High Labor Costs Are Affecting the Hospitality Industry

Labor shortages have plagued businesses all across the world since the pandemic, and the hotel industry is no different. Despite a strong increase in tourism, demand for workers has never been higher, and universal labor shortages linger, generating hotel challenges.

Hotels are battling to stay viable in these extraordinary times, with salaries rising and labor availability falling. Hotel running costs have a direct influence on the business. It’s not surprising that labor shortages and increased expenses are having an impact.

Wasteful expenditure reduces profit margins and jeopardizes the financial health and long-term profitability of a property. Hotels must strike a balance between overspending and foregoing essential services that will have a detrimental influence on the customers’ experience.

While it is true that you get what you pay for in terms of labor and service, given the current high cost of labor, hotels must discover creative methods to save expenses without compromising the guest experience.

The first step in controlling hotel operational costs is to practice appropriate revenue management. Rather than managing revenue using outmoded fixed-price methods, embrace an approach that more properly represents today’s dynamic market.

As tourism keeps rising, hotels will have challenges in maintaining the requisite depth of workforce beyond the 2020 reduction. To compete and justify room rate rises, hotels will shortly re-open some of the services and facilities that were eliminated in 2020.

According to Kimberly Berry, Director of Digital Business Development at Travel Outlook, “If hotels don’t find a solution for their staffing shortages, they’ll struggle to provide adequate service to guests who still expect a high level of customer service as they return to travel. That means guests will likely experience long wait times on the phone, lines at the front desks, and a stretched thin concierges department.”