The Hotel Labor Shortage: Three Things You Can Do Right Now

By Ken Greger Partner, August Leadership | March 15, 2020

It was 2007 when I first began publicly warning of the coming labor shortage.  I was speaking at the Global Spa Summit in New York City and shared some of the following information, including data from the U.S. Bureau of Labor Statistics:

  • There is a growing shortage of human capital, and a future filled with retirees
  • Between 2007 and 2015, the number of people 65 and older is expected to increase 26%
  • The supply of people 40 to 54 years of age will shrink by 5%
  • The generation of Americans 25 to 39 will grow by only 6%
  • The U.S. Bureau of Labor Statistics predicts a shortfall of 10 million workers by 2010, and by no later than 2015

In addition, it was believed that entrepreneurs would be starting their own businesses at a younger age, a potentially negative impact to employers.  Further, these trends were definitely not limited to the United States!  In 2007, global trending indicated that by 2025, the supply of workers aged 15 to 64 was expected to drop by 7% in Germany and by 14% in Japan!  

In December 2007, shortly after I began talking about the looming shortage, the U.S. economy suffered a disastrous hit, the second deepest recession in a century. I remember participating on an ALIS panel in January 2009 with my topic being the labor shortage at a time when headlines were announcing massive layoff's almost every day!  In fact, shortly after the ALIS panel, General Motors laid off nearly 50,000 workers!  Because math doesn't lie, the facts I'd presented remained on solid ground, but the deep recession was clearly going to delay the inevitable.

Known as the Great Recession, the economic downturn technically ended in June 2009, but, while economists might have known that, the pain and repercussions remained ongoing.  The following is excerpted from an article by Robert Rich, a researcher with the Federal Reserve Bank of New York at the time, that appears on FederalReserveHistory.org:

"The Great Recession began in December 2007 and ended in June 2009, which makes it the longest recession since World War II. Beyond its duration, the Great Recession was notably severe in several respects. Real gross domestic product (GDP) fell 4.3 percent from its peak in 2007 Q4 to its trough in 2009 Q2, the largest decline in the postwar era (based on data as of October 2013). The unemployment rate, which was 5 percent in December 2007, rose to 9.5 percent in June 2009, and peaked at 10 percent in October 2009."

Needless to say, with unemployment at those levels, it was hard to imagine a labor shortage!  Many of us watched first-hand as companies cut not only lower- and middle-level talent, but also substantially reduced expensive senior leadership positions as well.  

The recession lasted so long that many company leaders - despite working with skeleton crews - discovered they had survived the storm with less and didn't need the extra cost or 'risk' of restoring the company to its former full employment status.  They had made it through a disaster with far fewer people, so many companies decided to march into the future with a lean and mean team and healthy EBITDA.  The resulting high unemployment deferred any thought of a labor shortage.

The Math

About that math – it's indisputable because it's based on birth rates and retirees.  In early 2019, Forbes ran an excellent article, "Help Desperately Wanted: The Coming Employee Shortage," that easily illustrates the math and its impact:

"The year 2018 represented a significant point. It was exactly 65 years since 1953, which represented the peak of the Baby Boom. That year, the fertility rate in the country was 4.3 - the average family had four and a third children. It is not insignificant that the largest growth of schools in the US was in the late 1950s and early 1960s, as political leaders were mostly caught flat footed by the tidal wave of kids. After this, due to a number of factors including the introduction of the pill, the fertility rate collapsed over the course of the next twenty years before reaching a nadir in 1976 of about 1.7 children.

It should be noted that the replacement rate - that point where a population remains stable - is 2.1 children per family. Remember that number, because it drives a lot of the current economic situation.

There are now as many Baby Boomers in retirement as there are out of it. That means that those people born in the 40s and 50s are drawing their money out of pension funds and saving rather than getting it from their labor and investment. They are investing less, and are seeking safer havens. They are also spending more and more of their money on health care, which is drawing down their nest eggs faster than most like, and have been staying at least partially employed. The oldest Boomers are now in their mid-seventies. More people are working longer, but by eighty, their ability to participate in the work force declines quickly.

This means that there is a significant percentage of the population that is now dropping out of the labor force, and this factor is accelerating, and will do so for the next twenty years as we ride the fertility roller coaster on the way down. This is taking out both the senior management and the operational experts within companies, the ones that generally know where the bodies are buried."

McKinsey & Company has stated, "For many companies and governments, global labor and talent strategies will become as important as global sourcing and manufacturing strategies."    With that in mind, here's a shot of reality:... the hospitality industry isn't just competing for talent with other hotel companies.  We're competing for talent with all other industries!

