29 (37)
Susana Barrios
From:Theresa Bass
Sent:Monday, June 12, 2023 10:30 AM
To:Public Comment
Subject:FW: \[EXTERNAL\] Economic Impact Studies - Related to Tuesday's Item
Attachments:Oxford Economics - Impacts of Proposed Increase in Minimum Wage for Hotels and
LAX - May 2023.pdf; TE-CHLA - LA ordinance impact analysis - 2023 March.pdf
Begin forwarded message:
From: Lynn Mohrfeld <lmohrfeld@calodging.com>
Date: June 12, 2023 at 8:56:22 AM PDT
To: Ashleigh Aitken <AAitken@anaheim.net>, "Carlos A. Leon" <CLeon@anaheim.net>, Natalie Meeks
<NMeeks@anaheim.net>, Natalie Rubalcava <NRubalcava@anaheim.net>, "Norma C. Kurtz"
<NKurtz@anaheim.net>, Jose Diaz <JoDiaz@anaheim.net>, Stephen Faessel <SFaessel@anaheim.net>
Cc: Berenice Ballinas <BBallinas@anaheim.net>, "Taylor N. Griffin" <TGriffin@anaheim.net>, Cameron
Wessel <CWessel@anaheim.net>, Valeria Sandoval <VSandoval@anaheim.net>, Nadia Villafana
<NVillafana@anaheim.net>, Sarah Bartczak <SBartczak@anaheim.net>, Nam Bartash
<NBartash@anaheim.net>
Subject: \[EXTERNAL\] Economic Impact Studies - Related to Tuesday's Item
Warning: This email originated from outside the City of Anaheim. Do not click links or open attachments
unless you recognize the sender and are expecting the message.
Dear Anaheim Councilmembers:
Regarding Tuesday’s council item on the hotel wage, work rules, and personal safety devices, for your
consideration are two resources while the release of the economic impact study specific to Anaheim is
yet to occur.
Attached are two reports related to the City of Los Angeles detailing the visitation and tax losses from
LA’s proposed $25 wage and the Hotel Worker Protection Ordinance that was enacted in August of last
year. Anaheim’s impact from the ballot measure would be the combination of the impacts from each of
these reports.
Your consideration of a special election is greatly appreciated.
Thank you -
Lynn
Lynn S. Mohrfeld
President + CEO
CA Hotel/Lodging Assn.
_______________________________________________________________________________________________________________________________________________________________________________________________________
__________________
Office: 916.554.2664 |
1
CITY OF LOS ANGELES
HOTEL WORKER PROTECTION ORDINANCE
ECONOMIC IMPACT ANALYSIS
W W W . T O U R I S M E C O N O M I C S . C O M
Prepared for:
California Hotel & Lodging Association
March 14, 2023
2
Tourism Economics is an Oxford Economics company with a
singular objective: combine an understanding of tourism dynamics
with rigorous economics in order to answer the most important
questions facing destinations, developers, and strategic planners.
By combining quantitative methods with industry knowledge,
Tourism economics designs custom market strategies, destination
recovery plans, tourism forecasting models, tourism policy
analysis and economic impact studies.
With over four decades of experience of our principal consultants,
it is our passion to work as partners with our clients to achieve a
destination's full potential.
About Tourism Economics
Oxford Economics is one of the world's leading providers of
economic analysis, forecasts and consulting advice. Founded in
1981 as a joint venture with Oxford University's business college,
Oxford Economics enjoys a reputation for high quality ,
Quantitative analysis and evidence-based advice. For this, it
draws on its own staff of more than 250 professional economists
and analysts; a dedicated data analysis team; global modeling
tools, and a range of partner institutions in Europe, the US and in
the United Nations Project Link. Oxford economics has offices in
London, Oxford, Dubai, Philadelphia and Belfast.
For more information:
info@tourismeconomics.com
3
The California Hotel & Lodging Association (CHLA) engaged
Tourism Economics to analyze the economic impact of the Hotel
Worker Protection Ordinance (HWPO) that took effect in August
2022 within the City of Los Angeles, CA. We developed an
understanding of the HWPO and its impact on hotel operations
and prepared an economic model to quantify its expected impacts.
Key Observations
•Overall, in 2025 as an example year, we estimate that with the
HWPO, Los Angeles will experience:
•6.8% higher hotel average daily rate (ADR)
•5.0% decline in occupied hotel room nights
•$603.3 million of lost direct economic activity,
including $335.8 million less visitor spending and
$267.5 million less hotel capital spending
•These impacts are expected to result in broader losses to the
Los Angeles economy. Specifically, we anticipate that the loss of
visitor spending and loss of hotel capital spending will result in
the:
•loss of 5,856 jobs in other sectors of the economy,
•including the loss of 1,542 direct hotel construction
and renovation jobs.
•Overall, we estimate a:
•$51.5 million decrease in state and local tax revenues
in 2025 as a result of HWPO, reflecting a $4.8 million
EXECUTIVE SUMMARY
increase in lodging taxes due to higher room rates but
declines in other tax categories.
•The HWPO contains several provisions. Of these, the most
significant impact to hotel operations results from workload
limitations for room attendants that restrict the amount of space
they are permitted to clean each day at standard pay. Hotels have
adjusted operations in response to these restrictions, such as by
hiring additional staff or/or paying twice standard pay.
•Overall, as a result of HWPO, hotels are experiencing an
approximate doubling of housekeeping labor costs (room
attendants and managers).
•We quantified how we anticipate this cost increase will impact the
Los Angeles hotel market over time, relative to an alternative
scenario without the HWPO. We have used 2025 as a summary
year, allowing several years for hotel operations and customer
behavior to adapt to the change.
•In our analysis, we anticipate that hotels will continue to respond
to higher labor costs per occupied room by: (1) increasing ADR and
fees, (2) reducing services and staff in other departments, (3)
scaling back planned renovations. We also anticipate that the
development of new hotels in the market will slow.
•As travelers, including meetings and groups, respond to higher
room rates and reduced services, we expect hotel demand will
decline relative to the alternative scenario without the HWPO,
resulting in less visitor spending in Los Angeles.
4
EXECUTIVE SUMMARY
The accompanying figures illustrate impacts due to the HWPO relative to an alternative scenario without the ordinance. We have used
2025 as an example year.
Total lost economic output (business sales)
City of Los Angeles, compared to scenario without HWPO, in millions
Source: Tourism Economics
-$540
-$792
-$982 -$1,018 -$1,060
2023 2024 2025 2026 2027
Total lost jobs and wages in 2025
City of Los Angeles, compared to scenario without HWPO, $ in millions
Source: Tourism Economics
-2,477
-1,542
-1,067
-771
Tourism Construction
Direct jobs Other jobs
-$124 -$116
-$80
-$53
Tourism Construction
Direct wages Other wages
-2,312
-3,544 -$203
-$169
HWPO impact to tourism in 2025
City of Los Angeles, % compared to scenario without ordinance
Source: STR, Tourism Economics
28%
6.8%
-5.0%
1.4%
-4.7%
Increase in
payroll
costs
ADR
increase
Demand
loss
Room
revenue
increase
Visitor
spending
loss
HWPO impact in 2025
City of Los Angeles, in millions
Source: STR, Tourism Economics
-$335.8
-$81.0
-$186.5
Visitor spending loss
Renovation spending
loss
New development
spending loss
5
On June 28, 2022, the Los Angeles City Council approved a new
Hotel Worker Protection Ordinance (HWPO) that went into
effect on August 12, 2022. The HWPO contains several
provisions. Of these, the most significant impact to hotel
operations results from workload limitations for room
attendants. The restrictions include limits on the amount of guest
room space that room attendants may clean in a day. These limits
are reduced in certain cases, such as attendants assigned rooms
to clean that are on several different floors.
Hotels are responding to these restrictions in a variety of ways. In
some cases, room attendants are cleaning more rooms than the
limitation, and as stipulated in HWPO, hotels are paying staff
double the standard rate for each day. The double rate of pay
applies to every hour worked that day including hours worked
before square footage limit has been reached. In other cases,
hotels are hiring additional room attendants, while looking to
reduce other staffing at the property. Some properties are taking
rooms out of inventory temporarily due to lack of staffing.
