Revenue increases are expected to offset the anticipated growth in labor costs as hotels replace staff positions that were cut in the downturn.
Editor’s note: This article was originally posted on 18 June 2010. The article was chosen as part of Hotel News Now’s look back at 10 years of the hotel industry.
REPORT FROM THE U.S.—Hotel industry experts say hiring is back on the rise after its recession-period low in 2009. With the hospitality industry now three years into a recovery period, revenue increases are expected to offset the anticipated growth in labor costs as hotels replace staff positions that were cut in the downturn.
The number of man-hours worked at U.S. hotels in 2011 was up 3.1% over 2010, closely mirroring growth rates in rooms sold, according to research from PKF Hospitality Research. Hotels are re-hiring staff as business volume increases and reinstating services and amenities that were cut during the recession, said Robert Mandelbaum, director of research information services for PKF.
“The improvement’s gotten to the point where hotel managers can no longer operate with a limited staff, and they have to staff up,” Mandelbaum said. “The good news is that revenues are now starting to recover, so it covers the incremental labor increase costs. We think we’re entering that phase in the recovery where we’re going to start to see hotels ramp-up their staffing or give more hours to existing employees.”
According to Javier Rosenberg, COO of Radisson in the Americas and executive VP of managed hotels at Carlson Hotels, companywide hiring has been directly impacted by upward trending in hotel occupancies. “Decreasing staffing levels (in the past) are mostly a direct result of lower occupancies rather than any creative efficiencies discovered,” Rosenberg said. “As occupancy levels have recovered, we have seen some increases in staffing levels in hotels.”
Aside from cutting jobs and hours during the recent recession, one tactic often employed was to cross-train employees to perform other tasks normally outside of their job description. At hotels where such measures weren’t possible, other cost-cutting measures were frequently employed, like trimming restaurant hours and scaling back room service from a full 24-hour operation, especially between the slow times of 2 a.m. to 6 a.m. But now that business is picking up, managers will likely ease up on back-of- -house restrictions.
“There’s a strong variable component to hotel labor. The more rooms you have occupied, there’s a greater need for housekeepers, laundry, cooks, waiters, front-desk clerks and bellmen. There’s only so far you can stretch people,” Mandelbaum said. “The diversification—having people wear multiple hats—if you’ve got a full house, and people checking in, maybe they don’t have as much spare time to do multiple tasks. They get to the point where maybe we do need to have someone come in for four hours a day and just do the laundry.”
“Non-union hotels, they were doing whatever they had to do to keep people employed. Now we’re seeing them fill in those voids, and hire people for specific positions, so people can focus on their true job,” added Joe McInerney, president and CEO of the American Hotel & Lodging Association. “Business is getting better, and we need to give them service, especially in the 4- and 5-star hotels. The service protocols are the important thing … and if you’re an international hotel catering to international guests, airplanes come and go at odd hours and you need to really be there to support their needs.”
Efficiencies limit hiring
Other changes made during the recent downtown may stick, however. Necessity is indeed the mother of invention, and in certain cases efficiencies were created that are not only removed from the guest experience, but also they’re an improvement over past processes. MGM Resorts International is one such company that claims it has emerged from the recession more finely tuned than before. According to company representatives, staffing levels are expected to remain consistent through 2012, as are the protocols the company has recently put in place.
“Throughout the recession, we’ve learned a lot of lessons about how we can successfully do more with less, and work smarter, not harder. We’re going to continue those new practices,” said MGM Resorts spokesman Gordon Absher. “Because we’ve become more adept at working with our efficiencies, there’s no reason why we can’t apply to our future operations many of those lessons that we’ve learned in the past few years.
“Many of the changes we’ve made are invisible to guests. Customers won’t recognize changes made in strategic sourcing or financial support areas,” Absher continued. “We consolidated purchasing functions that were previously duplicated at various properties into a single corporate function. Today, our purchasing department is a leaner, meaner machine, which buys in larger volumes from more single-source suppliers, while maintaining our required levels of quality. As a result, our company has even greater purchasing power than before.”
Another solution MGM has implemented to stay competitive and do more with less during the downturn was to up its training programs, with the goal of ensuring that all employees go the extra mile when serving and interacting with guests. Radisson’s Rosenberg expressed similar sentiments, pointing to the company’s “Ambition 2015” guest satisfaction initiative, which espouses maximizing hotel operations with a motivated and engaged staff.
“We focus more on front-line employee interactions with our guests and the quality of those interactions,” said MGM’s Absher. “Today, we have a greater expectation that employees will proactively greet guests and will be informed about what is happening at their resorts and in our neighboring resorts. There is now an expectation that all employees in all areas—housekeepers, valets, engineers—are expected to know details of the shows and restaurants his or her property offers in order to be able to answer guest questions.”
Labor costs and employment levels aren’t expected to change much in the midscale, select- and limited-service sectors though, since these types of properties generally tend to run lean in the first place.
“I don’t expect the percentage of change in hours worked at limited-service hotels to rise as much as full-service properties, but conversely, if you looked at that number in 2009, I’d bet the reduction in hours worked were greater at full-service hotels,” Mandelbaum said. “In a limited-service hotel, they’re lean already. There’s not a lot of muscle there to cut.”