Hospitality's Labor Reality Today

After 10 years of continuous growth since the Great Recession, with at least 500,000 hotel rooms added during that period, hospitality's C-suite industry-wide is lamenting the shortage of talent, and there's a reason for that.  As mentioned in Deloitte's 2019 U.S. Travel & Hospitality Outlook, "The travel industry can't grow without talent: Labor gaps are not new to travel, but the magnitude of the current workforce shortage certainly is. In 2009, the US Bureau of Labor Statistics estimated 353,000 job openings across the leisure and hospitality sector.  As of 2018, with the travel industry surging, that number swelled to 1,139,000.  In fact, travel leads all industries in open positions."

Not only are we experiencing a very real labor shortage, but it is critical to get the right people in place now to optimize our businesses and successfully navigate the industry cycle and softer market conditions that we know will come.  And with a diminishing global workforce, we must work harder to find and keep the best and the brightest.  Quoting again from Deloitte's report previously referenced, "And the problem doesn't just center around unskilled labor. In the airline industry, for example, pilot shortages are constricting growth, even threatening the viability of some smaller, regional carriers."

Don't Panic – Do Something

The companies planning to win in the talent arena must increasingly view their human capital as the single most important driver of competitive performance.  But we aren't just individual companies – we're also an industry and we must make an authentic, collective effort to work together so our industry wins – then we can compete in a better arena.

To win, we must set up our industry – and our respective organizations - to Attract, Train, Grow and Retain. Here are some things you can do:

Commit to A Positive Working Environment

Every company has a culture by design or by default.  The work environment reflects the culture and the company's values.   It doesn't matter if a pretty list of values is framed and posted at headquarters and in back of the house at properties; what matters is what really happens.  Does your company authentically value and care about its human capital? If so, does the workplace environment reflect that?  If not, what are you going to do about it?   This is Step #1 for competing in the labor shortage arena – if you don't get this right, you might attract the best people, but you won't retain them.

Take a look at Fortune's 2019 list of the 100 Best Companies to Work For  and you'll see the following:

 #1 - Hilton

 #5 - Kimpton Hotels & Restaurants

#31 - Marriott International

#32 - Hyatt Hotels

#89 - Four Seasons Hotels & Resorts

Wow!  Hotel companies comprise only 5% of the top 100!  We're in the hospitality business, yet this is a poor showing if we're serious about attracting people to our industry and companies!  Who knows better how to treat guests and make them feel valued and important?  Who better caters to guests' needs?  Oops – it looks like we could do a better job extending that level of care to our people.  There is some introspection called for here.  Get to work – check out what your competitors listed above are doing in all categories of workplace attributes, compensation and benefits, etc.  Do it now.

In his book, Impending Crisis - Too Many Jobs, Too Few People, Roger Herman says that what happened after the recession is that "Businesses just went back to believing there were plenty of workers and that turnover was inevitable." He talks about "warm-seat" attrition, referring to people who have checked out, but haven't left.  No one wants to feel inadequate, disregarded or taken for granted.  The hospitality and tourism industry at large has always suffered atrocious turnover levels, but it's a mistake to accept that.  

Remember – some of your competitors don't suffer anywhere near the turnover your company may experience.  Turnover is toxic to a business - addressing the issue and the underlying factors requires high-priority C-suite attention to successfully achieve workforce stability and a solid talent pipeline.    

Develop and Grow Your People

Assuming you get the work environment right, remember to properly onboard your hires, and to continue to develop and grow them, along with others on your team.  When a farmer stops cultivating the soil, there are no crops to harvest.   If you want to retain the best people, keep cultivating.  Not only does this bear fruit but good people lead to other good people, as in happy employees recommending their company to colleagues, a powerful source to have on your side given the influence of social media.

Stop Recycling

We all know this industry isn't rocket science, but most hotel companies continue to err on the side of seeking people with "industry experience."  This means they persist in recruiting from other hotel companies, perpetually recycling talent.  I'm the last one to knock the value of experience, but how is someone perfectly suited to our industry supposed to get that experience if he or she is not already in the recycling bin?  The answer is that they can't unless the industry expands its field of vision, allowing all parties to benefit.

