Seven practical ways to optimize the hotel workforce
By Fran Worrall
Labor costs are historically the largest costs for hotels, and in recent years they have far outpaced RevPAR gains, fueled by a number of factors, including low unemployment rates, higher mandated minimum wage requirements and soaring benefit costs. In November 2018, for example, the City of Oakland, Calif., approved an amendment increasing the hourly minimum wage for hotel employees from $13.23 to $15 with healthcare benefits or $20 without benefits. According to the U.S. Bureau of Labor Statistics, hourly compensation levels for hospitality employees increased by an average of 3.4 percent each year between 2013 and 2015—a huge jump from the 0.6 percent wage increase between 2010 and 2012. For the average property, labor costs represent between 45 percent and 55 percent of overall costs.
“Labor is an enormous expense for every hotel, particularly for resorts and full-service properties in urban areas,” said Cornell University law professor David Sherwyn, director of the Cornell Center for Innovative Hospitality Labor & Employment Relations in Ithaca, NY. “The reality is that in a service industry, labor costs will always be high. It’s the nature of the beast.”
Yet, there are ways to manage these costs; and, in doing so, increase hotel profitability. According to Sherwyn, the secret lies not in staff lay-offs but in optimizing the workforce. “Today’s hotel workplace requires managers to reevaluate how work is done and to implement new ideas and systems,” he said. “There are actionable steps hotels can take to improve staff productivity so that labor costs are efficient.”
Boost profitability and guest service
Lluis Tomas, director of projects for global markets at Heath & Company in Atlanta, a professional services firm with expertise in labor productivity in the hospitality industry, agrees, observing that hoteliers are constantly seeking ways to maximize revenue, yet they frequently overlook labor costs. “It’s the largest controllable cost for hotels of all sizes, but it’s often ignored,” he said.
Like Sherwyn, Tomas believes that labor optimization is a critical component not only to reducing costs, but also to increasing revenue and ensuring quality guest service. Here, Sherwyn and Tomas offer their top ways to optimize the workforce:
1. Update the training. The majority of jobs in the hospitality industry are held by young workers—often in their 20s—who prefer a different type of training than their older counterparts. “They want to learn something new every day and are often looking for their next experience,” Sherwyn said. What’s more, these younger employees crave autonomy, preferring self-learning over the traditional classroom. His advice: Ditch the formal training programs in favor of more active learning. Or, offer modular courses that employees can complete independently. The result will be happier and more productive staff, both immediately and in the long run.
2. Practice cross-training. Employees who are trained to perform additional job functions can assist each another during demanding periods or cover several positions during slow periods. “In addition to reducing labor costs, this practice enables managers to respond more efficiently to the ups and downs of the business,” Sherwyn said. And while cross-training is not without its costs, the pay-off makes it worthwhile. “Many jobs don’t require a lot of additional training, and the cost is minimal if you address it up front,” he said, noting that cross-training is increasingly necessary as the industry grows while the labor pool remains the same or declines. An added benefit of cross-training is a boost to employee morale. “You’re creating a more interesting workplace for staff and letting them know that they’re part of the bigger enterprise. That glimpse of the future changes their mindset in a positive way.”
3. Implement crunch programs. Similar to cross-training, crunch programs allow managers to request help from other departments during small windows of high demand. In a crunch, a bellman might clear restaurant tables for a half-hour, for example; or several front desk employees might help catering staff prepare for a large banquet. Tomas advises hotels to require all new hires to sign up for a crunch program. “That way, employees know from the start that they’ll have to perform another job every once in a while,” he said. “Some hotel operators view this as reactive, but it’s really a recognition that hotels frequently experience high-demand situations unlike most other industries.”
4. Forecast guest demand. Hotels that want to optimize the labor force must first accurately forecast guest demand in all areas of the property. This includes anticipated customer volume in restaurants, bars, spas, golf courses and retail shops. “When you effectively anticipate guest demand, you can schedule your staff accordingly, making sure the right employees are in the right places at the right times and improving both service and efficiency,” Tomas said. He emphasizes the importance of gathering complete and up-to-date information and recommends automating all data transfers so that managers have an accurate picture. “Hotels often fail to do this well, primarily because they use disparate systems and a number of different vendors.” Yet, properties that go through the short-term pain of automating their tools have great success. “It’s worth the additional effort in terms of efficiency and guest satisfaction,” he said.
5. Schedule weekly labor meetings. Proper forecasting sets the stage for weekly labor meetings between department managers, allowing them to view the upcoming week’s business volume, review labor management reports and initiate corrective action. “The weekly labor meeting is as critical to bottom-line success as the weekly sales meeting,” Tomas said. “You have to make time in the schedule for it.”
6. Learn how to retain staff. It goes without saying that a key component to optimizing the workforce is retaining staff, yet many properties fail to take the necessary steps to ensure employee satisfaction. According to Sherwyn, this might take the form of flexible scheduling or shorter shifts, both of which improve employee work/life balance; or creating team-building activities and incentives that promote a strong work ethic. Often, merely acknowledging individual contributions makes a huge difference in staff morale. “Hotel work is hard,” he said. “What other business is open 24/7 and on every holiday? A compliment or a pat on the back can go a long way toward making employees feel valued and improving their workplace experience.”
7. Take advantage of technology. “It’s no longer a question of whether or not you need a workforce management solution; it’s a question of which one is the best fit for your property,” said Tomas. An automated system can manage scheduling and planning to help control labor costs and improve budget forecasting. Managers can use the solution to forecast schedules, manage attendance, minimize overtime risk and gain a high-level view into optimization of employee shifts. With some systems, staff can use smartphone technology to request specific shifts, request time off and view schedules in real time.
Finally, Tomas advises hoteliers to make labor optimization a habit. “It’s like going to the gym,” he said. “People often complain that they’re not fit; yet, when asked how frequently they work out, they respond that they don’t. You have to make labor optimization part of your routine. Although it may feel awkward at first, practice makes perfect.”
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