Labor cost represents the majority of a hotel’s expenses. Minimum wage increases raise hotels’ operating costs which in turn may be passed along to guests in the form of higher room rates which may lead to decreased profitability.
Hotels may elect to reduce employment levels or staffing levels to control costs but these strategies may backfire. Hotel industry jobs can require long work hours and be highly stressful, so reducing staffing levels could contribute to work overloads and increase turnover and possibly even increased workers compensation and health care costs. Hotel operators are tasked with maintaining guest satisfaction, brand standards, reducing expenses and maintaining profit levels. Hotel operators will need to be creative and have a long-term approach for mitigating the increased labor cost.
Find where the opportunities to reduce labor costs are. Analyze and identify how much labor it takes to do any activity, then ensure staffing schedules reflect this time. Reducing labor inappropriately can reduce the level of hospitality and ultimately negatively impact revenues and profits. It is important to spend time analyzing the projections and schedule to ensure a efficient scheduling.
Decrease work hours for hourly employees and hire more part-time employees to prevent overtime pay. Salaried managers could be required to handle more tasks and/or cover shifts normally covered by hourly employees. Hiring seasonal workers to meet demands during busy times of the year, such as the holidays and over the summer can make it easier to scale back on employees later when occupancy rates plummet. Hotel employers may want to consider eliminating shift differentials as a way to reduce costs.
Change employee benefits for new hires. For example, charge a nominal fee for meals, impose longer waiting periods for certain benefits to commence, and where applicable, reduce parking subsidies. Grandfathering existing employees will protect employee morale.
Cross-train employees. This can lead to more scheduling flexibility, a reduction in the number of employees on payroll and increased productivity. For example, front-desk clerks could be trained to answer external telephone calls in lieu of operating a separate PBX department.
Consolidate positions in which responsibilities overlap. For example, if multiple properties are managed by the same company and are close to one another, directors of departments such as front office, sales, accounting, housekeeping and maintenance could oversee all properties. This tactic must be carefully strategized to ensure that service is not disrupted and operational efficiencies aren’t compromised.
Invest in technology that increases guest satisfaction while decreasing operating costs. For example, mobile applications that allow guests to check in on their smartphone and use it as their key eliminate wait time in the lobby and require fewer front-desk staff. Virtual concierges reduce the need for guests to engage with employees.
The practice of outsourcing off-site has become prevalent in the hotel industry. Laundry services, housekeeping, equipment maintenance, spa, valet, security, and information technology, are all commonly outsourced functions. Hotels can reduce costs and liability. However, hotel employers should be mindful of potential joint employer liability. Under the new “joint employer” standard, a hotel may not only be held liable for its own labor violations, but for those of a franchisee entity as well. Analyzing joint employer criteria is paramount when making the decision to outsource.
WageWatch offers accurate, up-to-date HR metrics, benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes. Our experienced compensation consultants can assist with your organization’s compensation needs. We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.