Business
Tourists love Los Angeles. Could the fires change that?
Travelers flying into Los Angeles last weekend were greeted by an apocalyptic sight: billowing clouds of smoke and the red-orange glow of flames against the glittering expanse of city lights.
The stark panorama, and shocking, ubiquitous video of the wildfires, were at sharp odds with images of sun-kissed beaches and glamorous Hollywood that L.A. relies on to draw the flocks of tourists who pump billions of dollars into the local economy each year.
As firefighters begin to bring under control the blazes that laid ruin to Pacific Palisades, parts of Malibu, and the hillside town of Altadena, tourism officials are looking for signs of what short- and long-term toll the disaster may take on L.A.’s prowess as a tourism destination.
“We’re very nervous,” said Jackie Filla, president and CEO of the Hotel Assn. of Los Angeles.
“The first-blush look is obviously there’s a precipitous drop off in shorter-term reservations — people who were supposed to be here this week and next week. We’re seeing some long-term drop-off as well — not as much, but it’s certainly a trend we’re concerned about.”
By some measures, the fires struck as tourism in L.A. finally had recovered fully from the blow dealt by COVID-19. In 2023, the last full year for which statistics are available, Los Angeles tallied $40.4 billion in total tourism revenue, a record. That included 49.1 million visitors, a 3% dip from its 2019 pre-pandemic high.
Filla noted that no L.A County hotels or major tourist draws have been damaged in the fires and major conferences and conventions — a critical component of the tourism industry — are scheduled to go on as planned. The lineup includes the Society of Thoracic Surgeons, whose leadership voted Wednesday night to go ahead with their annual meeting later this month in downtown L.A. and to donate $100,000 to relief efforts.
And another major event, the Grammy Awards, are still scheduled for Feb. 2 in downtown’s Crypto.com Arena.
In normal times, organizers and attendees at these meetings and awards shows would book rooms without hesitation. However, with tens of thousands of people now displaced by the fires, the equation has become more complicated. “We’re very closely monitoring our conventions and conferences,” Filla said, because “everybody is concerned about not taking rooms away from the evacuees, but we have the capacity to do both.”
Occupancy in Los Angeles hotels, which typically hits a low point in January, jumped from 59.3% to 65% as the Palisades and Eaton fires raged in the week that ended Jan. 11 “due to displacement demand from the fires,” lodging industry analyst CoStar found. The biggest surge came over the first three days of the blazes, when average daily rates in the area’s luxury hotels jumped by 22.7% over last year — a rise that may have been driven by evacuees moving into high-priced suites during what is normally a slow time, the company’s senior director of analytics Isaac Collazo said.
The city of Los Angeles includes about 44,000 hotel rooms; the county, roughly 100,000. L.A. County Sheriff Robert Luna said Thursday that about 88,000 people were under evacuation orders.
It remains to be seen whether the region’s recovery will be more like the New Orleans following Hurricane Katrina in 2005, Napa Valley’s rebound after a major wildfire in 2017 or Maui’s ongoing recovery effort since destructive wildfires in 2023.
In the aftermath of Katrina, travel to New Orleans fell to less than half its former level, then gradually recovered. It wasn’t until 2016 that the number of visitors to the city returned to pre-Katrina levels.
Napa and Sonoma counties, by contrast, bounced back relatively quickly after fires blackened more than 110,000 acres and killed 24 people in fall 2017. The fires left most vineyards and tourism infrastructure undamaged and by early 2018 hotel occupancy and revenue were ahead of the year before, according to a local tourism organization, Visit Napa Valley. Local and state officials said the recovery was aided by vigorous marketing, including spending by Visit California, the state’s main marketing organization.
On Maui, where a fire in August 2023 claimed 102 lives and leveled most of Lahaina Town, a major tourist destination, recovery is ongoing. Visitor arrivals in November 2024 remained about 15% below their levels in 2022. Officials there are now pushing hard to bring tourists back following an initial period of mixed messages in which some were calling for travelers to stay away as the community tried to rebuild.
At Visit California, the state’s leading tourism organization, President and CEO Caroline Beteta said in a statement that “we need to make sure travelers understand that their visit helps the community — not hurts — and that the city’s hotels and businesses will be ready to welcome them.”
