AAA Memorandum -- October 19

October 19, 2004 MEMORANDUM To: 2004 Annual Meeting Registrants From: Liz Brumfiel, President Bill Davis, Executive Director Subject: San Francisco Hilton Hotel Labor Dispute This is to make you aware of a labor dispute involving the San Francisco Hilton Hotel and its organized employees, and to seek your advice on behalf of the AAA Executive Board relative to our scheduled 2004 Annual Meeting. The AAA Executive Board is conducting an on-line survey to obtain your opinion relative to the decision before it. To participate, please read the following memo carefully prior to completing the survey. Because of the urgency of the issue, please send your reply by Thursday, October 21, 2004 at 8:00 am Eastern Daylight Time. We recognize this is an extremely complex issue, and appreciate your reading the memo carefully prior to replying. SF Hilton Hotel Labor Dispute The San Francisco Hilton Hotel and thirteen other hotels in San Francisco are currently in a labor contract standoff with Local 2 of UNITE/HERE, the union representing cooks, dishwashers, bellmen, servers, room cleaners and switchboard operators. Union members struck the hotels several weeks ago and subsequently have been locked out. There are currently picket lines at the entrances to the Hilton, and there is every likelihood that contract negotiations between the union and the multi-employer group representing the 14 hotels will not be settled by the time of AAA's Annual Meeting. Understanding the discomfort that many members may have crossing picket lines, AAA's Officers and staff have been working steadily over the past two weeks to determine what possibilities might exist to move the meeting out of the Hilton, and the likely consequences of doing so. On Monday, October 18, AAA's Executive Board held a teleconference meeting, during which Board members decided to solicit the views of potential meeting attendees concerning our options. AAA Contract with SF Hilton Hotel The SF Hilton is the only hotel property in San Francisco able to accommodate under a single roof, our meeting both in sleeping rooms and in function space. AAA has had a signed a contract for the 2004 Annual Meeting with the San Francisco Hilton since October 29, 1996. The contract provides that, absent a failure on the part of Hilton to provide the services specified, AAA does not have the right to cancel its meeting in the Hilton without facing exposure to potential damages in excess of $1.2 million plus legal fees. Our contract with the SF Hilton provides that, to the extent that the hotel is unable to operate, meet its obligations and perform the services it is contracted to perform, we have cause to sever our contract without suffering a financial penalty. The hotel's management indicates that they have brought employees in from other properties and the hotel is operating as normal. Union representatives say that the hotel is not. Since the job action began, conferences and events have continued to be held in the Hilton. To determine the situation, we contacted representatives of other organizations that have conducted meetings in the Hilton since the beginning of the labor dispute to get their assessment of the Hilton's performance. Based on their reports, it appears that the Hilton has provided adequate services to those organizations. Thus, AAA cannot cancel its meeting in the Hilton without facing potential damages in excess of $1.2 million plus legal fees. Alternative Locations for the 2004 Annual Meeting Despite these contract provisions, we have been exploring other potential options for relocating the 2004 Annual Meeting to another property (outside San Francisco) or rescheduling it to another time period. Unfortunately, the requirements for AAA's Annual Meeting (sleeping rooms, meeting rooms, exhibit, job placement and registration service space, general session space) make it an unusually difficult meeting to site. In order to secure adequate space sufficient to accommodate our meeting, we schedule and contract for that space between 5 and 8 years in advance of the meeting. With only a month before the meeting is scheduled to begin, finding any optional space to move the meeting has been even more difficult. Several potential alternatives have been explored. These included moving our function space from the Hilton to other locations in San Francisco. Unfortunately, the Moscone Convention Center is tied up with an auto show and can't accommodate us. No other hotel property can be found which would accommodate all our meeting room needs. We explored other city venues for the 2004 Annual Meeting, including Orlando, Atlanta, Chicago, Oakland, Philadelphia and San Jose. While we felt we should consider all possibilities, moving the Annual Meeting to another city or to totally different dates appears to be a completely impractical alternative at this late date because many meeting registrants have already bought airline tickets, would incur a financial loss in rebooking their tickets and likely would nota be able to change their schedule of obligations on such short notice. The only possible alternative location within driving distance of the San Francisco airport for the meeting is San Jose, CA. For those of you who don't know the geography, San Jose is about 45 miles south of the San Francisco airport. A combination of eight hotels within 3 miles of the San Jose Convention Center could accommodate as many as 1,770 sleeping rooms each night of our meeting. (We currently have a hold on 1,850 hotel rooms in San Francisco.) A combination of the San Jose Convention Center, Civic Auditorium and Parkside Hall (both adjacent to the Convention Center) and all available meeting rooms at the Hilton Hotel and Crown Plaza hotel (a block from the Convention Center) could probably accommodate our need for function space for the scholarly program, general sessions, exhibit space, placement service and business meetings. However, renting this space would cost AAA approximately $100,000. A final option would be to cancel the 2004 Annual Meeting completely. Major Considerations: If picket lines are still up at the San Francisco Hilton during our meeting, there are really no good options for AAA. It appears likely that we will have reduced attendance whether we conduct it in the SF Hilton or move it to San Jose. If we have it at the Hilton, and there are picket lines around the hotel, some potential attendees (numbers uncertain) may cancel their attendance. If we move the meeting to San Jose at this late date, others may cancel. At least five major considerations are likely to be involved in an Executive Board decision on whether to hold the meeting at the Hilton as scheduled, cancel the meeting or attempt to change its location to San Jose. 1. Logistical Considerations After a year of planning, changing our meeting location with only four weeks before the meeting starts will be a mammoth logistical undertaking. There will be 450 sessions, 250 special events plus the exhibits program and placement service to relocate, and once relocated, they will end up in at least 5 different locations. Sleeping rooms for over 4,500 people will have to be secured, and it is likely that they would be in a minimum of 8 