How NY and CA hotelier can cope with wage hikes

H&LA’s Laurel Keller and John Kelley and provided insight in this Hotel News Now article, which spotlights ways hoteliers can contain and cope with increased personnel costs.

Published by: Sean McCracken/Hotel News Now
Published date: April, 2016

Hoteliers in New York and California could soon face some tough decisions as mandated minimum wage increases are expected to significantly increase the cost of doing business in each of those states.

Sources said hoteliers will need to find creative ways to reduce their payroll or pass costs along to customers as minimum wages gradually ratchet up to $15 an hour in both states.

Mike Doyle, EVP and managing director for CHMWarnick and former president of the Hospitality Asset Managers Association, said hoteliers won’t be able to stand pat as those wage increases take hold.

“I think this will only cause a greater focus on looking at ways to be more efficient and be more creative on how to deliver service and make sure properties are operating as efficiently as they can,” Doyle said.

It’s important that hoteliers don’t underestimate the impacts of a minimum wage increase, said John Kelley, associate at Hotel & Leisure Advisors.

“Labor is already the largest cost in operating a hotel, so the impact will be significant,” he said.

Kelley said wage increases won’t be kept to just employees working at minimum wage, either. In many cases, longer-tenured or higher-level employees will expect their wages to keep pace when they see pay for the bottom-tier employees make a significant jump.

“You’ll have to account for making everyone ‘whole,’” Kelley said.

Minimum wage in California currently sits at $10 an hour and is set to grow to $15 an hour by 2022. Hotels were also hit with a high-profile, industry-specific wage increase in Los Angeles that currently sets the floor at $15.37 an hour for nonunion hotels with 300 or more rooms, and that increase will expand to hotels of 150 or more rooms in July.

Similarly, New York will see its statewide minimum wage hit $15 by 2022, with the wage increase taking hold in New York City by 2019.

Doyle said it’s important for hoteliers across the country to stay informed on how hotels in New York and California deal with the wage shift as there is “movement in this direction” in other places across the country.

How to cope

Kelley and Laurel Keller, VP of Hotel & Leisure Advisors, said hoteliers in New York and California are going to have to find ways to cut into payroll, one way or another.

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