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December 2, 2009

New Study Shows Economic Benefits of a Sustainable Tourism Model at LAX-area Hotels

Improvements to the Gateway to L.A. Result in a Projected $23.9 Million Impact

LOS ANGELES – A new study released today by the Los Angeles Alliance for a New Economy (LAANE) examines the impact of two major achievements related to the effort to transform Century Corridor: (1) the Living Wage Ordinance, which went into effect in July 2008; and (2) the successful negotiation of collective bargaining agreements at four of the 12 Century Corridor hotels. The report, entitled “Transforming the Gateway to L.A.: The Economic Benefits of A Sustainable Tourism Model” can be viewed at www.laane.org.

The tourism industry—an industry generally noted for low wage employment and meager benefits—has recently surpassed international trade as L.A. County’s number one job generator. These initiatives provide an important model for how local leadership, responsible business practices and community engagement can help move an industry toward a model of development that helps the economy overall.

“Our study proves the benefits of a high road, sustainable tourism model that was created by the combined efforts of hotel workers, elected officials, business owners and community members,” says Jasleen Kohli, LAANE Research/Policy Analyst. “This is a model that can, and should be, replicated in other regions and industries.”

The study estimates that this model will have a $23.9 million impact over its first four years of implementation; including $18.5 million in direct wages/benefit improvement and $5.4 million in additional local revenue due to hotel workers’ increased spending in the region.

In 2006, a coalition of community members, workers, and clergy leaders joined together as the Coalition for a New Century in an effort to transform thousands of low wage hotel jobs into family-sustaining jobs and to upgrade a lackluster L.A. tourism district that is often the first glimpse visitors have of the region.  Due to their proximity to Los Angeles International Airport (LAX), the dozen hotels that line L.A.’s Century Boulevard have high occupancy rates.  Yet these hotels paid some of the region’s lowest wages, and the surrounding communities—where many tourism workers live—suffered from high rates of crime and poverty.

Report Findings

The ongoing shift away from good manufacturing jobs to an economy based on low-wage tourism employment represented a potential threat to the region’s economic health given the quality of many of the jobs in the industry.  But it is critical to note that hospitality jobs do not need to be low-paying; manufacturing jobs only became good jobs that offered pathways to the middle class after workers and community members advocated for improvements.  A similar trend is underway on Century Boulevard due to the efforts of the Coalition for a New Century and far-sighted leadership from the Mayor and the Los Angeles City Council.

The significant benefits for workers and community members of improved hotel jobs demonstrate the success of a high-road sustainable tourism model.  In the span of a few years, the Coalition—working with the Mayor and the Los Angeles City Council—has managed to transform one of the lowest paying hotel submarkets in the region into one that is on the path to providing quality, middle-class jobs.  These wage and benefit increases represent more than a 10 % increases for workers, but constitute less than 2 percent of hotels’ revenue. This is a model for economic development that could be replicated in Los Angeles and around the country.

This report estimates the benefit of the living wage policy and the union contracts for the 2,400 workers employed at the hotels over the first four years of their implementation—and the increased economic benefit to the community overall, including:

• Measures to improve the quality of jobs in the Century Corridor hotel submarket are projected to have a nearly $23.9 million impact over their first four years of implementation, including $18.5 million in direct wage and benefit improvements and $5.4 million in additional local revenue generated by hotel workers’ increased  spending in the region.
• The increase in spending by hotel workers as a result of higher wages will generate an estimated 106 new jobs in L.A. County over four years.
• Century hotel workers who are covered by union contracts are expected to see their wages increase by more than 14% over the four years, boosting their average annual wage above the federal poverty line for a family of four.  These workers will receive, on average, an additional $13,002 in wages and benefits over the first four years of implementation.
• The average worker affected by the Living Wage Ordinance is projected to receive an additional $4,141 in wages over the first four years of the law’s implementation.
• By 2012, average wages paid to Century Corridor hotel workers are projected to surpass those paid to Anaheim hotel workers and to approach the average wages paid in Santa Monica and Downtown hotels.  Century Boulevard hotel workers’ wages were once 15% below those paid in Santa Monica, but hotel workers who are covered by collective bargaining agreements are projected to earn within 3% of Santa Monica’s average wages by 2012.

The Living Wage Law provides a new wage floor that offers a moderate but important boost to workers’ earnings.  The union contracts negotiated at four of the 12 hotels provide wage increases, family health insurance and pension benefits that will dramatically increase these workers’ economic security.  The increased earnings and benefits—from the policy and from the union agreements—help communities as well, as workers spend their increased wages at local establishments and rely less and taxpayer-funded public assistance.

Of course, the achievements are not limited to the important wage increases and benefit improvements analyzed in this report.  The Coalition has advocated for a job training program and infrastructure investment as part of a comprehensive approach to remaking the gateway to L.A. and making the region’s largest industry sustainable.  Both elements are underway, and are important components in the effort to ensure that the region and its largest industry can thrive.

Taken together, these Coalition-backed initiatives to raise wages, provide public investment in infrastructure, and job training opportunities to local residents offer a new model for transforming the region’s low wage tourism sector in a way that benefits workers, communities, and employers alike.

“This model demonstrates that by emphasizing community benefits along with industry needs, it is possible to make L.A.’s largest industry – and thus L.A.’s economy – truly sustainable for all,” says Kohli.

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