Beteta acknowledged that “we’re already hearing from restaurants and hotels saying they’re being impacted,” and said her team is at work on a recovery campaign stressing that “everyone, especially California residents, should consider planning a trip to Los Angeles to support its economic recovery.”
Adam Burke, president and CEO of the Los Angeles Tourism & Convention Board, also known as Discover Los Angeles, said, “it’s premature to really understand what the implications are going to be,” but until then, “we’re trying to use our platform to help those who have been directly affected.”
In the longer term, Burke said, he’ll be looking closely at data on web searches for Los Angeles as a destination, international bookings, airport arrivals and hotel occupancy. He noted that in a typical year, hotel tax revenues add more than $300 million to the city’s general fund — money that could helpful fuel recovery efforts.
Despite the devastation of the fire areas, the vast majority of the region’s best-known tourism spots were undamaged by the fires. Though many parks and museums closed because of air quality or other concerns, several have reopened, including Griffith Park, the L.A. Zoo and Autry Museum of the American West on Thursday.
Overall consumer demand typically drops in the aftermath of a natural disaster, since fewer outside visitors to an area will lead to a reduction in leisure, hospitality and entertainment spending, said Raphaelle Gauvin-Coulombe, an assistant professor of economics at Middlebury, who was co-author of a study last year examining satellite data to understand fire activity and its effect on labor markets in counties across the U.S.
Leisure and hospitality is a sector that is particularly important for L.A. County, amounting to about 13.5% of the workforce, much higher than the median across counties, which hovers around 6%, Gauvin-Coulombe said. She did note, however, that destinations with more diverse economies — like that of Los Angeles — tend to be more resilient than those that are heavily dependent on one sector.
The disaster may also force the industry to contend with a shrinking labor force in the region, with fires tending to cause out-migration, she said. A slowing of employment growth can last for three years after a fire, she added.
“When people are traveling, they consider everything,” said Ray Patel, president of the Northeast Los Angeles Hotel Owners Assn. “It’s all perception to the guest. They might go, ‘oh, it’s too many fires.’ ”
It’s an understandable impulse, he said: “We all want to put our heads down at night and make sure we feel safe.”
As Los Angeles looks to stabilize its tourism industry in the wake of the fires, it can rely on an important asset many cities don’t have — its tourism board has staff at seven offices abroad who work with counterparts in Australia, the United Kingdom, India and China.
At a moment when dramatic television images threaten to overshadow the facts of L.A. geography, Burke said, “we’re already working with the travel trade in real time,” aiming to “educate people around the world about why it’s still safe to responsibly travel to Los Angeles.”
Business
Courts rejects bid to beef up policies issued by California’s home insurer of last resort
Retired nurse Nancy Reed has been through the ringer trying to get insurance for her home next to a San Diego County nature preserve.
First, she was dropped by her longtime carrier and forced onto the state’s insurer of last resort, the California FAIR Plan, which offers basic fire policies — something thousands of residents have experienced at the hands of fire-leery insurance companies.
But what she didn’t expect was how hard it would be to find the extra coverage she needed to augment her FAIR Plan policy, which doesn’t cover common perils such as water damage or liability if someone is injured on a property.
She secured the “difference-in-conditions” policies from two insurers, only to be dropped by both before finally finding another for her Escondido home.
“I’ve lived in this house for 25 years, and I went from a very fair price to ‘we’re not insuring you anymore’ — and I’ve had three different difference-in-conditions policies,” said Reed, 71, who is paying about $2,000 for 12 months of the extra coverage. “And I’m holding my breath to see if I will be renewed next year.”
Now, a Department of Insurance regulation that would have required the FAIR plan to offer that additional coverage has been blocked by a state appeals court — leaving the plan’s customers to find that insurance in a market widely considered dysfunctional.
The court ruled earlier this month that the order would have forced the plan to offer liability insurance, which was not the intent of the Legislature when it established the plan in 1968 to offer essential insurance for those who couldn’t get it.
“We appreciate that the court confirmed the California FAIR Plan is designed and intended to operate as California’s insurer of last resort, providing basic property coverage when it cannot be obtained in the voluntary market,” said spokesperson Hilary McLean.
Insurance Commissioner Ricardo Lara said he is “looking at all available options” following the decision. “I’ve been fighting so people can have access to all of the coverage the FAIR Plan is required by law to provide,” he said in a statement.