ORDINANCE SUMMARY
The following are measures from the new Hotel Worker
Protection Ordinance.
1)installation of panic buttons
2)on-call security for hotels with 60+ rooms or annual manager
training with fewer than 60 rooms,
3)leave for employees who activate a panic button
4)documented attendance for annual staff training regarding
maintenance and use of panic buttons
5)signage installation
Daily Square Footage Limitations
•Hotels with less than 45 rooms: Does not apply
•Hotels with 45-60 rooms: 4,000 square feet
•Hotels with 60+ rooms: 3,500 square feet
Square Footage Reductions (500 square feet each)
•Each special attention room or room with rollout bed assigned
in excess of five rooms
•Each additional building assigned
•Each additional floor assigned in excess of two floors
6
The Citywide Hotel Worker Minimum Wage Ordinance was also
amended. Previously, the elevated minimum wage and time off
requirements for hotel workers only applied to workers in hotels
with 150+ guest rooms. Hotels with 60+ rooms are now included
under the same requirements, thus expanding the minimum wage
requirement to cover an additional 17% of Los Angeles hotels.
This is effectively a minimum wage raise from $16.04/hour to
$18.86/hour for that group among additional time off
requirements. The hotel worker minimum wage will adjust
annually with the City of Los Angeles minimum wage.
While 100% of hotels in the City of Los Angeles are affected by
the HWPO measures related to panic buttons, 46% of hotels in
Los Angeles (87% of all rooms) are now also affected by the
square footage cleaning limitations.
ORDINANCE SCOPE
Supply share of Los Angeles hotels
Percent of Los Angeles market share
Hotels Rooms
Hotels with less than 45 rooms 54%13%
Hotels with between 45 and 59 rooms 9%4%
Hotels with between 60 and 149 rooms 17%14%
Hotels with 150+ rooms 20%69%
Source: STR (February 2023)
7
The Hotel Association of Los Angeles fielded a survey of hotel
operators in February 2023 to better understand operational
impacts and general response to the HWPO.
Key results are summarized as follows. Each percentage reflects
the share of hotel operators:
•71% report they are not considering a renovation this year;
•50% report they have postponed maintenance or renovations
that otherwise would have occurred; and,
•75% report they have already reduced staff, services, or taken
other cost containment steps;
•68% report already raising room rates or adding a fee;
•82% report already adding or considering adding an additional
fee specifically for this ordinance.
HOTEL OPERATOR SURVEY
In summary, hotel operators have already been responding to the
HWPO with multiple changes. Many of these changes include
increasing rates or fees and/or decreasing services,
acknowledging that one result will be fewer occupied rooms.
IMPACT
ANALYSIS
9
IMPACT ANALYSIS
We prepared an analysis of impacts to the City of Los Angeles in a
scenario with the HWPO as compared to an alternative scenario
without HWPO.
Approach
As part of this analysis:
•we reviewed the HWPO;
•held discussions with four teams of senior hotel operators in
the City of Los Angeles that have been making operating
changes in response to HWPO and that have been preparing
financial budgets for future periods;
•reviewed written comments and survey responses provided by
hotel operators;
•obtained hotel performance measures from STR, including
historical benchmark data on hotel payroll expenses per
occupied room; and,
•analyzed the scope of properties that will be affected by the
HWPO room cleaning limitations.
We understand that union properties may arrange a HWPO waiver
in connection with a collective bargaining agreement. However, we
assumed that over time, as existing collective bargaining agreements
are renegotiated, operating cost structures at union properties will
also be impacted by HWPO, for example through competition with
non-union properties for staff. As a result, over time HWPO is
expected to result in higher operating costs for effectively all hotels
in the City of Los Angeles.
Analysis overview
Our analysis included four primary steps. We:
1.estimated hotel operating impacts of the HWPO;
2.estimated how occupied room nights and visitor spending would
change in response to higher room rates and reduced services;
3.estimated how hotel renovation activity and new hotel
construction would slow as a result of reduced operating cash
flow; and,
4.quantified the economic impacts of reduced visitor spending and
reduced hotel capital spending.
10
TOURISM IMPACT
•Lastly, reduced spending on hotel renovations will make hotels in
the City of Los Angeles less attractive to travelers over time.
•With higher ADR, but lower demand, hotel revenue is estimated
to increase by only $30.0 million. This will only cover part of the
$110.3 million of increased payroll costs for hotels.
•We quantified the lost business sales, jobs and tax revenues
associated with this decrease in visitor spending.
•Initially, hotels subject to the HWPO are experiencing an
approximately 100% increase in housekeeping payroll costs per
occupied room. This is occurring, for example, as hotels pay twice
the standard rate to room attendants, as they hire additional staff,
and as they allocate staff time to tracking room cleaning
limitations. Hotels subject to HWPO account for 87% of hotel
rooms in the market. Because not all hotels in the market are
covered, and because we expect operations will adapt some over
time, we have assumed the rooms department payroll cost
increase per occupied room will stabilize at about 34.6% higher in
2025.
•Higher payroll costs represent a significant cost increase for
hotels. We estimate this additional cost at $14 per occupied room
night. Hotels must find ways to either increase prices, or reduce
other costs, or both, to help cover the impact to payroll. Overall,
we estimate total payroll costs at City of Los Angeles hotels will
increase by $110.3 million in 2025.
The following describes key aspects of our analysis. All changes refer
to changes in the current situation with HWPO relative to an
alternative scenario without HWPO. In the discussion we have
focused on 2025 as an example year, as it allows time for hotel
operating changes and traveler behavior to adjust.
Tourism impact
•We estimate on average in the market that hotels will increase
ADR by approximately $14.65 (6.8%) by 2025 due to HWPO
(through ADR increases or through added fees).
•As a result of higher ADR and reductions to service levels,
renovations and construction, we expect a decrease of demand
(occupied hotel room nights) of approximately 5.0%.
•With a 5.0% decrease in demand, we estimate a 4.7% decrease in
visitor spending, equivalent to $335.8 million less visitor
spending in 2025.
•Higher ADR will discourage some travelers from staying in the
City of Los Angeles or will cause them to reduce their length of
stay. For example, planners for some meetings and group events
are anticipated to select other markets that offer more
competitive pricing. Some travelers will select other destinations
or choose to stay at hotels that are outside the City of Los
Angeles. Other guests may choose to shorten their trip.
•Reduced service levels as hotels seek to cut other costs, such as by
reducing hours at restaurants, reducing staffing, and closing on-
site amenities, will also impact traveler choices over time.
11
TOURISM IMPACT
•We expect ADR in 2025
will increase by 6.8%
above what ADR would
be without the
ordinance.
•Demand will decline
5.0% due to the higher
rates and reduced
services.
•Room revenue will
increase by 1.4% in 2025.
This additional revenue
will address a small
portion of the increase in
payroll costs.
•In total, over the five-
year period of analysis,
we expect a loss of $1.4
billion of visitor
spending.
HWPO impact to Los Angeles tourism
$ in millions (except ADR increase and increase in payroll per occupied room)
2023 2024 2025 2026 2027 5 yr total
ADR increase (%)7.1%6.9%6.8%6.6%6.4%
ADR increase ($)$14.65 $14.65 $14.65 $14.65 $14.65
Demand loss (%)-2.2%-4.0%-5.0%-5.0%-5.0%
Room revenue increase (%)4.8%2.7%1.4%1.3%1.1%
Room revenue increase ($)$89.1 $53.2 $30.0 $28.1 $26.1
Increase in rooms payroll per occupied
room (%)34.6%34.6%34.6%34.6%34.6%
Increase in rooms payroll per occupied
room ($)$14.00 $14.00 $14.00 $14.00 $14.00
Increase in payroll costs (%)32%29%28%28%28%
Increase in payroll costs ($)$116.3 $112.1 $110.3 $113.7 $117.1
Visitor spending loss (%)-1.9%-3.7%-4.7%-4.7%-4.6%
Visitor spending loss ($)-$119.6 -$250.2 -$335.8 -$353.2 -$370.4 -$1,429.3
Source: STR, Tourism Economics
12
HOTEL CAPITAL SPENDING IMPACT
•With substantially higher
payroll costs and reduced
operating cash flows, we
expect hotel owners will
look for ways to delay or
scale back planned
renovations.
