Faced with a $30 minimum wage, hotel investors start looking outside L.A.
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Perched high above the Cahuenga Pass, the 24-story Hilton Los Angeles Universal City Hotel is positioned to be a prime gathering spot for visitors arriving for the 2028 Summer Olympic and Paralympic Games.
Sun Hill Properties Inc., which manages the 495-room hotel, has already signed a “room block” agreement with the LA28 organizing committee, reserving hundreds of rooms for Olympics fans. The City Council recently approved a plan to let the Hilton add a second, 18-story tower, which would open just in time for the Olympics.
Now, the future of the $250-million expansion is in doubt. On Wednesday, the Los Angeles City Council is set to vote on a requirement that hotels with 60 or more rooms pay their workers at least $30 per hour by 2028, along with a new $8.35 per hour healthcare payment.
If the council approves the proposal without significant changes, Sun Hill “absolutely will be pulling out of the room block for the Olympics,” said Mark Davis, the company’s president and chief executive. The hotel’s investors will also kill the 395-room expansion, he said.
“Our board was very adamant that if [council members] go forward with this nonsense, that it’s dead,” Davis said. “They’re going to move the project somewhere else.”
The council voted 12-3 last year to instruct City Atty. Hydee Feldstein Soto to draft the package of minimum wage hikes, which would apply not just to hotels but also private companies at Los Angeles International Airport, such as airlines and concessions. The minimum wage would be the highest in the country, according to Unite Here Local 11, the hotel and restaurant workers union, which has championed the proposal.
Backers of the higher wage say L.A.’s tourism workers are struggling to pay for food and rent, and deserve to benefit financially from the Olympics just as much as private corporations. They dismiss the hospitality industry’s dire warnings, including the notion that increased wages will scuttle the development of new hotels.
City Councilmember Hugo Soto-Martínez said the Sheraton Universal Hotel, a nearby competitor of the Hilton, has already been paying a higher wage to its unionized workforce. The real threat to the development of new hotels, he said, is higher interest rates and the economic uncertainty surrounding President Trump’s trade policies.
“So, I just don’t buy it,” said Soto-Martínez, a former hotel union organizer, as he referred to Davis’ warning.
Under the city’s proposal, the hotel and airport minimum wage would reach $22.50 on July 1. It would jump to $25 in July 2026, $27.50 in July 2027 and $30 in July 2028. On top of those increases, the $8.35 per hour healthcare payment would go into effect on Jan. 1.
Business groups point out that two hotels have closed in the past year — Four Points by Sheraton next to LAX and Mama Shelter in Hollywood, for a loss of 270 jobs. They say Trump’s trade wars are driving down tourist activity from other nations, with visitors from Canada especially lagging.
Once the increases are in effect, business leaders say, hotels with on-site dining won’t be able to compete with non-hotel restaurants, which will have a much lower minimum wage.
Amid news of visa cancellations and deportations, state and local tourism officials are increasingly worried about the potential adverse effects on travel to Los Angeles and California.
Jon Bortz, chairman and chief executive of the Pebblebrook Hotel Trust, said his company is already looking at scaling back restaurant operations at two of its Southern California properties — the Kimpton Hotel Palomar and the W Los Angeles West Beverly Hills, both in Westwood near UCLA.
The Palomar will likely offset the cost of the higher minimum wage by converting its restaurant into a self-service breakfast operation, while the W will probably close at least one of its two restaurants, Bortz said. “We have to change the business model of these properties to have any hope of surviving,” he added.
Bortz said the proposed wage hikes, along with other hotel regulations approved by the City Council in recent years, have spurred Pebblebrook to look to other markets for new hotel projects.
“Frankly, the [L.A.] market, from a broad-based buyer perspective, has been crossed off the map by investors,” he said.
Hotels in other parts of L.A. are considering similar reductions. An executive with Lightstone Group, which owns the 727-room Moxy + AC Hotels near the Convention Center, told City Council members last year that the minimum wage proposal would likely result in the closure of Level 8, a collection of restaurants on the hotel’s eighth floor.
