LA hotels slash jobs, staff hours as Karen Bass' $30 minimum wage hike drives up costs

Hotels in Los Angeles are facing mounting financial pressure as a new minimum wage law drives up labor costs, forcing operators to cut hours, reduce staff, and reconsider future investments. Under a law signed by Mayor Karen Bass, hotel and airport workers are set to receive annual wage increases of $2.50 until reaching $30 per hour by 2028, a mandate that researchers say is outpacing the industry’s ability to absorb costs. A new report from the American Hotel & Lodging Association (AHLA) highlights the city’s aggressive wage policy as a key factor behind the industry’s growing instability.

“Hotels are struggling to keep up with rising operating costs coupled with falling demand,” AHLA researchers said, pointing to the wage policy as a major driver of those costs. Unlike other expenses, the report argues, the mandated wage increases are “untethered” from hotel performance metrics like occupancy or seasonal demand. This means a hotel operating below capacity must still meet the same wage requirements as a fully booked property, limiting flexibility in an already volatile market.

Labor costs now account for roughly half of hotel operating expenses, and they are rising faster than revenue, creating a widening financial gap for many operators.

The pressures facing Los Angeles hotels reflect a broader debate across California, where sector-specific minimum wage increases have already produced mixed economic outcomes. In April 2024, the state implemented a $20 per hour minimum wage for fast-food workers, one of the largest targeted wage increases in US history. Researchers at the University of California, Santa Cruz, found the wage increase led to higher menu prices, reduced worker hours, and measurable job losses, with estimates pointing to a decline of roughly 18,000 jobs, or about 3 percent of the workforce.

"The results indicate a plethora of negative outcomes such as higher menu prices for consumers, reductions in employee working hours, widespread elimination of overtime and loss of benefits for employees," said Stephen Owen, an Economics Lecturer, University of California, Santa Cruz.

A Berkeley Research Group study discovered that 10,700 jobs were lost between June 2023 and June 2024 in the sector, according to Bureau of Labor Statistics data, while prices at the establishments spiked by 14.5 percent after the new minimum wage became law.

The AHLA survey found similar results. Nearly nine in ten hotels have either reduced worker hours or carried out layoffs over the past year. More than half have scaled back overtime opportunities, and a similar share have reduced employee benefits or amenities.

Hotel operators overwhelmingly attribute these decisions to rising labor costs, with 93 percent identifying them as a primary driver. The report suggests these measures are early responses to mounting financial pressure, with the potential for deeper cuts as wage requirements continue to climb.

The wage policy is also reshaping investor sentiment. Nearly all surveyed hotel stakeholders described Los Angeles as an unfavorable investment environment, and 80 percent said it is not a good place for long-term hotel investment.

Developers have already begun canceling or delaying projects, citing the increasing cost of labor and regulatory uncertainty. As capital shifts to other markets, Los Angeles risks falling behind competing cities in hotel development and tourism infrastructure, just two years away from the 2028 Summer Olympics the city is scheduled to host.

The implications extend beyond hotel operators. The industry generates roughly $12.5 billion annually for Los Angeles and supports nearly 64,000 jobs. As costs rise and operations contract, the report warns of reduced tourism spending, fewer jobs, and declining tax revenues that fund essential city services. The effects spread outward, impacting restaurants, retail, entertainment venues, and other businesses that rely on visitor activity.