Lara has faced criticism from consumer advocates who’ve called for his resignation over his response to the state’s ongoing property insurance crisis.
A FAIR Plan policy covers fires, lightning, smoke damage and internal explosions, as well as vandalism and some other hazards at an additional cost. But in addition to water damage and liability protection, it doesn’t cover such common perils as theft and the damage caused by trees falling on a house.
The demand for the additional coverage — commonly referred to as a “wrap-around” policy — has become even greater than in 2021 when Lara issued the order overturned on appeal.
The FAIR Plan at the time had about 160,000 active dwelling policies following a series of catastrophic wildfires, including the 2018 fire that nearly destroyed the mountain town of Paradise. By September, that number had grown to 646,000.
The insurance department lists less than two dozen companies that offer wrap-around policies, including major California home insurers such as Mercury and Farmers and a a number of smaller carriers.
Broker Dina Smith said that to find the coverage for her home insurance clients she needs to place about 90% of them with carriers not regulated by the state — with the combined coverage typically costing at least twice as much as a regular policy.
“The [market] is very limited,” said Smith, a managing director at Gallagher.
Safeco has not written California wrap-around coverage since the beginning of the year and will begin non-renewing existing policies next month. Smith also said carriers are being selective, with the ones that offer the coverage often demanding exclusions, such as for certain types of water damage.
“If I’ve got a newer home with no prior claims … for liability losses, it’s going to be easy to write. If I get a home that is built in the 1950s that might still have galvanized pipes … that’s going to be a tough one,” she said.
Attorney Amy Bach, executive director of United Policyholders, a San Francisco consumer group, said the difference-in-conditions, or DIC, market is getting just as problematic for homeowners as the overall market.
“The market is not as strong as it needs to be … given how many people are in the FAIR Plan, and there aren’t as many DIC options — with the DIC companies being just as picky as the primary insurers,” she said.
There is also confusion about the policies, she said. Her group is considering pushing for a law next year that would clearly label the coverage so consumers better understand what they are buying.
Business
Student Loan Borrowers in Default Could See Wages Garnished in Early 2026
The Trump administration will begin to garnish the pay of student loan borrowers in January, the Department of Education said Tuesday, stepping up a repayment enforcement effort that began this year.
Beginning the week of Jan. 7, roughly 1,000 borrowers who are in default will receive notices informing them of their status, according to an email from the department. The number of notices will increase on a monthly basis.
The collection activities are “conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans,” according to the email, which was unsigned.
The announcement comes as many Americans are already struggling financially, and the cost of living is top of mind. The wage garnishing could compound the effects on lower-income families contending with a stressed economy, employment concerns and health care premiums that are set to rise for millions of people.
The email did not contain any details about the nature of the garnishment, such as how much would be deducted from wages, but according to the government’s student aid website, up to 15 percent of a borrower’s take-home pay can be withheld. The government typically directs employers to withhold a certain amount, similar to a payroll tax.
A borrower should be sent a notice of the government’s intent 30 days before the seizure begins, according to the website, StudentAid.gov.
The administration ended a five-year reprieve on student loan repayments in May, paving the way for forced collections — meaning tax refunds and other federal payments, like Social Security, could be withheld and applied toward debt payments.
That move ushered in the end of pandemic-era relief that began in March 2020, when payments were paused. More than 9 percent of total student debt reported between July and September was more than 90 days delinquent or in default, according to the Federal Reserve Bank of New York. In April, only one-third of the 38 million Americans who owed money for college or graduate school and should have been making payments actually were, according to government data.
“It’s going to be more painful as you move down the income distribution,” said Michael Roberts, a professor of finance at the Wharton School at the University of Pennsylvania. But, he added, borrowers have to contend with the fact that they did take out money, even as government policies allowed many to put the loans at the back of their minds.
After several extensions by the Biden administration, payments resumed in October 2023, but borrowers were not penalized for defaulting until last year. About five million borrowers are in default, and millions more are expected to be close to missing payments.
The government had signaled this year that it would send notices that could lead to the garnishing of a portion of a borrower’s paycheck. Being in collections and in default can damage credit scores.