•Also, in a market with
higher operating costs
and lower returns, we
expect fewer new hotels
will be developed.
•Overall, we estimate that
through a combination of
reduced renovations and
new development, hotel
capital spending in Los
Angeles over the five-
year period of analysis
will be reduced by $1.27
billion.
HWPO impact to Los Angeles hotel capital spending
$ in millions
2023 2024 2025 2026 2027 5 yr total
Renovation spending loss (%)-65.0%-59.8%-57.2%-54.4%-54.4%
Renovation spending loss ($)-$82.4 -$79.0 -$81.0 -$81.5 -$86.2
New development spending loss ($)-$132.7 -$158.1 -$186.5 -$190.2 -$194.2
Hotel capital spending loss ($)-$215.1 -$237.1 -$267.5 -$271.7 -$280.5 -$1,271.8
Source: STR, Tourism Economics
13
VISITOR SPENDING ECONOMIC IMPACT
•Lost visitor spending has important
impacts on the local economy. We
estimate that a loss of $335.8 million
in visitor spending in 2025 will result
in total lost business sales of $558.1
million.
•This is expected to result in 3,544
total job losses in the City of Los
Angeles relative to an alternative
scenario without HWPO. These
include jobs at businesses patronized
by visitors, such as restaurants, as
well as jobs at other businesses in
the supply chain, such as specialized
maintenance services, advertising
and professional services.
•State and local taxes are expected to
be $30.0 million lower because of
HWPO in 2025, despite a $4.8
million increase in lodging taxes
resulting from higher ADR levels.
Visitor spending economic impact
in millions (except jobs)
Total 2023 2024 2025 2026 2027
Output -$198.8 -$415.9 -$558.1 -$587.0 -$615.6
GDP -$116.3 -$243.3 -$326.5 -$343.4 -$360.2
Wages and salaries -$72.4 -$151.4 -$203.2 -$213.7 -$224.1
Jobs -1,315 -2,695 -3,544 -3,653 -3,755
Taxes -$13.5 -$49.3 -$72.8 -$77.1 -$81.4
Federal -$15.2 -$31.9 -$42.8 -$45.0 -$47.2
State and local $1.8 -$17.5 -$30.0 -$32.1 -$34.2
Taxes on lodging $14.2 $8.5 $4.8 $4.5 $4.1
Direct
Output -$119.6 -$250.2 -$335.8 -$353.2 -$370.4
GDP -$68.2 -$142.6 -$191.3 -$201.2 -$211.0
Wages and salaries -$44.0 -$92.1 -$123.5 -$129.9 -$136.3
Jobs -919 -1,883 -2,477 -2,553 -2,624
Taxes -$2.9 -$27.2 -$43.1 -$45.9 -$48.7
Federal -$9.3 -$19.4 -$26.0 -$27.4 -$28.7
State and local $6.4 -$7.9 -$17.1 -$18.6 -$20.0
Taxes on lodging $14.2 $8.5 $4.8 $4.5 $4.1
Source: Tourism Economics
14
CONSTRUCTION ECONOMIC IMPACT
•An expected loss in 2025 direct hotel
capital spending of $267.5 million will
negatively affect economic output by
roughly $424.1 million in 2025.
•This corresponds to the loss of
approximately 1,542 direct hotel
construction and renovation jobs.
Construction economic impact
in millions (except jobs)
Total 2023 2024 2025 2026 2027
Output -$341.0 -$375.9 -$424.1 -$430.7 -$444.6
GDP -$180.0 -$198.4 -$223.9 -$227.3 -$234.7
Wages and salaries -$135.6 -$149.4 -$168.6 -$171.2 -$176.8
Jobs -1,936 -2,091 -2,312 -2,301 -2,328
Taxes -$43.3 -$47.7 -$53.9 -$54.7 -$56.5
Federal -$26.1 -$28.7 -$32.4 -$32.9 -$34.0
State and local -$17.2 -$19.0 -$21.4 -$21.8 -$22.5
Taxes on lodging $0.0 $0.0 $0.0 $0.0 $0.0
Direct
Output -$215.1 -$237.1 -$267.5 -$271.7 -$280.5
GDP -$103.9 -$114.5 -$129.2 -$131.2 -$135.5
Wages and salaries -$93.1 -$102.7 -$115.8 -$117.6 -$121.4
Jobs -1,291 -1,394 -1,542 -1,534 -1,552
Taxes -$25.7 -$28.3 -$31.9 -$32.4 -$33.5
Federal -$17.0 -$18.7 -$21.1 -$21.4 -$22.1
State and local -$8.7 -$9.6 -$10.8 -$11.0 -$11.4
Taxes on lodging $0.0 $0.0 $0.0 $0.0 $0.0
Source: Tourism Economics
15
ECONOMIC IMPACT
Total economic impact is the summation of
visitor spending and construction impacts
to the Los Angeles economy.
•The HWPO will negatively impact total
economic output by $982.2 million in
2025 (direct impact $603.3 million).
•GDP will be negatively impacted by
$550.4 million in 2025 (direct impact of
$320.5 million).
Total economic impact
in millions (except jobs)
Total 2023 2024 2025 2026 2027
Output -$539.9 -$791.8 -$982.2 -$1,017.7 -$1,060.3
GDP -$296.3 -$441.7 -$550.4 -$570.8 -$594.9
Wages and salaries -$208.0 -$300.9 -$371.8 -$385.0 -$400.9
Jobs -3,251 -4,786 -5,856 -5,955 -6,083
Taxes -$56.8 -$97.1 -$126.6 -$131.8 -$137.9
Federal -$41.3 -$60.6 -$75.2 -$77.9 -$81.2
State and local -$15.5 -$36.5 -$51.5 -$53.9 -$56.7
Taxes on lodging $14.2 $8.5 $4.8 $4.5 $4.1
Direct
Output -$334.7 -$487.3 -$603.3 -$624.9 -$650.9
GDP -$172.1 -$257.1 -$320.5 -$332.5 -$346.5
Wages and salaries -$137.2 -$194.7 -$239.4 -$247.6 -$257.7
Jobs -2,209 -3,277 -4,018 -4,087 -4,176
Taxes -$28.6 -$55.5 -$75.0 -$78.3 -$82.1
Federal -$26.2 -$38.1 -$47.1 -$48.8 -$50.8
State and local -$2.3 -$17.5 -$27.9 -$29.5 -$31.3
Taxes on lodging $14.2 $8.5 $4.8 $4.5 $4.1
Source: Tourism Economics
1
Economic Impact of City Council Motion
(April 12, 2023) to Amend LWO and LA HWMO
City of Los Angeles, CA
May 2023
2
Key Findings
Economic Impact Analysis
April 12 Motion
Impact to Hotel Operations
Impact to Airport Operations
Net Impact to Wages and Benefits
Minimum Wage Tipping Point
Additional Economic Impact Tables
1
2
3
4
5
6
7
8
TABLE OF
CONTENTS
Key Findings1
4
Key Findings -$25/Hour Minimum Wage
Oxford Economics prepared a comprehensive analysis
of the expected economic impact of an April 12, 2023
motion by Los Angeles City Council (April 12 Motion).
Annual Run-Rate of Losses
$846MM
Decrease in Visitor
Spending
$138MM
Lost State and
Local Tax Revenue,
Including $45MM
of Lost Local Tax
Revenue
$321MM
Lost
Construction
Spending
$1.9B
Lost Business
Sales at Los
Angeles
Businesses
12,187
Lost Jobs,
Including 1,927
Hotel
Construction
Jobs
The April 12 Motion would cause a reduction of
economic activity in the City of Los Angeles.
With a proposed minimum wage of $25 an hour,
less visitor spending and less construction
spending would result in a loss of $1.9 billion of
business sales annually, resulting in 12,187 lost
jobs in the broader City of Los Angeles
economy, and $138 million of lost state and
local tax revenue.
This includes losses such as fewer construction
jobs, fewer restaurant, retail and arts and
entertainment jobs, as well as fewer supply
chain jobs, such as maintenance roles.
