The hospitality industry has been battling a labour shortage for years, only made worse by a global pandemic.
NB: This is an article from Pace Revenue, one of our Expert Partners
Massive lay-offs, remote working and caring responsibilities have forced thousands to consider switching their careers during the pandemic. Many were forced out of their roles because their employers downsized or even shut down during the pandemic.
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Source: Tourism Economics
But labour market tightness is not just due to COVID. Plenty have been quitting in search of better pay and conditions. And now things are gradually returning to normal, low pay, bad benefits and a stressful workplace are putting off former restaurant and hotel staff from returning to the industry.
“We’ve seen some massive efficiency savings…eighteen months ago we were running ten hotels and now we’ve grown to nineteen but do not need to hire anyone extra in our team thanks to Pace.” 🇨🇭SV Group
With demand creeping back, wages in hospitality operations are now up at least 10 percent or as much as 20 percent since April 2020 according to some. In the U.S. alone, hotels need to hire 600,000 more employees by summer to be able to meet demand. Hotels and restaurants alike are offering sign-up bonuses, higher wages and even cash payments to candidates just to come for an interview.
What does that mean for the hotel p&l? A 7 to 10 percent growth in wages translates to a direct hit of 300 basis points to the bottom line according to a recent BCG report. That’s a heavy margin impact for operators. At the same time productivity is down due to the influx of inexperienced staff, since many of the experienced hospitality professionals left the industry due to furloughs and layoffs during the pandemic.
Source: Tourism Economics
But wages are only one part of the story. Since the start of the pandemic, employees have largely reevaluated what is most important in their employment relationship and wages, while still important, are no longer the majority driver of the decision whom to work for. Non-pay factors (eg. flexibility, manager relationship, career path, etc) have driven over 50 percent of departures according to BCG.
“The main reason for updating our tech stack was to find efficiency savings. We thought that automation could be seriously useful with all the heavy lifting we were doing with revenue management in particular.” 🇳🇱C&C Revenue Management
Job flexibility is much more important to younger workers in the 25-34 age group in comparison to those in the 55-64 age bracket. And out of all the industries surveyed, workers in the ‘Travel & Tourism’ were the biggest switchers to other industries.
55 percent of Americans say they plan to look for a new job. It won’t be easy to get back individuals who leave as the majority of employees who switch sectors are unlikely to return, with many taking up roles in the gig economy.
“For us it’s all about automation and efficiency savings and Pace has delivered that in droves. We are a boutique hotel and I am doing so many roles at the same time that it’s often difficult to juggle them all. With Pace I know that revenue management is being taken care of by their awesome platform.” 🇳🇱Hotel Unplugged
The sad fact is a lot of hotels have had to find ways to cut corners and do more with less. So what can a hotel do without?
Demand may be returning but they lack the personnel to service rooms or manage ancillary revenue outlets. If you open up all your inventory, you run the risk of a lot of unhappy guests at check-in time. If you go from being a full-service to a limited-service operation, you could harm your brand reputation.
“We’ve seen some massive efficiency savings from using Pace – we’ve not even needed to hire dedicated revenue managers as a result. That’s not normal! We have many different people in various departments looking at revenue so ease-of-use is a factor. We don’t have GMs at our properties as everything is centralised so we have people in operations, marketing and sales all using Pace and it’s very intuitive. So it’s really helped our labour cost structure, which has been particularly important in the last year!” 🇪🇸Líbere Hospitality
Of course, a full hotel isn’t necessarily a profitable hotel. That’s why inventory control and revenue management have never been more critical than right now, and with an unobtainable ample supply of skilled labor, automated technology is ready to rise to the occasion.
“We never used an RMS previously and we were originally looking for an easy-to-use platform as it’s just the two of us running the revenue management for 41 hotels. We needed something that could adapt to our ecosystem.” 🇫🇷Dalmata Hospitality
Properties are having to find ways to reduce reliance on labour so that they can reduce their hiring needs – automation and process redesign will be key. In order to support a lean staff, it’s critical to automate as many repetitive administrative functions as possible.
“After implementation, we switched on pricing automation pretty much straight away – it was all so simple. That’s in stark comparison to competitors, who are way too complicated. With Pace, pricing is so dynamic and it updates so quickly that our revenue managers can focus on getting new business in instead of constantly focusing on adjusting stuff that’s, technically, already been entered into the system! All those little system tweaks and adjustments I constantly had to do with my previous RMS I no longer need to do anymore. That has meant some massive time savings for me and the team so we can focus on more important stuff.” 🇺🇸SAGE Hospitality Group
The current labour shortage and rising costs can be solved, in part, through the optimisation and adoption of technology in hotels. We know automation creates efficiency savings. But as with the use of any technology, to reap its full benefits you need a solid backbone with the right infrastructure and mindset.
