January 20, 2019 - By Mark Heymann, Chairman & CEO, UniFocus - Published in Hotel Executive – With unemployment holding at historically low rates, hospitality and food service are among the industries most affected by the labor shortage, according to the Bureau of Labor Statistics. The immigrant workforce, a vital source of labor for the hospitality industry, is being impacted by a government crackdown at a time when the U.S.-born population is aging and shrinking. Adding to the challenge is that with job opportunities outpacing available labor, more workers are targeting higher skilled (and higher paying) positions, leaving lower-paying service jobs unfilled.
For hotel operators to continue to meet guest expectations with lower staffing levels, ingenuity will be required, from rethinking how service is delivered to considering nontraditional labor sources that can be trained for hospitality work. And, they will need to examine how a lower-paying industry can attract a larger percentage of the shrinking labor pool.
Raising Wages While Minimizing Impact
Is it possible that the labor shortage could spur the industry to raise average wage rates? Most people assume that a wage increase automatically means a raise in base wage rate. This is not necessarily the case. The use of pay-for-skill and performance pay can increase wages while limiting the impact of the higher net wage on the organization. Pay-for-skill can be implemented in conjunction with cross-utilization, thereby reducing time lost due to minimum shift requirements.
This creates a job enrichment culture (improving engagement) and reduces the number of full-time employees, effectively reducing total benefit costs. A pay-for-performance structure can measure aspects of an employee's job, like quality results, shift production, and other individual or team metrics. This approach, sometimes called gain sharing, assures that as the employee's compensation increases, there is a direct benefit to the organization.
A Shift Toward Self-Service
One way hotels are addressing the labor shortage is by migrating to a self-service environment in areas where that is feasible; in other words, where it doesn't negatively impact the customer experience. Already we're seeing technology-enabled changes at the front desk, from automated check-in to keyless room entry via smartphone. There are also more self-service operations in hotel restaurants-like grab and go offerings-that shift more responsibility to the customer and reduce the need for servers.
A larger, full-service hotel can optimize restaurant labor by offering both sit-down and grab-and-go options; for instance, opening the bar area in the morning for a self-serve continental breakfast so that the restaurant is reserved for those guests who want a full breakfast. Solutions like this streamline staffing needs while maintaining revenue levels and providing a customer experience that in many cases is perfectly acceptable.
Housekeeping is another area in which hotels can find opportunities to cut back on service without affecting guest satisfaction. Using a checkout standard versus stayover standard for servicing rooms, for example, reduces the number of rooms that need to be cleaned per day, and therefore the number of housekeepers needed to clean them. An additional cost impact of this approach is that laundry costs decrease and improve profitability. Along the same lines, some hotels allow guests to request no service at all in exchange for a small price reduction on their room rate.
At some point, as self-service becomes more prevalent in the industry and travelers find themselves with no real alternative (beyond booking a high-end hotel), the impact on the customer experience will essentially no longer matter as expectations will adjust to the new norms. We have already seen this happen in the airline industry.
Another way hotel operators can help compensate for a staffing shortage is by value-engineering labor; in other words, they can review certain tasks and determine which ones can be done on a less frequent schedule without diminishing the guest experience. This might mean, for instance, vacuuming public hallways twice a week instead of daily, with spot picks-up as needed. The challenge with value engineering is to maintain a balance between tasks, task frequency and quality. If guests are seeing litter on the ground because of reduced maintenance or cobwebs due to less frequent dusting, their experience is negatively impacted. That said, value engineering done right can actually enhance guest satisfaction because the primary focus of all tasks is on what creates value in the customer's mind.
Similarly, economies of scale occur when workers are producing higher volumes. In the kitchen, this could mean moving to a quasi-commissary approach, prepping certain ingredients at greater volume a few times a week instead of smaller volumes daily-as long as those items can be safely stored and remain fresh. Additionally, volume production can be improved, especially in banquet operations, by making sales staff aware of what menus have been sold on a particular day so that they can promote the same menus to other customers who are scheduling events for the same day. The extra effort this approach requires in terms of sharing information is well worth the positive impact on staffing needs.
