A Report Prepared by Harvard’s Student Labor Action Movement
HEI Hotels & Resorts, Company Profile
HEI Hotels & Resorts LLC is a privately held owner/operator of more than 30 full-service hotels across the US. Most of HEI’s properties are operated under Hilton-, Starwood-, and Marriott- owned brands. Harvard University owns at least 10% of two HEI funds—HEI Hospitality Fund I and HEI Hospitality Fund II—as indicated by the SEC Form D for each fund. The total value of these two funds is $699 million.
HEI buys hotels in order to turn them around and sell again at a profit. The company describes itself as a “long-term” investor, with an 8-12 year investment horizon.
While it owns a hotel, HEI employs a range of techniques to bring costs down. Employee experiences include:
- Cutting back on staffing levels—HEI reduces the hours of some workers, lays off others, and even eliminates entire job functions.
- Shortages in the basic materials workers need to do their jobs—employees report struggling to find enough towels and linens, and workers have encountered shortages of basic cleaning supplies like sponges and vacuum cleaners.
- HEI’s practices can take a physical toll when they make already-heavy workloads even harder, particularly in housekeeping.
HEI’s University Endowment Funds:
Since 2004, HEI’s acquisitions have been funded by investments from university endowments through private equity funds the company has launched itself. In 2004, HEI raised $274 million
through its HEI Hospitality Fund LP (“Fund I”). With the addition of about $525 million in debt, this real estate fund acquired 12 properties. Fund I’s biggest investors include the Harvard University endowment, the Yale University endowment, and Gary Mendell himself (each of whom contributed more than 10% of total equity).
HEI launched its next fund (“Fund II”) in 2006, raising $425 million in capital. Including debt, the fund was anticipated to acquire approximately $1.5 billion in assets over 36 months. Yale, Harvard, and Princeton each own more than 10% of Fund II.
Between Funds I and II, HEI raised investments from a total of twelve university endowments, with Harvard, Yale, and Princeton contributing the largest amounts.
HEI raised $500 million in early 2008 for its third fund (“Fund III”). This money came from sixteen university endowments. Eighty percent of Fund III’s capital came from previously-invested endowments.
In total, 22 university endowments are invested in HEI’s three funds. Yale, Harvard, Princeton, and the University of Chicago are among the company’s biggest investors, each holding a greater-than-10% stake in one or more of those funds. Other investors include Brown University and the University of Pennsylvania.
However, Brown University declared this winter that it will make no new investments in HEI. Brown’s Advisory Committee on Corporate Responsibility in Investment Policies declared that the university will not invest “until the Corporation is confident that HEI adheres to our high standards regarding respectful and humane treatment of workers, and that workers at HEI-operated hotels are able to seek union representation without fear of intimidation.”
Harvard’s Investment in HEI
The SEC Form Ds for the HEI Hospitality Funds show that Harvard University’s endowment has invested in the first two of the three HEI’s funds. These public documents do not specify the exact amount Harvard has invested, but do indicate that Harvard has invested at least 10% in these funds. As the total of the first two funds is $699 million, Harvard has at least $69.9 million invested in HEI Hotels and Resorts.
Injury, Intimidation, and Wage disparities at HEI Hotels
California Wage and Hour Laws
In August 2010 workers at the HEI managed Embassy Suites in Irvine, California filed suit for $120,000 worth of back pay they say they are owed as a result of years worth of missed breaks. In October 2010 workers at the HEI owned Hilton Long Beach who also filed suit saying that they were routinely denied the 10 minute breaks mandated by California law. Both cases are currently being investigated by the California Department of Industrial Relations. It is expected that the Irvine Embassy Suites case will make its way to court by March of 2011.
Currently, HEI is facing charges in front of the National Labor Relations Board on behalf of the workers at HEI’s Embassy Suites Irvine. These charges include:
● reductions in workers’ schedules
● interrogation and unlawful surveillance of workers
● prohibiting workers from posting pro-union materials and leafleting at the hotel’s property
● telling workers not to communicate with the public about working conditions, and
● suspending a worker for pro-union activity.
In 2008 and 2009, HEI spent almost $170,000 on an anti-union consultant called “Persuasive Communications” with the purpose of “helping employers express their position on unions and union representation persuasively and openly.”
HEI has also settled charges with the National Labor Relations Board’s General Counsel over charges of intimidation, coercive statements and threats, and creating the impression of surveillance. Settlements include:
● A 2009 settlement of charges involving HEI’s Le Meridien in San Francisco over alleged illegal intimidation and surveillance.
● A 2010 settlement of charges involving the Sheraton Crystal City that led to the reinstatement of union leader Ferdi Lazo.
Wages and Benefits at HEI Hotels
The average hourly wage for a housekeeper is $9.74 per hour at the Embassy Suites Irvine, and $9.75 at the Hilton Long Beach. Housekeepers at the Sheraton Crystal City earn as little as $10.24 an hour. This is well below the US 2010 federal poverty line for a family of four. Yet managers are paid handsomely. Documents filed in an age discrimination lawsuit filed against HEI revealed that the general manager of Le Meridien San Francisco was promised $235,000 per year beginning in November 2008, and was eligible for a bonus incentive with a target of 25% of his salary. When HEI’s Brian Mayer was offered a position as Senior Vice President in 2008, his offered base salary was $280,000 per year, with a target bonus of 30% of his salary (up to 50%) and ability to invest in HEI funds.
Of the 38 full-service hotels in San Francisco, only seven are not unionized, including HEI’s Le Meridien San Francisco. Although Le Meridien is very similar to the Omni San Francisco a few blocks away, employees face very different working standards. At the Le Meridien, approximately 180 employees currently staff a 360 room hotel, a significant decrease from the 225 workers employed when HEI first purchased the hotel in 2006. In contrast, the Omni employs 326 workers for a 362 room hotel.
Increased workloads can take a physical toll when they make already-heavy workloads even harder, particularly in housekeeping.
Hotel housekeeping is physically strenuous work: Workers in hotels across the country report work-related injuries and pain—from pulled tendons and pinched nerves, to carpal tunnel and back pain. According to a study of company records covering thousands of employee injuries, hotel housekeepers face an injury rate of 10.4%, almost double the injury rate for non-housekeepers (5.6%).
In a survey of more than 600 hotel housekeepers in the U.S. and Canada, 91% said that they have suffered work-related pain. 77% said their workplace pain interfered with routine activities.
Rushing to finish cleaning rooms per day leaves housekeepers even more vulnerable to injury, and often leaves workers without time to take breaks or eat lunch.
While working jobs that put them at risk for injury, many workers struggle to meet the increasing monthly premiums required to participate in HEI’s health care plans. Some forgo health insurance altogether—doing without for themselves and relying on government assistance for their children.
In San Francisco, where most of HEI’s competitor hotels are union, housekeepers clean 13 rooms per day. In Arlington, Virginia, where fewer competitors are union, housekeepers have been required to clean as many as 32 rooms per day.
Our Request to the Harvard Management Corporation:
We call on Harvard to:
1) Refuse future funding of HEI Hotels & Resorts and any of its hotel funds until:
a) HEI complies with all applicable federal, state, and local labor laws;
b) HEI maintains strict neutrality regarding workers’ right to freedom of association, and HEI hotels maintain an environment free of intimidation for workers exercising their legal right to organize; and
c) No employees of HEI hotels are on strike or have publicly called for boycotts of their hotels at the time of proposed re-investment.
2) Make a public statement calling upon HEI to respect workers’ rights and abide by the 3 conditions outlined above.
3) Speak with leaders of other universities and encourage them to do the same.