More hotel unionization harmful to New Orleans

Great; just as New Orleans finally has struggled past its pre-Hurricane Katrina tourism benchmarks, it takes a step backwards with an unnecessary escalation in some lodging prices that will deter visitors.

That will happen as a result of unionization of its largest hotel, the Hilton New Orleans Riverside. UNITE HERE and management currently negotiate a contract for around 500 workers, although bringing them into the cartel’s fold increases union penetration into the city’s overall hospitality industry only to four percent.

Advocates of the development spent some effort blowing sunshine up people’s skirts. Leftist interest groups took note and booked more business at it. Workers obviously ignorant of how the world works crowed about how they could get a “fair share” Hilton’s profits. Even an academician, clearly not trained in economics, thought this could make more jobs into “middle class.”


Perhaps these jobs will see some salary increases – offset by the fact there will be fewer of them, at least at Hilton. The iron law of supply and demand simply reveals that if you increase the price of a good like a hotel stay because the price of an input like labor increases – not because of market pressure but through government-sanctioned monopoly behavior and rent-seeking – consumers purchase less of it. Fewer jobs follow.

Especially given the trials and tribulations the hotel industry faces. As technology makes travel less necessary, market information more available, and alternatives such as private accommodation aggregators – think of the regulations New Orleans recently began applying to short-term rental operators – the market flooded with supply, hoteliers have found their industry swiftly mutating and margins squeezed. More than ever, pricing has become sensitized to consumer demands and is more elastic than ever.

Keep in mind as well that New Orleans exists not by itself, but in a competitive landscape. It’s no accident that among the largest markets by air passenger travel, those that have greater unions presence in hotels as measured by membership in UNITE HERE have seen their traffic fall relative to those places with small union presence from 2000 to 2013, often hardly growing or declining in absolute terms as well, while the other places generally have seen more robust growth. That can happen to New Orleans as well, as the over the long run price-conscious corporate travel planners and individual tourists will abjure stays that will offset decisively any short-term politically-charged decisions to book.

Although the impending unionization is significant, it starts from such a low base in New Orleans that the city still is a way from having a trend like that begin to affect markedly negatively the tourism industry. If it continues, that’s another matter.

Only this year did New Orleans’ tourism industry, which has outsized importance economically compared to almost every large city in the country, finally begin to eclipse metrics previous to 2005. By creating arbitrarily higher prices for jobs beyond what their performance returns to society, which is what happens when wages become a matter of collective bargaining, that only dampens economic development. Stunting the city’s comeback this way isn’t what the doctor ordered.