“I have a bunch of reports that go out to all the GMs every Monday and that’s all automated. I’ve also given some of our GMs access to Pace themselves as it’s so easy to use and ridiculously user friendly. We’ve now got a total of 41 scheduled reports going out every week and, remember, that’s all automated! Pace is giving me a lot of time back and that also means I no longer need to hire anyone else to help with RM.” 🇦🇺Saltwater Hotels & Resorts
Automating repetitive and mundane tasks will allow hotels to do more with fewer people. The purpose of technology has always been process optimization. To do more with less. Focusing on solutions that span across the organisation’s operations will allow one employee to manage multiple tasks.
“We were spending at least 8 hours every week making manual price modifications and, with Pace, that process immediately became way easier and that time was cut down by about 30%. But once we switched on Automated pricing things really took off. Previously we would also spend up to 4 hours a day preparing, extracting and analysing data for reports and sometimes even longer! Now it’s done in seconds so we can focus on the analysis!” 🇫🇷Machefert Group
The impetus for the adoption of technology has not changed since pre-pandemic. Perhaps the motivation for adoption has and this is the magic bullet that will see a pendulum shift for the industry…..
“We wanted something that would give us less work and not more. I’m performing several roles in the hotel at the moment so my time is precious. Pace’s automation was a major factor as the system handles stuff on its own. Sometimes I just want to be able to go into the RMS and spend 10 mins and see the right numbers, do a bit of analysis and have a look at what’s going on in the next few days. I used to spend 8 to 10 hours building just one monthly report but now it’s all delivered immediately by Pace Analytics…” 🇸🇪Hotel Rival
But it’s impossible to frame a conversation about automation simply around cost savings. The increased efficiencies of technologies are obvious if done well but let us not forget that automation can also be done badly.
“We chose Pace for a number of reasons. Firstly, I had to find a system that was so intuitive that it could accommodate a range of different users. We have a mix of professionals working in the group and not all are experienced with revenue management. There are junior managers and senior managers and sometimes they are good at RM and sometimes they are not. Also, our GMs do RM on their own so it was clear that we needed an easy-to-use tool – something simple and user friendly with an intuitive dashboard that allowed them to manage their pricing independently.” 🇫🇷Madeho
Hotel technology must be easy-to-use and easy-to-train on. It must be flexible and frictionless and it must be elegant in design. Legacy systems may carry a sense of familiarity but they are systems that require intensive training for those new to the field. Hence, the focus should be on adopting next-generation solutions with simple operations and intuitive UX designs which do not require specialised certifications or intense training. This will allow hotels to bring in employees from other service industries. This will open up a new channel for acquiring labour while eliminating the high labour cost from trained legacy system operators.
“The onboarding with Pace was great – it’s really quick and you get good support. To give you an idea – our first property was done in a couple of days. The second took no more than a week. On top of that, the training for Pace is just an hour or two. With the legacy systems training takes days and afterwards you still don’t understand how it all works. I now have automated pickup reports being generated daily which all helps to save hours of time every week that would normally have been wasted doing things manually every day. We’ve got well over a dozen reports and dashboards that we’ve built and many of those are scheduled daily.” 🇧🇪Xcentric Hotels
The Revenue Manager 2.0
Nonetheless, the sceptics of ‘technology to the rescue!’ have a point. We’ve all watched ‘The Matrix’…
At Pace, we’re strong believers in the cooperation between humans and machines, rather than machines replacing humans outright. It’s not about the replacement of manpower but about enabling your existing workforce to achieve more in their job roles and the operation in general. For revenue managers, that means less manual day-to-day price updates and spending more time on strategy and analysis that can really drive the business forward.
“Now I can focus on strategy and analysis whereas back in the day I would spend four hours a day just doing price updates. Time wasting is over. In our case, I can now focus on things like strategy around key events instead – like Wimbledon or the recent football matches at Wembley – and think about how to price and cross-sell around those events. Operations and commercial teams are now doing things together more and more as we can plan and actually have the time to do it.” 🇬🇧The Zetter Group
Job roles will need to change and underlying business platforms will need to become broader in their functionality to support better job design. Retooling for a new paradigm of platforms that harness data science and business intelligence to drive high level strategic decision making is vital. Such pressures on the industry have been growing for the last decade and are not going away.
In general, properties need to have a proactive approach to exploiting technology for their business in order to alleviate the challenge of being caught short and needing to scramble in the future. The writing is on the wall.
“We’ve changed our operations set up a lot over the last year and we have needed an RMS that anyone – from front desk to our GM – can use. The old system we used was so complicated and there was no way anyone without serious RM experience could use it. The amount of time Pace has saved me is crazy. I used to have to check all our pricing manually three times a day and then make all the changes. Now I have all that time back to do more important things like strategy and long term planning instead of wasting time changing prices. Because we are an independent property, I’ve had to multi-task a lot over the last year with other roles and Pace has really allowed me to do that by taking care of the heavy lifting for me in the background.” 🇦🇹Hotel Beethoven