Los Angeles hotel executives warn distress to follow wage hike
The Los Angeles City Council will hold a final vote on a proposal to increase minimum wage for hospitality workers to $30 an hour by 2028 on Friday, May 23. If it passes, which most expect it will, and Mayor Karen Bass signs it, distressed hotel sales and skittish investors and developers could follow.
'I've never seen so many hotels on the market right now, and none of them are selling,' Hotel Angeleno owner Mark Beccaria said. 'No one wants to pay anywhere close to what they're worth,' because they know the cost they'll incur owning a hotel in Los Angeles. One expansion has already been killed.
Los Angeles' hotels suffered throughout the pandemic and haven't fully recovered. More labor costs mean more pain. Hotel sales will fall further, Atlas Hospitality Group president Alan Reay believes.
'The higher the wages, the lower the net operating income, the lower the net operating income, the lower the sales price,' Raey explained. Sellers want to sell at what they believe the hotels are worth, but buyers can't purchase at that price while considering operating costs.
Increasing hotel costs when revenue is flat is a concern, Pebblebrook Hotel Trust chairman and CEO Jon Bortz said. Adding that he won't expand his Los Angeles portfolio.
'We won't make any further investment,' Bortz said. 'There's no return on that money…there'll be no transactions in the market other than lenders taking properties back. There'll be no new development—doesn't pencil, doesn't make any economic sense, and it's not financeable.'
The proposal requires hotels with more than 60 rooms and companies that do business at Los Angeles International Airport to increase wages over a three year period ending 2028, the same year the Summer Olympics will be held in the city. For hotel workers, it's a 48-percent increase. But for hotel owners, developers, brokers and investors, it's the last nail in the coffin. Beccaria didn't mince words: 'It's only going to get worse once this goes into effect.'
Hotels will have to reduce services and amenities, raise rates and lay off workers. And when hotels raise rates for stays, people go elsewhere, and they lose business, he said. In anticipation, his hotel has made layoffs. Beccaria's loan comes due next July. Hotel Angeleno has also already defaulted on that loan. He doesn't know that he'll secure another, so he is holding off on renovating. Beccaria may consider selling or choosing another location where he'd get a better return.
Beccaria and Bortz mentioned an earlier piece of legislation that reduced hotel housekeepers' workloads, capping floor space cleaning. Bortz said that was the last straw, but that was before the current proposal. Bortz said he'll probably shrink or eliminate food and beverage at his hotels; Beccaria floated getting rid of valet. In either case, it appears jobs will be lost. Not to mention, it could hurt the Olympics atmosphere.
Bortz suspects hotels will be in poor conditions and provide poor service once the Olympics come around. Beccaria said some hotels are attempting to pull out of their Summer Olympics stay agreements.
'The L.A. hotel industry is in a depression,' Bortz said. 'I'm not exaggerating. It's horrible.'
At ICSC, retail smiles through headache of macro uncertainties
Celebrity restaurants at hotels drive up average room rates, revenue
Stream Realty OK'd for 100K sf warehouse in Cudahy
This article originally appeared on The Real Deal. Click here to read the full story.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
4 hours ago
LA28 organizers confident Trump's latest travel ban won't affect Los Angeles Olympics
LOS ANGELES -- Planning and preparation for the 2028 Los Angeles Olympics has made 'significant progress' and organizers on Thursday expressed confidence that President Donald Trump's latest travel ban won't prevent games participants from entering the U.S. 'It was very clear in the directive that the Olympics require special consideration and I actually want to thank the federal government for recognizing that,' LA28 chairman and president Casey Wasserman said during a news conference at the Los Angeles Convention Center. 'It's very clear that the federal government understands that that's an environment that they will be accommodating and provide for,' he said. 'We have great confidence that that will only continue. It has been the case to date and it will certainly be the case going forward through the games.' International Olympic Committee member Nicole Hoevertsz, who is chair of the Coordination Commission for LA28, anticipates the U.S. government will cooperate, as it did in hosting previous Olympics. 'That is something that we will be definitely looking at and making sure that it is guaranteed as well,' she said. 'We are very confident that this is going to be accomplished. I'm sure this is going to be executed well.' Sixteen IOC members wrapped up a three-day visit Thursday, having inspected multiple venue locations, including Dodger Stadium where they attended a Major League Baseball game between the New York Mets and the Dodgers. The IOC's Coordination Commission was last in the city in November. 