NEW YORK— UBS Warburg reported that the tentative settlement agreement reached on Sept. 3 between Chicago hotels and the Hotel Employees and Restaurant Employees Union (HERE), Locals 1 and 450, should have little impact on the public parent companies of the hotels. The firm said in a statement: “The Chicago hotel employee union reached an agreement with hotels that increases wages and other benefits. We estimate Hilton [Hotels Corp.], which derives 10% of its EBITDA from Chicago, will incur a $4million EBITDA impact, or about $0.01 in EPA, due to changes on a full-year basis. We are not changing our estimates at this time. “We believe that investors should use the coming months to begin building positions in lodging stocks or increase their existing positions, as we believe lodging stocks will post significant returns when lodging demand returns.” Starwood Hotels & Resorts, Host Marriott, FelCor Lodging Trust and MeriStar Hospitality were among those companies, which also own downtown Chicago hotels affected by the settlement. UBS Warburg feels these companies “will realize a negligible financial impact due to the new union agreement.” The firm went on to say that the wage increase could result “in a ripple effect to non-union wages, although in the current weak operating environment, we believe this will not have a material impact in the near future.” Contract highlights include $3.27 in raises over the four-year agreement for non-tipped workers. This represents a 37% wage increase for union housekeepers, according to union officials. The overall economic package increase is more than 54%. Worker contributions for family medical coverage will decrease from $85.00 per month to $30.00 per month over the life of the contract. Employer contributions to the health care fund will increase 94% over the four-year contract. Additionally, the health care benefits will improve in the first year with an expanded network of hospitals covered at 100%, and will further improve in the second year with an expanded network of doctors, said union officials. The union also received four paid sick days over the life of the contract. The previous contract had none. The new contract proposal will affect 23 downtown and four suburban hotels. A ratification vote will be scheduled for later this week.