Also look at automating certain tasks, bringing in machinery that speeds up the process where it makes sense from a cost-benefit standpoint. In hotel kitchens, for example, a buffalo chopper can cut vegetables far more efficiently and faster than a worker can by hand. If kitchen volumes only require a worker to chop vegetables 20 minutes a day, the buffalo chopper might not be worth the investment, but for a larger operation it's certainly something to consider. One hotel client several years ago found itself needing three shifts per day to wash flat pans. By purchasing a pot washing machine that handled these large pans, staffing needs were dramatically reduced and the new machine paid for itself in less than a year.
Creating job combinations, or cross-utilizing staff, also can help bridge the labor gap. For example, front-desk staff can be trained to double as lunch servers, reducing the need for additional servers during peak periods. Housekeeping and banquet room setup and cleaning duties can be similarly combined. Cross-utilizing in this way decreases lost time and creates efficiencies that are beneficial not only in a labor-scarce environment but under normal worker availability conditions as well. Even if it means paying a lower-wage worker at a higher rate for the time they're performing a higher-wage role, hotels will still experience an overall cost savings. Full-service hotels will find more opportunities to cross-utilize staff than their select-service counterparts.
With no end to the labor shortage in sight, it might also be time to reevaluate current labor laws and consider legislating a reduction in minimum shift requirements. Where minimum shifts are four hours, a move to three-hour shifts for a slightly higher hourly rate could get better utilization, optimizing labor for peak and non-peak periods based on real demand. And, by enabling workers to pick up several shorter shifts at multiple hotels, it would spread available labor across a larger market. The hotel reduces labor costs while the worker has the opportunity to make more money doing two three-hour shifts at a higher rate than one four-hour shift. And that higher hourly rate could make the hotel industry more competitive for available labor.
Tapping New Sources of Labor
While strategies like those we outlined above can help hotels maintain service levels with smaller staffs, there's still ultimately a need for more hospitality workers. And that will require expanding the labor base into nontraditional sources. Two demographics hotel operators would do well to tap are retirees and stay-at-home individuals who have time available in the middle of the day. Within these two groups are plenty of people who might be interested in picking up a few hours of work a week, whether motivated by a desire for more social interaction, to feel more vital, to keep a toe in the job market, or to supplement their family income or retirement benefits. Because they're not working enough hours to qualify for-nor do they necessarily seek-employment benefits, hotels could create jobs at higher wage rates to attract this market while controlling or reducing their overall labor costs per hour due to a reduction in benefit costs.
As societal views around criminal rehabilitation evolve (the 2018 midterm elections saw Florida pass legislation restoring voting rights to former felons, for one), it might be time to consider yet another nontraditional source of labor-the formerly incarcerated. How many people are in prison for misdemeanors that could be released into the workforce? And could penitentiaries be training prisoners specifically for future work in the service industry? A comprehensive 2013 study by RAND Corporation showed that education and vocational training in prison reduce the odds of recidivism by 43 percent. Already, a number of successful models exist in the restaurant industry for prison-to-jobs programs. Could similar models be developed for the hospitality industry?
Advanced Scheduling Technology
The more hotel operators move towards a more flexible workforce, the more complex the task of scheduling becomes and the tougher it is to accomplish with a manual system. Advanced scheduling technology can greatly simplify the process, enabling accurate forecasting and scheduling to demand while taking into consideration the needs and availability of employees. Any of the staffing strategies described above would be virtually impossible to implement with manual scheduling.
A parting thought: Low unemployment is not the only cause of today's labor shortages. In certain markets, high cost of living is contributing to a scarcity of local workers available for lower-paying service industry jobs. In other words, it's not that potential workers don't exist-it's that they don't exist where we need the labor. As low-wage workers continue to be pushed farther away from areas where the majority of good job opportunities are, there's a growing need as a society to address the lack of affordable housing.
No matter the cause, the labor shortage is an issue that will continue to impact the hospitality industry for the foreseeable future. Succeeding in this climate will require adopting a combination of creative new workforce strategies and concepts that have been proven in other industries but not yet embraced in the hotel world. Ultimately, hotel operators will find that the value of these strategies isn't restricted to an employee-scarce market; rather, the efficiencies and bottom-line benefits they create make them smart practice in any labor environment.