Putting staff before customers is financial suicide

With all of Bermuda’s financial problems one would have thought that the last thing Bermudians want is a hotel dispute between the BIU and the Princess hotel which spills over to public transportation. But then, we live in extraordinary times.

 As I understand it, there are two issues.    

The first is that there is a consultative process between the owners and union which was either ignored or handled badly.   If there is an agreed process in place to deal with labour re-organization then it should be followed. If it was not, then the Princess management are at fault. Discussions should take place, and the problem resolved in a civilized manner.

Everyone sympathizes with people who lose their job through no fault of their own but in today’s fast moving economy, job losses are unavoidable as conditions change. 

The second, and more fundamental issue, is that management and owners, by necessity, should have the right to determine the most efficient way of running a hotel. In that critical function, management is accountable to, and has its hands firmly tied by, its paying customers who brook little opposition.   

Public opinion looks upon disputes between management and labour as if they were conflicts between wage earners and employers. It fails to understand that management is not wholly free to conduct its business in an independent way, but is subject to the orders issued by the hotel’s customers. Needless to say, customers have no interest in labour disputes. They want what they pay for, and if they are disappointed they take a hike.

Although management has most of the attributes of being the boss such as signing pay cheques, occupying big offices, wearing better suits than the help, and looking more important than a bartender, such matters are superficial. Wages and benefits are paid not by management, except in a clerical sense — they are paid by the customer.  No customer, no wage. The big boss is the customer who can be as fickle, obstinate and unreasonable as he wishes, but management has to obey his every whim — or else.

By virtue of the profit and loss system that governs every business enterprise, management of the Princess is compelled to supply its customers with those commodities and services in the best and cheapest way possible. If hotel management by mistake pays labour more than customers are prepared to pay, or it hires more labour than customers are prepared to pay for via their nightly charge, there will be an adverse reaction.

Failure to comply with the wishes of its customers means that they will go somewhere else. Even if hotel guests are wrong, they are right. If management does not follow the dictates of the customer, but prefers to be compliant with union demands, the guest disappears. 

Myth of union’s role in wages 

It is a myth that the relatively high wages in the hotel industry arise because of the beneficial interference by the BIU. High wages are dependent on high profits and high staff productivity. A major way to enhance productivity is to eliminate non-essential jobs which is what the Princess hotel is seeking to do.  But profits for many years in the hotel industry have been either minimal or non-existent, which is the main reason for the disappearance of many hotel jobs and the disparity between wage rates in international business and the hotel industry.    

The BIU is powerless to change this state of affairs, but its existence is dependent on fooling its members that it can maintain a high level of wages and preserve unnecessary jobs. What it achieves is unemployment.

The market economy is a democracy in which every dollar spent by customers gives them the right to vote. If they fail to spend by voting with their feet, business fails.  The Bermuda tourist industry, including the BIU, must surely understand this fundamental fact of finance. Over the past 30 or 40 years we have not given tourists the product they want at the price they are prepared to pay. The result has been that many major hotels have shut up shop because they have insufficient customers (they have voted with their feet) to make a profit. 

The lack of profitability is why no major hotel has been built in Bermuda since the early 1970s.  Tucker’s Point (formerly Castle Harbour) and Newstead are much smaller versions of their original structures but, tellingly, both are in financial administration — the precursor to bankruptcy. They cannot make a profit, and they must therefore ultimately go out of business. 

Many hotels of the past have simply vanished from the scene.   Think of the Bermudiana, Club Med, Sonesta Beach, St George’s Hotel, and the tourist ghost towns of Coral Beach and Pink Beach. Dozens of small properties have simply vanished. All for the same reason — the boss, the customer, was not provided with a product at a price for which he was prepared to pay. Hotel management failed in its vital task of paying attention to what the customer wants. It preferred to play footsy under the table with the BIU in an attempt to win industrial peace. In Biblical terms, we have eaten our seed corn.

The present actions of the BIU are effectively telling management that it must ignore the wishes of customers — that is, provide a product and service at a price customers are prepared to pay — and operate in a manner which is neither efficient nor economic.   Management is told that it must operate the hotel for the benefit of the employees, not for the benefit of the paying guest. This is financial suicide.  

But then the BIU is simply complying with the ancient Greek aphorism that those whom the Gods will destroy, they first make mad.