A newly implemented law in New York is causing concern in the hotel industry over its potential impact, with executives this week calling the Safe Hotels Act both “devastating” and “onerous.”
Though the city says the law’s main purpose is about safety — it requires hotel operators to provide employees with panic buttons and human trafficking recognition training — the labor component is receiving criticism. Nonunion hotels of more than 100 rooms must directly hire their “core employees,” a group that includes the cleaning crew and front desk staff. They are effectively forbidden to use subcontractors or staffing agencies.
“It has a real devastating impact on the hotel industry, particularly for nonunion hotels,” Sarah Bratko, vice president and policy counsel for state and local government affairs at the American Hotel & Lodging Association, said Monday at the New York University International Hospitality Industry Investment Conference.
What’s more, the law may have ramifications for other cities.
“This is the first bill that we’re aware of that bans the use of subcontractors,” she said in an interview. “When someone is looking where they want to invest, where they want to open a hotel, New York has become a lot less attractive because of these challenges.”
What’s being practiced in New York may become a template for other cities, she told CoStar News, adding that San Francisco and Los Angeles have considered similar legislation. “It’s obviously very concerning,” she said. “This is going to be the next phase of labor mandates that we expect to see in other blue cities.”
The direct employment requirement affects nonunion hotels more because unionized hotels generally already employ this class of workers directly, according to a study by the New York City Independent Budget Office, citing public testimony to the City Council by industry leaders. The budget office said the provision is “expected to have a larger impact on nonunion hotels, potentially increasing their operating costs.”
New York has 785 hotels, 581 of which are nonunion, according to the budget office study.
Some hotel operators CoStar News spoke to said subcontractors are crucial for them in a city such as New York, where housekeepers don’t live, say, near Fifth Avenue and may need to travel an hour and a half to get to work. Subcontractors who follow all the legal protocols can help source the workers and help arrange transportation and offer flexibility during off-peak seasons, for instance, they said, adding that some lenders have begun to factor in the impact of the law in whether they provide refinancing loans.
“It's incredibly challenging,” Bratko told CoStar News. “New York City is one of the most hotel important hotel markets in the world, and you now have a very significant challenge to doing business. We have heard that certain hotels are now unwilling to invest in New York. Financing for hotels has gotten a little bit more challenging here.”
The law also requires large hotels to have a security guard at all times when any room is occupied. Hotels must conduct daily housekeeping services unless the guest declines them.
The law is “pretty onerous and really extensive,” Vijay Dandapani, president and chief executive at the Hotel Association of New York City, said at the conference.