Hotels in Los Angeles are facing increasing financial and operational headwinds that threaten the sector’s long-term viability, according to a new market report from the American Hotel & Lodging Association.
Hotel development is slowing in the Southern California city, while investment is shifting to other markets and hotels are laying off staff to contend with rising labor and operational costs that are outpacing revenue growth, according to the April report, which surveyed Los Angeles-based AHLA members, including hotel owners, operators and brand representatives, in January.
The current policy environment in Los Angeles is making it “increasingly difficult for hotels to operate, invest and create more jobs in the city,” AHLA President and CEO Rosanna Maietta said in a statement.
With LA’s hospitality industry poised to benefit from major upcoming events, including the FIFA World Cup this summer and the Olympics in 2028, the city’s hoteliers are seeking policy solutions to the ongoing challenges they face. Some of the policy shifts they seek, however, conflict with those championed by the city’s hospitality workforce.
Rising costs strain LA hoteliers
Los Angeles hoteliers are widely concerned about the market’s growth prospects, with 55% saying they feel less confident about the market compared to last year, according to the AHLA survey. Some 86% of respondents cited rising labor costs as their top challenge this year.
Increasing labor expenses are a major concern for hoteliers nationwide, as total salaries, wages and benefits paid by U.S. hotels are projected to increase approximately 3% year over year in 2026 amid a weakened performance cycle. In Los Angeles, however, local legislation is exacerbating this challenge, hoteliers reported.
Last year’s passage of the Citywide Hotel Worker Minimum Wage Ordinance, in particular, has forced local hoteliers “to make serious changes to maintain business operations,” according to the report. For example, 88% of hotel stakeholders said they have reduced staffing or hours in the past year as a result of LA city council policies, per the report.
The ordinance, which AHLA and other hotel industry associations have strongly opposed, mandates set wage increases for tourism and hospitality workers in Los Angeles annually through July 1, 2029. Effective on July 1 of this year, the city’s hotels will be required to pay workers $25 per hour, according to recently updated documentation from the City of Los Angeles.
That wage still remains below what the Massachusetts Institute of Technology constitutes as a living wage for an adult with no children in Los Angeles County, which is $28.92. For an adult with one child in the market, that living wage goes up to $50.23, according to MIT’s Living Wage Calculator, which was last updated Feb. 15.
The wage ordinance is a direct result of advocacy by local hospitality worker organizations, including hospitality union Unite Here Local 11, which has pushed for higher wages in recent years to accommodate rising costs of living in LA.
According to AHLA, though, the city’s wage ordinance mandates “one of the most aggressive wage schedules in the nation,” which will “far exceed inflation, wage growth in comparable markets and the economic capacity of many mid-market and independent properties to absorb.”
The wage ordinance comes as hotels nationwide face dampened demand amid economic uncertainty and tightening travel budgets. Beyond rising labor costs, LA hoteliers attributed staffing cuts in the last year to reduced demand and room cancellations in addition to broader economic conditions.
Market woes drive investor caution
Rising expenses and lower demand have also led Los Angeles hoteliers to have a less-than-desirable outlook on the market’s hotel investment environment.
Some 97% of survey respondents said “burdensome labor policies” are making LA less attractive for hotel investment, followed by lagging demand at 66% and taxes at 49%, according to the report.
None of the survey respondents categorized LA’s hotel investment environment as “very favorable,” while 80% said the city is not a good place for long-term hotel investment. And according to AHLA, current policies regulating LA’s hotel industry are leading to investor flight from the market.
To combat these growing concerns, AHLA called on the LA City Council Thursday to “revisit and amend policies that are contributing to rising costs and declining investment, and to work collaboratively with industry stakeholders on solutions that support both workers and long-term economic growth.”
AHLA is focused on several top policy priorities in 2026, including improving the operating environment for hoteliers nationwide, strengthening the U.S. hospitality labor force and boosting tourism ahead of major events, the association’s newly appointed chief advocacy officer Brett Horton told Hotel Dive last month.
Across the country, New York City hoteliers are facing their own unique cost pressures amid changing policy.
