1,802 hotel employees affected, $1.7M hike in wage costs seen

Hotels may be forced to lay off employees, cut benefits, or reduce work hours as a result of the additional 50-cent increase in minimum wage scheduled in May, and which will cost the industry almost $1.7 million in added payroll costs annually.

Some 68 percent or 1,802 of the total 2,636 employees of hotels that are members of the Hotel Association of the Northern Mariana Islands will be affected by the minimum wage hike.

This means seven of every 10 employees in the hotel industry will get an increase in their hourly wages, forcing hotels to find ways to cushion the impact at a time when the CNMI economy is at its worst with the collapse of the garment industry and low tourist arrivals, coupled with uncertainties brought by federalization and the global economic crunch.

From the current $4.05 an hour, the CNMI’s minimum wage will increase to $4.55 an hour in May.

Public Law 110-28 requires the yearly increase in the minimum wage in the CNMI until it reaches the federal minimum wage level of $7.25 an hour.

“Any severe change like a minimum wage increase will hurt our business but we have to keep the doors open,” said Pete Igitol, director of Hafa Ada Beach Hotel in Garapan.

To cope with the additional salary expense, the management will have to decide whether to reduce work hours or lay off employees.

“I’m sure hotel principals would rather see reduced work hours than lay off people,” Igitol told Saipan Tribune.

Hiroki Sugie, general manager of Aqua Resort Club, yesterday said they will be increasing the salaries of hotel employees as required by law, but to cushion the impact of the additional cost, they may also reduce work hours.

Hafa Adai Beach Hotel and Aqua Resort Club are among the 14 HANMI members that reported a total of 1,802 hotel employees that will be affected by the minimum wage increase in May. The hotel industry employs a total of 2,636 individuals.

Each hotel reported 11 to 398 employees whose wages will be adjusted in just a few weeks to meet the federal wage law.

Lynn Knight, chairperson of HANMI, said while 68 percent of the employees might be glad to have an increase in their salaries which is understandable given the rising costs of living, this will be a huge burden to pay for all at one time and will put hotel businesses in jeopardy unless they find other ways to save money.

To reduce expenses in other areas, hotels are now looking at laying off employees, reducing work hours from 36 to 32 hours per week, reducing employee benefits, or charging employees for benefits, including meals, housing and insurance.

Others look to energy saving measures, increasing prices to customers, reducing pay to exempt staff by 10 percent, freeze hiring, and putting on hold capital improvements.

“Clearly, we are not taking in more profits this year as the rate of occupancy is just not at an average profitable level yet. Increases in business revenue are not available to the hotels without more air service and we’re not seeing that. In fact, the opposite is true with the reduction in some schedules from Japan and additional losses of business we expect with federalization and the loss of Russian and Chinese tourist markets,” said Knight.