Here are some examples of where you can look:

HSMAI Foundation 

The HSMAI Foundation is on an active mission to establish collaborative partnerships across hospitality and tourism organizations to create an employment brand for the industry that continually attracts and retains rising stars.  Agnelo Fernandes, Chair of the HSMAI Foundation, further explains: "The Foundation understands that smart, innovative and creative professionals must choose hospitality careers if we as an industry are going to successfully create, capture, manage and optimize revenues.  The Foundation's newest initiative – Open Your World – offers unique and highly relevant resources to enhance the visibility of sales, marketing and revenue optimization as desirable career paths in the hotel industry." This isn't just talk – there is action!  As Foundation President Fran Brasseux, points out, "Our boldest initiative is to attract new talent to the industry through a trailblazing partnership with the U.S. Chamber of Commerce's Hiring Our Heroes Initiative to employ thousands of military spouses with hotel partners across the country and around the globe."  

This is an amazing new resource for talent and a potential goldmine for our industry.   Some major hotel companies have stepped up to provide financial support for the HSMAI Foundation's initiative and there is always room for more.

 The First Step Act and Second Chance Hiring

Second chance hiring builds on the success of the historic First Step Act,  which was signed into law in December 2018. This landmark legislation reformed policies that failed Americans for decades and enabled some offenders to have their sentences reviewed.  The purpose of the Act was to create a fairer justice system for all and enact programs to reduce recidivism and make our communities safer.

To my knowledge, there is no "official" website for second chance hiring, but one site does seem to emerge as central and lists nearly 300 companies committed to giving offenders that second chance.

Unfortunately, there are only 10 hotel companies currently listed. Again, here's a potential source of labor that, in many instances, is anxious to be back in the labor force being a productive member of society.   And, like her or not, this issue is a passion for Kim Kardashian West, who has been heavily involved in supporting its success.  Last year, she and the White House announced a Ride Share program that provides Lyft gift cards to former prisoners to help with transportation to and from job interviews, workplaces and to see family members.   Some of the key benefits mentioned about second chance hiring follow:

  • Gives former prisoners the chance to successfully reenter society and live a life with dignity and meaning.
  • Instead of struggling to find the talent they need, businesses that hire former prisoners can often gain productive and dedicated workers.
  • All Americans benefit when former prisoners are able to find an occupation and a purpose rather than returning to crime.

Does your company have the courage to explore this new potential source of talent?

AHLA and AHLEF Career Development Programs

The American Hotel & Lodging Educational Foundation (AHLEF) – the charitable arm of the American Hotel & Lodging Association - is dedicated to helping people build careers that improve their lives and strengthen the lodging industry. These programs lift individuals out of poverty and connect them with a life-long career in the industry, offering the opportunity to earn certifications that promote current hotel employees into leadership positions. 

These are but three examples of resources at your fingertips that not only help your company source talent in the labor shortage, but benefit our industry and society as well.

Summary

The Travel & Tourism sector represents nearly 10% of all global employment, and it's pretty clear that a labor shorting is upon us.  I hope this article has helped you understand what it takes to compete and how to be resourceful in a tight labor market.  

In order to win, we must:

  • Promote our industry as a compelling, rewarding profession (college graduates have a lot of career choices)
  • Set our companies up to Attract, Train, Grow and Retain talent
  • Partner with academia, and with one another
  • Cultivate fresh talent and stop relying on recycling
  • Commit serious resources to make our work environments positive for our people

Together we can make our industry compelling. Together we can win!  Real action is required so let's get started.

Mr. Greger Based in Portland, OR, Ken Greger is a Partner with August Leadership (formerly known as Ward Howell USA) and a member of the Travel & Hospitality Practice. With a broad focus that includes hotels & resorts, restaurants, casinos and integrated resorts, cruise lines and travel technology, Mr. Greger focuses on finding the right leadership to help clients achieve strategic outcomes. Clients range from tech startups, hotels and resorts, to major brands and Fortune 500 organizations. Mr. Greger has spoken multiple times at The Lodging Conference, ALIS, The Global Spa & Wellness Summit and to numerous other audiences. A frequent author, Mr. Greger's articles have appeared in The Cornell H. R. A. Quarterly, Hotel & Motel Management, Hotel News Now and other leading industry news media, including Huffington Post. He is also a speaker at several of the hotel industry's top conferences. Mr. Greger can be contacted at 503-655-4100 or ken.greger@augustleadership.com Please visit http://www.augustleadership.com for more information. Extended Biography

HotelExecutive retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.

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Digital Millennium Copyright Act Compliance. As set forth in Subsection (b), you must contact our agent if you believe that a work protected by a U.S. Copyright which you own has been posted on our Site without authorization or that our Site, in some material way, contributes to its infringement. It is our policy in appropriate circumstances, if possible, to terminate the access rights of repeat infringers and other users who use HotelExecutive in an inappropriate or objectionable manner.

