Seven Red

(CCCC Louisville Update): It looks like Hyatt is feeling the pressure from their little test run up in Boston. As I suggested in the comments to my previous post on this, Hyatt is likely “user-testing” the viability of a general labor strategy with their decision to fire a hundred permanent housekeeping staff in Boston and replace them with contract workers. That this test comes as Hyatt is preparing an IPO should come as no surprise. Investors will want to see reductions in labor costs, so Hyatt management has to figure out how to provide these reductions without pissing off an already irritated public. The move was almost certainly suggested by some douchebag at Goldman Sachs (listed prominently in the syndicate underwriting the IPO), who will have to sell this dog at a road show with negative earnings for 2009 appearing on the balance sheet.

Based on the extensive response I got to the email I wrote Hyatt about the Boston issue, they are in full-fledged damage control mode, and probably having to do more than they thought they would. In Boston, the governor of Massachusetts has suggested that all state workers boycott Hyatt, period, and even cab drivers have started organizing a boycott (I’d love to see how *that* would work…refusing to take a customer to a location is illegal in NYC). So their test case didn’t go so well, and we hear word yesterday that Hyatt will “hire back” the fired workers. Of course, that’s not quite right: they will be hired by the contractor “until” at least December 2010, at the same salaries. Now, you might be asking how that could be: wouldn’t it be cheaper to pay these workers their salary than to pay the contracting company the salary plus fee? And wouldn’t this put the lie to the oft-repeated claim that the decision to fire the workers resulted purely from the drop in revenues? Well, maybe not. Hyatt also paid for benefits for these workers, which included, at least, health and 401K/other defined contribution plan. Now Hyatt gets to cut out those benefits, and try to save the PR disaster by pretending they’ve “lost” this fight. They do note – and did so in the email as well – that the contracting service provides health benefits, though again, you’d have to wonder how extensive these are. In any case, I think I will send out another email noting that I don’t buy it, and I’d urge everyone to continue to avoid the Louisville Hyatt Regency until management gets their heads out of their collective IPO-dreaming asses and abandons this outrageous labor strategy.

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