Written by The Business Journal Staff
Independent hotels and properties that command an average daily room rate on the low end of the spectrum may be on the path to extinction thanks to the state’s new $15 minimum wage law.
That’s the assessment from Kyung Yoon, vice president of Fresno-based Blackstone Hospitality Group, which manages a portfolio of 10 hotels throughout California and Washington, including six in the Central Valley.
Gov. Jerry Brown signed the bill into law this week that would gradually raise the state’s minimum wage from the current $10 an hour to $15 by 2022 for businesses with more than 25 workers, and 2023 for smaller businesses.
A study released by the University of California, Berkeley found that the increase would raise the wages of 5.6 million workers by an average of 24 percent. The study also estimates that 334,000 workers in the Central Valley would be affected by the increase — 193,000 in Fresno County, 24,000 in Kings County, 23,000 in Tulare County and 94,000 in Tulare County.
The study found that 15 percent of restaurant and other food service workers would be affected, as well as 16 percent of retail trade workers.
When it comes to hotels, Yoon said, there are few options for making up the added expense. There isn’t much room to increase the average daily room rates (ADR), and there are limited options for cutting front desk or housekeeping shifts before guests notice a drop in customer service.
And when considering that lower-tier hotels carry an ADR of $67 to $75, and owners will eventually have to pay those employees $5 more than today’s minimum wage, Yoon believes some hotels just won’t make it.
“If a property already bleeds as it is with a $10 minimum wage, this increase definitely makes business unsustainable,” he said.
The Blackstone Hospitality Group employs 290 people, with housekeeping staff making minimum wage and desk staff perhaps making $1 more an hour. Yoon also sees the potential for staff morale to suffer, as there won’t be much discretion for offering pay raises based on merit.
The bottom line for Blackstone Hospitality Group is that it will have to explore leaving the hospitality business in California, Yoon said.
A $15 minimum wage just doesn’t work on paper, he added.
“Not without the owners picking up the front desk and my wife cleaning the rooms,” he said.
Fresno hotel prepares for transition
The longtime Holiday Inn Airport hotel across from Fresno Yosemite International Airport became a Ramada hotel in January with the purchase by a private equity group operating under the Wyndham Hotels & Resorts umbrella.
The Ramada name is temporary, as the hotel ownership is about to execute a $2.5 million makeover that will convert the facility to Fresno’s first Wyndham Garden Hotel on Sept. 1, said General Manager Adrian Valencia.
Valencia said the world of hospitality is ever shifting, and it’s necessary to update guest amenities to keep with the times. For instance, Millennials appreciate a cell phone charging station on a bedside table with easy access, as opposed to being on your hands and knees hunting for a power outlet on the wall.
“The industry is changing all the time,” Valencia said.
For the Ramada, change has already started, first with updates of all public spaces including the lobby, restaurant, lounge and terraces. A makeover of all 210 guest rooms is also planned, with fresh carpet, vinyl and drapes. About 65 people work at the hotel, and to show that guest service is a No. 1 priority for Wyndham, new positions — including chief engineering and food and beverage director — have been added.
Leslie Beninga, Ramada’s director of sales since 2014, said a renovation is overdue. The hotel was built in 1975, and aspects such as the carpets and countertops show their age. The Ramada’s unique features includes Fresno’s largest indoor pool area with a tiki bar that used to be a favorite local haunt in the ‘70s and ‘80s.
Valencia plans to bring back those days with public entertainment, including live music. They are looking to cater to the public as well as hospitality industry workers from nearby hotels. And the airport is just a stone’s throw away.
Beninga said the transition has led to some previous customers from as long as 15 years ago coming back to do business with the hotel. The last time the hotel was renovated was 1999, so at the same time, some longtime customers who may have tired of the old look are fired up about the change.
The hotel has traditionally attracted some high-profile travel groups, including opponents of the Fresno State Bulldogs football team and most recently, the Liga MX soccer club León, which played an exhibition game at Chukchansi Park.
The soon-to-be Wyndham Garden will also host the 2016 Pink Heals, Inc. tour April 21-26. The nonprofit travels the country with a fleet of pink fire trucks, raising awareness and money to help people battle cancer. The money raised by Pink Heals stays local.
Fresno County featured in tourism video hub
Visit California, a nonprofit also known as the California Travel & Tourism Commission, has launched an online video hub that features some Fresno County stories.
Dream365TV has three original series: California Dreamers, Always in Season and California Dream Eater.
Always in Season takes visitors on a journey through Fresno County’s ag treasures including Enzo’s Table, Wawona Frozen Foods and Local craft beer.
The California Dreamers series follows Lyn Forestiere Kosewski, co-owner of the Forestiere Underground Gardens, as she tells the story of her great-uncle Baldassare Forestiere, who created the underground network of rooms over a course of 40 years.
“This was an opportunity to showcase Fresno County as a premier destination to the world,” said Layla Forstedt, president and CEO of the Fresno/Clovis Convention & Visitors Bureau.w