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30 (16) Susana Barrios From:Theresa Bass Sent:Friday, June 2, 2023 4:23 PM To:Public Comment Subject:\[EXTERNAL\] 50 Years (almost) Generating Revenue for the City of Anaheim Attachments:image001.png; City Council Letter.pdf From: Fred Brown <FredB@hansji.com> Date: June 1, 2023 at 7:13:56 AM PDT To: Ashleigh Aitken <AAitken@anaheim.net>, Jose Diaz <JoDiaz@anaheim.net>, "Carlos A. Leon" <CLeon@anaheim.net>, Natalie Rubalcava <NRubalcava@anaheim.net>, "Norma C. Kurtz" <NKurtz@anaheim.net>, Stephen Faessel <SFaessel@anaheim.net>, Natalie Meeks <NMeeks@anaheim.net> Cc: Jim Vanderpool <JVanderpool@anaheim.net> Subject: \[EXTERNAL\] 50 Years (almost) Generating Revenue for the City of Anaheim Warning: This email originated from outside the City of Anaheim. Do not click links or open attachments unless you recognize the sender and are expecting the message. Hello Mayor Aitken, Mayor Pro Tem Rubalcava, and Councilmembers, Attached is a personalized letter from me (not a chain letter) concerning the devastating effects of the Unite Here Ballot Measure for Anaheim hotels and as well as the City of Anaheim. I was told that Council wanted to hear from the smaller independent hotel operators in Anaheim. I am sorry but it is very long but tells a few stories of a pioneer Anaheim Hotelier family, myself and my family as well as the overwhelming concerns of mine regarding this ballot measure. Feel free to reach out to discuss any of my points in this letter and I am happy to back-up all of my statements with fact. Thank you, Fred ___________________________ Fred Brown Vice President of Operations and Technology Hansji Corporation 631 West Katella Ave. Anaheim, CA 92802 office (714) 399-0160 fax (714) 399-0161 email FredB@hansji.com web.www.hansji.com 1 This message and any attached documents contain information from Hansji Corporation that may be privileged and confidential and protected from disclosure. If the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by replying to the message and deleting it from your computer. Thank you. Support 2 631 WEST KATELLA AVE. ∙ FIFTH FLOOR ∙ ANAHEIM, CA 92802 714-399-0150 TEL 714-399-0151 FAX www.hansji.com June 1st, 2023 Hello Mayor Aitken, Mayor Pro Tem Rubalcava, and Councilmembers, I know you have been receiving a ton of emails and letters concerning Unite Here’s Anaheim Hotel Ballot Measure. I wanted to send a personalized letter rather than a form letter to let you know about the small businesses and people this measure will affect. I am sorry but it will be long but with our company being in Anaheim for almost 50 years as well as the devastating effects of this measure, there is a lot to say. Shirish Hansji is an immigrant from India who came to America in the late 60’s with only a few dollars in his pocket. In the early 70’s Shirish came to Anaheim from Virginia after saving every penny he could while he worked in the State Controller’s Office. Shirish was a hard worker and after a few years he had saved enough money to buy a 26-room motel in Anaheim (2176 South Harbor) in August of 1974. After years of hard work with 18-hour days seven days a week, Shirish and his wife Pushpa had saved enough money to buy another motel across the street (2145 S Harbor – 60-rooms). From there Shirish and Pushpa raised 2 children (Rajan and Aarti) who grew up in Anaheim, living in those motels and helping in the family business from a very young age. Shirish also sent for his brother who was in India, to come and help run the family business. Shirish was an accountant by trade and Arun was a master in facilities management. Together, Shirish and Arun had bought several motels in Anaheim over the years, investing capitol to bring the motels into today’s standards. Shirish has since retired and his son Rajan took over the family business around 2008. From 2000 to present, Hansji’s Anaheim properties have generated nearly $150,000,000 in TOT revenue for the City of Anaheim, while taking all of the risk in this venture. The City’s role in this partnership has been to open and few envelopes and deposit checks into the general fund each month. The Hansji Family currently owns Del Sol Inn (59 rooms), Anaheim Desert Inn (145 rooms) and Desert Palms Hotel (189 rooms). We also have a partial ownership in Cortona Inn (127 rooms). In February of 1997, I started at Coachman Inn (the 2nd motel above) as a weekend night auditor. I had a full-time job during the week but wanted a change in my weekend job (I had worked 7 days a week for years with two to three jobs