There’s a New Amenity at L.A. Hotels: a Much Higher Minimum Wage

Confined to about 15 of the city’s largest non-union hotels and accounting for more than a fifth of all its hotel rooms, the increase was aimed at the segment of the service economy that city leaders saw as best equipped to absorb the extra cost.

Hoteliers say full data are not yet in and some layoffs have taken place, but champions of the raise say that the naysayers’ concerns appear to have been overblown.

“There have not been the wholesale layoffs or cutbacks that we were told would occur,” said Los Angeles City Councilman Curren Price, who co-authored the wage hike ordinance.

The pay rise for a small slice of an industry gives an early if limited glimpse into the drive for a $15 minimum wage, gathering pace in states from New York to the West Coast. The federal minimum wage has been stuck at $7.25/hour since 2009.

A phased statewide raise to $15, ultimately affecting 5.6 million workers, was approved by the California legislature last week and Governor Jerry Brown, a Democrat, is expected to sign it into law on Monday.

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Pushing wages to just over $15 from as low as $9 an hour for an estimated 3,000 hotel workers began last summer as the first phase of a hike for the second-largest U.S. city, largely run by Democrats. It affects about 8,000 rooms, or half of Los Angeles’ large-hotel room inventory.

Hotel operators had warned the hike would force them to cut staff and services, put the brakes on new hotel projects and would drive away customers.

Because of the increase, Julie Robey, a general manager at the Holiday Inn (IHG) Los Angeles Gateway, south of downtown, said she had to lay off seven employees, cutting her staff to 95 full and part-time workers.

Robert Amano, executive director of the Hotel Association of Los Angeles, which opposed the increase, said the hike has led to some job cuts, but that an overall tally is not available.

Many hotels have chosen to absorb the increase by upping restaurant food prices by 15 to 30%, he said.

And he warned that smaller hotels, which do not have the same profit cushion, could face bigger challenges when they have to implement the increase this summer.

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Raising the minimum wage is a key issue for contenders in the November U.S. presidential election, addressing a movement led by labor unions to provide better living standards for the working poor.

Democratic hopefuls Hillary Clinton and Bernie Sanders are avid supporters. Republican front-runner and businessman Donald Trump, who owns hotels, has said U.S. wages in general are too low—but also that it is not necessarily bad to have a low minimum wage in order to compete in a global marketplace.

L.A. city leaders appear to have picked the right moment for their experiment.

An improving economy has helped buoy L.A. hotel occupancy rates to an all-time high, blunting the effect of the wage rise on the bottom line, hotel industry officials said.

“When demand is high and you’re running busy, you don’t want to cut staff,” Amano said.

More than two dozen new hotel projects are in the works, the biggest hotel development boom in Los Angeles since the 1980s, said Bruce Baltin, senior vice president at PKF Consulting, which provides analysis to the hotel industry.

“Fortunately, the industry in Los Angeles is very healthy right now,” Baltin said.

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For workers who received the sharp wage hike, the payoff can go beyond a bigger paycheck.

Jacob Loera, a bellman at a downtown Los Angeles hotel, was able to quit a second job that sometimes made his working day go from before dawn until midnight.

Now, with one full-time job at the higher minimum wage, the 39-year-old father of three still earns about the same $2,100 a month, but said he has gained something more valuable.

“I get to spend quality time with my kids,” Loera said.