San Diego may be on the verge of adopting a $25 minimum wage for hospitality workers. Before the City Council votes, I want to offer a perspective grounded not in theory, but in experience.
Earlier this year, I halted a major hotel expansion project in Los Angeles — the planned 395-guest-room tower at Hilton Universal City — and withdrew from the hotel’s Olympic room-block agreement. The reason wasn’t a lack of demand or a sudden change in strategy. It was policy. When Los Angeles approved a rapid implementation of a minimum wage for hotel workers, the economics of the expansion no longer penciled.
That decision carried real consequences beyond my balance sheet. Without that tower, San Fernando Valley lost a long pipeline of well-paying construction jobs, including around 1,000 union construction jobs that would have lasted multiple years. The region also lost more than 200 permanent hotel careers that would have followed in operations, culinary, engineering and sales that simply won’t exist now. Those are careers with benefits, training and advancement. Those are families’ rent and groceries. Those are tax revenues — an estimated $50 million in transient occupancy taxes alone — that won’t flow to the city.
Some have suggested companies like mine simply can “absorb” these sudden, steep labor-cost hikes. But hospitality is a high-fixed-cost, low-margin business. Payroll already is the largest expense, and sharp, mandated increases ripple through everything: room rates, restaurant prices, service levels and ultimately occupancy.
This is not an argument against fair pay. Our industry rises or falls on the strength of our people. We compete to recruit and retain talented team members, and wages have climbed materially in recent years. But there is a responsible path and a reckless one. Los Angeles chose speed and politics over balance and analysis.
The result has been uncertainty, canceled investments and, in my case, stepping away from an Olympic commitment that we were proud to support. That outcome helps no one — not workers, not guests, not neighborhoods and not the city.
San Diego should learn from that experience, not replicate it. A $25 wage floor set by city mandate, independent of broader regional economics and without a comprehensive impact analysis, will trigger the same chain reaction.
Projects will be deferred or canceled, expansions will be rethought, hours and services will be reduced and prices will be pushed up for residents and visitors. When visitors change plans or shorten stays, hotel tax revenues decline. That means less funding for city services, parks, arts and public safety. Precisely the local investments San Diegans value.
I recognize the intent behind the proposal. We all want San Diego’s economy to be strong and inclusive. But good intentions do not guarantee good outcomes.
In Los Angeles, the combined wage-and-health care mandate forced me to cancel a significant hotel project and step away from a high-profile Olympic room-block commitment. Those were not negotiating tactics. They were the unavoidable outcomes of a policy that moved faster than the underlying economics.
San Diego is a world-class destination with a bright future. Don’t dim that future by repeating Los Angeles’s missteps. Slow down and study the impacts to protect workers and preserves the investment and jobs that make opportunity possible in the first place.
Davis is president and CEO of Sun Hill Properties and lives in Los Angeles County.