at a time). A few months later, I quit my weekday job and moved to the hotel full-time. Due to the ability to move up in a hotel is based on initiative, drive, ambition and common sense, I moved up quickly and by September of 1997, I had been made General Manger of that motel (fake it till you make it!). In October of 2000, I was transferred to Desert Palms on Katella @ Harbor as General Manager, and eventually moved up to head Operations and Technology for all of the Hansji family’s businesses. About the same time Shirish arrived in Anaheim, I was a young child growing up in Anaheim, going to Horace Mann Elementary, Fremont Junior High (its’ final year) and Loara High School. I met my wife in high school and we have been together 40 years this year. We have three children who were all born in three different hospitals in Anaheim. My oldest daughter started working at Desert Palms while in high school and has been there for 14 years. My middle son has worked at two different hotels in the Anaheim Resort. My youngest son is in college but I am sure he will make his way into a hotel in the Anaheim Resort someday. I sit on the Board for several organizations in the Anaheim Resort, with most being as an Executive Committee member (Anaheim Tourism Investment District Transpiration Fund-Chair - 631 WEST KATELLA AVE. ∙ FIFTH FLOOR ∙ ANAHEIM, CA 92802 714-399-0150 TEL 714-399-0151 FAX www.hansji.com Visit Anaheim-Vice Chair, Anaheim Resort Transit-Vice Chair, Anaheim/Orange County Hotel & Lodging Association-Immediate Past Chair, Anaheim Police Chief’s Advisory Council-Member). I have been very involved in the Boy Scouts over the past 20 years, most recently serving as the District Chairman for the Valencia District of Orange County Boy Scouts of America, which covers Anaheim, Fullerton, Brea, Placentia and parts of La Habra. My two sons are Eagle Scouts and I currently serve as an Eagle Advisor, Merit Badge Counselor and Assistant Scoutmaster for OCBSA. We are a homegrown family and a homegrown company. Now that you know a little about myself and the Hansji family, I wanted to let you know how devastating this ballot measure will be on Anaheim Hotels, especially for the smaller independent operators like myself as well as for the City of Anaheim. Obviously, a jump from around $17 to $18 an hour to $25 an hour will be a huge burden on the hotel operations costs. This increase would not just affect staff under the $25 an hour baseline, it would affect all hourly and salary staff. Currently, payroll is the biggest expense in hotel operations and 25% to 30% increase in payroll will be very hard to absorb. To do this, we would have to significantly raise prices for our rooms to meet the additional expense. That sounds easy but as we raise prices, demand goes down, causing rooms to go empty, costing our company and our partner, the City of Anaheim an untold amount in revenue. Most hotels also have negotiated group and convention contracts that go beyond 2030 with no ability to increase those rates. So yes, the Union getting involved in the wage of non-union members will have devastating effects on its own. But this is not our only or even main concern. 1. The measure has restric�ons on what we clean and how we clean it. It does not allow us to service guest rooms on a mul�-day basis, demanding that all guestrooms are serviced every day. This has not been the standard in hotels since covid and if it were, I have not had the staff since reopening to service all of my rented rooms on a daily basis and would be forced to close down rooms that I could not clean. For years (even before Covid) hotels have been offering guests a rebate in cash or rewards points to forgo daily cleaning to save water, cleaning chemicals, life of linen and terry and labor. This would not be allowed under this ac�on. Every room must be cleaned every day. 2. The industry standard to clean a standard hotel room has been 30 minutes for years. In an 8-hour shi�, housekeepers would typically clean 13-15 rooms. The standard size of a hotel guestroom is 13 x 28 = 364sf., however the size of the room doesn’t have much effect on the �me it takes to clean a room, it is more related to what is in the room (number of beds, number of bathrooms, kitchen and so forth) and addi�onal �me is giving for addi�onal items in the room. If a standard room at 450sf at one hotel has 1 bed, 1 bathroom and no kitchen, the addi�onal square footage of addi�onal floor space or furniture had litle effect on the �me or effort to clean it. This measure however has a cap of 4000 total