Hotel REITs and Labor Unrest: Analyzing RLJ Lodging Trust's Exposure to Rising Unionization and Cost Pressures

The U.S. hospitality sector is navigating a complex landscape of labor dynamics, where unionization trends and escalating wage demands intersect with operational challenges. For real estate investment trusts (REITs) like RLJ Lodging Trust, these pressures pose both immediate financial risks and long-term strategic uncertainties. This analysis examines how rising labor costs and fragmented union activity are reshaping the hotel industry, with a focus on RLJ's exposure and its capacity to mitigate these risks.

Industry Trends: A Shift in Labor Dynamics

Unionization activity in the hospitality sector has seen a notable decline in 2025, with only 400 workers engaged in strikes at a single hotel-a stark contrast to the over 10,000 workers on picket lines across 25 hotels in 2024, according to a Costar report. However, the sector's broader labor cost pressures remain acute. According to the American Hotel and Lodging Association, hotels paid $123 billion in wages in 2024, a 20% increase from 2019, per a Matthews analysis. In key markets like Los Angeles and Miami, labor costs have surged by 29% since 2019, driven by inflation, staffing shortages, and regulatory changes such as Los Angeles's impending $30/hour minimum wage for hotel workers by 2028, per the same Matthews analysis. These trends underscore a sector grappling with the dual challenges of rising expenses and a shifting labor landscape.

RLJ Lodging Trust: Financial Performance and Labor Exposure

RLJ Lodging Trust, a major player in the hotel REIT space, reported a net loss of $(3.8) million in Q3 2025, a sharp decline from the $20.6 million net income in the same period in 2024, according to a TradingView report. While the company's earnings call emphasized cost management and RevPAR performance, it notably omitted any discussion of unionization activity or labor negotiations, according to a Seeking Alpha report. This silence contrasts with the industry-wide rise in labor costs, which the American Hotel and Lodging Association attributes to inflation and staffing demands, per the Matthews analysis.

RLJ's 10-Q filing attributes its financial struggles to declining room revenue and increased expenses, though it does not explicitly link these to labor costs, per the TradingView report. However, the company's focus on "disciplined cost control" and "operational efficiency" suggests that rising wages may be a contributing factor, per the Seeking Alpha report. For instance, Nikhil Bhalla, RLJ's CFO, highlighted achieving hotel EBITDA of $80.8 million and EBITDA margins of 24.5% in Q3 2025 despite a 5.1% RevPAR contraction, according to the Seeking Alpha report. This underscores the company's reliance on cost containment to offset external pressures-a strategy that may face limits as labor costs continue to climb.

Risk Mitigation and Strategic Resilience

RLJ's risk management strategy centers on maintaining a robust balance sheet, with $1.0 billion in liquidity as of September 30, 2025, per the Seeking Alpha report. The company has also prioritized capital recycling, selling properties like the Courtyard Atlanta Buckhead to optimize its portfolio, per the TradingView report. Additionally, RLJ plans $80–$100 million in capital expenditures for hotel renovations, aiming to enhance long-term value, per the Seeking Alpha report. These initiatives reflect a proactive approach to mitigating operational risks, though they do not directly address unionization pressures.

The absence of explicit union-related disclosures in RLJ's SEC filings raises questions about its preparedness for potential labor disruptions. While the company's 2025 risk management plan emphasizes liquidity and cost discipline, per the Seeking Alpha report, it does not outline specific strategies for navigating union negotiations or wage inflation. This gap could become critical as cities like Los Angeles implement aggressive labor policies, potentially forcing hotels to absorb higher costs or pass them to consumers.

Investment Implications

For investors, RLJ's exposure to labor cost pressures hinges on two key factors: its ability to maintain cost discipline and the broader trajectory of unionization in the hospitality sector. While the company's Q3 results demonstrate resilience in managing expenses, according to the Seeking Alpha report, the industry's structural challenges-such as the 11.2% year-over-year rise in labor costs in 2024, per the Matthews analysis-suggest that margins may remain under pressure.

RLJ's strategic focus on high-growth urban markets and portfolio optimization offers a counterbalance to these risks, per the TradingView report. However, the lack of transparency around labor costs and unionization efforts in its filings, per the TradingView report, limits visibility into its preparedness for potential disruptions. Investors should monitor upcoming wage regulations, such as Los Angeles's $30/hour minimum, and assess how RLJ's cost-containment measures align with these evolving dynamics.

Conclusion

The hospitality sector's labor landscape is evolving rapidly, with rising wages and fragmented union activity creating both challenges and opportunities for hotel REITs. RLJ Lodging Trust's Q3 2025 performance highlights its operational agility, but the absence of detailed labor risk disclosures raises concerns about its long-term resilience. As the industry navigates regulatory shifts and inflationary pressures, RLJ's ability to balance cost control with strategic investments will be pivotal in determining its competitive position.