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Minimum Wage Battle: Travel Industry Flexes its Political Muscle

Travel industry touts service sector's importance to boost the industry's political clout nationally and sap support for a higher minimum wage.

Activists and workers, demanding an increase in minimum wage, protest in Manhattan this month. Travel industry touts service sector's importance to boost the industry's political clout nationally and sap support for a higher minimum wage. ADREES LATIF / Reuters

To hear the travel industry tell it, tourism jobs are powering the U.S. economic recovery, creating a path back to the American Dream as the service sector's importance outpaces agriculture and manufacturing. That message, they hope, will boost the industry's political clout nationally and sap support for a higher minimum wage.

A survey released last week by the American Hotel & Lodging Association (AHLA) is the latest salvo in that campaign and asserts the hospitality industry provides "good high-paying jobs with benefits" and "flexible hours and continuing education opportunities."

Not everyone agrees. Eyebrows were raised in Los Angeles, one of the front lines of the minimum wage battle.

"I'd like to challenge anyone in the hotel industry to live on $22,000 a year in Los Angeles," said Leigh Shelton, spokeswoman for the Unite Here hotel workers union in Los Angeles. The average hotel pay there is $10.55 per hour, making it the city's biggest low-wage industry, she said.

The Los Angeles campaign seeks to raise the minimum wage to $15.37 per hour at hotels with more than 100 rooms. "That's about the minimum you could be paid and not have to rely on public assistance," Shelton said.

The wage fight comes as tourism numbers are reaching all-time highs in cities across the United States, including Los Angeles, which last year saw a record 42.2 million visitors who spent $18.4 billion, according to the Los Angeles Tourism & Convention Board.

"A lot of hotel jobs used to be full-time jobs. Now we have what some people call the casualization of the workforce," Shelton said, referring to a rise in part-time work.

For the AHLA report, WageWatch surveyed 356 hotel management companies, representing 23 percent of the 53,000 U.S. hotels. Of those surveyed, about 25 percent of their workforce is made up of part-time employees, which Randy Pullen, the report's author said, is consistent with the industry. On average, a part-time worker in the hotel industry works 25 hours a week, he said.

Almost half of the companies said they pay at least 75 percent of their employees above the minimum wage. But the study does not address how many workers are making minimum wage, how many are making just slightly above minimum wage or work so few hours they don't qualify for benefits.

With 52 months of consecutive growth, "hotel jobs and hospitality jobs remain a real bright jobs in the economy, " Katherine Lugar, the president and CEO of the AHLA, told CNBC.

"The picture is just not as rosy as they're painting," said Valerie Wilson, a labor market economist at the Economic Policy Institute. "Leisure and hospitality, as an industry, they're at the bottom."

Elsewhere, Moody's Analytics pegs the average annual pay for all workers in the "traveler accommodations" industry at $32,347 in 2013, compared with the average of $52,539 for all other industries, excluding accommodations.

Although leisure and hospitality has the lowest wages of any major sector in the economy tracked by the Bureau of Labor Statistics, that doesn't paint an entirely accurate picture of jobs in the travel industry, said David Huether, senior vice president for research and economics at the U.S. Travel Association. Travel covers not just hotels, but parts of retail, restaurants, transportation and energy and other sectors, he said.

'Travel jobs, good jobs'

Indeed, employment in the travel sector is on the rise, increasing 2.1 percent in the first quarter of 2014 to nearly 7.7 million tourism-related jobs, according to the U.S. Department of Commerce. Travel officials bristle when pressed about the quality of those jobs.

"Travel jobs are good jobs" Jonathan Tisch, the chairman of Loews Hotels & Resorts told a packed hotels convention this summer, asserting the industry needs to speak with a strong, unified voice. His speech culled heavily from a two-year old report by the U.S Travel Association that portrays travel jobs as all-American, middle-class jobs, and says "2 out of 5 workers who first took a job in the travel industry are earning more than $100,000 per year."

"If you're not at the table, you're on the menu," Lugar said, by way of encouraging other hotel players to beef up their political action committee contributions and court politicians by touting the industry's jobs that provide access to the American Dream. The Political Action Committees for the lodging and tourism industries have made nearly $1.5 million in federal contributions this election cycle, according to Federal Election Commission filings aggregated at the nonpartisan, nonprofit OpenSecrets.org

In addition to the fight against a raise in the minimum wage, the AHLA's main policy goals are comprehensive immigration reform, renewed funding from Congress for the Brand USA campaign to bring foreign tourists to the U.S., and an extension of the Terror Risk Insurance Act, which otherwise might leave hotels without required coverage by Jan. 1, Lugar said in an interview with CNBC.

But the minimum wage battle, especially in Los Angeles, is primary, she said. For its fight against the "extreme minimum wage," the hotel industry has been working with the National Restaurant Association, the National Retail Association and the National Franchisee Association, Lugar told the hotel panelists this summer.

In June, the AHLA issued a report on the effects of raising the minimum wage. An "extreme minimum wage"—which includes President Obama's push for an increase in the federal minimum wage to $10.10 per hour from $7.25—would cause hotels an annual loss of $2.53 billion through extra wages and lost business due to the price increase, said John O'Neill, the report's author and director of the School of Hospitality Management at Pennsylvania State University. Cities and other government groups would lose $70.4 million in hotel occupancy taxes, hotels would have to cut 12,195 hotel staff positions and hotel values would decline more than $1 billion, O'Neill predicts.

To cover an increase in the minimum wage to $10.10, the price of hotel rooms would need to rise by 3.4 percent, according to the report. Based on the national average room rate of $110.33 when the report was issued in June, that translates into an extra $3.75 nightly per room, O'Neill said.