At press time, the U.S. unemployment rate is at 3.9%. While that may be good for the economy, it has caused a labor shortage for industries across the country, and hospitality is definitely feeling the crunch.
“It is a very tight labor market, especially in the leisure and hospitality industry,” said John B. (Jack) Corgel, professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels’ Americas Research. “According to the Bureau of Labor Statistics (BLS), the current level of open jobs in the sector equates to 5.3% of the total personnel currently employed. This is the highest level since 2000 and indicative of the difficulty hospitality managers are having finding qualified employees.”
The labor shortage is only going to get bigger. “It is big and getting bigger,” said Mark Woodworth, senior managing director, head of lodging research for CBRE Hotels. “Labor and turnover and things of that nature have always been a big issue in the service industries in general and, obviously, lodging within that. The problem becomes more acute as the availability of labor becomes more scarce, and that is absolutely the mode that we have been in for at least the last one to two years.”
He continued, “If you combine the unemployment rate and look at the underemployed rate, those levels are down to the pre-crisis—10-12 years ago now. There is every indication that the problem, which is very real today, is going to get worse before it gets better.”
BLS projects that the growth in labor supply in the U.S. in 2020 will be the lowest in recorded history. “[It is not the] percentage change here, it is just literally the number of people that are expected to enter the labor pool then,” said Woodworth.
Chip Rogers, president/CEO of the Asian American Hotel Owners Association (AAHOA), said that his members are also reporting a labor shortage. “Employee shortages are one of the greatest challenges facing the industry. A 2017 AAHOA member survey found that 87% of respondents have job vacancies at their properties, and more than half reported that at least 10% of their jobs remain unfilled.”
One factor that CBRE has been tracking in relation to the labor shortage, according to Woodworth, is how current immigration policies are affecting labor supply. “The Census Bureau just recently put together an analysis that we just recently started talking about where we look at the metro level and what the population change has been over the last eight years, from 2010-2017,” he said. “…You have some residents move away; some residents move to that city from another city; and third is that you have [legal] immigration of non-U.S. residents. It is amazing when you look at the metro level. “
He continued, “This labor shortage is going to get worse, because whatever new immigration policies are developed and implemented, it is going to take some time. Most economists—and the CBRE official economic outlook—call for a fairly meaningful slowdown in the economy in 2020. So on the one hand, you can say if you held everything else constant, that leaves pressure on labor and the cost thereof, but one of the main contributing factors as to why the economy is expected to slow down is we are going to run out of workers to actually do the work. It is one thing for companies to grow and expand and want to hire more employees, but if we don’t have the people to employ, then the jobs don’t get filled, and the economic benefit is not realized.”
Joel Carver, CEO of the Carver Companies in Atlanta, believes that the labor shortage is one of the greatest challenges facing North America. “One trendline shows that, without finding new sources of legal workers and without clear paths to citizenship for many, one in three hotels will experience a significant workforce shortage in heart-of-the-house positions within the next 18 months,” he said. “That’s a fundamental problem.”
Marco Manzie, president of Paramount Hospitality Management in Orlando, FL, said that his company finds a number of its frontline employees, including housekeeping team members, from legal immigrants.
The elimination of the temporary protected status of Haitian immigrants is a concern for Manzie. “We are hopeful that our industry lobbying of this issue will have a positive outcome for us,” he said. “Understanding the dilemma that we face with finding U.S. citizens that want to clean rooms seems to be a major growing concern for our industry. Our industry must lobby for our government to implement a process that will screen and legally allow foreign workers to enter the country as long as they meet a criteria that protects our country as well.”
An area that has faced a labor shortage is Hilton Head, SC. One of the factors affecting the shortage are restrictions placed on work visas for overseas workers, including those who take seasonal positions at resorts on the island.
According to Douglas OFlaherty, VP of the South Carolina Restaurant and Lodging Association (SCRLA), the association’s members are not receiving the same number of approvals on H-2B applications as they did in the past. “Someone told me that they put 400 H-2B visa applications in, and they were able to get 175,” he said.
Many of the workers denied had previously been approved for visas. “A lot of the H-2B workers are the same workers coming every year,” he said. “It does help the resort itself just for training purposes—they understand the policies, they understand the resort, they understand how to get around. They were able to get 350 two years ago, and now they are down to 175. They are going to have to take the other 175 in some other capacity to find other people to fill those jobs because they need to be able to operate. It is costing them twice as much money to do the training.”
Beyond immigrant workers, Hilton Head hospitality employers have also had trouble finding other local and seasonal workers. “The labor shortage is significantly affecting them,” said OFlaherty. “Hilton Head is probably the worst in the entire state of South Carolina. It is at a very critical point.”
A contributing factor is that the high price of real estate on the island means that many workers can’t afford to live on the island, instead having to live in neighboring Bluffton. “Bluffton is now thriving,” he said. “But now, a lot of the employees now work in Bluffton because it has grown. They also work in nearby Savannah, GA, which is growing as well.”
