New York City’s Safe Hotels Act, which became effective May 3, will have a negative impact on hotel operations and bottom lines in New York City, but it may also inspire cities nationwide to impose similar regulations, stakeholders say.
What’s in the Act?
The new law imposes a $350, bi-yearly licensing fee on hotels and an inflexible staffing requirement on the largest hotels - those with 100 or rooms - to “direct-hire core employees” which includes front desk and housekeeping employees. These hotels can no longer utilize contractors, subcontractors or staffing agencies to perform these roles, even if unable to fill job openings.
It also sets stronger security and cleaning standards designed to strengthen health and safety protections for both guests and hotel employees, according to the legislation’s supporters.
Hotels with less than 100 rooms are exempt, which includes more than 250 hotels, both budget and luxury accommodations. So roughly 75 percent of hotels outside Manhattan are unaffected by this law, and nearly 90 percent of them are non-union.Additionally, every hotel with 400 rooms or more must have an onsite security guard.
Hotels must also provide staff panic buttons and keep housekeeping schedules, payroll records as well as proof of human trafficking training.
Motivations
But Vijay Dandapani, president and chief executive officer at the Hotel Association of New York City contends that the new law actually has little to do with health or safety, but rather was motivated by the political ambitions of the hotel union’s leadership and City Council member who sponsored the bill.
Dandapani, along with Sarah Bratko, vice president and policy counsel for State & Local Government Affairs at the American Hospitality & Lodging Association discussed this new legislation’s operational and financial impacts on the hotel industry at NYU’s recent Hospitality Investment Forum.
Obviously, it has a real devastating impact on the hotel industry, particularly for non-union hotels that are now bearing the brunt of it,” she said.
Bratko noted that the new law also is hurting subcontractors and their employees who cleaned at large hotels and are now being laid off.
Dandapani noted that the first iterations of this legislation proposed in 2017 and 2019 sought to reduce the number of hotel rooms. The latest one came with a mandate to provide employees human-trafficking training within 60 days of hire. This mandate was unnecessary, however, because New York state law already requires this training for hotel workers, he said.
“When the legislation was first introduced, it was shocking because of the things they put in there, essentially making it impossible to operate a re-owned hotel in New York,” Bratko continued. “Where the bill ended up is still not great.” She suggested, however, that “the industry look at the outcome as both kind of a cautionary tale and guidebook for how to transform its advocacy to match the energy of what proponents of these.
Bratko said that the most interesting part of the six months of negotiations was the coalition building that brought every local and national hospitality organization together to oppose it. “The fact that this coalition was able to get an unprecedented response to an ordinance that sent shockwaves, not just through our industry, but also the City Council and union members, is a lesson for labor proponents in other markets as well,” she pointed out.
With the law in effect for over a month, the City has already received licensing applications from 500 of its 720 hotels.
Bratko noted that hotels that applied have reported receiving their licenses relatively quickly, which was initially a concern. “I think the part that is going to be interesting is as this is rolled out long-term, how will the union weaponize this license to control the operational and labor mandates in specific hotels. I anticipate that if there's a targeted hotel, a lot of complaints against its license will mysteriously pop up,” she said, noting that the AHLA will track this.
The Impact
Dandapani cited another important aspect of the law that affects buyers when a hotel is sold. The new licensee must comply with the Displaced Workers Act, which was passed in 2020 to protect building service employees from job loss during transitions. This means that the new owner and licensee cannot bring in its own team, as the law requires the previous owner's employees to be retained for a 90-day period.
During this time, employees can only be terminated for just cause or if the new employer determines fewer employees are needed. After the 90 days, employees must be offered continued employment if their performance is satisfactory.
In discussing the implications for this legislation’s broader impact on the industry, Bratko said that the AHLA is expecting similar laws to be enacted nationally. “Maybe not this exact standard or this exact language, but we'll see some form of it in other jurisdictions,” she said. She noted that in wake of this legislation enacted, San Francisco introduced a bill that would ban subcontractors.
And while that is no longer a threat due to some electoral changes in the city council, Bratko noted that Los Angeles also was considering adding an amendment to a pending bill, which would have banned hotel subcontractors. Therefore, she thinks cities are most likely to go after the subcontractor segment of the industry in the next round of labor mandates.
As Vijay pointed out, there's few things in this legislation that the industry wasn't already doing - the human trafficking training, the panic buttons, cleaning standards. Bratko adds: “But the attack on the subcontractors is new and obviously very appealing for unions to go after, because it’s a segment of the industry they been unable to unionize.”
Bratko said that AHLA is keeping an eye on blue cities with a history of passing anti-hotel legislation or pro-labor legislation, expecting them to tie labor and operational mandates to health and safety to pass legislation similar to New York’s new law.
“We saw a similar ordinance pop up in Boston last year, recalled Bratko. “It had nothing to do with subcontractors, but tried to connect labor mandates to safety,” she said. While human trafficking is an issue for hotels, Bratko contended that it has no documented connection to labor, but the union is trying to weaponize this problem to further its own agenda.
This article originally appeared in our sister publication Hospitality Investor.