The government garnished wages before the pandemic pause, said Betsy Mayotte, president of the Institute of Student Loan Advisors, which provides free advice for borrowers. But the 2020 collections pause was the first she was aware of, she said, and that may make the deductions more shocking for people who have not had to pay for years.
“There’s a lot of defaulted borrowers that think that there was a mistake made somewhere along the line, or the Department of Education forgot about them,” Ms. Mayotte said. “I think this is going to catch a lot of them off guard.”
The first day after a missed payment, a loan becomes delinquent. After a certain amount of time in delinquency, usually 270 days, the loan is considered in default — the kind of loan determines the time period. If someone defaults on a federal student loan, the entire balance becomes due immediately. Then the loan holder can begin collections, including on wages.
But there are options to reorganize the defaulted loans, including consolidation or rehabilitation, which requires making a certain number of consecutive payments determined by the holder.
Often, people who default on debt owe the smallest amounts, said Constantine Yannelis, an economics professor at the University of Cambridge who researches U.S. student loans.
“They’re often dropouts or they went to two-year, for-profit colleges, and people who spent many, many years in schools, like doctors or lawyers, have very low default rates,” he said.
This year, millions of borrowers saw their credit scores drop after the pause on penalties was lifted. If someone does not earn an income, the government can take the person to court. But, practically speaking, a borrower’s credit score will plummet.
Dr. Yannelis added that a common reason people default was that they were not aware of the repayment options. There are plans that allow borrowers to pay 10 percent of their income rather than having 15 percent garnished, for example.
The whiplash policy changes around the time of the pandemic were “a terrible thing from a borrower-welfare perspective,” Dr. Yannelis said. “Policy uncertainty is really terrible for borrowers.”
Business
Kevin Costner’s western ‘Horizon’ faces more claims of unpaid fees
In the midst of attempting to complete filming on his western anthology ”Horizon: An American Saga,” Kevin Costner is facing another legal dispute over the production.
On Monday, Western Costume Co. sued Costner and the production companies behind the epic western, claiming unpaid costume fees and damages to some of the clothing during the filming of the series’ second episode.
“The costumes are costly to replace if damaged or not returned,” states the complaint, which included copies of invoices for about $134,000 in costume rentals. “Without a reasonable basis for doing so and/or with reckless regard to the consequences, defendants failed to pay for the rented costumes and failed to return the costumes undamaged.”
Western Costume, the iconic business based in North Hollywood, is seeking to recover roughly $440,000, including legal fees, according to the lawsuit filed Monday in Los Angeles Superior Court.
A spokesperson for Costner did not immediately respond to a request for comment.
The lawsuit is the latest in a series of legal and financial problems that have dogged the sprawling western drama, which Costner directed, co-wrote, starred in and partially funded.
In May, United Costume Corp., sued the production, claiming $350,000 in unpaid fees for the first two chapters of “Horizon.” Two months later, the costume firm filed to dismiss the suit with prejudice.
In May, Devyn LaBella, a stunt performer on “Chapter 2,” sued the production for sexual discrimination, harassment and retaliation in Los Angeles Superior Court. LaBella alleged an unscripted rape scene was filmed without the presence of a contractually mandated intimacy coordinator.
In a motion filed in August to get the suit tossed, Costner said he had reviewed LaBella’s complaint and was “shocked at the false and misleading allegations she was making.”
In October, a Los Angeles Superior Court judge denied Costner’s anti-SLAPP motion to dismiss the case. The judge also denied LaBella’s claim that Costner had interfered with her civil rights through the use of intimidation or coercion with respect to her participation in the filming of a rape scene, but allowed several of her other claims to proceed.
The case is pending.
The production is also facing an arbitration claim for alleged breaches in its co-financing agreement with its distributor New Line Cinema and City National Bank, “Horizon” bondholder, according to the Hollywood Reporter.
In June 2024, “Chapter 1” of the planned four-part series was released in theaters followed by a streaming broadcast on HBO Max, but it was largely panned by critics.
In its review, The Times described “Horizon” as “a massive boondoggle, a misguided and excruciatingly tedious cinematic experience.”
It failed at the box office, grossing just $38.8 million worldwide, on a reported $100 million budget.
“Chapter 2” premiered at the Venice International Film Festival last September, but its theatrical release was pulled and remains indefinitely delayed, while the final two chapters remain in production or development, according to IMDb.
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