With jobs unfilled, many of the resorts may be forced to limit services or amenities previously offered. “They may choose not to open a food and beverage outlet,” said OFlaherty. “They are closing the outlets because they don’t have the people to staff them. Sometimes, a hotel might only run at 70% occupancy. That is full for them, because they might not have the housekeeping staff to clean a full house. They are choosing to run lower occupancies because they don’t have the staff to fulfill the requirement to switch over. They may run 100% on the weekend, and then the out-of-service rooms sit dirty until Wednesday because they don’t have the housekeeping staff to clean it.”
CBRE’s Woodworth has heard from other operators regarding the short-term ways they have dealt with the labor shortage. “If you have a guest who is in your hotel on a multi-night stay, maybe on check-in, you offer that guest an incentive if they are willing to have housekeeping not turnover their room the morning of the second day,” he said. “If it is someone like me, a business traveler, I usually get to my room late at night and get up early the next morning; I am not even going to miss that, but it will save management housekeeping time. Therefore, there are some productivity gains on that front.”
With the pool for labor smaller than previous years, companies are working harder to bring workers into the fold.
“We have hosted job fairs,” said OFlaherty. “We host webinars. We talk to colleges that are here in our state and out of our state about opportunities that are there, both seasonal and full time. Not all of the jobs that are available are seasonal—a lot of them are full-time workers.”
Ben Rafter, CEO of OLS Hotels & Resorts in Encino, CA, noted that labor issues are also apparent in corporate roles, beyond frontline employees. He thinks that the industry needs to do a better job of selling itself to potential employees. “To some extent, the whole industry needs to continue reinventing itself so that, minus Cornell, Michigan State and a few others, people in universities are looking at hospitality as a potential career option,” he said. “A lot look at it in terms of the actual operating functions of the hotel, versus looking at it in terms of ‘we churn out massive amounts of data, just like any other industry, but with it, we have the fun nature of supporting people’s experiences, travel, leisure. If you want to work in analytics and data, this should be a great option because it’s a good industry.’ We don’t do a good job of conveying that to people. In a fully employed economy, it’s hard to find the right people.”
Carver agrees. “I actually do not think we, as an industry, do a very good job. The business world runs on travel, and everyone is ‘staying at a hotel,’ but I’m always surprised at how people are intrigued by how a hotel actually operates.” he said. “It’s a 24/7 operation, with tons of standards that are expected and regulated. It takes a lot of training, engagement, smiles and professionalism to run a hotel, and those of us who learned it early in our career are absolutely passionate about it. The postings I see frequently just don’t convey the passion of this industry.”
Companies are increasing their recruiting efforts for those who have decided to make hospitality their career at schools across the country.
“Penn State is enviable to be in a position to have more than 70 recruiters come specifically for our hospitality program,” said Donna Quadri-Felitti, director of the School of Hospitality Management at Penn State. “The interest has increased, as well as the people who have come. We are not alone. Many other industries are under the same concern—whether it is a service industry like healthcare or retail—everyone has experienced a talent deficit.”
Nicolas Graf, associate dean of the Jonathan M. Tisch Center for Hospitality and Tourism at NYU, echoed Quadri-Felitti. “We, indeed, see more effort at trying to recruit our students, and we have seen our students having more choices upon graduation,” he said. “It has become more competitive for employers today to attract the best talent. In addition, hotel brands and management companies now compete with other sorts of companies for recruitment, including OTAs, sharing platforms and other vacation rentals, but also luxury retailers and other service-related companies.”
While in the past it has been potential employees pitching themselves to employers, the companies are now working to convince workers to join them. “All industries experiencing this talent deficit are experimenting with retention and recruiting tactics, but they are looking at strategically understanding their values,” said Quadri-Felitti. “For instance, our faculty do research within diversity, inclusion and workplace issues in order to understand and find causes and correlations and, therefore, solutions for industry.”
Carver agreed. “At every level, we have moved from an employer-based environment to an employee-based environment,” he said. “That’s something many of us still have to get our head around. After the recession, many of us have been in the mindset that if we wanted a purple elephant with pink polka dots to run our hotel, we could find them. And, because of the unemployment rate, we often could. Today, that’s just not reality. We need to make sure that we set clear and reasonable expectations for our recruiting teams to find good, well-qualified candidates for every position and not unrealistic ones.”
Potential employees want to know that they will have the chance for growth within the company. “We find that our students like to go to companies that can communicate opportunities to grow throughout their career,” said Quadri-Felitti. “Out of a college program, companies that can demonstrate their value early on are also important. A student’s internship experience also impact their choices. Recruiters who are building relationships that are relational and not transactional regarding labor are the ones who are succeeding in recruiting our students.”
Manzie said his company tries to do just that. “Finding great talent comes with the company’s culture and reputation,” he said. “Today, talent is interviewing the company as much, if not more, than we are interviewing them. Therefore, attracting talent [is about] individuals knowing about our company, our transparency in setting expectations and the recognition and respect that we have earned within the marketplace. People want to feel proud about where they are working.”
