The hotel industry has been one of the hardest hit by the COVID19 pandemic. At its peak, more than ten percent of US hotels were closed and over 75 percent of all hotel workers were laid off. Owners and operators focused on “keeping the lights on,” and for the most part hoteliers were able to survive the worst year in the modern history of the industry.
Now, the long-awaited recovery has begun. With this recovery, hotels are experiencing a new challenge which is nearly as painful as the lack of guests in 2020. Increased occupancy means more labor - and hotels are struggling to find it. In the past 30 days, sustained occupancy has risen by the highest percentage ever experienced. This sudden, non-forecasted return of guests put operators into frantic hiring mode even as GMs were shared everyday responsibilities with the front desk, housekeeping, and maintenance staff within their hotels. Across the board, hotel managers have found:
- Experienced hotel workers from pre-COVID were no longer available (they had taken other jobs outside the industry)
- Despite high unemployment, many qualified workers were not yet willing to return to work
- Recruiting inexperienced workers to a new industry is incredibly difficult
Despite these challenges, guests need to be served, so general managers everywhere have filled their staffing needs by three methods: (1) Overtime - giving more hours to their existing team members; (2) Contract Labor; and (3) Higher wages. Each of these methods is very expensive, and for most hotels they may be unsustainable. Even so, this is the reality of the current labor market in hotels across most of the US.
Smart operators have realized that there are three things they must do to survive the current crisis and put their hotels into the best possible position as the recovery process accelerates:
- Embrace dynamic staffing
- Eliminate non-productive overtime
- Establish and manage productivity standards
As a result of this staffing “crunch,” hotels are realizing the importance of a closer alignment of their staffing models and operational drivers. Old-school static scheduling - where managers used the same schedules week after week and relied on historical staff levels to determine their daily and weekly labor investment - was no longer effective. With volatile occupancy and a sharp upward trend, managers were left shorthanded almost every day.
Dynamic staffing fixes this problem in two ways. First, this method links the most current operational forecast data in the property management system or Business Intelligence tool and the payroll system. Every hotel will use daily occupancy forecasts to determine the number of people in each department required to handle that day’s guest needs. Rather than guessing (which leads to overestimating labor requirements and hours needed), managers get a precise calculation of the number of labor hours they need to fill.
Second, a dynamic staffing model gives managers a flexible schedule that adjusts up or down based upon changes to occupancy (or other business drivers) and can support mid-week changes as the week passes. Compared with a static staffing model, hotels will generally find that they can address the additional guest volume with a lot less labor than they had estimated. This staffing model makes it much more likely that they will be successful in finding the required workers AND meeting the needs of their guests without overspending.
Eliminating non-productive Overtime
Overtime is tricky - most workers like to earn extra money, but there is a natural limit to how many weeks in a row an individual can support 10-20 hours of overtime in a hotel’s physically demanding work environment. While overtime pay rates are usually more affordable than 3rd party contract labor, the 50-100 percent wage premium is still very costly. Hotel managers need to know that all of the overtime they are buying is necessary and is explicitly linked to room sales and guest activity.
Unfortunately, not all overtime is productive. “Junk” overtime exists throughout our industry and happens when employees have poor time clock discipline. Clocking in a few minutes early, clocking out late, and shaving time from scheduled breaks can add up to a few hours per week for every team member, and this expense is 100 percent preventable. In order to avoid junk overtime, managers must have the ability to see it as it happens and take steps during the week to address it before the excess expense is incurred. With a good labor management system, this can be automated. Still, every manager should at least be reviewing time and attendance data on a daily basis - even if it is a manual process.
Focus on Productivity
Labor represents the biggest expense - by far - for any hotel. As the largest single daily investment made, it is critical to ensure that the ROI meets your requirements. Experienced operators know that the return on labor investment is measured in productivity. The outcome and outputs of every hour of work are the measurement of success, and good managers know precisely what productivity levels they should expect for every role in the hotel.
Managing productivity starts with measurement. Capturing and tracking the output data is critical, and once again this calls for a linkage between the PMS and Payroll systems. Whether the productivity measure is tracking rooms cleaned, guest arrivals/departures, meals served, or repair requests completed, this data must be known and reviewed regularly.
Hotel companies must also document their expectations for productivity levels in the form of labor standards. Examples of this might be the expected time to clean a room upon departure, or the number of covers served per hour per server in a restaurant. Best-in-class operators start with benchmark data for other hotels in their brand or asset class and then refine their goals to the individual attributes of each hotel. Establishing productivity and labor standards will be essential in evaluating the performance of all workers - direct employees and contractors. This can be used to identify individual improvement opportunities and test process changes that may produce greater efficiency or quality.
No longer a luxury
Before COVID19, optimizing labor costs was a straightforward means to improve GOP and profitability. Today, hotels that embrace modern labor-management practices will recover more quickly and become market leaders as they invest the operating cost savings into revenue driving activities and set the bar for quality and guest satisfaction through consistent application of labor standards. Whether this is done manually or through a labor-management system, the pressure to recover GOP and GOP margin along with the current staffing crunch makes these steps a requirement for future success in the post-COVID world.