners Association (AAHOA), Washington Lodging Association and Oregon Lodging Association (OLA). He is president of Oregon-based BHG Hotels
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RE: Minimum Wage Madness article link
Ultimately increasing wages, causes most things to go up in price helping no one in the long run. The government needs to work on cutting costs by running a better ship. As small business owners we have to work within budgets, the same should apply to them. The cost of living would go up by this increase and would further harm the bottom line.


Email: soniasachania@aol.com
8/25/2014

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