labor agreement. That contract ran three years from July 2000 to October 31, 2003.
The contract fell short in a number of areas, but it was far better than what KSL first proposed. Grand Wailea members decided to live with the second rate conditions of that first contract, but in future negotiations they fully intended to recover lost gains and bring Grand Wailea wages and benefits up to previous first-class levels.
When the negotiations for a second contract between the ILWU and KSL started in November 2003, it was clear that KSL was not interested in improving conditions for their employees. Instead, KSL wanted more cuts in wages and benefits—proposing to make employees pay for meals and pay more for their medical coverage.
To make matters worse, KSL is using attorney Greg Sato as their negotiator. Sato is from the “business-oriented” law firm of Torkildson, Katz, Fonseca, Jaffe, Moore & Herington. Sato is involved in other negotiations with the ILWU, where negotiations have dragged on for a long time at the expense of both management and workers. On the Big Island he is representing an employer who wants a 15% cut in wages. On Kauai, he is complicating negotiations for a small group of condominium owners by arguing for unusual union security language. With so many negotiations going on at the same time, Sato has caused scheduling problems and long delays for all groups.
Hotel for sale
In the middle of these negotiations, KSL announced that the hotel was being sold. Besides negotiating a new contract, the union also had to be concerned about protecting the job security of Grand Wailea members.
In mid-February, it appeared that real estate investment firm CNL Hospitality Properties would be the buyer. The deal was finalized on April 2, 2004, with CNL paying $2.2 billion for the Grand Wailea and five other KSL resort properties—Doral Resort & Spa in Miami, La Quinta Resort & Club in California, the Arizona Biltmore Resort & Spa in Phoenix; the Claremont Resort & Spa in Berkeley, Calif; and Lake Lanier r Islands Resort near Atlanta.
As part of the deal, KSL Recreation will continue to manage the hotel until the end of this year. At that time, KSL would have to compete with other companies such as Marriott to win a longerterm management contract. Both Marriott and KSL currently manage other properties owned by CNL.
Grand Wailea workers stand together for a fair contract.
CNL is the nation’s second largest hotel Real Estate Investment Trust (Host Marriott is the largest), with a portfolio of 136 hotels and resorts with total assets of more than $6 billion. A Real Estate Investment Trust (REIT) is organized to take advantage of a special tax break that allows a company to avoid paying any corporate income tax. Instead the company must pay out at least 90 percent of its taxable profit as dividends to its stockholders. In addition, while REIT’s are able to own and invest in real estate, they are prohibited from operating or managing their properties. This is why CNL must depend on companies like Marriott or KSL to manage their hotels.
Contract talks continue
With KSL still in charge of running the hotel, the ILWU has resumed contract talks with KSL management.
The union negotiating committee has been rallying Grand Wailea members for what will be a tough fight to get a fair contract. Over 500 members attended a series of informational meetings held on March 27 and 29. They made it clear they want KSL to respect and appreciate the work they do to make the hotel one of the world’s best. Members made it clear they want the union to make improvements in the contract and to oppose the cuts sought by KSL. ◆
A history of the Grand Wailea Rise and fall of fortunes
WAILEA, Maui—When the super luxury hotel opened in 1991 as the Grand Hyatt Resort & Spa, it set a record, which still stands, as the most expensive hotel every built in Hawaii with a construction cost of $600 million.
The hotel’s owner, Japanese developer Takeshi Sekiguchi, had dreams of making it the best resort in the world. The hotel set new industry standards for luxury, with 53 suites, a massive spa, elaborate water features and $30 million worth of art from such famed artists as Picasso, Warhol, Leger, Botero, and others. Room rates topped out at $7,000 a night in 1991, and today range from $465 to $10,800.
The hotel, but more importantly its workers, began earning the industry’s highest awards for excellence and outstanding service. The Grand Wailea Resort became known world-wide for the ultimate in service and luxury. Even though the hotel struggled financially, Grand Wailea workers were able to make steady gains, and by 1997 were earning the highest wages and benefits in the state, thanks to union contracts negotiated by the ILWU.
Shattered dreams
By 1992, recessions in the U.S. and Japan combined with George Bush’s (the father) first war against Iraq hit Hawaii’s tourism industry hard. Hawaii real estate values plummeted and many Japanese investors, who paid astronomical prices for U.S. and Hawaii properties, found themselves in deep financial trouble. Many of them, including Sekiguchi, had financed their purchases by borrowing most of the money from Japanese banks. In 1993 Sekiguchi broke with Hyatt and formed an independent management firm called the Grand Wailea Resort, Hotel & Spa to oversee the hotel. Sekiguchi had to buy out the remaining management contract from Hyatt Corporation at the contract’s full value, rumored to be $30 million. In 1995, Sekiguchi sued Hyatt for mismanagement.
Sekiguchi continued to run the Grand Wailea until 1998, when the banks finally foreclosed on his $357 million mortgage and took control of the property. International Hotel Acquisitions is said to have purchased the property from Credit Suisse First Boston for between $275 and $310 million and then sold it six months later in December 1998 to KSL Recreation for $373 million.
Under new management
KSL bought a different management style to the Grand Wailea and workers had to fight to keep their jobs and prevent even deeper cuts in wages and benefits. ILWU members at the hotel who are now involved in a contract struggle began to fall behind other ILWU hotels in wages and benefits.
In 2001 another recession and the 9/11 terrorists attacks caused a deep drop in Hawaii’s tourism industry. There was also another war against Iraq in 2003 by George Bush (the son). The similarities with events 10 years ago are eerie. But there is one big difference, KSL appears to have sold the Grand Wailea at a profit. ◆