18 SEPTEMBER, 2018
5 insights into the Hotel Industry’s Labor Challenges
Finding and keeping good talent is a top concern among hoteliers. Speakers on a recent panel shared data affecting hotel labor and best practices for getting around labor hurdles.
It’s a common refrain at hotel industry events to hear executives talk about tight labor markets, difficulty attracting quality employees and dealing with wage pressure.
In a recent panel at the Southern Lodging Summit, however, speakers shared data underpinning today’s labor market and actionable tips for dealing with the issue.
“The war for talent is over, and guess what? The talent won,” said Judy King, founder, and principal of Quality Management Services. “We’re in such a thin labor market that the practices we have in place for recruitment, retention, and for full productivity and engagement are all the more important. We have moved from labor being considered perhaps more expendable to being absolutely essential.”
King, along with CBRE’s Director of Research Information Services Robert Mandelbaum and Graduate Hotels President Tim Franzen, talked about why the labor market is a critical one for hotel employers and best practices for getting around it.
1. Labor is the largest expense for a hotel … and it’s changing
According to CBRE’s 2018 “Trends in the Hotel Industry” research, total labor costs and related expenses made up 42.8% of all hotel expenses in 2017.
At the same time, Mandelbaum said current low unemployment rates have “manifest challenges in many ways, one of which is the upward pressure on compensation.”
What this has resulted in for the hotel industry is a change in the drivers of labor costs in some ways, Mandelbaum said. Bureau of Labor Statistics data overlaid with CBRE data shows that while average hourly compensation for hotel employees has grown, overall number of hours worked is going down.
“I don’t think it’s necessarily just cutting of schedules, but it’s also about changing the way we’re offering services and the influence of technology,” he said. Factors include “a different mix of employees at a lower rate vs. those at a higher rate, and also enhancements to employee productivity.”
Along the same lines, CBRE’s “Trends” research showed that from 2016 to 2017, the payroll category of contract/leased labor grew 4.2%.
2. Money matters … but it’s not everything
King shared data from Randstad’s Employer Brand Research showing that as predicted, salary and compensation are always the top reasons why employees say they stay at a job and it’s their top reason for leaving.
While King said those compensation issues definitely show a theme, she also pointed out the relatively high numbers of people who stay for things like a work-life balance and flexibility in the workplace.
“One of the things I hear a lot from millennials and even Gen Z coming into the workforce is that flexibility is important,” she said.
She also pointed out the 43% of people surveyed who said a limited career path was a top reason why they left a job.
“We need to make sure we have investment and development for everyone,” she said. “It’s not just training for entry-level positions, but how are we equipping our leaders at other levels in the organization?”
3. The first three months of employment are critical
“We have found that 87% of turnover takes place within the first 90 days,” King said, citing data from Schulte Hospitality Group. “What are we doing in that assimilation period that would cause the hire to say, ‘This was a great decision and I want to stay,’ or ‘This was as bad decision and I want to leave.’”
King said it’s important to make sure training and orientation extends beyond the traditional first week of employment.
And if that three-month mark comes and an employee isn’t working out, Graduate Hotels’ Franzen said it’s the signal to move on.
“If you have someone who isn’t working out, cut bait, move along and find someone else,” he advised. “Don’t waste time trying to make it work. At the end of the day, what happens is this: If you have someone not doing their job—if they’re not passionate about it, if they don’t care—then everyone else who does care becomes very apathetic. And once that starts happening, people go out the door.”
4. Raise standards, don’t lower them
King said something she sees all over is the domino effect of one apathetic employee spreading a bad attitude throughout a team.
“I see a tendency to drop standards, and a toleration of poor performance leads to nothing but more poor performance,” she said. “Your good employees are not only doing their jobs, but they have to pick up the slack from other people.
“I understand the pressure, and yet if we drop standards, it has the opposite effect,” she warned. “People don’t want to come to work because it’s imbalanced in terms of performance management.”
King cited a hotel she works with, the Nonantum Resort in Kennebunkport, Maine, whose principals—innkeeper Jean Ginn Marvin and GM Tina Hewett-Gordon—made the choice to raise their standards for employment in hopes of attracting a more committed workforce. It paid off, King said.
“Instead of putting guests first, they put employees first, understanding that if employees are well-taken-care-of, then they will take care of the guest,” she said. “They don’t operate out of fear.”
5. Give enough time and training to culture
Franzen said that in the years since Graduate Hotels formed as a collection of independent boutique hotels largely in university towns, he learned a lot of lessons about the importance of training and culture to an organization.
He said that as the company was growing its management capabilities, he and other principals realized they needed “better control over the training” employees were given. So they created a culture guide.
“It instills to all employees what our culture is all about,” he said.
King, who developed the guide with Graduate Hotels, said the guide “reflects a mindset rather than the number and types of practices and processes we have.”
Franzen pointed out that the best and most expensive hotel design and furniture in the best location can’t make up for a poor culture.
“Culture eats strategy for lunch,” he said. “If the culture’s not right at the hotel and for the hotel employees, it’s all for naught.”
He likened the culture of a strong hotel environment to that of an athletic team, not necessarily a family.
“It’s not necessarily unconditional love, like a family, but more like an ‘I’ve got your back if you’ve got mine’ team mindset,” he said.
Published September 18, 2018