May 12, 2021

Hotel Labor Shortage Spurs Shift in Industry's Operating Model

Aimbridge Considers Daily Pay, Third-Party Recruitment to Lure Employees

Hoteliers across the U.S. are seeing demand recovering from the COVID-19 pandemic, and while that increase in demand is welcome news for their budgets, it’s also creating some operational challenges.

Hotel executives speaking during the “A View From the Top” panel of the Hunter Hotel Investment Conference in Atlanta said they are excited for what the summer and rest of 2021 bring as they try to navigate the ongoing labor shortage in the hotel industry.

Recovering Demand

Aimbridge Hospitality finalized its 2021 budgets in November last year as the second wave of U.S. COVID-19 cases was starting, Aimbridge President and CEO Mike Deitemeyer said. January was a slower start as it had more hotels closed than anticipated, but eight weeks in to 2021 the U.S. portfolio saw 60% occupancy. The company has had three weeks of average-daily-rate growth.

“As we look forward through May and June, we’re feeling really pretty bullish,” he said, adding that the company is now exceeding previous budget expectations.

Aimbridge’s hotels are a bit backloaded in the second half of the year, but there are signs of life. Deitemeyer said even business travel, which has lagged behind leisure demand in the early stages of the recovery, is improving by 10 to 20 basis points each week in midscale select-service properties.

“It’s coming in, and we’re excited about that,” he said.

Performance has been a bit choppy over the first four months of the year, Concord Hospitality President and CEO Mark Laport said. Properties in the Sunshine Belt have performed better than their notfarther north.

Business travel is slowly coming back, he said. When visiting some hotels over the last week, he “was delighted” to see guests wearing suits and ties and dresses and carrying briefcases.

There has been an uptick in group business as well. While larger groups continue to be a challenge, Concord’s hotels are booking an increased number of smaller groups.

This summer is going to be fantastic, said Jim Merkel, founder at CEO of Rockbridge. Leisure travelers are able to do more, and they want to travel and have adventures.

“We wish we had more leisure travel hotels this past year, and so this summer has the potential to really make the year,” he said.

Labor Shortage

Labor is going to be a challenge, G6 Hospitality CEO Rob Palleschi said, citing discussions from previous conference panels about trying to recruit staff at bus stops and grocery stores. Staffing isn’t a new issue, but COVID-19 has complicated it, he said. It’s been an ongoing challenge as some team members were uncomfortable coming back to work regardless of the safety measures put in place.

Demand continues to grow, which increases the need for more staff. Currently, the company’s 135 properties need 547 team members to operate. Last week, the number was 520, and the number the week before was 480.

“The number keeps going up, and we’re looking at it every day,” he said.

Aimbridge has been setting up recruitment outsourcing using vendors to find new team members in different markets where the company has enough scale to justify them, Deitemeyer said. That’s a short-term fix he hopes will fill in the gaps to a degree.

A longer-term fix Aimbridge is exploring is thinking about the associate base differently, specifically from a gig-economy perspective, he said. The company is testing out gig pay in several markets, paying employees at the end of their shift each day.

“That is something that we think will have an appeal to a certain demographic,” he said.

Operational Changes

Now is the time the industry changes its business model, Laport said. Many hoteliers serving on various advisory boards and brand committees are pushing for it.

“This is the perfect storm in which we should really embrace change, and that will help our labor statistics in a big way,” he said.

“We’re already doing things, in some case, that some of our friends in the brands would push back, but they don’t pay your bills. We just need to seize the moment and really push, push, push hard.”

Housekeeping is a big component, Deitemeyer said. How stayover cleaning works is an ongoing conversation. Eliminating daily housekeeping works up to a point, but the luxury consumer may still want the service on a daily basis, and the luxury segment will be back with higher average daily rates.

“That’s a slippery slope with this stuff as you think about the different brands as you think about the nuances in the brands,” he said. “It’s housekeeping. It’s food and beverage. When can we suspend the buffet versus when do we have to have it?”

The good news now is the break-even point for hotels is much lower than it used to be, he said. The question is how sustainable that will be given the expectations that wages will increase.

“Some of these efficiencies, some of the things we’ve seen, we either have to keep those or we have to find additional ways to be more efficient.”

Companies can only save so much, Merkel said. Everyone has worked hard to make sure they’ve been running their businesses as efficiently as possible. There’s always a change, and COVID-19 was an extreme scenario no one expected.

If people want a service a hotel provides, they have to pay for it, he said.

“We have to just be really diligent about what we’re providing and that we’re getting paid for it,” he said. “In an economy hotel, you’re paying for ‘x.’ At a luxury hotel, you’re paying for ‘y,’ and we have to be smart about how we’re charging for it and how we’re differentiating the product so that people find the value.”

Copyright 2021 CoStar Realty Information Inc. All rights reserved. From By Bryan Wroten, Hotel News Now.

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