Hyatt’s Boston-area firing of nearly a hundred housekeeping employees has demonstrated how a management decision, perhaps thought to be a merely local action, can reverberate around the world and threaten the foundations of an otherwise respected brand.
The Boston Globe broke the story in its September 17 edition and the very next day, at 6:24 pm September 18, an unidentified individual registered the Web URL www.hyattboycott.com, which is now pumping out support for the terminated employees and spitting venom at the hotel chain.
Hyatt Hotel, Boston; Photo RM Miles
“Unfortunately the decision for Hyatt was to cut from [the] bottom [and] has resulted in a viral campaign,” commented a manager at a far-away major hotel brand in Beijing, China.
“Hyatt should take a page out of [the] guide on how to avoid social media destruction, as they are not managing the response in the online world, currently powered by readers that have been reading negative after negative news. They should have managed discussions like these, comments in [the] media, Twitter, Facebook, etc., instead of just issuing press statement,” the China hotel manager added
Back at home, the City of Boston naturally enough joined “the battle against Hyatt,” according to The Boston Globe. The city council issued a resolution condemning Hyatt’s “poor treatment of its employees.”
“This is not something that should be happening in our city,” said council president Michael Ross. “And if it is happening in our city. We have an obligation and a duty to speak out loudly against it.”
Boston Mayor Thomas Menino said the Hyatt Hotels’ job cuts “fly in the face of what Boston is all about,” reported travel industry Web site UpTake.
At the state level, Massachusetts Gov. Deval Patrick threatened to have state employees boycott the hotel chain and wrote Hyatt Hotels Corp. CEO Mark Hoplamazian stating:
“Surely there is some way to retain the jobs for your housekeeping staffs, as other hotels have done… rather than tossing them out unceremoniously to fend for themselves while the people they trained take their jobs at barely livable wages,” according to a report in Chicago Real Estate Daily. Chicago is the headquarters city for the Pritzker family’s Hyatt chain.
Showing a further lack of insight and sensitivity to community and other stakeholder interests Hyatt Regency Boston president Phil Stamm fired back at the governor stating:
“We are very disappointed by the governor’s decision to threaten a boycott of our hotels since it directly threatens the 600 associates who work in Hyatt properties and who live and work in Massachusetts,” reported Reuters.
When the Hyatt firings hit the US west coast, the social activist organization Change.org joined the fray and made “Join the Hyatt Boycott” its lead .
And even if potential guests want to ignore the call to action, many of Boston’s cab drivers — themselves on a similar economic footing as the fired housekeepers — might not let them.
Local ABC affiliate, WCVB-TV reported that “a union representing about 1,700 Boston cab drivers said it will boycott Hyatt hotels in the city unless the company rehires nearly 100 fired housekeepers.” And one of the station’s news broadcasts about the situation has gone global on YouTube.
The international travel authority Fodor’s has an active series of blog commentaries on the Hyatt debacle with one reader echoing the sentiments of several others:
“This morning on NPR, there was a piece about Hyatt Boston firing all their housekeepers and hiring temps, so as to save on healthcare and benefits. There was a woman who had worked housekeeping for Hyatt for 19 years who had a 13 year-old son with asthma. Where was she going to get another job or healthcare benefits? Did the CEO of Hyatt get laid off and a temp CEO hired? No. Hyatt has gone severely downhill in my opinion and I will NEVER stay at another Hyatt again.”
Highly respected institutions and Websites ranging from AOL Travel’s gadling.com (“Hyatt’s problems increase as chain is boycotted“) to the Economist.com (“Hyatt vs Massachusetts”) to the Harvard Business Review (“Lessons From Hyatt: Simple Ways to Damage Your Brand”) have chosen to prominently cover the story and, in doing so, denigrate Hyatt’s management decisions.
HBR calls the Hyatt actions a “sure-fire way” to “damage your brand.”
This is all concurrent with Hyatt’s filing of a plan with SEC to take the company public, an IPO, with an estimated valuation of $1.15 billion. Not exactly a moment when management and potential investors should be distracted by bad publicity.
And if the Boston-gone-global fiasco weren’t enough to damage the IPO, on the left coast PublishersWeekly.com reports:
“A $125,000 donation in support of an anti-gay marriage initiative by a [Hyatt] San Diego hotelier [Doug Manchester] has drawn the ire of gay and lesbian activists and local labor unions who are now calling for a boycott,” according to the publication’s Web site.
The Captain in Cool Hand Luke, after having struck Paul Newman over the head, famously said, “What we have here… is a failure to communicate. Some men you just can’t reach.” That’s sort of Hyatt’s problem, but you can substitute any number of terms for the word “communicate;” so, pick one, or two, or….
This is going to be one to watch. It's ugly and the fur is flying, all over the Internet/world/press. This gets down to who is in control in the wonderful world of branding. The business model for hotel chains is really franchising, and thus you have your classic problem with how to manage decisions at the local and corporate levels. Since we are in a period of precipitous economic deline, this is a good example of how the locals really might have thought through the potential noise that such actions might cause. Boston is a bad place to do this sort of thing on any given day, much less now and in a media environment that will, and has, created a flash-bang for the Hyatt brand. As for "Papa" Doug Manchester in San Diego, I can't comment about his contributions to anti-gay causes, but should there be some truth to this it is yet another example of how the local franchisees can go silly-buggers. I suppose if you have enough money to invest, you don't have to go to branding school.
[...] This post was mentioned on Twitter by Dan Hutson and Alison Burke. Alison Burke said: RT @dhutson Hyatt PR Gaffe Goes Viral, Global http://bit.ly/nVxag [...]
From and academic branding perspective, that the Hyatt chain is a private corporation and, thus, the bottom line is that the Pritzker family can pretty well squander their brand equity and hard capital any way they want, or allow others to throw it away for them. That, of course, does not mean that condoning, or even benignly allowing, such behavior is good business practice.
To the degree that the Pritzker family holdings are supported by additional private investors, then the picture begins to change because the family’s fiduciary responsibilities expand in proportion to their accountability to those outside of the clan.
The real irony comes in that the corporation, thus the family, wants to take the Hyatt public, and has filed with the SEC to do so; however, they are moving toward that new environment where public shareholder accountability is a real responsibility while continuing to behave without regard to that new aspired-to and more accountable status. They seem to have missed the notion that in the public equity world a multitude of stakeholders exist, have influence, and really matter. [This is not to say that stakeholders don’t matter among private entities; they do. However, the burden on a public company is much heavier.]
In the end, unfortunately, it might be that the family and any large-scale private investors believe that this little event in Boston is a mere annoyance, nothing more than a gnat on an elephant’s rear; that it will go away, and they can move forward with having hardly missed a beat. Well, maybe; maybe not. We’ll see.