(The Center Square) – Los Angeles City council voted to pass a $30 minimum wage for hotel and airport workers, along with an additional healthcare benefit starting at $8.35 per hour for employees of businesses that do not provide health insurance.
Businesses say the large spike in wages will lead to closures, scaling back employees, and hotels backing out of agreements put in place for the 2028 Olympics — and could threaten the city budget.
“Payroll for hourly employees alone will increase by more than 70% from current costs by the time the $30/hour wage is achieved in 2028,” wrote the Los Angeles Chamber of Commerce in opposition. “[Transient Occupancy Tax] revenue is the city’s largest source of unrestricted General Fund revenue. This revenue is already in decline.”
“The proposed ordinance will only further reduce revenue at a time when the city is facing a half-billion-dollar deficit,” continued the Chamber of Commerce.
According to a city-commissioned analysis by Berkeley Economic Advising and Research, which lists the People’s Republic of China as one of its featured clients, the minimum wages for LA hotel and airport workers are $19.73 and $18.78 respectively. The ordinance requires the wage to jump to $25 per hour on February 1, 2025, with steady increases to $30 per hour by July 1, 2028 — in time for the 2028 Summer Olympics hosted in Los Angeles.
The BEAR analysis said that hotel and airport payroll costs would increase by 32%, consumer prices at businesses paying the wage would increase 6%, and that consumer spending would be $21 million lower than otherwise by 2028.
BEAR claimed that these changes would result in a gain of 6,319 local jobs, not result in people looking for other travel options because there are “limited options for substitution,” and that “real estate will be strongly stimulated by the rise in earnings, and can be expected to generate a supply response that will offset price increases,” citing a Zillow housing market temperature meter for Los Angeles and a website marketing itself as a “premier source for turnkey cash-flow investment property.”
BEAR rejected the inclusion of data provided by the local hotel association, but did include data from UNITE HERE! Local 11, a hospitality union that recently tried to pass ballot measure requiring hotels to house homeless individuals in unsold rooms.
New federal data suggests that California’s increase of the fast food minimum wage has cost jobs. The fast food industry added 9,118 jobs in 2023 between March and June for the typical ramp up into summer. This year, they added only 406 jobs in the same time frame, after the fast food minimum wage rose from $16 per hour to $20 per hour at the start of April.
It also appears unlikely that housing production will increase quickly enough to offset any higher rents; Los Angeles Housing Production Institute Director Joseph Cohen noted that in November, “Less than 20 new apartment buildings broke ground in Los Angeles in the last month.”
Tourism in LA is yet to recover from the pandemic; in 2023, more than 75 million passengers traveled through LAX, compared to 88 million in 2019, according to the airport’s operator.
Hotels say the new wage increase is unaffordable, especially with income for many hotels flat as other costs rise, and could leave some with no option but to convert to homeless housing.
“The impact to Hotel Angeleno will be over $850,000 per year, said Mark Beccaria, a partner and owner representative for the upscale hotel in Brentwood in opposition to the measure. “Common sense says you cannot raise wages over 30% in less than a year when revenue is flat. If this increase in labor costs passes, we will be forced by the City to consider converting this hotel in the heart of residential Brentwood into a homeless shelter.”
For some hotels, the only option could be to shut down.
“From an operational standpoint, we are still dealing with the impact of the Hotel Worker Protection Ordinance,” said Hotel Per La’s general manager George Unseld, referring to the city’s existing hotel worker ordinance.” As a result, we have had to cut back on services, hours and positions as we are not able to meet our mortgage payments nor are we able to set aside reserves for maintaining the asset. We are at risk of having to close our doors, affecting over 100 jobs.”
Only Councilmembers Traci Park — whose district includes LAX — John Lee, and Monica Rodriguez voted against the measure.
