As Los Angeles continues to recover from the long-term effects of the pandemic and most recently the devastating wildfires, a new report from the American Hotel & Lodging Association found that the recovery of international visitors from 2019 levels lags behind every other major U.S. city. Coupled with the recent wildfires and the potential passage of legislation before the City Council, the tourism industry is facing significant challenges that are contributing to the city’s budget shortfall.
The tourism industry is one of the top five employers in Los Angeles County, supporting more than 540,000 Angelenos. In 2023, the industry generated more than $40 billion in local business sales and $290 million in transient occupancy tax revenue. However, Los Angeles experienced a $14.3 TOT budget shortfall in FY 2023-2024. For midyear FY24-25, the TOT budget shortfall reached $13.9 million in just the first six months.
New Legislation
As the city prepares for the 2026 World Cup and the 2028 Olympics, the report argues that new hotel operational restrictions being considered by the City Council could further depress the industry and lead to increased TOT shortfalls.
“The Los Angeles’ tourism industry has historically been a top contributor to the city’s economy. However, several external factors have brought the hospitality industry to an inflection point,” AHLA President & CEO Rosanna Maietta said in a statement. “While the city faces a significant budget deficit, the City Council continues to push legislation that will multiply hotel operational costs, which would result in thousands of layoffs and ultimately decrease taxable revenue. This report is a reminder of what we have told the mayor and the City Council for months—abandon the effort to decimate the hotel industry and work with us as we aid the city in its recovery and prepare for major world events.”
Among the report’s key trends and findings:
- Los Angeles is at the bottom of the list of major cities recovering from the COVID-19 pandemic, reaching only 79 percent of 2019 levels. International visitors represent 23 percent of overnight visitation in Los Angeles, but account for more than 49 percent of overnight visitor spending.
- Labor expenses account for approximately 50 percent of a hotel’s total costs and have consistently outpaced revenue growth since 2020.
- Legislation such as the Worker Minimum Wage Ordinance could exacerbate the city’s current economic situation, causing the elimination of 14,000 hotel jobs, costing $169 million in state and local tax revenue and discouraging $342 million in hotel construction spending.