Note: Estimates measure total impact of lost visitor spending and hotel construction with an increase of the minimum wage for hotel workers
and airport workers to $25 an hour, expanded health care for hotel and airport workers, and the Hotel Worker Protection Ordin ance, relative to a
baseline scenario (April 12 Motion ($25/hr) relative to LWO).
Source: Oxford Economics
5
Key Findings -$30/Hour Minimum Wage
Annual Run-Rate of Losses
$1.1B
Decrease in Visitor
Spending
$169MM
Lost State and
Local Tax Revenue,
Including $55MM
of Lost Local Tax
Revenue
$342MM
Lost
Construction
Spending
$2.3B
Lost Business
Sales at Los
Angeles
Businesses
14,870
Lost Jobs,
Including 2,053
Hotel
Construction
Jobs
With a proposed minimum wage of $30 an hour,
less visitor spending and less construction
spending would result in a loss of $2.3 billion of
business sales annually, resulting in 14,870 lost
jobs in the broader City of Los Angeles
economy, and $169 million of lost state and
local tax revenue.
This includes losses such as fewer construction
jobs, fewer restaurant, retail and arts and
entertainment jobs, as well as fewer supply
chain jobs, such as maintenance roles.
Note: Estimates measure total impact of lost visitor spending and hotel construction with an increase of the minimum wage for hotel workers
and airport workers to $30 an hour, expanded health care for hotel and airport workers, and the Hotel Worker Protection Ordin ance, relative to a
baseline scenario (April 12 Motion ($30/hr) relative to LWO).
Source: Oxford Economics
6
Key Findings -$30/Hour Minimum Wage
+ Impacts of Proposed Responsible Hotel Ordinance
Annual Run-Rate of Losses
$2.4B
Decrease in Visitor
Spending
$400MM
Lost State and
Local Tax Revenue,
Including $168MM
of Lost Local Tax
Revenue
$421MM
Lost
Construction
Spending
$4.7B
Lost Business
Sales at Los
Angeles
Businesses
30,141
Lost Jobs,
Including 2,526
Hotel
Construction
Jobs
With a proposed minimum wage of $30 an hour
and passage of the proposed Responsible Hotel
Ordinance, less visitor spending and less
construction spending would result in a loss of
$4.7 billion of business sales annually, resulting
in 30,141 lost jobs in the broader City of Los
Angeles economy, and $400 million of lost state
and local tax revenue.
This includes losses such as fewer construction
jobs, fewer restaurant, retail and arts and
entertainment jobs, as well as fewer supply
chain jobs, such as maintenance roles.
Note: Estimates measure total impact of lost visitor spending and hotel construction with an increase of the minimum wage for hotel workers
and airport workers to $30 an hour, expanded health care for hotel and airport workers, and the Hotel Worker Protection Ordin ance, and passage
of the proposed Responsible Hotel Ordinance relative to a baseline scenario (April 12 Motion ($30/hr) and RHO relative to LWO).
Source: Oxford Economics
7
Key Findings
Workers across a range of sectors in Los Angeles will
realize lost wages as a result of the April 12 Motion.
The losses range from $714 million annually to $1.7
billion across the three April 12 Motion scenarios.
Negatively impacted workers include (not limited to):
•Construction
•Restaurants
•Retail
•Transportation
•Maintenance
•Arts and recreation
With reductions in visitor spending and hotel
construction, state and local tax revenue would be
reduced between $138 million and $400 million
annually.
Lost tax revenue must be made up by higher tax rates
on businesses and households, or reduced government
services.
Note: Estimates measure total impact of lost visitor spending and hotel construction relative to LWO.
Source: Oxford Economics
Impact of City Council April 12 Motion
Annual Run-Rate of Losses
Monetary amounts in millions, City of Los Angeles
LWO and
HWPO
April 12
Motion
($25/hr)
April 12
Motion
($30/hr)
April 12
Motion
($30/hr) and
RHO
Lost business sales ($914)($1,915)($2,326)($4,653)
Lost visitor spending ($293)($846)($1,073)($2,398)
Lost construction spending ($269)($321)($342)($421)
Lost wages ($347)($714)($865)($1,716)
Lost jobs (5,643)(12,187)(14,870)(30,141)
Lost state and local tax revenue ($55)($138)($169)($400)
Lost state tax revenue ($43)($94)($114)($232)
Lost local tax revenue ($12)($45)($55)($168)
8
Key Findings
Summary of scenario assumptions:
•LWO: Living Wage Ordinance (LWO), this represents the baseline
without HWPO and without April 12 Motion
•LWO and HWPO: LWO, plus Hotel Worker Protection Ordinance
(HWPO)
•April 12 Motion ($25/hr): LWO, HWPO, plus $25/hr minimum
wage and expanded health care for hotel and airport employees
•April 12 Motion ($30/hr): Same as April 12 Motion ($25/hr), but
showing impact of $30/hr minimum wage
•April 12 Motion ($30/hr) and RHO: Same as April 12 Motion
($30/hr) scenario plus the Responsible Hotel Ordinance (RHO)
Economic Impact Analysis2
10
The combined hotel and airport economic impact shows the result of:
•Hotel: Lost visitor spending and lost hotel construction
(renovation and new construction)
•Airport: Lost visitor spending associated with airline/service
provider labor cost increases
In this analysis, these impacts are additive. The hotel and airport
impacts are the result of higher wage and health care costs.
The economic impact is quantified in terms of direct effects, and total
effects.
•Direct effects refer to the first-round impacts, consisting of the
reduction in visitor spending and hotel construction spending.
•Total effects refer to the direct effects, plus the downstream or
multiplier effects that happen in the local economy as a result of
the direct effect reduction. For example, this includes supply
chain effects as restaurants purchase fewer inputs from
wholesalers, and as employees supported by visitor spending
have less wages and salaries to spend at local businesses.
Economic Impact
City of Los Angeles, CA -Direct and Total Impacts
Combined economic impact: hotel and airport (lost visitor spending and hotel construction)
in millions (except jobs)
Total
Output -$913.7 -$1,915.1 -$2,325.5 -$4,652.8
GDP -$510.2 -$1,091.3 -$1,329.5 -$2,683.9
Wages and salaries -$347.0 -$714.3 -$864.9 -$1,716.3
Jobs -5,643 -12,187 -14,870 -30,141
Taxes -$125.2 -$285.0 -$347.0 -$756.3
Federal -$69.9 -$146.7 -$178.1 -$356.4
State and local -$55.3 -$138.4 -$168.9 -$399.9
State -$43.1 -$93.6 -$114.3 -$232.4
Local -$12.2 -$44.8 -$54.5 -$167.5
Taxes on lodging $4.3 -$1.8 -$3.6 -$73.0
Property taxes -$7.7 -$23.3 -$26.7 -$44.7
Direct
Output -$562.2 -$1,167.0 -$1,415.0 -$2,818.8
GDP -$297.0 -$637.0 -$776.5 -$1,569.4
Wages and salaries -$224.3 -$450.3 -$542.8 -$1,064.4
Jobs -3,865 -8,423 -10,292 -20,941
Taxes -$77.2 -$184.0 -$224.2 -$510.0
Federal -$43.9 -$90.8 -$110.1 -$218.9
State and local -$33.3 -$93.1 -$114.1 -$291.1
State -$25.1 -$56.4 -$69.2 -$142.6
Local -$8.2 -$36.8 -$44.9 -$148.5
Taxes on lodging $4.3 -$1.8 -$3.6 -$73.0
Property taxes -$7.7 -$23.3 -$26.7 -$44.7
Source: Oxford Economics
LWO LWO and HWPO April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
April 12 Motion
($30/hr) and RHO
11
RETAIL
ENTERTAINMENT/REC
FOOD & BEVERAGE
LOCAL TRANSPORTATION
LODGING
AIR TRANSPORTATION
Economic Impact Approach
Our analysis of the economic impact of the April 12 Motion in the City of Los Angeles begins with
actual spending by visitors but also considers the downstream effects of this injection of spending
into the local economy. To determine the total economic impact in Los Angeles, we input visitor
spending into a model created in IMPLAN. The model calculates three distinct types of impact: direct,
indirect, and induced.
The impacts on business sales, jobs, wages, and taxes are calculated for all three levels of impact.