'We've seen significant progress,' Hoevertsz said. 'We leave the city very confident with the road ahead.' Noting the games are 1,135 days from opening on July 14, 2028, Wasserman said, "We are in delivery mode now.' Saturday marks the six-month anniversary of the start of the deadly wildfires that devastated Pacific Palisades on the city's west side and the community of Altadena, northeast of downtown. 'In California, there are some obvious things you should be prepared for — earthquakes, wildfires,' Wasserman said. 'You certainly hope that they never happen, but shame on us if we're not prepared for any and every kind of eventuality because that is our job.' Reynold Hoover, who runs the day-to-day work of LA28 as its CEO, said contingency planning is ongoing. 'The wildfires gave us an opportunity within the organization to think a little bit differently about how we're structured and how we impact the community and how we think about sustainability,' he said. From a financial standpoint, Wasserman said he's 'incredibly confident' the games will turn a profit. 'Frankly, losing money is not really an option for us. We understand that while there is a backstop from the city, that is not something we ever intend to get close to,' he said. 'We have built our entire delivery to be tracked against the revenue we create, which is why we are being so aggressive, and have been for a long time, on generating as much revenue as possible.' Wasserman said LA28 is 'well over" 60% in contracted revenue.
Yahoo
6 hours ago
- Yahoo
LA, Olympic officials have 'every confidence' travel ban won't disrupt 2028 Games
The International Olympic Committee and LA28 organizers have 'every confidence' that President Donald Trump's newly announced travel ban won't disrupt the Summer Games or the preparations for them. Speaking after a meeting with the IOC's coordination commission, LA28 chair and president Casey Wasserman said Thursday that Trump's travel ban was clear in carving out an exception for the Olympics. Trump wants to block foreign nationals from 12 countries from coming to the United States and partially restrict the entry of foreign nationals from seven others. Advertisement The ban, scheduled to go into effect Monday, is likely to be challenged in court. 'I actually want to thank the federal government for recognizing that it's the Games writ large,' Wasserman said. 'It's the constituents of people — the IOC members here this week and, for the next three years, the cadence of people from federations and governing bodies and (National Olympic Committees) and broadcasters — that you know so well as they've come to the city pre-Games and during the Games. It's very clear that the federal government understands that that's an environment that they will be accommodating and provide for. 'And so we have great confidence that that will only continue,' Wasserman added. 'It has been the case to date, and it will certainly be the case going forward and through the Games.' Los Angeles and U.S. Olympic and Paralympic Committee officials signed a contract with the IOC in 2017 that promised, among other things, temporary entry to the United States 'without limitation' for 'representatives, employees or other persons acting on behalf of, or representing' the IOC, National Olympic Committees, international sport federations, rights-holding broadcasters, marketing partners, media and the Games' official timekeeper. Advertisement 'We at the IOC have every confidence in the fact that the local authorities and the federal authorities understand that bringing the Games to your country is a big responsibility. It is 206 countries that are preparing to come to the Games,' Nicole Hoevertsz, an IOC vice president who chairs the LA28 coordination commission, said. Those 206 countries include some that would be banned by Trump's order. Afghanistan, Burma, Chad, the Republic of Congo, Equatorial Guinea, Eritrea, Haiti, Iran, Libya, Somalia, Sudan and Yemen are the countries banned while partial suspensions apply to Burundi, Cuba, Laos, Sierra Leone, Togo, Turkmenistan and Venezuela. 'The federal government has given us that guarantee … to make sure that these participants will be able to enter the country,' Hoevertsz added. '… We are very confident that this is going to be accomplished.' While athletes and others affiliated with the Los Angeles Games might be exempt from the ban, it says nothing about fans who ordinarily travel for the Olympics and World Cup. In addition to the 2028 Olympics, the United States is co-hosting the men's World Cup next summer with Canada and Mexico. Advertisement But Wasserman said he doesn't anticipate the travel ban affecting ticket sales, answering with a flat 'No' when he was asked about the possibility. This article originally appeared on USA TODAY: LA28 officials expect Trump administration to honor promises for Games
Yahoo
8 hours ago
- Yahoo