9. COOPERATION WITH LAW ENFORCEMENT

HotelExecutive reserves the right to fully cooperate with any law enforcement authorities or court order requesting or directing HotelExecutive to disclose the identity or other information regarding any user or member alleged by any governmental entity to be using HotelExecutive or any Content or materials available in, at, through or in association with HotelExecutive in violation of any law or regulation, or in violation of this Agreement, including, without limitation, the posting of e-mail messages, or publishing or otherwise making available any such materials. By accepting this agreement you waive and hold harmless HotelExecutive from any claims resulting from any action by HotelExecutive during, or as a result of, its investigations, and from any actions taken as a consequence of investigations by either HotelExecutive or law enforcement authorities

10. APPLICABLE LAWS, VENUE, JURISDICTION & MANDATORY ARBITRATION

If any provision(s) of this Agreement is held by a court of competent jurisdiction to be contrary to law, then such provision(s) shall be construed, as nearly as possible, to reflect the intentions of the parties with the other provisions remaining in full force and effect. HotelExecutive's failure to exercise or enforce any right or provision of this Agreement shall not constitute a waiver of such right or provision unless acknowledged and agreed to by HotelExecutive in writing. The section titles in this Agreement are solely used for the convenience of the parties and have no legal or contractual significance. This Agreement may be assigned in whole or in part by HotelExecutive. This Agreement may not be assigned in any manner by you without the express, prior written permission of HotelExecutive.

Any and all disputes or controversies of any kind, including but not limited to any performance, duty, obligation or liability arising under or related to this Agreement which are not first resolved informally, shall be determined by binding arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association. The final award in any such arbitration proceeding shall be subject to entry as a judgment by any court or competent jurisdiction, provided that such judgment does not conflict with the terms and provisions hereof. The jurisdiction of the arbiter (or arbiters) with respect to legal matters shall be limited only by the statutory and common law of the State of California and the United States.

Notwithstanding the foregoing, any and all disputes, which the parties cannot informally resolve, regarding the scope of issues or matter with the jurisdiction of the arbitrator, shall be resolved by a separate dispute resolution process whereby HotelExecutive, in its sole discretion shall elect the dispute to be resolved by either (1) a court of competent jurisdiction in the State of California or (2) a panel of three new arbitrators.

This Agreement shall be governed by and construed in accordance with the laws of the State of California notwithstanding any conflict of laws provisions. You and HotelExecutive agree that the venue for all legal disputes, controversies, actions of any kind arising under or related to this Agreement shall be San Francisco, California. You and HotelExecutive further agree that in case of any litigation regarding this Agreement, you irrevocably and unconditionally (i) consent to submit to the exclusive jurisdiction of the state and federal courts in the County of San Francisco, California for any litigation or dispute arising out of or relating to this Agreement, (ii) agree not to commence any litigation arising out of or relating to this Agreement except in the California Courts, (iii) agree not to plead or claim that such litigation brought therein has been brought in an inconvenient forum, and (iv) agree the California Courts represent the exclusive jurisdiction for all litigation relating to this Agreement.

11. MEMBERSHIP FEES

Hotel Business Review Subscriptions

If you choose to purchase a subscription, member subscription payments can be made in U.S. Dollars, as well as a variety of international currencies. Membership terms are Annual Recurring, and Monthly Recurring. The Annual Recurring subscription is an annual commitment and subscribers will be charged each consecutive billing cycle. Annual Recurring subscriptions can be cancelled after the first billing cycle and within 30-days of the billing date for a full refund. Monthly Recurring subscriptions are ongoing and subscribers will be charged each consecutive monthly billing cycle. Monthly Recurring subscriptions can be cancelled after the first month and within 7 days of the monthly billing cycle for a full refund.

12. PAYMENT AUTHORIZATION

Payment for the services provided to you in, at, through or in association with HotelExecutive may be made by automatic credit card, debit card, direct debit, bankwire or Paypal and other approved payment means offered in, at, through or in association with HotelExecutive, and you hereby authorize HotelExecutive and its agents to transact such payments on your behalf.

You hereby authorize HotelExecutive's Internet Payment Service Provider to charge your credit card to pay for your membership to HotelExecutive. You further authorize HotelExecutive's Internet Payment Service Provider to charge your credit card for any and all purchases of products, services in association with HotelExecutive. You agree to be personally liable for all charges incurred by you in association with your access or other use of any content provided by HotelExecutive or any third party in association with HotelExecutive. You acknowledge and agree that your liability for all such charges shall continue after termination of your access or any type of membership arrangement with HotelExecutive.

