A proposed ordinance would require hotels in Los Angeles (LA) city to fill vacancies with the homeless. Due to be voted on by the city’s residents in March 2024, it has caused major concern among hotel operators, particularly in the luxury sector.
Luxury hotels have been a steadily growing sector across the US. GlobalData figures have revealed that, despite a dip in properties in 2020 as the pandemic threatened the industry, the sector had recovered only a year later.
The steady growth has the US luxury sector on a trajectory to have 1,160 hotels by 2027. However, LA city’s trajectory could look significantly different, as hotel operators warn that guests may be deterred by a new measure.
The Responsible Hotel Ordinance would compel all hotels in LA city to report the number of vacant rooms to the local authority by 2pm each day. The businesses must then accept members of the homeless community who are allocated these vacancies.
Homeless LA residents would receive a voucher to present to the hotels, and the LA Housing Department would compensate the businesses with a fair market rate to lodge each person. LA city has over 46,000 homeless people in need of safe shelter, but operators fear the impact on visitor numbers, and the measure has proved divisive.
Speaking at a council meeting last month, Stuart Waldman, president of the Valley Industry and Commerce Association, said: “Hotels did not cause the homeless problem. Hotels are not the solution for the homeless problem.”
Meanwhile, Richard Earlie, representative of Petra Risk Solutions (a hospitality insurance brokerage) raised issues around insurance: “Insurance carriers will legitimately pull coverage. The business is underwritten with risks that involve guests and business travelers, not residents who bring a whole set of separate implications.”
The council voted 11-1 not to adopt the ordinance immediately, but to put it on the March 2024 ballot instead.
Analysis of figures by GlobalData reveals that the US luxury hotel sector consistently has vacancies, hitting a high of 76.3% of rooms filled in 2019. Predictions by analysts have found that 2023 is expected to be the first year of full recovery.
The significant dip in room occupancy during the 2020 pandemic opened discussions around the potential role of hotels in tackling homelessness. LA authorities combined worries around vulnerable people with worries about increased vacancies in Project Roomkey, a collaborative effort by the LA County and the Los Angeles Homeless Services Authority (LAHSA), to offer hotel rooms to homeless people. The project was intended to reduce the spread of the virus, while also utilising empty hotel rooms to keep the industry afloat.
Project Roomkey received a warm response from LA communities, but the Responsible Hotel Ordinance has met with resistance. Its opposers have argued that the measure will pose safety concerns for guests and employees, and will likely drive custom to Airbnbs and hotels in surrounding cities.
The ordinance was initiated by Unite Here, the union currently on a rolling strike. It has been suggested that the measure is part of a negotiating tactic, as the union continues to push for more affordable housing for hotel workers in LA. It states on its website that: “The Responsible Hotels Ordinance will help address the affordable housing crisis by ensuring that hotel developments do not displace affordable housing and establishing a program similar to the City’s successful Project Roomkey to provide temporary lodging for unhoused families and individuals.”
The proposed ordinance would also require hotels to acquire a permit for development projects of 100 rooms or over, and would also mandate that developments of over 14 rooms that demolish or convert current housing must replace the residences lost with nearby affordable properties.
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