Inhospitable Higher Wages

The San Fernando Valley’s population and business community have skyrocketed in the past few decades – so much that the entire region has not been able to keep up with the growth in terms of housing and jobs. However, one industry in particular has not been able to grow with the region’s needs, with only 0.73 percent growth in the last 24 years. And that is the hotel industry. In 1990, there were 91,000 hotel rooms in the City of Los Angeles. Now? Only a tiny increase to 94,000. Hotels are a large venture to undertake between construction costs, overhead and staffing needs. But L.A. is a particularly difficult city to bring a hotel to, due to high taxes and fees and never-ending red tape. Tourism has been a priority for local leaders, as shown by the expanded marketing efforts of the L.A. Tourism and Convention Center Board and discussions to build a football stadium. So it makes it even more frustrating for the business community that the hotel industry is specifically targeted in a citywide, emotionally driven campaign that will result in the loss of thousands of hospitality jobs. In February, Councilmembers Mike Bonin, Nury Martinez and Curren Price Jr. introduced a motion to implement a $15.37 minimum wage for only hotel workers in hotels with more than 100 rooms that are not unionized. That means that unionized hotels can continue to pay their workers less than $15.37. The city is in the process of conducting an economic impact survey. San Fernando Valley hotels in particular are struggling with maintaining profits while being located further away from the major airports, convention centers and tourist destinations in the region. And if the increased minimum wage ordinance passes, about a dozen Valley hotels (and about 60 hotels citywide in total) are going to have to make the difficult decisions of cutting services and staff. The sad irony that our councilmembers do not seem to get is while their intention with the ordinance is to provide a higher wage for hotel workers, they are essentially guaranteeing that anywhere from 15 percent to 20 percent of the affected staff will lose their jobs. One only needs to look to nearby Long Beach for the reality of such gigantic wage hikes: As a result of a successful ballot measure in 2012, the Westin Long Beach had to choose to unionize (since the hike did not apply to unionized hotels) or increase its wages to $13 an hour. Immediately after the ordinance took effect, the hotel eliminated or reduced hours for more than 2,500 employees. Even so, the hotel still faced $750,000 in additional costs. So it had to cut services that keep it competitive, such as 24-hour room service and the concierge desk. The wage increase helped the remaining staff, but what do proponents say about the hundreds of residents who are now relying on unemployment and other government subsidies? The measure is shortsighted and if we do not stop it now, we will have to wait for thousands to lose their jobs before our leaders see the actual effects. The Valley Industry & Commerce Association supports employers providing competitive wages and benefits to its workers but it is not up to local governments to target specific industries and hurt their competitiveness and profitability. And contrary to many proponents’ arguments, the hotel industry is not a stagnant field where lower-wage employees are unable to move up. The hospitality industry is known for its management having started from the bottom. That cannot be said about many other industries. A hotel living wage will result in the elimination of many upper- and middle-management positions – slashing the number of opportunities for promotions. In addition to the immediate effects on our residents, we can expect any interest in hotel development in the city to disappear. No one will want to build a hotel in the city with the highest minimum wage in the entire United States. With the inevitable increase in hotel prices, conferences will become too costly to hold in the city and they will relocate elsewhere. All in all, our hospitality industry will stagnate. Hotels need to voice their concern with our elected officials, but so do all businesses – because the wage hike will not stop with hotels. We’re going to see these mandates spread citywide, causing a business exodus from the region and a huge loss of jobs that will be difficult to recover. Proponents tout the effort as an act that will lift our residents out of poverty – but the reality is it will raise wages for some people, and obliterate jobs for many others. But that truth does not sound as good at a press conference and so we continue to fight emotional appeals that endanger hundreds of livelihoods in the Valley. The Valley Industry and Commerce Association (VICA) is a business advocacy organization based in Sherman Oaks that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.