The City has made significant financial investments to create a climate that has allowed the hospitality industry to thrive in Los Angeles. For example, the City assists in providing and maintaining free public tourist attractions and in helping to build and maintain the public transportation system that carries visitors around the City, including to and from hotels. The City's investments have helped the hospitality industry, which has enjoyed three consecutive years of growth, achieve an occupancy rate of 78 percent (far better than the national average of 62 percent) and a "revenue per room available" rate of $111 – a 14 year high for Los Angeles. Because hotels receive benefits from City assets and investments and because the City and its tourist industry benefit from hotels with experienced and content workers with low turnover, it is fair and reasonable that hotels pay their employees a fair wage. It will benefit the local economy and benefit City visitors, residents and businesses.
According to the Economic Development Department, 43 percent of the people who work in hotels in Los Angeles earn wages that put them below the federal poverty line. Wages paid to hotel employees are economically restrictive and prevent many hospitality employees from exercising purchasing power at local businesses, which takes a toll on the local economy. According to research based on modeling by the Economic Policy Roundtable, increasing wages for hotel workers could generate more than $70 million in economic activity for Los Angeles. These employees, who live paycheck to paycheck, are frequently forced to work two or three jobs to provide food and shelter for their families. In many instances, they cannot take time to spend with their children or care for themselves or family when sick. They also rely on the public sector as a provider of social support services and, therefore, the City has an interest in promoting an employment environment that protects government resources. In requiring the payment of a higher minimum wage, this article benefits that interest.
In 2007, the Los Angeles City Council passed a living wage ordinance for workers employed in hotels near Los Angeles International Airport (LAX), and in 2009 passed an ordinance that raised the wages for airport employees. The living wage for LAX hotel workers and airport employees has resulted in higher pay and real benefits for low-income families, and the hotels around LAX have thrived. In recent years, LAX passenger traffic has steadily increased (a 4.7 percent increase in 2013, following a 3 percent increase in 2012) in part due to City investment in infrastructure that draws tourists to Los Angeles and encourages them to come back and visit the City repeatedly. Tourism is one of the largest industries in the City, hosting millions of people per year. Hotel workers frequently are the face of the industry, providing services directly to tourists.
Income equality is one of the most pressing economic, social and civil rights issues facing Los Angeles. By proceeding incrementally and applying a minimum wage to hotel workers at larger hotels, including a hardship waiver for certain affected hotels, and by including the Los Angeles Airport Enterprise Zone (AHEZ) hotels which are already paying a higher than state-mandated minimum wage, the City seeks to promote the health, safety and welfare of thousands of hotel workers by ensuring they receive decent compensation for the work they perform. The City also seeks to improve the welfare of hotel workers by mandating that a hotel employer pay service charges to their workers. When a service charge is listed on customer's bill, often times there is a reduction in the gratuity to the hotel worker on the assumption that the service charge is automatically paid to the hotel worker. This ordinance guarantees that a hotel worker gets paid for any service charge a customer reasonably would believe is intended for the worker who actually performed the service.
A large hotel, one containing more than 150 rooms, is in a better position to absorb the cost of paying living wages to its employees and also to absorb costs without layoffs. First, large hotels more often are part of international, national or regional chains. A large hotel that is part of a chain of hotels may more easily relocate or transfer employees to other hotels in the chain rather than laying off employees. Second, a large hotel often has sources of income beyond mere room rental, including special event revenue, conference revenue and revenue from other hotel amenities such as gymnasiums, business centers and restaurants. A large hotel is better able than a small hotel to ensure high room occupancy through access to chain hotel "reward" points. A large hotel tends to have a larger advertising budget than a small hotel, which enables a large hotel to advertise more broadly and extensively, which in turns makes more likely the possibility that occupants in a large hotel are out of town tourists and business travelers drawn to the City due, in part, to the City's investment in tourism and business infrastructure and services. Lastly, a large hotel may more easily absorb the cost of paying employees a higher wage through the economies of scale in operating a large hotel compared to the costs of operating a small hotel.