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CHICAGO-A recently ratified labor pact with hotel workers gave employees hefty increases that union leaders were long overdue, bringing them closer to parity with counterparts in New York City. However, it is a “major issue” for the hotel market here, already reeling with a steep decline in occupancy, competitive rate slashing and expenses in other areas, such as property taxes, still on the rise.

The 7,000 members of Hotel Employers and Restaurant Employers International Union Locals 1 and 450 will receive increases of 54% in pay and benefits over the four-year term of a contract with 27 Chicago hotels.

The new pact will mean a 5% reduction in the gross operating profits of Downtown hotels in its first year, predicts Scott K. Steilen, principal and managing director of Warnick & Co. Meanwhile, laundry workers and engineers will soon be coming to the bargaining table, he adds, and most likely will be looking for similar increases.

“Across the board, the industry will have to react,” Steilen says.

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