As city officials try to keep Hilton Baltimore Inner Harbor afloat, they said they see a new labor contract as an investment in making the hotel more competitive, even though it will likely increase the struggling hotel’s labor costs. But some question whether the struggling city-owned hotel’s problems are too big to overcome.

The 757-room hotel overlooking Camden Yards opened in 2008 after the city borrowed about $300 million in bonds to fund the construction of the West Pratt Street building. Since then, the Hilton has struggled to become profitable. And the coronavirus pandemic, which dealt a major blow to the worldwide hospitality industry, triggered additional losses.

The city-owned hotel has slowly rebounded since the pandemic shut it down for nearly a year and led to the Hilton losing some $20.4 million in 2020. Since then, the Baltimore City Council has approved millions in grants to prop up the hotel, and Mayor Brandon Scott has floated the idea of selling it. And while the convention center hotel’s occupancy rates have also bounced back, they still had not met pre-2020 levels by the end of 2023, according to yearly financial reports.

Anirban Basu, an economist and CEO of Sage Policy Group, said officials should get the hotel off of the city’s books, but noted that the property may be a difficult sell due to its track record.

Though the Hilton, like most hotels across the country, was able to rebound to a stable occupancy level, it was not enough to get the struggling city property back on its feet and then sold, Basu said. He is skeptical that a new labor contract will make much of a difference.

Incomes for hotel staff in Baltimore “have fallen significantly behind” those of workers in neighboring cities, said Tracy Lingo, president of Unite Here Local 7, which represents over 300,000 hospitality workers, including those at the Hilton. The new contract’s provisions, which the union declined to disclose the specifics of, were focused on “narrowing that gap and getting a significant wage increase,” she said. The new contract also increases funding for their health care and pension plans.

Wages in Baltimore for the most common hotel occupations have lagged behind national increases over the past five years, according to Bureau of Labor Statistics data. While the average hourly wage for desk clerks has jumped by more than 25% since 2019 at the national level, pay grew by about 8% less in the Baltimore area during that time frame. Wages for housekeepers also grew slower in the Baltimore metro region, according to the data.

Record inflation that hit the world in the post-COVID era washed away most of the gains made by Baltimore hotel workers in their first contract in 2020, Lingo said.

“A lot of unions that negotiated in that time frame … sort of negotiated under the premise that inflation was going to continue around 2%,” said Jeremy Schwartz, an economics professor at Loyola University Maryland.

Inflation in the U.S. ended up surging, peaking at 9.1% in mid-2022. The labor union’s leadership and its members noted that their latest agreement followed years of employees struggling to make ends meet, relying on food stamps and visiting food banks.

Bargaining as inflation continues to cool, with a tightening labor market, likely gave the union better leverage, Schwartz said.

“It’s going to be an expense for the city, but the alternative may not have been too attractive either, going without a contract and risking a strike would have led to losses as well,” he said.

Hotel management may also “just be recognizing that they could not find the workers that they need at wages, that in real terms, were continuing to decline year after year,” he said.

The new agreement “puts our hospitality workers first and makes Baltimore City more competitive region-wide,” Mayor Brandon Scott said in a statement. He said the agreement reflects his administration’s promise “to work hand-in-hand with labor and business to ensure Baltimore — and especially our city-owned assets — continue to live up to that commitment and support all of Baltimore’s hard-working families.”

The contract came after negotiations between Unite Here Local 7, the union representing Hilton employees as well as other hotel workers in Baltimore, and Hilton management, which said in a statement that it believed the agreement will be “beneficial to our team members and to our hotel.”

A spokesperson for the Baltimore Development Corporation, the city’s economic development arm that oversees the corporation that owns the hotel, declined to comment directly on the negotiations, noting that BDC was not involved.

Unite Here is in the midst of negotiations with hotel chains across North America. Local 7, the union’s Baltimore-area affiliate, is also negotiating with management at the Hyatt Waterfront, and warned Monday that the “dispute could escalate without a settlement soon.”

That would make the Hilton look more attractive to prospective employees by comparison, at least in the short term, Schwartz said.

Basu, who was part of Renew Baltimore’s push for a ballot question that would have slashed the city’s property tax rate, noted that despite a new contract being “fantastic” from the perspective of Hilton workers, it will result in “even larger operating losses for the hotel” due to increased expenses, with everything else remaining equal.”

What could make the hotel more attractive to potential buyers, Basu said, would be a stronger focus on promoting tourism by improving what’s around it. A “meaningful investment” in the Baltimore Convention Center next door, alongside a sale, would be the “optimal outcome.”

That’s in the works. State officials are reviewing the costs of a face-lift of the aging convention center, which hasn’t been renovated and expanded since 1996.

“We can compete,” Basu said, and a major face-lift to the convention center would drive more business to the Hilton hotel, rendering it “much more valuable to prospective buyers.”

“That might give the city an out — a satisfying out,” Basu said, “as opposed to one driven by a subtle feeling of desperation.”

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