Have Cities Like New York, Los Angeles And San Francisco Declared War On Hotels?

What does the idiom “kill the goose that lays the golden egg” mean? “To destroy something that makes a lot of money for you,” is the Cambridge Dictionary’s succinct definition.

Hotels are an integral part of a city’s economy. They house tourists and business visitors to a city and provide valuable tax revenue to the local coffers. They provide a venue for social events like weddings and business functions like meetings and conventions. Hotels also provide jobs, including many entry-level positions.

Many hotels barely survived COVID. But rather than promote the recovering hotel sector, many US cities, like New York, Portland, San Francisco and Los Angeles are not exactly promoting their hotels to potential visitors. Instead, cities are using hotels to house migrants, homeless people, and drug addicts. Meanwhile surging street crime is threatening tourism in travel meccas like San Francisco.

In Los Angeles, an initiative was presented to the City Council in July that called for the city’s hotels to report their vacancies to the city’s housing authority each day. Then, under the Los Angeles Responsible Hotel Ordinance, homeless people could receive a voucher (funding source not yet defined) that would pay the hotel a “fair market rate” for the room. The unhoused individual could then move into the hotel for the night, next to paying guests, without screening.

As the ordinance reads, “New and already existing hotels will be required to adhere to responsible business practices, including making guest rooms available to unhoused Angelenos on a non-discriminatory basis, and be subject to City oversight.”

The petition was circulated by the local hotel workers union and garnered 126,000 signatures. Their stated concern was that “new hotels do not contribute to the City’s lack of affordable housing, burden the City’s social services, or result in undue transportation and traffic impacts.”

Of course, hotels were never designed to solve the problem of permanent shelter. They were meant for short-term housing (except for the occasional eccentrics who insisted on living in hotels and paying accordingly.) At the City Council meeting where the Responsible Hotel Ordinance was proposed, Stuart Waldman, president of the Valley Industry and Commerce Association, said “Hotels did not cause the homeless problem. Hotels are not the solution for the homeless problem.”

The crowd, including dozens of hotel operators, roared in approval. But rather than reject the measure out of hand, the city council kicked the can down the road. Instead, it voted 12-0 to put the measure on a citywide ballot in March 2024.

If the hotel situation in Los Angeles is bad, it is even worse elsewhere. In San Francisco, as a recent SF Chronicle story revealed, “at least 166 people fatally overdosed in city-funded hotels in 2020 and 2021 — 14% of all confirmed overdose deaths in San Francisco, though the buildings housed less than 1% of the city’s population.”

In New York, the city government is also doing the tourist industry no favors. In New York City, the city government is now leasing at least eleven hotels. More than 4000 migrants, including many shipped across the country by bus from Texas, have entered the city’s shelter system since May. What were called ‘welfare hotels’ in the 1980s are now ‘homeless’ or ‘migrant’ housing.

Such decisions are not cost-free to tourism infrastructure. In addition to the financial outflows from renting hotel rooms to people who can’t pay, cities are losing the tax inflows of tourists and business travelers paying hotel occupancy taxes.

Unchecked crime and hotels full of homeless people do not necessarily draw tourists to the surrounding neighborhood. The hotels themselves suffer increased wear and tear. In Los Angeles, one hotel owner, who had leased his hotel to the city for housing under a pandemic-era initiative called Project Roomkey, said he had spent a considerable amount of time cleaning up the damage the new tenants had created.

The situation, if anything, is worse in Portland, Oregon. Operators of the Benson, historic hotel in downtown Portland, are reportedly considering a lawsuit against the city after a corporate client dropped staying at the hotel over “safety concerns.” A hospitality executive reportedly told the Oregon Restaurant and Lodging Association, “The city is not living up to its duty to provide basic services (cleanliness, safety & security).”

In Seattle, 11 homicides in August marked the highest number since at least 2008. A recently opened Amazon Go market on Pike Street was closed “for the safety of our store employees, customers, and third-party vendors.” The popular nearby Wild Ginger restaurant had 5 boarded-up, smashed windows, including one smashed by a rock-throwing man with customers inside.

Crime has been on the rise in Portland, as has the growth of homeless encampments. There was a 144% increase in homicides from January 2019 to June 2021 while non-fatal shootings increased 241% from January 2019 to December 2021.

Rising violent crime isn’t good for anyone, and it certainly takes its toll on travel and tourism. The Benson, a historic downtown Portland hotel, has reportedly been taking a beating in terms of bookings. An unnamed corporate client apparently got out of a contract for 300 rooms per month at $156 a night, citing security issues. Delta and Alaska reportedly trimmed their commitment to buy rooms at the Benson for the same reason.

The hotel executive was considering suing the city of Portland about the Benson. “I’ve got to believe we can get other hoteliers to join in and make it a class action suit. We are not the only one’s suffering.”

Loss of tourism dollars is hardly the worst effect of rising crime and growth in homelessness. And city officials faced with crises like housing thousands of the unhoused understandably see the hotel industry as a short-term stopgap solution. But it could well be the canary in the coal mine, showing that city officials are ignoring the slow death of the golden goose for every city, its hotel and tourism industry.

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