Update: Los Angeles’ Citywide Hotel Minimum Wage Ordinance Is Already Having Disastrous Effects on the Local Economy
The City of Los Angeles’ Hotel Worker Minimum Wage Ordinance (“Ordinance”), which was adopted in May of 2025 and became effective in September of 2025, has already caused significant damage to the City of Los Angeles, its hotel industry, and the industries that work in partnership with these larger hotels. This Ordinance raised the minimum wage for hotel workers working in a hotel with at least 60 rooms to $22.50 an hour nearly overnight. Unfortunately, this Ordinance significantly increased the cost of doing business for those in the larger hotel industry at a time when the hotel industry was already struggling with low demand for hotels and limited ability to recoup costs by simply raising prices.
A recent study published in February of 2026 by the Hospitality Education and Research Organization of Los Angeles (“HERO”) highlights just how devastating this new Ordinance has been for the industry. In fact, as of the first six months of the new Ordinance going into effect, the statistics show an overwhelming and devastating impact on the city’s hotel industry. HERO’s study offers the following statistics:
-6% (650 jobs) of existing hotel jobs have already been eliminated or are at risk of being eliminated
-14 hotel restaurants are expected to close within the year
-the cost of labor due to the new hotel worker minimum wage is expected to increase labor costs nearly 90% from 2024 to 2028
-58% of Los Angeles city hotels are expected to be unprofitable by the end of this year.
These are massive percentages for the City of Los Angeles’ hotel industry. This is not a county wide study. This study is only for the city of Los Angeles.
Currently, HERO’s study shows that “43% of Los Angeles hotels now devote more than half of total operating expenses to labor, a level widely viewed as financially unstable.” Unsurprisingly, the majority of the hotel jobs being eliminated or at risk of being eliminated are “concentrated in labor-intensive departments, including food and beverage (160 jobs), housekeeping (76 jobs), and parking (8% of the parking workforce eliminated).” In addition, many hotel workers whose jobs are not eliminated find that their working hours are being cut significantly. HERO’s study states that “[m]any hotels also anticipate significant hour reductions as a cost-control strategy: 62% expect staff hours to decrease in 2026, and three-quarters anticipate reductions of at least 10%.”
Likewise, since the Ordinance also applies to hotel subcontractors, a bunch of other unrelated businesses and their employees are adversely affected. For example, “subcontractors operating on hotel premises- including restaurants, parking, and security” have suffered significant losses. In addition, “[h]otels reported that two-thirds of third-party providers plan to raise prices, while one in five plan to cancel hotel contracts altogether. Nearly half of hotels reported they were likely to close food and beverage outlets, gift shops, or other onsite businesses.” Clearly, the Ordinance’s increase in hotel worker’s minimum wage has had a domino-like effect on other businesses and industries that work in partnership with the hotels.
All these adverse effects of the Ordinance are already being felt only six months into the Ordinance going into effect, but the largest increase in hotel worker’s minimum wage has yet to materialize. Currently, the minimum wage for the city of Los Angeles’ hotel workers is $22.50 an hour. Thereafter, the minimum wage is expected to increase significantly because of the additional hourly wage for health benefits as follows:
-July 1, 2026: minimum wage increases to $25.00/hour plus an additional $7.65 per hour for health benefits if they are not provided.
-July 1, 2027: minimum wage increases to $27.50/hour plus an additional $7.65 per hour for health benefits if they are not provided.
-July 1, 2028: minimum wage increases to $30.00/hour plus an additional $8.45 per hour for health benefits if they are not provided.
In fact, HERO’s study warns that the “July 2026 increase to $25.00/hour, combined with the health benefit spending requirement of an additional $7.65/hour if benefits are not provided is projected to raise total mandated hourly compensation to approximately $32.65/hour (about a 45% year-over-year increase). These increases are expected to intensify staffing reductions and service cutbacks.”
To put things into perspective, general managers of hotels located in Los Angeles confirm HERO’s study with “only 27% of City of Los Angeles hotels are profitable, while 46% are unprofitable and 58% expect to be unprofitable within one year.” The implementation of this new Ordinance has already had disastrous effects in the first six months. Employers have been forced to cut costs and the hotel industry, its employees, and its partners are paying dearly for this implementation: they are paying with their entire livelihood. Instead of smaller, incremental, merit based hourly wage increases, the minimum wage mandate forced an entire industry and those who rely on this industry to absorb extraordinary increases in costs nearly overnight.
Source: Mageau, Jamie. February 2026. Hospitality Education and Research Organization of Los Angeles: Early Evidence of Economic and Employment Impacts From Los Angeles’ Hotel Minimum Wage Ordinance. Hotel Association of Los Angeles. https://static1.squarespace.com/static/6581f5a1ab7d3e180278a500/t/69ab26c2d27f3201dc56ec23/1772824258093/RoveHala_HERO_EarlyEvidenceReport_Feb20_E5+%281%29.pdf.