In the event that you have chosen to have your membership automatically rebilled, unless and until you notify HotelExecutive that you wish to cancel or terminate your membership to HotelExecutive, you hereby agree and authorize HotelExecutive's Internet Payment Service Provider to automatically renew your membership to HotelExecutive on a continuing basis and to charge your credit card (or other payment means you have selected) to pay for the ongoing cost of your membership. You hereby further authorize HotelExecutive's Internet Payment Service Provider to charge your credit card (or other approved payment means you have selected) for any and all purchases of products, services and entertainment provided to in, at, through or in association with HotelExecutive.

13. PRIVACY POLICY

The following is the Privacy Policy for HotelExecutive

We can be reached via telephone, email, or online at our contact page. When you visit our site we do not log any information regarding your domain or email address. Information Sharing: We do not share user information with any third parties other than via press release distribution as described below.

Hotel Newswire is a newswire service that distributes press releases on behalf of our users. If you decide to submit a press release for distribution through our system we will transmit your entire press release including any personal information therein contained to our media contacts and online distribution points including search engines. This is the only redistribution of your information that we engage in. Your submission of press releases through our system indicates consent with this policy. The information we collect during your registration process is used to notify users about updates to our service and inform users of any special events hosted by Hotel Newswire. This information is not shared with other organizations for commercial or non-commercial purposes.

Cookies: Our system requires the use of cookies to enable the user to log back into our website to access information from the newswire, without having to log in each time using the required username and password.

If you do not want to receive email from us in the future, please let us know by following instructions included in our communication with you. Users who supply us with telephone numbers online may receive telephone contact from us regarding their account, or informing them of new products and services available on the HotelExecutive website. If you do not wish to receive such telephone calls, please edit your account and remove your phone number from your account profile. This can be done from your user account menu.

Ad Servers: We do not partner with or have any relationship with any ad server companies. From time to time, we may use customer information for new uses not previously disclosed in our privacy notice. If our information practices change at any time, we will post the policy changes to our website to notify you of these changes and provide you with the ability to opt out of these new uses. If you are concerned about how your information is used, you should check back at our website periodically.

Upon request we provide site visitors with access to all information (including proprietary information) that we maintain about them. Users can access this information by logging in to their account.

Security: We always use industry-standard encryption technologies while transferring and receiving user data exchanged with our site. We have appropriate security measures in place in our physical facilities to protect against the loss, misuse, or alteration of information that we have collected from you on our site. We do not store credit card information in our systems.

If you feel that this site is not following its stated information policy, you may contact us.

Hotel Newswire Headlines Feed  

Zoe Connolly

"We are in uncharted territory, but we also know that this crisis will pass. The hospitality industry has weathered many a storm and will continue to do so. We are a resilient, imaginative and eminently human industry and by working together and acting swiftly, we can plan successfully for the upturn," writes Pedro Colaco, CEO and Founder of Guestcentric Systems. In this article, he shares how Guestcentric is working closely with the hospitality industry and tech leaders to build for a brighter future, launching the non-profit Rooms Against Covid to support relocated healthcare professionals as they tackle the crisis head-on. READ MORE

Tim Peter
Jan Sammeck
Babs S. Harrison
Court Williams
Brandon Billings
Ted Horner
Stephanie Smith
Gio Palatucci
Coming up in May 2020...

Eco-Friendly Practices: Creative Innovation

Being eco-friendly is no longer a fad. It is an urgent planetary need and hotels are actively doing their part to reduce their carbon footprint by implementing sustainable, green practices. In addition to the goodwill derived from doing the right thing, hotels are also realizing the benefits to their business. A large percentage of Millennials expect hotels to be eco-friendly and will only patronize those properties that are proudly conforming. Consequently, more hotels are realizing that sustainability is a key element in a successful branding strategy. In addition, going green can lead to a more profitable bottom line, as savings on electricity, water and cleaning materials can add up. Also, there are other advantages that come with being an eco-friendly business, such as government subsidies and tax and loan incentives. As a result, many hotels are finding innovative ways to integrate eco-friendly practices into their business. Geo-thermal energy systems, along with energy-from-waste systems, are being used to heat and cool the property. Passive solar panels, green roofs, natural lighting and natural ventilation strategies also assist in energy conservation. Low-flow water systems and plumbing fixtures make a contribution, as does eco-friendly hardwood flooring, and energy efficient televisions and appliances throughout the property. In addition, some hotels have implemented in-room recycling programs, and only provide all-natural, personal care items. One hotel has actually constructed a bee-keeping operation on their grounds. Not only is this good for the bees but the hotel also produces products from the operation which they sell. This kind of creative innovation also holds enormous appeal to guests. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.