Anyone who has picked up a newspaper or glanced at the evening news is aware that there has been a great deal of passionate debate in recent months about the relative merits and possible adverse effects of the recent healthcare reform bill. With passage of this legislation now a reality, it’s critically important the debate begin to shift away from theoretical notions and focus instead on practical real-world considerations and specifics. The social and economic costs of this legislation, however well-intended, will be significant, and determining who will bear the brunt of those costs should be a priority for anyone interested in engaging in an even-handed analysis of these sweeping new mandates and regulations.

Perhaps no one has been watching the evolution of the healthcare debate and the recent passage of the healthcare legislation as closely as hotel owners. The travel, tourism and hospitality industry is particularly vulnerable to the potentially significant changes brought about by the healthcare reform legislation, and industry leaders understand all too well that the structural realities of the industry are such that a change of this magnitude is certain to have an unavoidably powerful impact on hoteliers everywhere. Perhaps most importantly, recent evidence suggests a pattern of legislative behavior that may be of great concern to the hospitality industry.

The travel and hospitality industry is central to our nation’s economic well-being. According to the Travel Industry Association, travel places travel fifth among 20 major private industry sectors. Only retail, manufacturing, administrative and (ironically) health are larger. Collectively, travel and tourism is a $740-billion industry in the U.S., with more than 7.5 million people employed in travel or travel-related professions. The most recent survey published by the American Hotel and Lodging Association estimates that in 2008 hotels alone generated approximately $140 billion in sales, and today the lodging industry employs in excess of 4.4 million people—with two million people directly employed in hotel jobs.

The key to understanding how healthcare reform will impact the hospitality industry is engaging in a clear-eyed analysis of the legislative details; to begin to close the gap between political goals and real-world ramifications. The first step toward closing that gap is to look at the bottom line. The short- and long-term costs to the industry as a result of this legislation are a real concern for many who have looked closely at the reform bill’s language.

The AH&LA is dedicated to serving the interests of hoteliers and has expressed opposition to the recent bill and voiced particular concern regarding the potential economic impact on the industry. While the AH&LA has yet to release a formal economic costs forecast, industry leaders have privately estimated that the bill could cost AH&LA members alone in excess of $50 million in increased healthcare costs.  

Industry observers have pointed to two elements of the legislation that are of particular cause for concern. The first regards new mandates for employers to provide health insurance or face punishing fines or penalties; specifically, a $2,000 penalty per employee if hotel ownership doesn’t provide coverage for every employee. Additionally, companies with more than 200 employees are required to automatically enroll new full-time employees. In addition to the economic burden this will impose, there is worry about imprecise wording and inexact language in the bill that fails to delineate how the mandate will apply to seasonal and part-time employees.

The unique and diverse demographic profile of the hospitality industry workforce includes a large percentage of first-generation Americans and individuals who enter the industry on the lower end of the socioeconomic spectrum, resulting in an industry that is extremely vulnerable to the kind of wholesale changes outlined in the healthcare reform bill. In fact, many hoteliers who already offer health insurance benefits don’t currently see a high level of employee participation in those plans—25 percent or lower in many cases—and have natural concerns about how fines will be enforced.

Secondly, industry analysts are worried about the potentially significant repercussions from a higher tax burden. Because much of the funding for this legislation is slated to come from higher taxes on wealthier individuals and successful businesses, there is the potential to dampen growth and discourage risk-taking and innovation. Most hotels in the nation are owned by entrepreneurial individuals and limited liability companies, and in a risky industry that is already extremely sensitive to the national social and economic climate, there is little margin for error. Many believe reducing that margin even further could be a mistake. In addition, a potentially costly and inefficient new layer of bureaucracy imposed by the legislation—including new paperwork obligations and inflexible regulatory requirements—will serve only to further diminish the industry’s financial vitality.

While there have been some positive signs from Congress and the current administration—notably the Travel Promotion Act passed in February and the prospect of comprehensive immigration reform in the months and years ahead—industry concern is not exclusively limited to the healthcare reform legislation. Multiple recent recess appointments to the National Labor Relations Board, including a former union lawyer who advocates what some have characterized as strong anti-business sentiments, are worrying signs that appointments to labor regulatory and oversight panels may be part of a backdoor strategy to gain traction on controversial measures such as the proposed Employee Free Choice Act. Regardless of intent, it appears that at the very least employers and small and mid-sized business owners can expect to see an increased level of scrutiny in the next few years.

Ultimately, the economic health and well-being of a vibrant hospitality industry is an issue that transcends party politics. At this fragile moment in our national economic recovery, imposing new stresses from healthcare mandates and penalties, one-sided labor advocacy and a progressive tax policy that stifles growth seems like a dubious strategy. Leaders within the industry have a responsibility to remain active and become even more involved in educating legislators and the public about the impact of legislation that has the potential to dramatically reshape the industry. All of us must carefully consider the degree to which these new policies may have a lasting social and economic impact on the welfare of not only the hospitality industry but also the entire nation.

Robert Habeeb is president and COO of Rosemont, Ill.-based First Hospitality Group. He can be reached at rhabeeb@fhginc.com or 847.299.9040.