RSBA & Associates 
Hospitality Consulting Services
400 Spear Street, Suite 106
San Francisco, CA 94105
Email: [email protected]
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 Lack of Human Capital Is Becoming Serious
Issue for Hotel Owners, Operators
by Rick Swig, December 2006

When the spotlight is on resources, the issues generally tilt toward the financial or natural ones.  Yet the most challenging shortage now might be of human capital.

Human resource issues in the hotel business have traditionally been about training to provide guest satisfaction, which has a direct correlation with price/value, return guest ratios, brand reputation and ultimately, financial performance. There has also been a spotlight on employee satisfaction, since a happy worker presents a picture of contentment to hotel guests, which results in better delivery of service.

The inverse of that is high employee turnover, which can undermine financial stability on multiple levels.

Turnover costs include recruitment, training, low productivity and the risk of inadequate service delivery. This applies both to management and hourly employees. In each case, excessive turnover can create an ongoing “dumbing-down” effect, where employees are not knowledgeable about the hotel, its physical idiosyncrasies and its historical business patterns. They also tend to have little or no relationship with customers, who look forward to returning to a familiar place with familiar people.

There is also the issue of scarcity of hotel workers. In some market areas, there are shortages of key staff to deliver fundamental services at the front desk, in housekeeping or in food and beverage areas. Reasons for this are varied and tend to be financial (unattractive wage structures), social (disinterest in the service sector) and political (immigration laws). It could also be due to over-aggressive hotel management, which has succeeded in cutting costs through limiting management tiers and other value engineering, but has also preempted the development of managers to support new expansion. All of these intertwine and result in the same issue: the lack of human resources.

Qualified workers may no longer find hotel employment financially viable. Workers are subject to more personal expenses than ever before. The cost of housing, fuel and other life essentials have put a great strain on hourly workers, especially in expensive coastal locations, such as California and New England, and large urban areas. Side effects include higher levels of personal debt or migration from these costly locations to other more affordable regions.  Linked to this are potential attitudes toward servicerelated careers. What is the hotel industry doing to make front desk, housekeeping, food and beverage or other jobs financially or culturally attractive? As the cost of hotel investments are rising in the same markets where shortages of workers are appearing, there seem to be few initiatives or answers to stimulate interest in hotel careers.

Outsourcing to foreign shores has become the norm in many industries. Even the hotel sector is outsourcing reservation departments to Canada, Ireland and India.  However, there is a limit to this initiative. Domestic hotel projects will always be dependent on local workers and while immigration has been used to supplement the scarce supply of domestic workers, labor shortages are now so severe that hotels are importing workers from multiple countries in South America and even as far away as Iraq, where people have been dislodged from their careers and their homes.

The human resource shortages in New Orleans exemplifies this issue. As hotels in the Gulf Coast region recovered from Hurricane Katrina and were ready to put revenue-producing inventory back on line, these efforts were thwarted by a lack workers. Although this example is a bit extreme, it is not out of the realm of reality, even in more stabilized conditions.  There may come a time when hotels in gentrified big cities with high costs of living discover shortages of maids and other guest service staff, not to mention salespersons to stimulate the demand for those service personnel.

The human resources challenge is both systemic and far-reaching, yet what is most important is the recognition of the issue. It may be time to review initiatives on many levels—organizational, financial and political—to enable the hotel real estate sector to continue functioning with satisfactory pricing and profitability for owners, as well as price/value and service satisfaction for guests. 

The views expressed in this article are those of the author and not Real Estate Media or its publications.

Rick Swig is president of RSBA & Associates, a hospitality industry consulting firm based in San Francisco. He may be contacted at [email protected].

RSBA & Associates
400 Spear Street, Suite 106
San Francisco, CA 94105
E:mail:   [email protected]
Tel:  (415) 541-7722
Fax: (415) 541-5333

Rick Swig Article Index:
Successful Hotel Brand Differentiation Means Connecting With Customers / Rick Swig / RSBA Associates / June 2006
Shortage of Sites, Rising Expenses Should Keep Hotel Development in Check / Rick Swig / RSBA Associates / February 2006
In Today’s Hotel Acquisition Market, How Much Do Cap Rates Matter? / Rick Swig / RSBA Associates / January 2006
Lodging Business in Transitional Year, But Challenges Will Remain After ’05; A Hotel with Truly Unique Attributes Is Worth a Premium / Rick Swig / October 2005
Despite Lack of Long-Term Data, Hotel Developers Favor Hybrid Projects; The Fractional and Condominium Component Not a Proven Solution to Development Prosperity / Rick Swig / June 2005
Travelers Prefer Innovation, Creativity Over Predictability, Discount Pricing / Rick Swig / March 2005
Recent Occupancy, ADR Growth Still Do Not Spell Post-9/11 Relief; Total 2% revenue growth over four years has not kept up with national annual average inflation growth of 2.5% / Rick Swig / RSBA Associates / November 2004
Hotel Success Hinges on Relationship Between Owner, Asset Manager, GM / Rick Swig / August 2004
Hotel Operators Can Gain Market Share Through Distinctive Brand Images; A 100-room boutique hotel can develop more identity within a market than its 1,000-room competitor  through customer impact points / Rick Swig / May 2004
Hotel Operators Must Share Blame with the Economy for Stagnant Performance / Rick Swig / RSBA Associates / January 2004
Investors Seeking Opportunistic Hotel Buys Are Likely to Come Up Empty Handed  / November 2003
Hotel Sector Remains in the Game Despite Reaching Strike Three; Occupancies are now beginning to improve compared with last year and a poor first half of 2003 / September 2003
Some Stability Has Returned to the Hotel Sector, But Its Staying Power Is in Question; The Plundering of Lower Market Tiers Has Cost Upscale Hotels / May 2003
New Business Practices Essential to Lodging Companies’ Success / February 2003
Unreliable Market Trends Yield an Uncertain Direction / October 2002
The Bigger They Are, The Harder They Fall / September 2002
News of Boutiques’ Demise Is Greatly Exaggerated  / May 2002
Management by Spreadsheet Erodes Full-Service Hotel Core Values / Feb 2002
Hotel Lenders Face Challenges In Tough Climate / October 2001
Where We Are Now Depends on Starting Point / Summer 2001
Solid Management Practices Can Improve Franchise Value / May 2001
Hotel Market Stagnation To Continue / January 2001
Here Today…but Tomorrow? / November 2000
Ready, Willing, and Unable? / August 2000
Independent Hotels: The New Brand Alternative / June 2000
Ankle Biter Syndrome / January 2000
Redefining a Mature Hotel Sector / November 1999
Focus On Operations Is Not Enough / August 1999
What’s Next?? / May 1999
Growth Through Management  / Feb 1999
Expect a Subdued Market in 1999 / Feb 1999
Hotel Real Estate: Back to Fundamentals / Nov 1998
The Hotel Investment Barometer For Institutional Investors / 1998
The State of Independents / 1998
Success (or Survival) of Boutique Hotels and Resorts / 1998

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