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MGM, Wynn layoffs indicative of larger problem in US hotel industry

Updated September 1, 2020 - 1:58 pm

Labor Day weekend is usually a farewell to summer.

At some hotels and resorts nationwide this year, it’s a farewell to fellow laborers.

MGM Resorts International on Monday confirmed that 1,100 workers at MGM Detroit are facing layoffs, while Wynn Resorts Ltd. said 385 of its 1,300 already-furloughed employees would be let go at Encore Boston Harbor on Tuesday.

The layoffs are indicative of a broader problem identified in an analysis issued Monday by the American Hotel & Lodging Association that shows the U.S. hotel industry may be on the brink of financial collapse.

The MGM layoffs in Detroit were expected as part of the company’s announcement last week that 18,000 furloughed MGM employees — about a quarter of the company’s pre-pandemic workforce — would be laid off Monday. MGM wouldn’t say how many of those workers are in Nevada, nor would it offer a state-by-state breakdown of layoffs.

The story is similar at Encore Boston Harbor in Everett, Massachusetts.

“With continued efforts from the state to minimize the spread of COVID-19, Encore Boston Harbor continues to operate with a significantly reduced capacity in all parts of our resort,” an emailed statement from Wynn spokesman Michael Weaver said.

“As we take a look at our business during these extraordinary conditions, we do not believe that all Encore Boston Harbor jobs will return in 2020,” he said. “As a result, we are making the difficult decision to move forward with transitioning some positions currently on furlough to lay-off status, effective Sept. 1.”

The American Hotel & Lodging Association indicated the layoffs in Detroit and Boston aren’t surprising considering the organization reported that 4 out of 10 hotel employees laid off since February are not working.

In its report “State of the Hotel Industry Analysis: COVID-19 Six Months Later,” the association also said:

— Almost two-thirds of hotels remain at or below 50 percent occupancy, the level at which most hotels can break even and begin paying off debt. Thousands of hotels are at risk of closure or are unable to hire back staff due to continuing, drastically low hotel occupancy rates, the report says.

— Consumer travel remains at an all-time low. Only 33 percent of Americans say they have traveled overnight for leisure or vacation since March, and only 38 percent say they are likely to do so by the end of the year. A survey conducted by Morning Consult on behalf of AHLA indicated only 16 percent of Americans would be traveling over the Labor Day weekend and the Amadeus reservation system indicated hotel occupancy at about 14 percent two weeks before the holiday.

— The industry’s leading employers — urban hotels — face collapse with cripplingly low occupancies. Jobs at urban hotels are unlikely to return without either a dramatic increase in occupancy — which is unlikely — or additional congressional action, the organization said.

— COVID-19’s impact has left hotels in major cities across the country struggling to stay in business, resulting in massive job loss and dramatically reducing state and local tax revenue for 2020 and beyond. Las Vegas was neither in the top 10 nor bottom 10 among U.S. markets affected by the pandemic Aug. 9-15. Las Vegas resorts indicated 54.4 percent occupancy on weekends in July, but 36.9 percent at midweek, according to the Las Vegas Convention and Visitors Authority.

When the MGM layoffs were confirmed last week, several analysts indicated it was understandable why companies could not bring back every employee, increasing labor costs at a time when health and safety restrictions during the pandemic would not allow properties to make every amenity available to guests.

Bars, spas, nightclubs and other entertainment affiliated with resorts, as well as convention facilities, have been shuttered for all or part of the current shutdown.

“You can’t have everyone working when you don’t have the (business) volume to support it,” said Greg Chase, founder and CEO of Las Vegas-based Experience Strategy Associates.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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