Labor Management in the Hospitality Industry
(A Guide to the Processes and Systems)

By Ron Strecker, Len Wolin & Ken Heymann

Imagine that each time you check into a luxury hotel, a team of associates are personally assigned to take care of all your needs. How about checking into a limited service hotel and having a valet parker, doorman, bellman, concierge, and front desk agent (not all the same person) there to greet you? Whether a guest stays at a five star hotel or a one star hotel, all hotels have a “limit” to the level of service that is provided. The guest satisfaction for both of these experiences would likely top the charts but the owner’s satisfaction with profitability would hit an all time low. The level of service is dictated by both the needs and expectations of the guest as well as the labor cost associated with the service. The “Service Wow” provided to the guest comes at a cost and that cost is labor. Now imagine checking into the same luxury hotel and finding only one person standing behind the front desk doing his best to register a line of guests. During this process the clerk is apologetic about the wait and the fact that the guests will need to park their own car as well as carry their own bags to the guest room. The clerk mentions to the guest that senior management has asked all departments to reduce their labor expense as much as possible in order to improve the bottom line. While the owner may now feel the profits are being maximized it won’t take long for the drop in guest satisfaction to translate into fewer repeat guests and negative word of mouth “publicity” that ultimately will result in declining revenues and profit.

How does the smart operator balance guest satisfaction against maximizing profits? This is a very similar dilemma to the age old challenge of balancing average daily rate with occupied rooms.

The largest controllable cost in most hospitality businesses is labor. Hoteliers have known this for decades and have incorporated many different processes, systems, and procedures to help manage these costs. In the past decade Labor Management Systems (LMS) have become more widespread in the industry as more organizations adopt some form of LMS. The current opportunity is to better utilize all the features of LMS across the hospitality industry. Many hotel companies are using bits and pieces of LMS but not utilizing all the components. Research at hotels shows that LMS range from no formal approach to sophisticated systems that incorporate forecasting, scheduling, time data management, and labor reporting. Most hotels are somewhere in the middle using Excel-based spreadsheets or basic time and attendance systems.

Another way to consider LMS is to also understand what it is not. It is not simply a basic time and attendance system. It is also not a set of tools to force feed payroll cost reductions across the board without appropriate levels of discussion, even though LMS systems can be instrumental in creating cost reduction action plans. We think it is time for the industry to come to agreement on the core features that constitute an LMS program and the specific minimum attributes that each feature should possess in order to qualify as an LMS. This article takes a two-step process to understanding labor management systems. The first part looks at the basic principles and processes of labor management. The second part (which will be in the next edition of FocusEd) explains how a labor management system can be used to better manage these processes.