News for the Hospitality Executive |
Staffing For Prosperity
By
Robert Mandelbaum
August 20, 2012 In 2010 it was the ability of U.S. hotel managers to control labor costs that was the driving force behind the subdued 3.4 percent increase in total operating expenses posted by the properties in our Trends® in the Hotel Industry survey sample. Despite a 6.2 percent gain in occupied rooms in 2010, operators were able to service the increased volume of business with just a 1.5 percent rise in the total hours worked by hotel employees. Following the dramatic declines in revenues and profits suffered during 2009, it was no surprise that hotels were leery to “staff up” despite the sharp rise in lodging demand. As the U.S. lodging industry continues along the road to recovery and occupancy levels begin to surpass long-run average levels, hotel managers will be challenged to continue to operate on austere levels of staffing. If 2011 was any indication, it appears that operators may have already reached the point when additional employee hours are needed to provide the amenities and services typically offered when hotels are more prosperous. Measuring Staffing To gain a better understanding of movements in hotel staffing levels, we analyzed the change in the total number of employee hours worked at the average property in our Trends® survey. The following data was gathered to calculate historical changes in hours worked:
According to the BLS, the average weekly hours worked by an individual Leisure and Hospitality employee has not changed significantly over the years, thus facilitating the preceding calculation. Exhibit One presents the pertinent labor cost and compensation date for the years 2002 through 2011, as well as the resulting calculation of hours worked. To provide some context to the historical changes in staffing, we analyzed the historical relationship between the annual changes in total hours worked by all employees and the annual changes in the number of occupied rooms. When the change in hours worked exceeds the change in rooms occupied, this would be an indication of a decline in productivity. Conversely, when the change in occupied rooms exceeds the change in hours worked, it would indicate an increase in productivity. Recessions
Based on the June 2012 edition of PKF-HR’s Hotel Horizons® report, PKF-HR forecasts continual growth in occupancy and ADR levels for U.S. hotels through 2015. This will result in a period of revenue and profit growth well above long-run averages. If history repeats itself, we can expect hotels to react to the prosperous market conditions by scheduling more hours for their existing staff, and hiring additional employees as needed. Increased levels of staffing will most likely result in declines in productivity, but the impact on profitability should be minimal. The expected continuation of high levels of unemployment should help to suppresses future increases in employee compensation, thus limiting the growth in total labor cost expenditures. Robert Mandelbaum is Director of Research Information Services for PKF Hospitality Research, LLC. He is located in the firm’s Atlanta office. To purchase a copy of the 2012 Trends® in the Hotel Industry report, please visit www.pkfc.com/store. This article was published in the July 2012 issue of Lodging. |
Contact:
Robert Mandelbaum |