Can Hotels Afford Not to Hire After a Minimum Wage Hike?

By Mark Heymann Chairman & CEO, Unifocus | April 02, 2017

As a growing number of cities and states legislate minimum wage hikes, hotel operators might be tempted to respond with a hiring freeze to avoid higher labor costs. This article explores the potential negative impacts hotels risk with a halt-on-hiring approach as well as more effective ways to offset higher wages. The not-so-simple truth is that increasing the minimum wage will require hoteliers to take a more measured look at their business in specific time periods. They’ll need to understand the wage increase impact at peak and non-peak times, and determine what their true minimum staffing levels can be while still servicing customers to their expectations.

While it appears unlikely the new White House administration will continue the efforts of its predecessor to raise the federal minimum wage for the first time since 2009, movements like the Fight for $15 already have spurred seven U.S. states – Arizona, California, Colorado, Maine, New York, Oregon and Washington – as well as 18 cities and counties to legislate their own wage hikes. Many of these are already being phased in with incremental increases.

On July 1, 2016, San Francisco raised its minimum wage from $12.55 to $13 per hour; by 2018 it will hit $15. In a San Francisco Chronicle article (“SF’s minimum wage hike took effect July 1, but changes little,” Jessica Floum) updated three days after the initial hike took effect, David Neumark, an economics professor and director of the Economic Self-Sufficiency Research Institute at UC Irvine, cautioned that raising the minimum wage can lead to lower employment. “The adjustment is not so much through firing people but through slower hiring,” he said.

A slowdown, or even a halt, in hiring might be a realistic option in the short term until a hotel can shake out the impact of higher labor costs. It also might work if an organization is aggressively turning to new technology that reduces the need for labor. But overall, a hiring freeze has significant long-term negative impacts and those potential casualties include employee engagement, customer service, and, ultimately, customer loyalty.

Impact on Engagement

Any time an organization has turnover, employee engagement may well suffer. If a hiring freeze results in under staffing, it can lead to fatigue and dissatisfaction in the remaining workers who have to shoulder the burden. A Washington Post report (“What hiring freezes do to your other workers,” Jena McGregor, Jan. 25, 2017) on the potential impact of the administration’s temporary hiring freeze on federal workers had this to say: “If hiring freezes lead to frustration and burnout, it's usually the top performers who leave first. And limiting the number of people who are hired, [human resources experts] say, can result in more risk aversion -- and therefore, less innovation -- while driving stressed and overwhelmed workers to take shortcuts.”

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.