Voluntary separations may stave off LVCVA layoffs

By Richard N. Velotta

Friday, Sept. 18, 2009 | 3 a.m.

It’s no secret that Southern Nevada’s tourism economy is suffering big-time because of the recession.

Now, the Las Vegas Convention and Visitors Authority, which markets the destination worldwide and produced the award-winning “What happens here, stays here” ad campaign that helped bring millions of people to the city, is feeling the financial pinch and has a plan to cut its workforce.

At last week’s board meeting, a voluntary separation plan similar to those offered by local municipalities was shown to the 14 members. It’s one piece of a savings package designed to head off layoffs at what most consider to be the most successful convention and visitors bureau in the country.

The problem is that room tax revenue is going to be down by double-digit percentages, thanks to average daily room rates falling off a cliff, and visitation — mostly the midweek convention crowd — not coming as much as in the past.

Brenda Siddall, vice president of finance, delivered the grim news to board members.

In June room-tax revenue was $1.5 million below projections, she said. In July it was down $1.8 million.

The organization already has a number of cost-savings measures in effect, including shutting down the $890 million refurbishment of the Las Vegas Convention Center. A hiring freeze is in place; there have been no bonuses paid.

The next cost-cutting move is the voluntary separation program so that some of the highest paid employees, those nearing retirement, can opt out. Eligibility is based on the sum of a full-time employee’s age and years of service equaling or exceeding 65. So, a 50-year-old employee who has 15 years with the organization would qualify, for example.

Participants in the program would get one week of base pay for every full year of service, plus three months of paid medical premiums.

Mark Olson, vice president of human resources, determined that 132 employees qualify for the program. When details were sent out, 40 expressed interest in the program.

Based on 40 employees participating, the human resource and finance departments determined that in the current fiscal year estimated savings would be $2.5 million with the estimated cost of the severance at $1.8 million — a net savings of $750,000. But in the following fiscal year, the savings would increase because there would be no severance paid. The potential savings, if all of the positions remained vacant, would be $3.7 million.

Realistically, there probably won’t be 40 employees opting out. If 25 end up leaving, the net savings would be $500,000 and the long-term savings would be about $2.5 million a year after that. That’s well short of the $3.3 million revenue shortfall that occurred in June and July alone.

There are other plans to head off the authority’s financial predicament.

One would be the development of a furlough program similar to what the state government has in place. Under such a program, some workers would be sent home and not paid for a certain time — maybe one day a month or one day every two weeks — which amounts to a pay cut and more time off.

Authority spokesman Vince Alberta said a furlough program wouldn’t be installed across the board because some high-level executives are required to be in their offices every working day. So, for them, the change would be to work an extra day every month or two weeks — a Saturday, Sunday or holiday.

Another cost-cutting strategy would be to negotiate concessions on a recently approved five-year union contract.

An 8-4 vote in support of the contract in July is coming back to bite the organization.

Under terms of the agreement, 350 operational employees received a 1 percent pay increase retroactive to January, a 1.5 percent increase effective July 12 with another 1 percent increase to take effect Jan. 10. Increases effective on July 1 of 2010, 2011 and 2012 are subject to renegotiation under terms of the agreement.

Although authority executives said they would attempt to negotiate concessions — possibly a delay in the next increase — representatives of the Service Employees International Union Local 1107 indicated they aren’t budging. A group of union leaders attended the meeting and told the board there were other cuts that should be made before considering contract concession talks.

It’s not like there haven’t been other cost-cutting measures taken. On another agenda item, the board voted unanimously to extend a transportation consultant contract with the Skancke Co. Ltd. It’s a $360,000 contract, but that amount is 20 percent less than what it had been last year. President Tom Skancke offered the concession and said he might have to lay off one of his own employees to do it.

But board members’ biggest concern was whether it would continue to get the same level of service and quality of work under the smaller contract amount. Skancke said he would deliver.

One other cost-cutting measure is laced with irony.

The board approved $183,000 for the authority to exhibit at the World Travel Market, a major tourism trade show Nov. 9-12 in London.

Asked for details on the business-to-business event at which 52 percent of the attendees in the 2008 show were from worldwide destinations, Cathy Tull, senior vice president of marketing, said the authority would do more with less by cutting back on the number of employees it takes to London.

That, of course, is what is happening at thousands of meetings, conventions and trade shows in Las Vegas. Instead of bringing contingents of 20 employees, companies are sending 15. The bottom line is that convention visitation to Las Vegas is down by more than 25 percent in 2009. In doing the same thing, the authority is cutting costs, but isn’t exactly leading by example.

But that’s what’s necessary in these tough times.

Pilot union ousted

In a rarity in aviation labor history, pilots of US Airways voted to decertify its union of 59 years, the Air Line Pilots Association, and instead will be represented by the US Airline Pilots Association.

The airline’s 5,300 pilots voted in an election overseen by the federal National Mediation Board.

The vote came as a result of an issue that has been around since 2005 when America West Airlines acquired US Airways and stuck with the more familiar US Airways name. The issue was the integration of pilot seniority when the two companies merged.

It’s definitely a sticky issue. Seniority is important to pilots because rank determines what types of planes they fly, what routes they get and when they can take their vacations.

Seniority integration disputes are plaguing the merger between Delta and Northwest airlines and the issue scuttled Southwest Airlines’ bid to acquire Frontier earlier this year. Southwest’s management said “no thanks” to a seniority controversy and backed away from the deal. They needed only to look at US Airways, the second-busiest carrier at McCarran International Airport, to see how bad morale can get as a result of the issue.

For US Airways, whose pilot groups are simply known as “east” and “west,” it came down to name-calling and shouting across terminals, threatening e-mails and near brawls in parking lots.

Going with the theory that a happy workforce is going to do its best to get passengers and their bags safely and on time to their destinations, the public should be happy about this development and should be hoping that the new US Airline Pilots Association representation will lead to a contract for pilots who have worked four years without one.

In a related matter, the Southwest Airlines Pilots Association is close to forwarding a contract vote to its membership.

The contract offers a minimum of three 2 percent raises over the life of the contract, which is renewable in 2011, and an increase in 401(k) matches from 7.3 percent to 7.8 percent.

Pilots rejected the airline’s last contract when 51 percent voted against it.

Travel Promotion Act

And now, a little good news.

The Senate, in a 79-19 vote, approved the Travel Promotion Act, which would build a fund to promote tourism in the United States by foreigners and will not cost U.S. taxpayers any money. Foreign travelers who do not pay a visa fee will be charged $10 once every two years. The private sector will match the funds.

The Senate bill was co-sponsored by Sen. John Ensign, R-Nev., and a similar House version is pending.

The United States has lost market share to other countries for millions of foreign travelers, who spend an average $4,500 per trip. The U.S. will now market American destinations abroad.

This is great news for Las Vegas since many of those who travel to the United States visit here.

Richard N. Velotta covers tourism, technology and small business for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4061 or at [email protected].