A new eight-year labor agreement between the Hotel Association of New York City, representing more than 250 hotels, and the Hotel and Gaming Trades Council (HTC) labor union will deliver a 5% annual raise for hotel employees, resulting in a 50% increase in salaries over the length of the contract.
For some housekeepers, that means a salary of more than $100,000 by 2034.
And in Southern California, the local minimum wage for employees working in hotels in several cities will rise July 1. In Glendale, Long Beach, Los Angeles, Santa Monica and West Hollywood, that rate will become $25 per hour, rising to $30 per hour by July 2030.
Also beginning on July 1, hotels in Los Angeles must make a new payment of $4.25 per hour that goes to each employee’s healthcare benefits.
In San Diego, the minimum wage for employees of larger hotels, convention and event centers and amusement parks increases July 1 to $19 per hour for hotel and amusement-park employees, and $21.06 per hour for convention and event center employees. Both wage rates are scheduled for annual increases that come to $25 per hour on July 1, 2030; annual Consumer Price Index-based increases kick in after that.
What It Means for Hotel Costs Nationwide
Hotel ownership groups and industry consultants say that these new labor deals, especially the agreement in New York, will likely affect hotel-labor costs across America.
“Every other unionized market in the country has been feverishly waiting for finalization on that contract,” said Daniel Lesser, co-founder, president and CEO of LW Hospitality Advisors, in this article from Hotel Management. “It will be looked to as a beacon when other cities come up for renegotiation.”
In fact, “labor organizers in San Francisco, San Diego and Los Angeles are already using NYC’s $100,000 housekeeper benchmark to recalibrate their own negotiating targets,” Alan Reay, president at Atlas Hospitality Group, told Hotel Management.
Because labor accounts for 40% to 50% of a full-service hotel’s operating expenses, a substantial labor-wage hike eats into gross operating profit margins, Reay said. In New York and Southern California, then, already-high prices will probably have to rise further to preserve acceptable profit margins.
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However, in other cities where hotels will negotiate with labor unions in the coming years, the ability to pass through increased costs to customers isn’t a sure thing. As a result, “hotels may evaluate a combination of pricing strategies, operational efficiencies and productivity improvements to help offset increased labor costs while maintaining service levels,” Elie Khoury, COO of Crescent Hotels, told Hotel Management.
This would include technological advances for areas such as front desk, concierge and housekeeping.
“Theoretically, technology is an opportunity to cut costs—but we are in the hospitality business,” Lesser noted.
In cities where labor costs rise higher than hotels can raise rates to offset them, Reay said to expect housekeeping to become strictly an opt-in service, while hotel-operated restaurants become less common, replaced by outside operators who lease the space along with more sophisticated grab-and-go outlets.