1.Direct Impacts: Visitors create direct economic value within a discreet group of sectors (e.g.,
recreation, transportation). This supports a relative proportion of jobs, wages, taxes, and GDP
within each sector.
2.Indirect Impacts: Each directly affected sector also purchases goods and services as inputs
(e.g., food wholesalers, utilities) into production. These impacts are called indirect impacts.
3.Induced Impacts: Lastly, the induced impact is generated when employees whose wages are
generated either directly or indirectly by visitors spend those wages in the local economy.
IMPLAN is particularly effective because it calculates these three levels of impact –direct, indirect,
and induced –for a broad set of indicators. These include the following:
▪Spending
▪Wages
▪Employment
▪Federal Taxes
▪State Taxes
▪Local Taxes
How visitor spending generates employment and income
DIRECT IMPACTS
Tourism contribution
measured by visitor
spending
TOTAL
IMPACTS
Direct, indirect,
and induced
impacts
SALES
GDP
JOBS
INCOME
TAXES
>>
SUPPLY
CHAIN
EFFECTS
B2B GOODS
& SERVICES
PURCHASED
INCOME
EFFECT
HOUSEHOLD
CONSUMPTION
INDIRECT IMPACTS
Purchases of inputs from suppliers
Suppliers’ own supply chains
INDUCED IMPACTS
Consumer spending out of
employees’ wages:
12
•considered previous research on visitor spending and visitor behavior in
response to price changes;
•gathered data on airport passenger activity at LAX; and,
•prepared a customized IMPLAN input-output model to quantify changes in
visitor spending and hotel construction. This model incorporates industry
data on employment, wages, and sales from the U.S. Census, the Bureau of
Economic Analysis, and the Bureau of Labor Statistics.
In preparing our estimates of impacts in the various scenarios, we focused on
annualized impacts relative to the baseline scenario. These are estimates of
impacts that may take several years to reach stabilization, allowing time for
operators to institute changes and for visitor behavior to respond.
This research is based on data we gathered, our discussions with local
hotel operators, and airline / service provider operators at Los Angeles
International Airport, our understanding of the hotel and airline sectors, and
our customized economic impact models.
As part of our research, we:
•obtained hotel operating statistics from STR/Costar, the leading provider
of hotel statistics;
•researched minimum wage research by academic researchers and think
tank organizations;
•prepared economic models to help quantify changes in hotel and airport
operations;
•conducted telephone interviews with multiple hotel operators, a major
airline, and a major airline service provider to gain an understanding of
how operators would respond to wage increases, and some of the
factors involved;
•considered previous research we have done on the HWPO for the
California Lodging Association;
Methods and Data Sources
April 12 Motion3
14
On April 12, 2023, the Los Angeles City Council moved for a new draft
of amendments (April 12 Motion) to the Living Wage Ordinance (LWO) and
the Hotel Worker Minimum Wage Ordinance (LA HWMO).
April 12 Motion
The following provisions would apply directly to the LWO and HWPO
specifically regarding airport and hotel workers.
•Raise the hourly minimum wage to $25 in 2023, and by $1 every year
thereafter, to reach $30 an hour by 2028. This is a 39% increase to
airport workers under the LWO and a 33% increase for hotel workers
under the HWPO.
•Adjust the health care credit to meet the average cost of healthcare
coverage, add minimum health benefit requirements including family
coverage, and require transparency around health care payments.
April 12 Motion
Los Angeles City Council
Note: In the hotel graph, the dark blue line follows inflation growth since
2015, which is the same as the grey inflation line in the airport graph.
Living Wage Minimum for Airport Employees
Los Angeles
Source: City of Los Angeles, Oxford Economics
Hotel Employee Minimum Wage
Los Angeles
Source: City of Los Angeles, Oxford Economics
$18.04
$25 $26 $27 $28 $29 $30
2015 2016 2018 2020 2022 2024 2026 2028
With motion
Without motion
Following
inflation growth
since 2015
39%
$18.86
$25 $26 $27 $28 $29 $30
2015 2016 2018 2020 2022 2024 2026 2028
33%
With motion
Without motion
following
inflation growth
since 2015
15
Ordinance Summary
•The Living Wage Ordinance (LWO)
•The LWO currently requires airport employers to pay workers $18.04
an hour at a minimum, which is above the city minimum wage at
$16.04 per hour.
•The LWO currently requires airport employers to pay workers an
additional health wage minimum of $5.77 per hour if they don’t offer
health insurance.
•The Hotel Worker Protection Ordinance (HWPO)
•The HWPO currently requires a minimum of $18.86 per hour for hotel
workers (hotels with 60 rooms or more).
•Amended the previous minimum wage scope to hotels with 60 rooms
or more (previously 150+ rooms) which expanded to an additional 17%
of Los Angeles hotels.
•If a room attendant cleans more than 3,500 square feet in a day (60
room hotel or more) their pay rate doubles for the whole day.
•The Responsible Hotel Ordinance –Was not passed by city council but is on
the 2024 voting ballot.
•Voucher program would allow the otherwise unhoused to book vacant
rooms.
•New hotel development that demolishes or converts existing housing
requires projects to include new affordable housing on a one-to-one
basis.
•Unprecedented annual permitting process via the appointed Police
Commission.
Impact to Hotel Operations4
17
Ordinance & Hotel Summary
•The Hotel Worker Protection Ordinance (HWPO)
•The HWPO contains several provisions. Of these, the most
significant impact to hotel operations results from workload
limitations for room attendants that restrict the amount of space
they are permitted to clean each day at standard pay.
•Overall, as a result of HWPO, hotels are experiencing an
approximate doubling of housekeeping labor costs (room
attendants and managers).
•April 12 Motion
•The motion stipulates an increase in the minimum wage for hotel
workers from $18.86 to $25 per hour.
18
Impact to hotel operations
•Housekeeping
•Hotels have very limited ability to respond to increased
housekeeping costs through cost savings measures within
housekeeping. As a result, hotels must either attempt to pass on
cost increases to customers or find other operational changes.
•Food and beverage
•Food and beverage operations such as restaurants and room service
have very low, if any, profitability for hotels. With HWPO and the April
12 Motion, hotels are expected to reduce hours, close outlets,
eliminate room service and reduce positions.
•Hotels will also reduce menu selections and raise prices. For
example, one operator will consider closing the restaurant and
offering a bar menu with five items, including a $45 hamburger.
•Banquet and catering are important to hotels’ ability to attract group
business, such as business events. Higher wage costs are expected
to make Los Angeles hotels some of the most expensive places to
hold a business event. Many business events have a choice of
destinations and will shift business to other markets.
•The April 12 Motion does not have an exemption or lower rate for
tipped employees like many union hotels have in their collective
bargaining agreements. Tipped employees will make more than
other hotel employees, resulting in stark differences between
positions.
•Overall impacts to operations
•Payroll costs are already the highest operating cost of hotels . For example,
total payroll costs per occupied room at a custom set of hotels considered
in this analysis reached $120, representing 56% of total operating expenses
per occupied room of $215 (expenses before gross operating profit).
•An increased minimum wage affects not only employees currently earning
at or near the minimum wage, it also requires increases in other positions to
help maintain premiums for positions with greater responsibility. For
example, the wage for a lead role with a $3 to $5 premium, must also be
increased. This increases the overall cost of minimum wage increases.
•Analysis assumes health care expansion equivalent to a 30% increase in
payroll costs, on average.
•RHO analysis assumes a large city program with prevalent use of housing
stay vouchers across a large range of hotel properties with little ability for
hotels to manage negative impact on perceptions of potential travelers,
particularly leisure and group.
•In response to higher costs, we anticipate hotels will:
•Reduce staff hours and positions by reducing F&B and other hotel
services and reducing non-essential maintenance and upkeep.
•Reduce funding and devotion of staff time to community involvement.
•Increase room rates, charge additional fees, raise menu and catering
pricing.Experience a decline in demand from guests, resulting in fewer
occupied guest rooms (particularly leisure and group).
19
Impact to hotel operations
•Impacts to renovations
•Hotels will have significantly reduced funds for renovations, and
hotel owners will have reduced interest in investing in the upkeep
of Los Angeles hotels and valuation decline due to increased
costs.
