Operating costs are always top of mind for hotel operators but particularly so these days in the wake of a global pandemic with reduced demand and declining rates threatening overall profitability. A handful of executives recently pointed to rising labor costs as a key issue during a panel discussion during BITAC Operations Virtual connect 2021.
The panel, entitled “Operational Outlook: Keys To Increasing Profitability For 2021 And Beyond,” also addressed some of the recent changes to many food & beverage programs as a result of the pandemic and how those may evolve going forward.
Tommy Beyer, vp, development, Newport Hospitality Group, detailed the impact of some recent salary spikes at the property level.
“There’s pressure on wages everywhere. We’ve seen hourly wages for line-level [employees], specifically housekeepers, increase as much as three, four, five dollars per hour in some markets. In Orlando, you really can’t touch somebody unless you’re paying 17 or 18 dollars an hour where two months ago that was 12 or 13 dollars an hour. So now you’re paying people all this extra money now. Wages will be up there and maybe demand falls down so what do you do if you have to be competitive? You don’t want to close your doors or turn off your reservation systems because we need the money; everybody needs it,” he stated.
Gregory Winey, CEO/President, Northpointe Hospitality Management, reinforced the point while suggesting that destination fees might be a way to counterbalance the increased labor costs.
“Will there be a normalization of labor after September? Maybe a bit of a reset quite frankly. I think we’re going to see that especially on the housekeeping side. We were paying 9 dollars an hour in Charleston and we’re up to anywhere between 15 and 18 dollars an hour. It depends on what asset we’re dealing, but it’s been brutal. I hate it for our teams out there because they’re professional hoteliers and they want to do the right thing. They want to take care of our guests and it’s difficult to do so right now,” he commented.
Lou Carrier, president, Distinctive Hospitality Group, also acknowledged that five dollar salary increases for line-level employees are not uncommon.
“If you’re paying somebody five dollars an hour more you’re in essence paying 12,000 dollars per employee per year now so how do you pay for that? he asked.
Carrier, however, pointed out that for the lodging industry the issues with labor extend well beyond wages as the impact of the pandemic has lasted far longer than anyone anticipated.
“I would say that 2021 may go down as the year of the great labor crisis. As much as we asked our managers to multitask and do everything they could to keep us afloat this was not the reward we had hoped for. We were expecting demand obviously to come back at some point,” he said.
Beyer, meanwhile, pointed out that the company is expecting a busy summer at many of its hotels. “Our teams are going to be stretched really thin, specifically the management teams. So we’re having internal meetings trying to decide how do we solve for that and how do we make sure our folks are taken care of and that they don’t go find jobs in other industries?” he said.
Carrier added, “One of the things that we’re all going to be contending with is the fact that people who were career people in our industry in service positions have moved on and a lot of them are not going to come back. Training is going to be a big issue for us.”
Raj Singh, CEO and founder, Go Moment, pointed that technology like the company’s Ivy messaging system can help take on some of the tasks previously being done by humans.
“This means that more expensive labor that is now 15, 17, 18 dollars an hour can focus on higher value tasks and really taking care of the guest in front of them,” he said.
Singh added, “We also see that technology is a huge factor in bridging that gap between what the labor can currently provide and what the guest expectation is. We do see that the gulf is getting broader and broader in terms of guest expectations because those are now being set not just by the hotel down the street, but they’re being set by Uber and they’re being set by Airbnb and all of these other technology players. This is exactly why we see technology being adopted to increase service levels all around the industry without necessarily incurring additional labor costs.”
Food and beverage can also be an area of considerable cost for operators. But while many in the industry have predicted the end of the traditional breakfast buffet for health and safety reasons in favor of more limited offerings, the panelists don’t necessarily believe that’s a long-term solution.
Winey—who noted people are still willing to pay more for upscale dining experiences—doesn’t see the buffet going way. “I would say by and large, at least from my vantagepoint, we’ll see buffets actually come back because it’s an easier way to handle volume for breakfast,” he said.
Masudur Khan, managing director & co-owner, Seaside Lodging LLC, shared his company’s experience as an operator of a number of upscale, coastal hotels.
“We converted the buffet to the grab-and-go type style of breakfast and so far people like it. So overall its working really well, but I agree that the buffet will come back with some sort of restrictions and some new design,” he said.
Carrier noted that in Massachusetts the company’s hotels haven’t been legally permitted to relaunch the buffets yet but maintains it’s a matter of time.
“We’re trying to get incrementally back there and people want it. For the Hampton brand or any of the select-service brands that is a key component and people want that. That’s part of the brand promise that you get that,” he said.