Tourism is vital to San Diego’s economy and quality of life. Looking out the window, it is no surprise that it is one of our core industries. According to the San Diego Tourism Authority, it provides one in eight jobs and $1 billion in tax revenue to essential city services like roads, police, fire, parks, libraries and homeless outreach programs.
In practical , tourism offsets the overall tax burden by saving residents around $1,000 per household annually — those are taxes that visitors pay for us. In every sense, tourism is the golden goose that benefits every San Diegan. However, the proposed $25 per hour minimum wage increase moving through the City Council threatens to upend this and potentially cost San Diego residents.
Unfortunately, the proposed wage hike would do the opposite of what it intends — hurt workers, not help them. As a lifelong San Diegan and a member of the hotel industry who proudly contributes to San Diego’s success, I believe this policy will harm our ability to provide jobs and keep San Diego competitive against other cities.
I own and operate several modestly sized hotels that serve business travelers and families across the region. While operations may vary in size, we face the same day-to-day realities as other small business owners. We employ residents, contract with neighborhood vendors, and reinvest in our communities. I have deep roots and decades of experience in San Diego. Short of the COVID-19 pandemic, I have never seen an issue that could change an industry as much as a 45% increase in the minimum wage.
A recent study by Oxford Economics found that this proposal would lead to the loss of 4,400 jobs a year and $66 million in Transient Occupancy Tax (TOT) in just the first 10 years alone. Why? Fewer visitors mean fewer dollars spent, fewer jobs created, and less investment in our city’s future. That’s not just bad for business — it’s bad for everyone.
These impacts are not theoretical. The impacts were almost immediate when California enacted the $20 per hour fast food minimum wage. The state lost more than 10,000 jobs in the first year. According to a Berkeley Research Group report, 89% of fast-food employers reduced employee hours, 35% cut supplemental benefits, and food prices jumped by nearly 15%. Those are real consequences for real people who ultimately pay the price.
People often say, “But it’s San Diego; why not just raise hotel rates?” While it is true that people will pay a lot to come here, there are limits. Many hoteliers have priced incorrectly and have had to pay the penalty for unused rooms. I say penalty because vacant rooms aren’t just missed opportunities; they cost us. Expenses like loans, insurance, utilities and labor still add up. Which, in turn, costs the city valuable tax revenue.
Whatever we do not collect in revenue must be made up somewhere — or, more aptly, by someone. In this case, it is the San Diego taxpayer. When the city falls short of revenue, it is tough to cut expenses. Instead, it looks for ways to collect more revenue. The turmoil we are witnessing during the city’s budget deliberation directly results from voters not increasing the sales tax last November. Measure E, as it was called, would have increased the sales tax by 1 percentage point and generated $400 million in additional revenue. Instead, the city is desperately trying to fill a $258 million budget shortfall.
When the city is facing a financial crisis and deliberating whether to scale back or shut down essential services, it should be taking steps to expand revenue opportunities, not find ways to limit them. Promoting and welcoming tourists can be important in ensuring San Diego’s success. You see, when tourism wins, San Diegans win. When tourism loses, San Diegans lose by feeling the pressure of higher fees, taxes or fewer services.
We have an asset that few others around the country have. Let’s use that advantage — welcoming visitors, encouraging them to spend, and thanking them as they leave, all while preserving the essential services San Diegans count on.
Rauch is chair of Brick Hospitality, owner and operator of local and national hotels, and lives in San Diego.
