The hospitality industry has been hit hard by a labor crisis coming on the heels of the deep impact of COVID. Labor rates for key hospitality positions such as housekeeping have increased by up to 18% in the last year alone. While the Leisure and Hospitality segment gained 179,000 jobs in February, the bulk of those gains were in restaurants and bars. Hotels have added many fewer jobs in housekeeping, partially because of rising labor rates.

But focusing only on this one single issue can cost a property in many other ways. While there is definitely a cost to hiring labor, there is an even higher cost to not hiring ENOUGH labor.

Rising Guest Expectations

One of the most obvious costs is simply not keeping up standards of quality. While guests may have given properties a COVID-pass during the pandemic and the early days of recovery, many are returning with renewed expectations about how often and how thoroughly a room and common areas are cleaned. At a recent industry roundtable, Sloan Dean, CEO and president of Remington Hotels, a leading third-party management company, noted that “the pass we got last year with limited housekeeping and limited [food and beverage] is over. If you’re not back to normal, you’re going to have very bad customer experiences.”

Quality scores and guest surveys have returned to many properties, so putting the best foot forward becomes necessary not only for today’s occupancy rates, but for a property’s overall reputation, brand, image, and long term viability.

Maxing Out Occupancy

Another aspect of how labor can impact the bottom line is simply in taking advantage of higher occupancy rates. Many properties are keeping occupancy artificially low in order to align with available staff. While this may be a short-term fix – done with the good intention of providing quality experience to fewer guests – the strategy will ultimately cost the hotel in the form of lower RevPAR.
While the recovery period has taught us that nothing is certain, right now it would seem that lower infection rates and eased masking mandates means that travel is expected to meet or exceed pre-pandemic levels.

And the numbers back it up.

Even during the height of Omicron, air passenger volumes during the year-end holidays clocked in at 6.4 million, nearly triple the 2020 total. In December 2021, U.S. demand set a record for any December at 90.8 million room nights sold. (That month’s ADR of $135.28 and RevPAR at $72.15 were significant increases over 2019 totals.)

Not hiring staff to fill this need means that a property is not maximizing its profitability. After a long period of losses and breakeven, there’s finally money to be made. Inadequate staffing levels means hotels could be leaving money on the table.

Turnover and Overtime

A more hidden cost of not hiring enough staff comes in the form of increased turnover for existing staff. Staff that are working overtime – or are stretched to positions they were never intended to fill – can lead to a workforce that is ineffective, frustrated, exhausted, and ready to look for greener pastures elsewhere. The talent drain during the pandemic was deep, and the lack of experienced housekeeping staff has led to additional short-term remedies like overtime. While overtime might seem like a quick solution, our experience is that those hotels paying excessive overtime also have the highest turnover rates. Having the right levels of staff can not only improve quality, but it can improve the working environment for the better.

Staffing Solutions

HSS has been working with clients to determine the right staffing levels for properties and also to figure out what is the best plan to implement those staffing strategies. Many properties are finding that contingent labor can help take advantage of higher occupancy while mitigating risk of uncertainty ahead. We’re also finding that outsourced services such as common area cleaning and kitchen cleaning help to alleviate turnover with existing staff.

There is no cure-all for an historically tight labor market. There are strategies that can be deployed in order to take full advantage of a hospitality industry that is returning to growth. While high labor rates may complicate recovery, not enough housekeeping staff will deprive properties of long-overdue profitability.