Trump trade, immigration policies clouding World Cup preparations
When the United States, Mexico and Canada launched their joint bid for the 2026 World Cup in the shadow of the Statue of Liberty, the prevailing mood was unmistakeably upbeat. Peace, love and harmony: three countries joining forces in a "United Bid" to roll out the welcome mat for the most popular sporting carnival on the planet, a beacon of hope in a polarised world. "We don't believe sport can solve all the issues in the world," US Soccer chief Sunil Gulati told an audience at a Manhattan skyscraper. "But ... we believe this is a hugely positive signal and symbol of what we can do together in unifying people, especially in our three countries." Fast forward eight years, and the soaring optimism that accompanied the bid's launch in 2017 has run into some stiff geopolitical headwinds, the re-election of President Donald Trump casting a pall of uncertainty over preparations for the event in ways that few could have imagined. While Trump has been a staunch backer of the World Cup from the outset, the US leader has nevertheless taken a combative stance to co-hosts Mexico and Canada since returning to the White House, from trade wars to border crackdowns, while simultaneously calling for Canada to become the "cherished 51st state" of the US. That in turn has led to Canada's Prime Minister Mark Carney vowing to pivot away from the US, declaring in March that "the old relationship we had with the United States -- based on deepening integration of our economies and tight security and military cooperation — is over." - 'Tension's a good thing' - Trump, who enjoys a close friendship with Gianni Infantino, the president of world football's governing body FIFA, the organisers of the World Cup, has laughed off suggestions that trade turmoil could impact the tournament. "Tension's a good thing, I think it makes it much more exciting," Trump said in March when asked how his administration's tariffs against Canada and Mexico might affect the World Cup. Trump's policies, though, already appear to be hurting US tourism, with hotel search site Trivago last month reporting double-digit percentage declines in bookings to the US from visitors from Japan, Canada and Mexico. Figures from the US government's National Travel and Tourism Office released in April found an 11.6% decline in visits to the US from overseas in March compared to a year earlier. Andrew Zimbalist, an economics professor at Smith College in Northampton, Massachussetts whose books include "Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup", believes Trump's economic policies could reduce the number of international fans travelling to the World Cup. But, Zimbalist added, "in terms of the actual playing of the games, the tariffs don't affect athletes." "So unless the political situation internationally deteriorates further and people decide to boycott the games in large numbers, I wouldn't anticipate a very large impact," he told AFP. - 'Seamless experience' for fans? - Other commentators have questioned whether World Cup fans will be deterred by the Trump administration's hardline border crackdown, which has seen visitors from countries including France, Germany, Australia and Canada either turned away at the border or subjected to harsh interrogation and detention. "Will soccer fans really want to crisscross our borders right now — and be squinted at by guards simply because they speak a Romance language or risk being held on a cold floor in a detention cage?," Washington Post columnist Sally Jenkins asked recently. The Trump administration's 2026 World Cup Task Force last month insisted all fans would be welcome, saying football supporters could look forward to a "seamless experience" when visiting the US. Vice President JD Vance though cautioned that foreign visitors would have to leave at the end of the tournament. "We'll have visitors, probably from close to 100 countries," said Vance, the vice-chair of the World Cup task force. "We want them to come. We want them to celebrate. But when the time is up, they'll have to go home." John Zerafa, a Britain-based sports communications strategist, believes the Trump administration may need to "short circuit" current visa processing wait times in order to facilitate large numbers of foreign fans at the World Cup. "I think the US and the Trump administration will go out of their way to try and make that process as smooth as possible," Zerafa told AFP. "But there's also the other part of how that stacks with the MAGA agenda and closing borders. There's a real dichotomy there for Trump and the MAGA base -- you're letting the world in but at the same time you're trying to shut the world out," Zerafa added. "Those two things are very difficult to co-exist, and which one is going to win the day? I can certainly envisage examples of fans applying for tickets, but not being granted visas. And you only need a couple of those stories to emerge in the runup to the World Cup to start painting a difficult backdrop for FIFA and the US." rcw/gj