square feet of space, regardless of the amount of cleaning in that space. With these facts in mind, the typical 15 rooms would drop to 10 if we were going to stay below the 4000sf double wage threshold (not coun�ng any deduc�ons). That would mean in addi�on to the 25% higher wage, I would have to have four team members to clean what three team members currently clean which is an addi�onal 631 WEST KATELLA AVE. ∙ FIFTH FLOOR ∙ ANAHEIM, CA 92802 714-399-0150 TEL 714-399-0151 FAX www.hansji.com $65,000 for every three team members I have. This does not include common areas such as hallways, mee�ng space, retail space, F&B space and so on. There are deduc�ons of 500sf from the 4000sf cap for floor moves, building moves, check-out rooms, and rooms with 2 or more beds (including sofas). If that amount is exceeded a�er deduc�ons, a penalty of 100% is assessed on the wage of that day, making the mandated $25 an hour $50 for that day. This included common areas. Anaheim is a family des�na�on and I would be willing to bet that 95% of the hotel rooms in Anaheim have at the very least a double bed and a sofa. At Desert Palms, 100% of my rooms have 2 beds minimum (coun�ng sofas) under that defini�on. This would give a 500sf deduc�on for each room cleaned meaning that I would max out at 4 rooms per team member to stay below the double minimum wage rate ($50). With these deduc�ons, I would have to have 2.5 addi�onal team members to clean what 1 team member currently cleans. That is and addi�onal $165,000 for each set of 12 rooms I rent daily per year. At Desert Palms my lobby is about 4000sf. This room is spot cleaned all day long but for a total of probably 4 hours of labor in a 24-hour period, which includes moping the floor overnight. That cost with wage, work comp and taxes about is $33,000 a year. This measure would have me have a dedicated person on three shi�s a day (24 hours instead of 4) to keep it clean. The new cost under this measure just to clean the lobby would be $273,000. If the space exceeds 4000sf, that cost would DOUBLE. 3. I am also very concerned about the li�ga�on aspect of this law. I see employees suing the hotels sta�ng that they are not adhering to the ballot measure, leaving the burden of proof on the hotel. It really makes no difference if the allega�ons are true or not. We all know anyone can sue anyone for anything in California and unfortunately it is easier to setle than pay out a huge claim. 4. The tag line for this measure is about safety however that is just to get the voter’s aten�on. Unfortunately, this measure has prevented myself and other hoteliers from installing these devices to way and see what happens with this measure. I have not spoken to one hotelier that has a problem ini�a�ng some sort of panic buton for our team members. I would hate to install a system that has a capitol cost of $50,000+ to find out it does not meet the needs of the measure. 5. There are other effects of this measure that affect the value of the hotels in Anaheim when refinanced or sold. In 2005, The Hansji Family, in partnership with Ajesh Patel and Bill O’Connell, built Doubletree Suites on Harbor and Orangewood. Shirish purchased the land (which was a shutered grocery store at the �me) a few decades ago, wai�ng for the right �me to build two hotels on the land. Due to the cost of running a 4-star hotel, the 2nd hotel, which was fully en�tled, was never built. If this hotel had been built in 2010 as ini�ally proposed, it would have generated $36.5 million dollars for the City of 631 WEST KATELLA AVE. ∙ FIFTH FLOOR ∙ ANAHEIM, CA 92802 714-399-0150 TEL 714-399-0151 FAX www.hansji.com Anaheim to date. Late last year, the Ownership group had the Doubletree Suites in escrow, but the buyer dropped out when they heard about the Unite Here ballot measure and the addi�onal costs it would add to opera�ng the hotel. The hotel was eventually sold in Q1 of this year however at an $8 million dollar price reduc�on due to the effects of this ballot measure. I hope that helps gives the perspective of an independent hotel operator in Anaheim. I am happy to discuss any of the information above in detail if you have questions or comments. This measure will close hotel rooms as well as I feel it will close hotels. We cannot survive with the effects of this measure and need help in getting this ballot measure on a special election as soon as possible. It has already cost our company 8,000,000. Sincerely, Fred Brown Vice President of Operations and Technology General Manager, Desert Palms Hotel & Suites CC: Jim Vanderpool, City Manager