Fixing creditor-debtors’ tensions through labor devaluation. Insights from the Spanish hotel market

Abstract

This article aims to analyze how labor devaluation alleviates the post-crisis creditor-debtor tensions in Spanish hotels. It is argued that the disciplinary measures imposed by financial creditors to corporate debtors are increasingly being displaced towards labor. More broadly, the article makes the point that labor devaluation at the corporate level is not only pursued in order to increase corporate profits, but it mainly aims to improve the creditor-debtor relations.The arguments are exemplified by the case study one of largest Spanish hotel corporations, NH Hotels. The article finds that the eruption of the economic crisis in 2008 and the following lack of liquidity forced creditors (banks) to discipline hotel corporations such as NH Hotels. The paper finds that labor devaluation helped to enhance the economic performance of NH Hotels in three main ways. First, labor devaluation implied an ‘improvement’ of the corporation's image towards potential investors; second, it helped to improve the corporation’s economic performance ratios, and thirdly, it smooths the process of revaluing hotel assets. The article concludes that labor devaluation strategies have been fruitful to indebted corporations, as the creditor-debtor relations have improved with labor devaluation.