With the labor shortage, employers are now offering better benefits and increased pay. Per the BLS, the average hourly compensation rate for hospitality employees rose 3.8% in 2017.
“Many of our members are already offering a premium rate for all of their employees,” said SCRLA’s OFlaherty. “Some are offering a stipend to offset the cost for transportation for employees from other counties and providing employees meals. The larger resorts can offer medical and 401Ks, dental and life insurance.”
AAHOA’s Rogers reports that its members are doing the same. “In the recent AAHOA member survey, 66% reported plans to expand their workforces in the next three years. Due to the improving economy and low unemployment, hoteliers, as well as other employers, are making wages and benefits more competitive to attract workers for a multitude of positions. The recent passage of the Tax Cuts and Jobs Act is certainly making that easier.”
The benefits aren’t always financial. “We have typically found that yes, money is a factor, but more and more the trend has been work/life balance and quality of work environment,” said Carver. “We pay competitively, and we survey annually to make sure we are doing so, but we also cover the soft factors of having a safe, fair, healthy work environment that is fun and rewarding.”
The tight labor market also puts an emphasis on retaining employees—and companies are trying to do just that. “We first let them know we care about them; creating respect in the work force is a major plus,” said Manzie. “We have a comprehensive positive orientation that sets expectations levels. We have frequent team-member recognition programs identifying their personal special events, such as birthdays, with personalized cards with gift certificates. We pay a fair—if not above average—wage within the market that allows us. In addition, we have an aggressive employee benefit plan that is tiered to appeal to several different needs and financial scenarios.”
Even with these added benefits and recruiting efforts, positions may still not be filled and companies may need to find new ways to get them done.
Efficiency of labor is one. “Cross-training team members allows us to take advantage of levels of efficiencies,” said Manzie. “This is, of course, if you are in a non-union environment. A union environment is more complex to accomplish this goal.”
Efficiency has become a focus at hospitality schools. “We constantly adapt our curricula to changes in the industry, and improving efficiency is certainly part of this,” said Graf. “Our courses in hotel operations, revenue management and asset management are all focused on efficiency, for instance. We are also increasingly challenging our students to improve their problem-solving skills as well as developing innovative approaches.”
Hospitality can also look to technology to make operations more efficient, with items like robotic guestroom vacuums and an automated check-in and checkout process. “If we are able to embrace that automation, that may slightly soften the pain of exceptionally low unemployment numbers,” said Carver. “However, the word hospitality is never far from my thought process. We must maintain a laser focus on the customer and remember that we are there to serve.”
Quadri-Felitti echoed that sentiment. “Technology will never replace human leadership and management in creating a memorable and valued experience,” she said. “However, it can help—but it is not going to be the ultimate answer.”
Efficiency can also be improved when properties are still in the planning stages. “To me, it is not a surprise for the rise of the select- or focused-service hotels, for example, because they require less staffing,” she said. “They are attractive to consumer preferences. There is the other side of not needing a lot of bodies to run them. We see an increased interest in students desiring select-service as a management track. We stress the opportunities that are in that space.”
The size of the properties being built may also provide efficiency. “Developers and the owners of these brands are going to be very much focused on…the square footage of thee building they are going to construct,” said Woodworth. “It is going to be a smaller number of sq. ft. Therefore, that helps on the development side because less square footage means less cost to build it, but then critically over the life of the project, the fewer sq. ft. there are in the building, the fewer sq. ft. there are to clean. Therefore, I can get some gains on the productivity side from a labor perspective.”
The shortage isn’t just affecting the labor operating the hotels—it also affects those building and restoring them. Sam Cicero Jr., president of Cicero’s Development Corp., a general contractor in Plainfield, IL, that primarily focuses on hospitality renovations, has noticed the problem finding adequate labor for a few years. “It is becoming more and more of an issue, and we don’t think it is going to go away any time soon,” he said. “You are not seeing a lot of people that want to go into the trades, and even on the professional side, as far as administrative, it is getting harder and harder to find. People are migrating more into the tech sector and it is getting more difficult to locate people who want to be on the construction side.”
He said that he is using some of the same tactics that hotels are using to recruit employees. “We are trying to attract them with different types of hours, packages for hours, whether it is four 10-hour days or some people are driven by the overtime and would prefer that, so we offer them so much overtime,” he said. “We are trying to groom people to come here as a place to learn and grow their talents. You can either continue their talents, or you may want to take them someplace else. But get them to understand that it is a career, not just a job.”
Beyond looking for those already in the industry and those just graduating from college, Woodworth suggests another source may be out there to tap. “As the labor force ages, we are seeing people working longer and longer to the degree that it becomes an important new source of labor for the industry,” he said, noting that employers will need to understand the needs and preferences of an older population who may have spent their career in other industries. “That may represent a solution to some of these labor problems.” HB