New York City has housed the homeless in hotels for years, often lower-end properties or hotels out by JFK (which historically has meant lower-end properties).

During the pandemic several cities housed the homeless in hotels and this did reduce the spread of Covid-19. It was win-win, with hotels empty and seeing an opportunity for some revenue, and cities able to address a problem for less than it usually costs them – though New York City still managed to get fleeced.

New York spends $41,000 per year per homeless person which is why they’ve sent some to Hawaii with a plane ticket, rent money, and cash for furnishings.

Now Los Angeles has a plan. Their City Council has voted unanimously to place a requirement on the ballot for all hotels to provide rooms to the homeless when they aren’t full.

If it passes in 2024, the hotels will have to inform the city of the number of vacant rooms they have each day. The city would house individuals in the vacant rooms and pay for them with vouchers.

The program would not be voluntary, and managers could face lawsuits if they don’t comply.

Hotels reportedly would have to inform the city about open inventory each day at 2 p.m. But that’s even prior to check-in time at most hotels. Hotels continue to sell rooms even after midnight (when some online channels can no longer accommodate this).

Customers increasingly book last minute. That’s the premise of ‘HotelTonight’, you land in a city and book your room. Hotels have all sorts of mechanisms to unload unsold inventory at the last minute, including at normal rates, so if the city provides less than prevailing rates for these rooms it is a hit to a hotel’s bottom line.

Airport hotels often get their best rates at the last minute. Last minute surges in bookings happen during weather events and other airline operational meltdowns which often aren’t known until day of.

Will all hotels receive the same rate? Will homeless be put up at the Four Seasons? No matter what you think of someone’s ‘right to housing’ it will inevitably conflict with a property’s brand experience that then diminishes its ability to hold revenue premiums. That not only reduces the income-generating potential of a hotel, but jeopardizes its ability to repay debt. And riskier hotel debt makes it tougher to finance new hotel projects in LA.

Fundamentally, though, for this to make sense you’d need to believe that,

1. The problem of homelessness is primarily about lack of a place to sleep and shower
   
2. And that there’s no way to voluntarily purchase or provide shelter in the market

I’m not suggesting LA buy hotels and operate them for the homeless, there are probably better operators. But hotels which are geared towards traditional guests aren’t going to have the services many in the homeless population need – either to assist them out of their situation, or to deal with their experiences in the moment.

It seems far better to (1) contract with hotels for blocks of rooms for housing, as an alternative to shelters. Pay a rate that entices some hotel owners, package that with social services, and prepare to deliver rooms in a way that helps the homeless and manages the experiences of other guests at the same time.

Requiring hotels to take in homeless people on a one-off basis, when they happen to have a room available, seems like the least effective way to address the problem of homelessness. The program is based on same-day availability of rooms, so homeless will often be forced to move from hotel to hotel every night, too, which hardly seems the best way to address the problem – for the homeless themselves, or for the city administering the program, since presumably many of those staying won’t just be checking out, hopping in an Uber, and then showing up at the next hotel on their itinerary (and waiting at the pool or bar until check-in time?).

To be sure, there are outlier cases where someone might benefit from this. Several years ago an employed but homeless man in New York obtained free hotel nights via credit card initial bonuses using stolen identities in order to secure shelter. A voucher program would have accomplished the same thing for him while being legal. But this is also a very edge case.