•Examples from hotel operators include plans to delay renovations
and plans to cancel projects for expanding new space that would
have supported new jobs (e.g., adding a bar in unused space).
•Impacts to new construction
•New construction of hotels will slow significantly. The profitability
of the market will be substantially reduced, making it difficult to
justify new investment.
•Also, the market gains a reputation for unpredictable negative
policies, further discouraging new investment.
•Reduced new construction means a loss of construction activity
as well as a loss of the jobs and tax revenue supported by
additional visitors.
20
Hotel Performance Is Still Below 2019 Levels
Hotel Demand, Real ADR, Real Room Revenue, and Occupancy since 2015
Los Angeles hotels are still operating
below pre-pandemic levels.
•Hotel demand (occupied room
nights) in 2022 was down 10%
from 2019 levels.
•Real hotel ADR in 2022 was down
5% from 2019 levels.
•Real room revenue in 2022 was
down 15% from 2019 levels.
•Hotel occupancy in 2022 was
down 12% from 2019 levels.
Real dollar values are adjusted for
inflation based on CPI and shown in
2022 dollars.
Hotel Demand
Los Angeles, CA; in millions
Source: STR, Oxford Economics
9.23 9.25 9.36 9.79 9.99
5.12
7.23
8.95
2015 2016 2017 2018 2019 2020 2021 2022
-10%
Hotel ADR, Real
Los Angeles, CA
Source: STR, Oxford Economics
$204
$219 $219 $219 $212
$163 $174
$201
2015 2016 2017 2018 2019 2020 2021 2022
-5%
Room Revenue, Real
Los Angeles, CA; in billions
Source: STR, Oxford Economics
$1.89
$2.03 $2.05 $2.14 $2.12
$0.84
$1.26
$1.80
2015 2016 2017 2018 2019 2020 2021 2022
-15%
Hotel Occupancy
Los Angeles, CA
Source: STR, Oxford Economics
80%81%79%80%81%
45%
61%
71%
2015 2016 2017 2018 2019 2020 2021 2022
-12%
21
Historical Rooms Payroll Increase
City of Los Angeles, CA
In additional to demand and ADR that is below pre-pandemic levels, hotels have experienced
strong increases in payroll costs.
Rooms department payroll, which includes housekeeping, as well as staff such as front desk,
guest relations, and reservations, has increased to $55.47 per occupied room during the most
seven-month period since enactment of the HWPO in August 2022. This represents a 92%
increase relative to the six-month period ending September 2021. Part of this increase reflects
steps by hotels to restore staffing levels post-pandemic, but it also reflects the impacts of tight
labor markets and the HWPO.
Total payroll per occupied room increased to almost $120 in the seven-month period ending
March 2023. This includes all hotel staff.
Rooms Payroll Per Occupied Room Comparison
City of Los Angeles, CA; Selected Non-Union Hotels
Source: STR; Oxford Economics
$55.47
$41.32
$35.93
$28.94
Sep-22Apr-22Oct-21Apr-21
totototo
Mar-23Aug-22Mar-22Sep-21
34%
15%
24%
92%
Total Payroll Per Occupied Room Comparison
City of Los Angeles, CA; Selected Non-Union Hotels
Source: STR; Oxford Economics
$119.82
$91.74
$82.24
$63.17
Sep-22Apr-22Oct-21Apr-21
totototo
Mar-23Aug-22Mar-22Sep-21
31%
12%
30%
90%
22
Los Angeles is estimated to lose $293 million of
visitor spending annually from the already
enacted HWPO.
With a $25 minimum wage and increased health
care, this loss increases to $750 million per year.
With the increased minimum wage in the April 12 Motion ($25/hr)
scenario, we expect hotels will realize an increase to payroll costs of
$339.0 million, even after reducing hours and staffing. Hotels will be
forced to raise ADR, causing a -15% loss in demand relative to the
LWO only, and only generating an additional $21.5 million of room
revenue, contributing to reduced profits/increased losses.
Decreased demand (occupied rooms) will result in a loss of $750
million of visitor spending on an annual basis.
Ordinance Scenarios: Hotel Operations
City of Los Angeles, CA
Ordinance scenarios
Relative to LWO; in millions (except ADR increase)
ADR increase (%)6.8%19.0%22.5%20.3%
ADR increase ($)$14.00 $39.11 $46.32 $41.79
Demand loss (%)-5.0%-15.0%-17.2%-35.1%
Demand loss (room nights)-0.45 -1.36 -1.56 -3.19
Room revenue increase (%)1.5%1.2%1.4%-21.9%
Room revenue increase ($)$27.3 $21.5 $26.7 -$410.1
Increase in housekeeping payroll (%)82.96%160.8%189.4%122.1%
Increase in housekeeping payroll ($)$114.0 $220.9 $260.3 $167.8
Increase in total payroll (%)13.8%46.3%57.6%21.7%
Increase in total payroll ($)$101.2 $339.0 $421.1 $158.5
Visitor spending loss (%)-4.6%-11.9%-14.8%-35.7%
Visitor spending loss ($)-$293.1 -$750.1 -$932.6 -$2,257.6
Source: STR, Oxford Economics
LWO LWO and
HWPO
April 12
Motion
($25/hr)
April 12
Motion
($30/hr)
April 12
Motion
($30/hr) and
RHO
23
Los Angeles is estimated to lose $269 million in
hotel capital spending annually from the already
enacted HWPO.
With a $25 minimum wage and increased health
care, this loss increases to $321 million per year.
Hotels have already started delaying new renovations after the
HWPO became effective in August 2022. In the April 12 Motion
($25/hr) scenario we expect renovation spending to decrease $90.2
relative to the LWO.
We expect the April 12 Motion ($25/hr) scenario to reduce
development spending by $230.9 million annually relative to the
LWO.
This results in a combined hotel capital spending (hotel construction)
loss of $321.2 million relative to the LWO.
Ordinance Scenarios: Hotel Capital Spending
City of Los Angeles, CA
Hotel Capital Spending
Relative to LWO; $ in millions
Renovation spending loss ($)-$82.5 -$90.2 -$93.5 -$101.2
Renovation spending loss (%)-75%-82%-85%-92%
New development spending loss ($)-$186.52 -$230.94 -$248.70 -$319.76
Hotel capital spending loss ($)-$269.05 -$321.16 -$342.23 -$420.98
Source: STR, Oxford Economics
April 12
Motion
($30/hr) and
RHO
LWO LWO and
HWPO
April 12
Motion
($25/hr)
April 12
Motion
($30/hr)
Impact to Airport Operations5
25
Ordinance & Airport Summary
•April 12 Motion
•The motion stipulates an increase in the minimum wage for airport workers
from $18.06 to $25 per hour.
•The motion also includes adjustments to the health care credit to meet the
average cost of healthcare coverage, add minimum health benefit
requirements including family coverage, and require transparency around
health care payments.
•Living Wage Ordinance (LWO) -Airport Employees:
•There are multiple categories of stakeholders affected by the ordinance at LAX.
•Los Angeles World Airports (LAWA): Operating airport
•Airlines: Operating flights
•Service providers: Providing services to airlines, such as baggage handling,
cleaning planes, wheelchair service
•Concessionaires: operating airport concessions
•Our analysis focuses on:
•Airlines and service providers combined
•We did not include LAWA staff costs in the analysis as we do not yet have clear
understanding of the potential impact of the Motion.
•LAWA has a budgeted FY2023 headcount of 3,584 full and part-time
positions, with annual personnel costs of $497.5 million. Of these,
approximately 2,000 are in operations and maintenance, or public safety
and security.
26
Ordinance Scenarios: Airline/Service Providers
•Airline/service providers
•Airlines rely on direct airline staff and staff of service providers to
operate at LAX.
•Both the airlines and the service providers have experienced the
impact of previous cost increases and tight labor market
conditions and have worked extensively to find efficiencies and
limit cost increases. As a result, there is very little flexibility to
absorb further cost increases without passing the full cost on to
passengers.
•With previous labor cost increases, airlines and service providers
have looked for ways to reduce the staff positions assigned to
each flight. For example, to reduce costs, an airline and service
provider may decide to eliminate 16 labor hours associated with
the process to turn a flight (deplane passengers, ready plan for
departure, enplane passengers). This would be accomplished by
cutting four positions with four hours each.
