A little noticed executive order by CA Gov. Gavin Newsom has accelerated layoffs in the state’s hotel industry — with pink slips issued recently to nearly 3,600 workers in March.
The job cuts, which for now are officially reported as temporary layoffs, are perhaps the most tangible sign yet of California’s hotel industry in freefall amid the coronavirus crisis.
Newsom announced on March 17 a partial suspension of the state’s Worker Adjustment Retraining and Notification Act, better known as the WARN law, which normally compels employers to give workers and the public 60-days notice before carrying out layoffs of 50 or more employees.
Under the governor’s order, employers must still report mass layoffs to the state’s Employment Development Department. But companies can enact the layoffs immediately if the pink slips are the result of measures taken in response to the coronavirus, a new rule hotels were quick to utilize.
“In my lifetime I have never seen damage as swift to the industry, plus with such an unknown end,” said Peter Hillan, spokesman for the California Hotel and Lodging Association.
Besides layoffs, hotel property owners including Ashford Hospitality Inc., landlords of the Beverly Hills’ Marriott, are mulling bankruptcy, and management companies like Hyatt are enduring a valuation plunge.
The WARN notices, issued amid Newsom’s coronavirus-induced order, currently only cover March 17th-20th. The layoff numbers over those four days indicate the pandemic’s staggering economic toll.
All told, 91 mass layoffs notices in various industries were issued March 17th-20th — causing 13,566 California workers to lose their jobs. Along with restaurants, the most affected industry was hotels, with 19 notices prompting “temporary” layoffs.
In Los Angeles County, the cuts include 429 layoffs at the Hyatt Regency in Long Beach, 73 layoffs at Hyatt Centric The Pike in Long Beach, 160 laid off workers at the Andaz in West Hollywood, and 96 pink slips at the Doubletree in downtown Los Angeles.
Also hard-hit is L.A.’s neighbor to the south, Orange County, where hotels reported 529 layoffs to the state.
“Between the closing of Disneyland and convention centers, Orange County has been completely devastated,” said Alan Reay, president of Orange County-based hotel brokerage Atlas Hospitality Group.
All hoteliers are struggling, Reay said, “But the hotels that are really impacted are large full-service meeting hotels” where property owners and managers draw revenue from large parties who book months ahead for expositions, conferences, and weddings. “People are not booking anything into the future because they don’t know how long this lockdown is going to last,” Reay said.
Conversely, some smaller hotels who rely on drive-in motorists instead of advanced bookings may weather the economic storm somewhat better. Reay pointed to Santa Monica-headquartered PRG Investment and Management Inc. and Irvine-based Pacifica Hotel Co. Ltd. as companies with the cash reserves and business model to return to relative normalcy when California shelter-in-place orders are eased.
Although the layoffs are listed as temporary on the WARN notices, it is unclear how many of the thousands of affected workers could, in fact, get their jobs back.
“I think they all could eventually come back,” said Reay, but he added the jobs returning might take years, and it is unrealistic to expect workers to wait out for those jobs to return.
Hilan of the Hotel and Lodging Association said there could be a rebound this summer. However, he also acknowledged that the initial 3,582 listed layoffs was the tip of the iceberg. “It’s going to be far more than that,” he said.