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As the Delta Between Higher Hourly Wages and Lower Payroll Expense Closes, Attracting and Retaining Young Talent is Key – By Rayna Katz

A smiling woman sitting at a computer - Source Hotstats

As the Delta Between Higher Hourly Wages and Lower Payroll Expense Closes, Attracting and Retaining Young Talent is Key

It turns out that the Golden Rule is a maxim hoteliers need to pay heed to when it comes to their own employees. It’s an axiom that is even more glaring as hourly wages in the leisure and hospitality space climb against a payroll cost base that remains lower but is showing signs of growth.

So say several hospitality industry professionals and educators when asked what it will take for hoteliers to attract and retain the younger generation of hospitality workers. It boils down to one central admonishment: treat young associates better.

“Not only should a hotel care about customers, its number one target market is internal associates,” said Leora Halpern Lanz, Assistant Dean, Academic Affairs and Associate Professor of the Practice at Boston University’s School of Hospitality Administration. “If they’re treated well, word gets out that it’s a good place to work.”

That starts with more humane hours. “The industry needs to evaluate why people are working 14-hour days because they’re being worn down,” she said. “There has to be an element of work/life balance.”

Beyond the long hours, Kyle Allison, host of the Hospitality MD podcast, said that the hotel industry needs to tweak its legacy messaging. “People don’t think being in hospitality is cool or fun or exciting,” he said. “A young person might look at it and say ‘I don’t want to be a servant or to have to just smile because the customer is always right.’ That’s an antiquated stigma that still exists; it’s why young people aren’t flocking to the industry.”

Junior staffers also need a better career path, Allison said. “If someone is a housekeeping supervisor and their job is to check rooms, arrange amenities for VIPs and inspect maybe 40 rooms a day, do they need to do that for four years before being promoted?” he asked.

“I don’t think so. And if that supervisor has been in the position for six months and doing great but the company rule says they have to work a year before being promoted, they’re going to feel it’s the wrong place for them and leave. If we allowed people to move up quicker, they would be more excited about the industry and where they’re going.”

Hoteliers also could be more flexible regarding remote work and time off. “Everyone doesn’t have to be on site all the time,” said Craig Sullivan, founder and president of the California Lodging Investment Conference. “For example, the revenue manager doesn’t always need to be there. We’ve had more than 19 months of debunking the fantasy that people can’t work off site.”

Conditions for young workers also should be improved, he added. “Stop giving them windowless offices or putting them in the basement. The rooms with windows generally are guest rooms or other things. The industry needs to start building structures that are more for the associates on site.”

A Better Carrot

Increasing wages for entry-level work and promoting career advancement are also vital toward attracting young talent. The legacy of the hospitality industry has been one of “pull oneself up by one’s bootstraps”—that, unlike most other industries, a person can start as a dishwasher and wind up a CEO. As such, starting wages have historically been lower than other industries. One thing the hotel industry has overlooked is that not everyone will become a CEO or within the C-suite. Rather, they are there to provide for their families: food and life’s other necessities are their drive, not career advancement.

Though wages for entry-level positions might remain lower than other industries, they are rising, a byproduct of the current national predicament.

Consider, first, front-desk agents, the ones who check guests in and out and perform other front-of-house services. The median annual salary in the U.S. is $28,149, according to Salary.com, which breaks out to $14.66 for a 40-hour workweek. Meanwhile, a housekeeper’s median annual wages come in at a similar level of $27,055 or $14.09 per hour.

How many states have a $15 minimum wage? As of September 2021, the answer is none. However, several states have scheduled minimum wage increases to reach $15 an hour in the coming years. Here’s a list.

“Parents may not be supportive of hospitality because salary and career growth may not be as impressive as other fields,” said Halpern Lanz, though she recognized that hoteliers have to answer to owners and maintain profitability.

Overall, average hourly wages in the leisure and hospitality segment have climbed considerably since 2019, according to data from the U.S. Bureau of Labor Statistics. Preliminary data points to an hourly wage for all employees of $19.20 in November 2021 versus $16.77 in November 2019 and $17.09 in November 2020. For non-supervisory roles specifically, preliminary data for November 2021 is $16.67 an hour compared to $14.75 in November 2019.

A tighter national labor market is having a profound impact on overall wages—a phenomenon that puts workers in the catbird seat, but eats further into already fragile hotel P&Ls.

Labor Squeeze

Labor is the hot-button issue in the hospitality segment and something hoteliers struggle with consistently. The fact is, total payroll on a per-available-room basis is still around two times less in 2021 compared to 2019, according to HotStats data. Year-to-date October 2021, total payroll PAR in the U.S. is $43.46 compared to $85.86 over the same period in 2019. In Europe, the data is similar—€25.96 YTD October 2021 versus €50.42 over the same period in 2019. The Middle East had a slightly lower gap in 2021 versus 2019, $36.66 v. $53.69.

What explains the discrepancy, then, between higher hourly wages and a still depressed overall labor expense base? Though hourly wages are up against baseline 2019, the industry isn’t hiring as many workers or full-time equivalents (FTEs). In 2019, the full-year average unemployment rate in the leisure and hospitality segment was 5.2%. It ballooned beginning in April 2020 at the outset of the COVID-19 pandemic and has so far averaged out at 10.45% in 2021 (it’s down to 7.5% as of November). The unemployment rate is certainly trending down and it could be just a matter of time before the higher wages catch up with hotel owners.

Despite the cost associated with labor, the hotel industry is in a better space when its workers are content. The industry, Allison contends, needs to make associates understand the bigger, altruistic picture of hospitality. “We don’t just clean rooms,” he said. “We feed and house people, nourishing them to take on the day, and provide comfort when they don’t have anywhere to sleep.

“I don’t know if we communicate that well. Young people are looking for purpose and we have it. We just have to show it to them and invite them to be part of it.”

HotStats provides a unique profit – and – loss benchmarking service to hoteliers from across the globe that enables monthly comparison of hotels’ performance against competitors. It is distinguished by the fact that it maintains in excess of 500 key performance metrics covering 70 areas of hotel revenue, cost, profit and statistics, providing far deeper insight into the hotel operation than any other tool. The HotStats database totals millions of hotel rooms worldwide. For more information, visit www.hotstats.com.

Posted by on December 14, 2021.

Categories: Features

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