•Eventually there is a limit to this type of cost management, for
example, as further reductions place a greater burden on
remaining staff, and result in planes that are less clean.
•In scenarios with the April 12 Motion, we expect airlines and
service providers will attempt to pass on a large portion of cost
increase to passengers and will make further reductions in
staffing and service levels.
27
Impact to Airline/Service Providers
In the April 12 Motion ($25/hr)
scenario, we expect 1.3 million fewer
passengers than the LWO scenario.
With the increased minimum wage in the April 12
Motion ($25/hr) scenario, and the shift to expanded
health care, we expect a $10.04 in labor costs per
enplaned passenger for airline and service providers
combined. This is expected to result in the loss of 1.3
million passengers relative to the LWO. The increase
in labor costs represents an increase of 34.8% relative
to the LWO, representing $342.8 million of additional
costs.
We anticipate the decline in passenger volume and
staff reductions per flight will result airline and service
provider job losses that will offset a part of the labor
cost increase.
Airline and service provider labor costs
Wages and health care
Estimated incremental labor costs per enplaned passenger $10.04 $14.70 $14.70
Lost passengers (enplanements and deplanements)(1,342,732) (1,964,526) (1,964,526)
Airline and service provider aggregate costs
Baseline cost without minimum wage increase and health care expansion
(in millions)$984.0 $984.0 $984.0
Incremental cost with minimum wage increase and health care expansion
(in millions)342.8 501.5 501.5
Total cost with minimum wage increase and healthcare expansion (in
millions)$1,326.8 $1,485.6 $1,485.6
Percentage difference relative to baseline 34.8%51.0%51.0%
Potential cost reduction due to reduction in passenger volume (in
millions)($26.1)($42.8)($42.8)
Potential cost reduction due to staffing reductions (in millions)(66.3) (89.1) (89.1)
Net increase to airline and service provider labor costs relative to baseline
(in millions)$1,234.4 $1,353.7 $1,353.7
Percentage difference relative to baseline 25.4%37.6%37.6%
LWO LWO and
HWPO
April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
April 12 Motion
($30/hr) and
RHO
28
Impact to Airline/Service Providers
In the April 12 Motion ($25/hr)
scenario, we expect a loss of $95.8
million of visitor spending relative to
the LWO scenario.
With the increased minimum wage in the April 12
Motion ($25/hr) scenario, and the shift to expanded
health care, we expect higher fares and reduced
service levels will result in approximately 671,000
fewer passenger enplanements annually. This will
result in the loss of approximately 131,000 annual
overnight visitors to the City of Los Angeles,
representing $95.8 million of lost visitor spending.
Impact to concession activity and visitor spending
Lost concessions
Lost enplanements -671,366 -982,263 -982,263
Gross concession revenue per enplanement $12.11 $12.11 $12.11
Lost gross concession revenue (in millions)-$8.13 -$11.90 -$11.90
Lost visitor spending
Lost visitors (overnight, City of Los Angeles)(130,835) (191,423) (191,423)
Lost visitor spending (in millions, City of Los Angeles)-$95.8 -$140.2 -$140.2
LWO LWO and
HWPO
April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
April 12 Motion
($30/hr) and
RHO
29
Ordinance Scenarios: Concessionaires
•Concessionaires
•LAWA reported gross concession revenue of $366.3 million during
FY2022, including significant amounts of in-terminal revenue,
such as duty free, food and beverage, and advertising; as well as
off-terminal revenue, such as auto parking and rent-a-car.
•We did not specifically analyze the impact of the April 12 Measure
on labor costs and operations across these categories of
concessions, due to the tight timeline on this analysis.
•Based on our understanding of operations such as airport
concession F&B, we would anticipate that the April 12 Measure
would represent a significant increase in operating cost that
would cause most operators to institute significant price
increases, reduce hours, reducing staffing and close outlets. The
result would include fewer staff positions, fewer staff hours,
increased costs for passengers, and decreased passenger
satisfaction with the airport. Ultimately, we expect this would
result in some reduction in passenger volumes.
Net Impact to Wages and Benefits6
31
We estimated the impacts to wages and benefits on a net basis as well. We
started with the lost wages and benefits as a result of lost visitor sales and
hotel construction, and we added the increased wages and benefits at hotels
and the airport, including induced, downstream, effects. The net result is
shown in the last row. This shows:
•In the LWO and HWPO scenario, there is a net reduction to wages and
benefits of $222.8 million;
•In the April 12 Motion ($25/hr) scenario, the increase to hotel and airport
wages and benefits is narrowly greater than the loss in visitor spending
and hotel construction, resulting in a net increase of $8.5 million; and,
•In the April 12 Motion ($30/hr) scenario, the increase to hotel and airport
wages and benefits is greater than the loss in visitor spending and hotel
construction, resulting in a net increase of $104.9 million; and,
•In the April 12 Motion ($30/hr) and RHO scenario, there is a net reduction
to wages and benefits of $1.1 billion.
In each of these scenarios, we anticipate some hotel and airport workers will
lose hours and others will lose their job, with higher wages earned by certain
remaining employees. The increase of wages and benefits will accrue to
certain remaining workers at hotels and the airport, while the losses will
affect certain other hotel and airport employees, and across a range of
sectors, including jobs in construction, as well as F&B, and downstream
services such as maintenance and wholesale distribution.
Net Impact to Wages and Benefits
Net impact to wages and benefits
in millions, annual impact
Impact to wages and benefits
Lost wages and benefits due to visitor
sales and hotel construction -$347.0 -$714.3 -$864.9 -$1,716.3
Increased hotel wages and benefits $101.2 $339.0 $421.1 $158.5
Increased airport wages and benefits $0.0 $250.4 $369.7 $369.7
Induced effect of net change to wages
and benefits $22.9 $133.5 $179.1 $119.6
Net total impact to wages and benefits -$222.8 $8.5 $104.9 -$1,068.6
Source: Oxford Economics
LWO LWO and HWPO April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
April 12 Motion
($30/hr) and RHO
Minimum Wage Tipping Point7
33
Minimum Wage Tipping Point
•In many situations, researchers examining the impact of minimum wage
increases are looking at situations with either small changes to a
minimum wage, or a large change that still results in a wage that is low
relative to other wages.
•That such studies do not generally find strong indication of large
negative employment effects does provide good guidance for a situation
in which the wage increase is large, and results in a wage that is at a level
well above more typical entry-level wages.
•In the economic literature, there has been evidence that large hikes that
cross a tipping point threshold from low minimum wage -to-median
earnings to high minimum wage-to-median earnings cause significant
declines in employment among low-income workers.
•Thus, while the employment impact of minimum wage increases is
debated, there is a foundation of evidence to suggest that large increases
in the minimum wage, particularly above a certain threshold value, can
lead to notable declines in employment among the most vulnerable
workers.
Research examples
•The 1966 amendment to the Fair Labor Standards Act, which raised the
national minimum wage 28% to $13.54 per hour in 2022 dollars and
extended coverage to an additional 9.1 million workers, was found to
significantly lower employment rates in certain subgroups, such as
African-American men, who experienced a sharp and significant decline
in employment during the year and annual hours worked.
•During the 41% Federal minimum wage hike between July 23, 2007 and
July 24, 2009 from $5.15 to $7.25, employment among low-wage
workers fell. In addition, this increase led to a reduction in upward
mobility among low-skilled workers by limiting their access to
opportunities for accumulating work experience.
•France has been plagued by high unemployment, and high youth
unemployment in particular, a feature often attributed to the relatively
high minimum wage. In France, the minimum wage is relatively high –
11.52 euros per hour as of May 1, 2023 or about $12.63 per hour. The
2019 French minimum wage increase in 2019 directly affected 13.4% of
workers. Comparatively, in the U.S. approximately 1.1% of workers were
at or below the Federal minimum wage in 2019.
34
Minimum Wage Tipping Point (continued)
•In Denmark, when workers turn 18, they become eligible for the adult rate
–approximately a 40% increase to a level comparable to a $15 minimum
wage. This rise in the wage requirement has been found to cause a 33%
drop in the employment rate and a 45% fall in hours worked for those
impacted.
