A&M's Travel, Hospitality & Leisure practice presents Staying Power, a series on how hotels can profitably deliveroutstanding service and experiences to guests as they navigate the current market.
Across economic sectors, the labor market is tight. With more than 30 percent of former hospitality workers reporting they have left the industry for good, the sector has been hit especially hard. Inflation is disproportionately affecting the hourly workers who make up most hotel staff, and other societal factors attributed to COVID-19 (e.g. the "Great Resignation") are fueling labor shortages and driving costs up for hoteliers, putting pressure on profitability.
Although RevPAR is at 75 percent of pre-pandemic levels and higher in some markets, hotels are operating with fewer employees. According to the AAHOA Hospitality Labor Report, 76 percent of hotels are struggling to return a significant proportion of their workforce. Additionally, there is a backlog of development projects that are resulting in diminished service levels across segments.
In the near-term, hoteliers fear an erosion of pricing power will further impact the bottom line. If the labor market and inflationary pressures do not ease soon - which would allow hotels to refurbish, re-staff and restore service levels - there is fear of long-term harm to brand equity, pricing power and loyalty to major brands.
Read Part 1 in the series - Addressing Labor Challenges Without Sacrificing Service
Originally published on November 1, 2022
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