As a double immigrant who worked through high school and university, I believe in the lifelong benefits of working on the front line of a service business early in life. If there is a change in senior management or control, all bets are off: one clan wins, and the other is either pushed aside or sent home.
In no business is this more prevalent than hospitality. Hotel and restaurant operators wave their hands and say, “hire this guy.” Their teams and human resources are often relegated to administrative roles. As an outsider, sometimes this can work in your favor, but it can be deadly once you get inside the organization. Having learned this lesson once, I became very careful. After lengthy periods as a management consultant to their senior teams, I only joined the executive ranks of large hotel companies, such as Hilton and Caesars.
As a venture-backed founder of a leading talent marketplace company in hospitality, I am perplexed by the lack of meritocracy and transparency in most organizations that manage hotels and restaurants. The barons, typically hotel operators at corporate, regional, and property levels, still call the shots. When it comes to financial performance and customer satisfaction, they can be very data-centric and objective. But when it comes to talent or “labor,” as they continue to call it, they usually are cavalier.
But the labor shortage on the front line is not the only issue facing the hospitality industry. The greater and perhaps the more existential threat is the “General Manager” ready talents, such as sales managers and directors, who have jumped ship for hybrid remote industries where they are paid more, such as technology, pharmaceuticals, and eCommerce. This has resulted in a double hit on the hospitality industry: a loss of talent and a commensurate decrease in gender diversity since 2/3rds of hotel sales roles were filled by women rising in the ranks and becoming hotel GMs.
Never before has the hospitality industry faced such a large-scale and systemic HR crisis and, more importantly, a talent crisis. The leisure and hospitality sector, hit hard by the pandemic, still has a lot of ground to make up. It took 31 months for the U.S. job market to recover fully. The hospitality industry has been adding jobs since the beginning of 2021, including 67,000 in June and July. However, jobs in the leisure and hospitality sector remain short-listed by 1.7 million or 8 percent from February 2020, after falling by almost 50% in the first two months of the pandemic.
So where did all the labor go? Primarily to more flexible, hourly positions, including delivery.
While it is accurate that an increase in wages may be a wash against the backdrop of historic inflation and declining productivity (and quality) of labor, the more significant issue facing CEOs is how the hospitality industry can win back talent. Customers are aware of hotel brands, owners, and operators who are cutting corners. While automation of hotel check-in and reduction in amenities will help reduce labor requirements, the data suggests they are insufficient to recapture satisfaction scores, which are well below those required to achieve customer loyalty. In other words, hotel brands and independent hotels are ruining their reputations with high rates, lack of transparency, and inadequate or poor service.
1) Stop relying on job boards (OTAs for talent).
Recommendation: Build Databases and Employee Loyalty Programs that Market to Talent Directly.
Job boards are in the business of advertising and selling candidate and employer data. Furthermore, they don’t work. Research suggests they fill 1 percent of positions and compromise an employer’s confidentiality. They also send a signal to competitors and the marketplace that a company is desperate for talent or worse.
We also found legacy HR tech and a lack of tech expertise in HR is a big part of the problem. The paradox is that the modernization of HR processes in the hospitality industry is usually addressed on a leftover basis or as part of merger integration. More than 90 percent of hotel operators with more than ten properties have implemented a Recruiting Management or Marketing System (RMS) that compliments their Applicant Tracking Systems (ATS) and supports recruiters in marketing, sourcing, and automating the recruiting process.
2) Apply the principles of CRM to employee relationship management (ERM) and start the KPIs used in the sports industry.
For hospitality companies who swim in big customer and financial data, the following questions must be addressed daily: What’s my talent pipeline? Is talent advancing, and if so, where? The following KPIs are essential on a talent marketplace dashboard for hospitality: internal talent pipeline (number of promotion-ready internal candidates by tier or what the sports industry calls “bench strength”) by position with segment cuts for the market, department, and product type; and employee advancement (measured in terms of self-improvement gains made on the platform); and target external acquisitions of talent who should be engaged, nurtured and hire-ready at a certain price.
3) Stop paying signing bonuses and static wages.
Recommendation: Implement Yield Management for Labor and ESOP Plans for Hotel Supervisors and Above.
Few industries understand yield management better than hotels. But it’s time to bring yield management into another domain. Uber’s surge pricing innovations reflect the changing ways in which value can be shared with employees in the wake of the so-called freelance economy. Consequently, drivers can choose their rides and are not traditional employees with clearly defined work schedules but relatively independent entrepreneurs. This dynamic wage concept and salary pricing can imply intrapreneurship elements (to the extent possible in the hospitality sector).
Regardless of whether it’s shares, shadow equity, or profit sharing, there are proven benefits to these employee compensation schemes, including empowerment and retention, increased productivity, and significant strengthening of the employer brand. While economic motivations are not the sole driver of employee turnover and will only go so far in the absence of career development, in the short term, they are probably the best place to start attracting talent in a world without labor.