different hotels in San Jose. Since two of those hotels are three miles from the San Jose Convention Center, shuttle bus transportation would have to be secured. Since the meeting program is already at the printer, an addendum with newly assigned rooms will have to be prepared. It is likely that every registered attendee (4,579 people have registered thus far) will have to be contacted directly and walked through the process of alternative arrangements. On site in San Jose, it is likely there will be glitches and lots of confusion; attendees will undoubtedly find it difficult to navigate the meeting; some events will probably not occur; some individuals will not be able to get to sessions they expected to attend; and things will certainly not go as smoothly as attendees have come to expect from AAA. 2. Financial Risk Another major consideration in moving our 2004 Annual Meeting is of course the financial cost to AAA. According to a report from ConferenceDirect, the firm that AAA contracts with to advise on site location and hotel contract negotiation, the San Francisco Hilton will claim damages of $1,125,975 if we cancel the contract with them. While that amount may be mitigated by certain terms of the contract and Hilton's ability to resell some of its rooms, the potential damages owed to Hilton would be very substantial. Breaking other contracts with overflow hotels in San Francisco, according to ConferenceDirect's calculations is likely to cost AAA an additional $66,379. Renting function room space in San Jose is estimated at $100,000. Assuming the cost of Shuttle Bus service in San Jose will be borne by the San Jose hotels and Convention and Visitors Bureau, and that our costs can be held at about current budget levels, the potential financial loss to AAA as a consequence of a move to San Jose is calculated by ConferenceDirect is approximately $1.3 million not including legal fees. 3. Ethical and Economic Implications Were we to move the meeting out of a hotel that is being struck by its employees, many of our members would consider AAA to be on the right side of an issue that is probably quite dear to their hearts. Over the course of the past two weeks, we've engaged in several discussions with representatives of UNITE/HERE in an attempt to identify ways that our members and/or the Association could support the strike effort. The union's position is that the only thing they want us to do is to cancel our meeting in the SF Hilton. The media and public relations benefit to the union in our canceling the meeting is perceived as being very significant. Cancellation of our meeting at the Hilton would cause only limited economic loss to the hotel for two reasons. First, under the terms of our contract, AAA does not pay a fee for the use of function rooms. The meeting space in the hotel is provided to AAA free of charge in order to get our sleeping room and food and beverage business. Thus moving our meeting does not deny the hotel any income for the rental of function room space. Second, if we cancel our meeting at the SF Hilton, under the terms of our contract, the Hotel will make a claim against AAA for recovery of anticipated income from sleeping room and food and beverage business which is lost as a consequence of our canceling the meeting. To the extent that the Hilton succeeds in recovering from AAA any or all of the $1,125,975 in estimated losses it incurs as a result of the contract cancellation, the hotel will not suffer that loss. The loss would accrue to the AAA which would be forced to compensate the Hilton for its lost income. 4. An Additional Consideration: The "Attrition" Clause An additional, very important point should be made. There is no "attrition" clause in our contract-which means that, as long as AAA does not cancel its contract, it would not be liable if the Hilton didn't fill the rooms that we have blocked off and if the Hilton did not receive its anticipated food, beverage and other income. Under the terms of our contract with the SF Hilton, individual members could exercise their own personal choices on whether to maintain or cancel their sleeping room reservations at the Hilton and to use or refrain from using the hotel's restaurant and cocktail lounge facilities without exposing the Association to financial damages or loss, so long as AAA does NOT cancel the location of its meeting. 5. Demonstrating Support for Striking Hotel Employees We have attempted to identify ways in which, were we to keep our meeting in the San Francisco Hilton, our members and/or the Association could provide help in support of the strike effort. The union's position is that the only thing they want to see us do is to cancel our meeting in the SF Hilton. They have been unwilling to discuss any other possible actions that AAA or our members might take to be of assistance or show support to the striking/locked out employee's efforts. Clearly, the media and public relations benefit to the union in our canceling the meeting is perceived as being so great that it is politically unwise for them to discuss other possible assistance the AAA might provide. A number of suggestions have been put forth by AAA's Executive Board and members, however, of ways that individual members and the Association as a whole might demonstrate support for striking hotel employees short of canceling or moving our meeting from the SF Hilton Hotel. These include: 1. Sending a letter to the hotel requesting they settle the strike before we arrive and letting the hotel know that we support striking/locked out employees. 2. Sending a letter to the president of UNITE/HERE to let him know that we have a contract with the Hilton and have arranged a schedule with several thousands of people that we cannot now change, but which expresses support for the workers on strike and requests permission for AAA members and visitors to cross the picket line. 3. Inviting the union to address our annual business meeting to explain their situation. 4. Providing a table for the union in our conference registration area for the distribution of information on their situation. 5. Inviting the union to our receptions to explain the situation and to collect funds to support the workers. 6. Conducting the organized session on the anthropology of unions (organized by Paul Durrenberger) to meet on the sidewalk across the street from the hotel or on the picket line rather than cross it and offer the union an opportunity for some supportive press coverage. 7. Securing a parade permit from the City of San Francisco and organizing a parade from the hotel to Union Square and a demonstration in Union Square. 8. Conducting a teach-in at the hotel or in an adjacent location which members of AAA would be asked to participate in and /or attend. 9. Organizing and conducting an effort to collect financial contributions from AAA members to support union members. Express Your Opinion The AAA Executive Board is conducting an on-line survey to obtain your opinion relative to the decision before them. To participate in this survey, please click on the following link (or copy and paste the URL into your browser window). http://www.zoomerang.com/survey.zgi?p=WEB223VBLTXFXC Thank you very much for participating in this survey.