•Significant increases in minimum wages have also been found to impact
growth in the number of business establishments. Following Hungary’s
minimum wage increase in 2001 from 35% of median earnings to 50%,
an estimated 30,000 minimum wage workers lost their jobs (10.3% of
total minimum wage workers) as firms substituted labor with capital. Not
only did contemporaneous employment decline as a result of this
minimum wage hike, but employment growth at the firms most affected
by the minimum wage hike declined in future periods.
References cited
•Bailey, Martha J., John DiNardo, and Bryan A. Stuart. 2020. “The
Economic Impact of a High National Minimum Wage: Evidence From the
1966 Fair Labor Standards Act.” NBER Working Paper 26926.
•Clemens, Jeffrey, and Michael Wither. 2019. “The Minimum Wage and
the Great Recession: Evidence of Effects on the Employment and Income
Trajectories of Low-Skilled Workers.” Journal of Public Economics 170
53–67.
•Manning, Alan. 2021. “The Elusive Employment Effect of the Minimum
Wage.” Journal of Economic Perspectives 35 3-26.
•Kreiner, Claus Thustrup, Daniel Reck, and Peer Ebbesen Skov. 2020. “Do
Lower Minimum Wages for Young Workers Raise Their Employment?
Evidence from a Danish Discontinuity.” Review of Economics and
Statistics 102 (2): 339–54.
•Harasztosi, Peter, and Attila Lindner. 2019. “Who Pays for the Minimum
Wage?” American Economic Review 109 (8): 2693–2727.
Additional Economic Impact Tables8
36
The accompanying table shows the impact of lost visitor spending due
to hotel labor cost increases.
The direct impact loss of visitor spending in the April 12 Motion ($25/hr)
scenario relative to the LWO scenario is shown as $750.1 million of
reduced output (business sales).
Economic Impact: Hotel Visitor Spending
City of Los Angeles, CA -Direct and Total Impacts Hotel visitor spending economic impact
in millions (except jobs)
Total
Output -$487.2 -$1,246.7 -$1,550.0 -$3,752.4
GDP -$285.0 -$729.4 -$906.8 -$2,195.3
Wages and salaries -$177.4 -$453.9 -$564.3 -$1,366.1
Jobs -3,221 -8,243 -10,249 -24,811
Taxes -$71.0 -$193.1 -$237.8 -$631.3
Federal -$37.3 -$95.5 -$118.8 -$287.5
State and local -$33.7 -$97.5 -$119.1 -$343.8
Taxes on lodging $4.3 $3.4 $4.3 -$65.2
Property taxes -$7.7 -$23.3 -$26.7 -$44.7
Direct
Output -$293.1 -$750.1 -$932.6 -$2,257.6
GDP -$167.0 -$427.3 -$531.3 -$1,286.2
Wages and salaries -$107.8 -$275.9 -$343.1 -$830.6
Jobs -2,251 -5,761 -7,162 -17,339
Taxes -$45.1 -$126.8 -$155.5 -$432.0
Federal -$22.7 -$58.1 -$72.2 -$174.9
State and local -$22.4 -$68.7 -$83.2 -$257.1
Taxes on lodging $4.3 $3.4 $4.3 -$65.2
Property taxes -$7.7 -$23.3 -$26.7 -$44.7
Source: Oxford Economics
LWO and HWPO April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
April 12 Motion
($30/hr) and RHOLWO
37
The accompanying table shows the impact of reduced hotel
construction activity as a result of higher labor costs at hotels.
The direct impact loss of $321.2 million of reduced hotel construction
spending in the April 12 Motion ($25/hr) scenario relative to the LWO
scenario is shown as reduced output (business sales).
Economic Impact: Hotel Construction
City of Los Angeles, CA -Direct and Total Impacts Hotel construction economic impact
in millions (except jobs)
Total
Output -$426.5 -$509.1 -$542.5 -$667.4
GDP -$225.1 -$268.8 -$286.4 -$352.3
Wages and salaries -$169.6 -$202.4 -$215.7 -$265.3
Jobs -2,421 -2,890 -3,080 -3,789
Taxes -$54.2 -$64.7 -$68.9 -$84.8
Federal -$32.6 -$38.9 -$41.5 -$51.0
State and local -$21.6 -$25.7 -$27.4 -$33.7
Taxes on lodging $0.0 $0.0 $0.0 $0.0
Property taxes $0.0 $0.0 $0.0 $0.0
Direct
Output -$269.0 -$321.2 -$342.2 -$421.0
GDP -$130.0 -$155.1 -$165.3 -$203.4
Wages and salaries -$116.5 -$139.1 -$148.2 -$182.3
Jobs -1,614 -1,927 -2,053 -2,526
Taxes -$32.1 -$38.3 -$40.8 -$50.2
Federal -$21.2 -$25.3 -$27.0 -$33.2
State and local -$10.9 -$13.0 -$13.8 -$17.0
Taxes on lodging $0.0 $0.0 $0.0 $0.0
Property taxes $0.0 $0.0 $0.0 $0.0
Source: Oxford Economics
LWO LWO and HWPO April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
April 12 Motion
($30/hr) and RHO
38
The accompanying table shows the impact of reduced visitor
spending and reduced hotel construction activity as a result of
higher labor costs at hotels.
Economic Impact: Total Hotel Impact
City of Los Angeles, CA -Direct and Total Impacts Total hotel economic impact
in millions (except jobs)
Total
Output -$913.7 -$1,755.8 -$2,092.5 -$4,419.8
GDP -$510.2 -$998.1 -$1,193.2 -$2,547.6
Wages and salaries -$347.0 -$656.3 -$780.0 -$1,631.5
Jobs -5,643 -11,134 -13,329 -28,600
Taxes -$125.2 -$257.7 -$306.7 -$716.1
Federal -$69.9 -$134.5 -$160.3 -$338.6
State and local -$55.3 -$123.3 -$146.5 -$377.5
Taxes on lodging $4.3 $3.4 $4.3 -$65.2
Property taxes -$7.7 -$23.3 -$26.7 -$44.7
Direct
Output -$562.2 -$1,071.2 -$1,274.8 -$2,678.6
GDP -$297.0 -$582.5 -$696.6 -$1,489.5
Wages and salaries -$224.3 -$415.0 -$491.3 -$1,012.8
Jobs -3,865 -7,688 -9,215 -19,865
Taxes -$77.2 -$165.1 -$196.3 -$482.2
Federal -$43.9 -$83.4 -$99.2 -$208.1
State and local -$33.3 -$81.7 -$97.1 -$274.1
Taxes on lodging $4.3 $3.4 $4.3 -$65.2
Property taxes -$7.7 -$23.3 -$26.7 -$44.7
Source: Oxford Economics
LWO LWO and HWPO April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
April 12 Motion
($30/hr) and RHO
39
The accompanying table shows the impact of reduced visitor
spending as a result of higher labor costs for airlines/service
providers at the airport.
Economic Impact: Airport Visitor Spending
City of Los Angeles, CA -Direct and Total Impacts Airport visitor spending economic impact
in millions (except jobs)
Total
Output -$159.2 -$233.0 -$233.0
GDP -$93.2 -$136.3 -$136.3
Wages and salaries -$58.0 -$84.8 -$84.8
Jobs -1,053 -1,541 -1,541
Taxes -$27.3 -$40.2 -$40.2
Federal -$12.2 -$17.9 -$17.9
State and local -$15.1 -$22.4 -$22.4
Taxes on lodging -$5.2 -$7.8 -$7.8
Property taxes $0.0 $0.0 $0.0
Direct
Output -$95.8 -$140.2 -$140.2
GDP -$54.6 -$79.9 -$79.9
Wages and salaries -$35.2 -$51.6 -$51.6
Jobs -736 -1,077 -1,077
Taxes -$18.8 -$27.8 -$27.8
Federal -$7.4 -$10.9 -$10.9
State and local -$11.4 -$17.0 -$17.0
Taxes on lodging -$5.2 -$7.8 -$7.8
Property taxes $0.0 $0.0 $0.0
Source: Oxford Economics
April 12 Motion
($30/hr) and RHOLWOLWO and HWPO April 12 Motion
($25/hr)
April 12 Motion
($30/hr)
40
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