Mark Beccaria, a partner with the Hotel Angeleno near the 405 Freeway, said in a separate letter to city leaders that he would have to shutter not just the hotel’s restaurant but also its valet parking, eliminating 39 jobs.
“Common sense says you cannot raise wages over 50% in a year when revenues are down,” he said.
Kurt Petersen, co-president of Unite Here Local 11, accused the hotels of fear-mongering, saying they are misrepresenting the potential impact of the planned wage hikes. Hotel owners, he said, “act like the sky is falling every time they have to share profits with their workers.”
“This ‘Chicken Little’ stuff has got to end. Every single time, hotels cry poverty, and then a day later, they’re doing fine. It’s always the same routine,” Petersen said. “What’s not falling is rent and healthcare. What’s not sustainable is workers not earning enough to live in Los Angeles.”
The hospitality industry issued similar warnings a decade ago — when the council approved the current hotel minimum wage — only to see tourism flourish in the years that immediately followed, said Víctor Sánchez, executive director of the L.A. Alliance for a New Economy, a pro-labor advocacy group that produced a report on that phenomenon.
In Long Beach, where residents voted to raise the hotel minimum wage last year, revenue per available room was up 15.7% in March compared with the same month the prior year, said Sánchez, citing data from the real estate group CoStar.
With the first of several wage hikes for airport and hotel workers scheduled to go into effect on July 1, a coalition of L.A. business leaders has urged the City Council to hold off on the increases.
L.A.’s political leaders have enacted a number of wage laws over the last few decades. The hotel minimum wage, approved by the council in 2014, is currently $20.32 per hour. The minimum wage for private-sector employees at LAX is $25.23 per hour, once the required $5.95 hourly healthcare payment is included. Then there’s the minimum wage for nearly everyone else in L.A., which is $17.28 per hour — 78 cents higher than the state’s.
The hourly minimum wage for hotel and airport workers was already slated to go up this year, as part of regularly scheduled increases in the city’s wage laws. Once the council showed interest in the much larger increases, business leaders began warning that hotel developers would take their business elsewhere.
Few were as dramatic as Davis, who told council members that their proposal, as drafted, would “likely kill” the Universal City Hilton’s 395-room expansion.
Davis, whose company has hotels in Simi Valley, Colorado Springs, Colo., and the greater Denver area, said his board instructed him last year to look at acquiring property outside of California, in markets that “make more sense financially for an investment of $250 million.”
“The owners investing this money, they have to look at the numbers,” he said in an interview. “Any project survives only by its numbers.”
The Universal City Hilton already pays most of its workers more than $25 per hour, while also offering healthcare coverage, Davis said. If those health plans have a financial value lower than the $8.35 per hour, the company will need to make up the difference, he said.
Davis said he, too, is looking at scaling back restaurant operations, which would likely require layoffs.
At one point, Davis’ project drew support from the city’s political leaders.
The Universal City Hilton reached an agreement early on with construction trade unions, promising to pay a higher prevailing wage to the estimated 1,000 construction workers who would work on the new tower.
In August, the council voted unanimously to seek an economic analysis that would determine whether the city should provide taxpayer assistance to the project. The analysis, requested by Councilmembers Nithya Raman and Soto-Martínez, would have explored whether to allow the hotel to keep a share of the tax revenues generated by the new tower.
Raman, whose district includes a portion of Universal City, did not respond to questions from The Times about the project — or the potential impact of the higher tourism wage.
In recent days, the Hotel Assn. of Los Angeles has been appealing directly to Mayor Karen Bass, purchasing digital ads that ask her to intervene on the minimum wage issue.
Bass, in an interview earlier this year, said she wants hotel workers to “make a decent living” while also ensuring that their employers “are able to survive.”
“We have to make sure that we can address both — that we can address the needs of the workers without crippling the industry,” she said.
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