A third-party analysis of Long Beach’s Measure WW concluded that certain provisions in the measure would impose significant costs to hotels, potentially reduce tax revenue to the city and possibly negatively impact future hotel development.
Measure WW, the Hotel Workplace Requirements and Restrictions Initiative Ordinance, appears on the November 6 Long Beach ballot. If passed, the ordinance would require hotels with more than 50 rooms to implement certain safety provisions and workload restrictions for workers, and establish penalties for hotels that fail to comply.
However, the measure allows hotels that enter into a collective bargaining agreement to opt-out of the workload restrictions. Those opposed to the measure, including the Business Journal, point to that and say the real reason for the measure is to unionize hotels. According to the study, only five of the city’s 58 hotel properties (representing 27% of the city’s hotel rooms) operate under a collective bargaining agreement.
On August 7, the Long Beach City Council unanimously voted to put the initiative-driven measure on the ballot. The council also engaged BAE Urban Economics, a real estate development consulting firm, to evaluate the ordinance’s operational and economic impacts.
The report was forwarded to the city council, city manager, mayor and other city officials on October 11. It concluded that, while many of the worker safety provisions in the ordinance would impose “modest impacts” to hotel operations in the city, the provisions restricting room cleaner workloads “represent a fundamental shift in current housekeeping practices.” The restrictions would impose staffing costs that negatively affect hotel profits – and an economic impact that could have a “dampening effect” on property investment in the area, according to the report.
To assess the practical and economic effects of the proposal, BAE conducted a series of interviews with local and nationwide hotel operators and hospitality industry stakeholders.
BAE grouped the 58 hotel and motel properties within Long Beach into three categories: small properties (containing under 100 rooms), medium properties (100-299 rooms) and large properties (300+ rooms). In total, Long Beach hotels have 6,206 rooms, of which 27% are located in small properties, 34% in medium properties and 39% in large properties.
According to BAE’s assessment, 52% of these rooms (3,200) are located in hotels that already require housekeepers to wear panic buttons, a provision Measure WW would require of all hotels with more than 50 rooms. (In a recent 5-0 vote, the city council decided to require all hotels and motels, irrespective of size, to supply panic buttons to workers.) Most hotel operators that do not yet require panic buttons indicated that they were supportive of doing so, according to the report. Costlier to implement, operators reported, would be WW’s “humane workload” standard.
Hotel operators reported to BAE that housekeepers currently clean between 13 and 15 rooms per day. The “humane workload” standard would prohibit hotel employees from cleaning more than 4,000 square feet of total room space in an eight-hour workday, or approximately 10 rooms on average. For employees who work fewer than eight hours per day, the maximum floor space would be reduced on a prorated basis. The ordinance allows an exemption to the 4,000 square foot cap if employers are willing to pay their employees twice the regular rate of pay for all hours worked.
To comply with the measure, the study reported that non-unionized hotels and motels would need to employ additional housekeepers – 31% more workers for smaller properties and 20% for larger ones. This would drive up operating costs unless a corresponding increase was made to room rates, the report noted. The yearly impact of these operating costs was calculated at a range of between $535 to $1,618 per room on the low end and $2,005 to $2,417 per room on the upper end. Fines for non-compliance with the ordinance could be assessed at $50 per affected employee per day.
If hotels raised their room rates to compensate for the increased costs of operating, higher room rates for hotels “may impact the Long Beach Convention Center’s effectiveness in competing for convention and conference bookings,” BAE reported.
BAE further noted that Long Beach could see a decline in transient occupancy tax (TOT) and sales tax receipts if investors pulled out of planned hotel developments. Five hotel projects are currently “planned or proposed” within the city. BAE calculated the cumulative annual loss of TOT if each project fails to move forward at $8.1 million.
Long Beach Assistant City Manager Tom Modica told the Business Journal that a discussion of the BAE analysis is not currently scheduled for a city council meeting.