Will Higher Minimum Wages Hurt Or Help These Restaurant And Hotel Stocks?
Written by: Kapitall
Tickers in this article:
BOBE DRI IHG MAR SBUX
James Dennin, Kapitall: Seattle and Maryland raised their minimum wages. Could these restaurant and hotel stocks get a boost?��
President Obama and the Democratic congress have been eager��to leverage��the overwhelming popularity of a minimum wage increase, which could be as high as 70%. That effort has stalled, however, and so the battle��is shifting to the local level.����
Over the weekend Maryland and Seattle executives signed bills signed bills into law raising the minimum wage. At $15 an hour, Seattle's minimum wage��would be the highest in the country. The steep hike has��garnered opposition from unexpected places: the companies that already had high wages and benefits.
The most often cited example is Dick's, a privately owned restaurant chain in Seattle. The family that owns Dick's is worried about a minimum wage hike that doesn't take into account benefits. Dick's already pays��wages well above the national minimum, with salaries often starting around $9 an hour.
That's on top of generous benefits, which include health insurance, college scholarships, and a smoking cessation program, among others. They worry that a minimum wage of $15 an hour would force them to cut benefits.��
Read more from ��about the minimum wage debate.
About half of states have laws setting the minimum wage higher than the Federal level, with Connecticut, Hawaii, and Maryland joining the growing list this spring. Assuming that a compromise isn't reached on the national level, we might expect the wave of pay��hikes to continue.
If that's the case, then hospitality will certainly be the most affected industry. Hotels and restaurants account for at least half of the workforce currently earning minimum wage,��so we decided to screen those industries for companies that already had higher wages and benefits.
To do that we used the database of our partner CSRHub, which compiles reports on corporate social responsibility. We screened for companies in the restaurant and hotel sector that had industry-beating ratings for how they treat��their��employees based on compensation, diversity��and training.
The average score for companies in the industry is 55, so we included all the companies that had a rating of 64 or higher. That left us with six companies on our list, three hotel chains and three restaurant chains. Depending on the types of laws that get passed (tipping credit? benefit credit?) these companies could benefit handily from a minimum wage increase, because their margins would suffer less of a shock.����
Click on the interactive chart to view data over time.��
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Will higher wages for employees be a benefit or a detriment to these companies? Use the list below to begin your analysis.����
1. Bob Evans Farms Inc. (BOBE): Operates full-service restaurants under the Bob Evans and Mimi's Cafe brand names in the United States. Market cap at $1.16B, most recent closing price at $47.21.
Employee rating is 65/100 vs. Industry average of 55/100.��
2. Starbucks Corporation (SBUX): Operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. Market cap at $53.25B, most recent closing price at $70.60.
Employee rating is 68/100 vs. Industry average of 55/100.��
3. Marriott International, Inc. (MAR): Operates and franchises hotels and related lodging facilities worldwide. Market cap at $17.24B, most recent closing price at $59.09.
Employee rating is 69/100 vs. Industry average of 55/100.��
4. Intercontinental Hotels Group plc (IHG): Owns, manages, franchises, and leases hotels and resorts. Market cap at $9.52B, most recent closing price at $36.90.
Employee rating is 70/100 vs. Industry average of 55/100.��
5. Darden Restaurants, Inc. (DRI): Operates full service restaurant in the United States and Canada. Market cap at $6.49B, most recent closing price at $49.67.
Employee rating is 64/100 vs. Industry average of 55/100.��
6. Hilton Worldwide Holdings Inc. (HLT): Engaged in the ownership, leasing, management, development, and franchising of hotels, resorts, and timeshare properties worldwide.��Market cap at $21.55B, most recent closing price at $22.05.
Employee rating is 76/100 vs. Industry average of 55/100.��
(List compiled by James Dennin, a Kapitall Writer. Monthly returns sourced from Zacks Investment Research. Employee data sourced from CSRHub.)