Hotel Staff Shortages Threaten to Push Travel Costs Even Higher

Jenae Matthews says the Hard Rock Hotel in Daytona Beach, Fla., had to get creative to cover some services.
Jenae Matthews says the Hard Rock Hotel in Daytona Beach, Fla., had to get creative to cover some services.

Summary

Room rates look poised to rise as owners pass on escalating wage costs.

Hotel owners have been on an epic hiring spree. Yet even after clawing back hundreds of thousands of jobs during the past two years, the industry is still light on staff and often struggling to adapt.

Daily housekeeping for all guests, room service and other amenities that were reduced or eliminated during the pandemic are still lacking at many properties.

At the same time, hotels across the U.S. have held their daily room rates near all-time highs this winter, in part to offset the increase in wages to lure workers back. Hotels will collectively pay $123 billion in compensation this year, up more than 20% from 2019, according to the American Hotel & Lodging Association.

Some hotel owners now fret that a guest backlash could be building as smaller staffs can compromise the level of service and higher wages threaten to push the cost of travel even higher.

“If we’re expecting empathy from consumers, we’re not going to get it," said Bob Habeeb, chief executive officer of Maverick Hotels & Restaurants, which owns about two dozen hotels, mostly in Chicago and the Midwest.

Habeeb expects he will need to increase wages across his hotel portfolio by 10% this year—a cost that will be passed in part on to guests. “Consumers are going to have to pay more," he said.

The leisure-and-hospitality category has bolstered U.S. hiring growth for much of the past two years. The industry’s appetite for even more workers could help sustain growth in the broader hiring market, said Nancy Vanden Houten, a lead U.S. economist at Oxford Economics.

The severity of hotel worker shortages when U.S. travel ramped up in 2021 has eased. But the industry is still below pandemic staffing levels. Employment in the accommodation sector is down 9% from early 2020, according to government data.

A number of reasons account for the lingering shortage. Workers are often hesitant to return to the hotel industry after the mass layoffs in 2020, said Chip Rogers, CEO of the American Hotel & Lodging Association. Many switched to other industries with big pay raises. Immigration laws are also capping the amount of seasonal workers the industry can hire.

The uneven recovery of travel is also to blame. Different workers are needed to cater to typical vacationers than are needed for big conferences or business travelers. Some hotels that staffed up for the rapid rebound of leisure travel still might not have the banquet staff needed for the return of conferences that is expected this year.

Now, the industry is experimenting with ways to reduce the need for workers, stirring more wariness among potential employees.

“Hoteliers figured out how to do more with less," Rogers said. Many are leaning more on food-delivery apps than in-house kitchen staff and say they have made the housekeeping and check-in processes more efficient.

Hotel operators are also asking workers to do more. Employees doing laundry are helping strip beds at some hotels, and staffers at the front desk might also sling drinks at the bar when needed.

Not all hotel markets are suffering the same labor shortfall. Jenae Matthews, the area human-resources director for the Hard Rock Hotel in Daytona Beach, Fla., said the situation in Southern Florida is much improved from a few years ago.

Florida was among the first states to allow hotels to reopen in 2020, so the sector has had more time to revamp operations. Demand has come down over the past year, with more travelers returning to cruises and international travel. That has alleviated some of the pressure on staffing.

Still, Matthews has had to get creative about how the Hard Rock staffs certain positions. She said the hotel now encourages customers to order room service via QR code, rather than by calling a dedicated in-room dining attendant, a position that existed before the pandemic.

Across Atlanta-based Hospitality Ventures Management Group, which manages the Hard Rock Hotel Daytona Beach and more than 50 other hotels, openings are down to about 10% of total staff, said Sue Sanders, chief strategy and administrative officer.

Sanders said HVMG decided at the peak of the hiring challenges in 2021 to move its recruiting efforts to the corporate level, easing pressure on property managers and allowing more coordination. She said that initiative has reduced turnover and accelerated hiring when openings do occur.

The corporate team does regular market assessments to make sure its hotels are paying competitive wages. Wage increases have come down recently, she said.

Greg Miller and C. Patrick Scholes, analysts at investment bank Truist, said labor shortages and rising wages could be a key risk for hotels this year. Miller said unions in major markets, including San Francisco and parts of Hawaii, are set for contract negotiations this year and could secure big wage increases.

In markets where demand still hasn’t recovered to 2019 levels, lower occupancy means fewer tips for workers, making the job less desirable, Miller said.

HEI Hotels & Resorts, which manages dozens of hotels across the country, is keeping labor costs in check by moving more of its workers from contracted crews to in-house employees, Chief Operating Officer Rachel Moniz said. Many of its properties are also leaning more on technology, with some experimenting with virtual check-ins.

And while HEI’s hotels have brought back room service and daily housekeeping, those services have changed in ways that require less labor.

“The services are all back, but I think the way in which people expect them to be delivered is a little different," Moniz said. “A lot of people are fine if you’re not necessarily doing a big formal fussy room service."

Write to Will Feuer at Will.Feuer@wsj.com

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