Yes , efficiencies exist , but labor-related issues might wreak havoc with balance sheets .
Hilton CEO Chris Nassetta ended his company ’ s third-quarter 2020 earnings call with this : “ I do believe , in my heart-of-hearts , that when we get to the other side of this , we ’ re a bigger , better , stronger , more efficient higher-margin business .”
It wasn ’ t the only time during the call , which took place in the thick of the pandemic , that Nassetta used the word “ efficient ” to characterize a post-pandemic operating model . At other points he remarked : “ Our disciplined strategy will enable us to emerge stronger and more efficient than ever before .” And , “ You will get to free cash flow and EBITDA levels of 2019 before you necessarily get back to demand levels of 2019 , because you have created a much more efficient cost structure .”
The hotel industry , however , has a cognitive dissonance problem : It oftentimes acts out of line with its beliefs . Let ’ s say you ’ re a vegetarian , for illustrative purposes , but one night you slip up and eat a hamburger after having a few too many drinks . The next day you might be angry at yourself since eating meat goes against your principles .
Expenses are the meat of the hotel industry : It tries to steer clear of it , but , sometimes , there is no escaping its siren call .
Yes , efficiencies exist , but labor-related issues might wreak havoc with balance sheets .
ALL ABOUT LABOR Labor is the most impactful cost to a hotel and hoteliers do their best to limit it . It ’ s no easy task and oftentimes vary based off property size and , of course , customer demand . Though the pandemic artificially curbed labor costs – by way of layoffs and furloughs – hoteliers vowed that on the rebound , they ’ d stay down . According to some , and relative to the data , keeping labor costs down is easier said than done .
There are three main factors for why and all revolve around the same reason : labor shortage .
PEOPLE HAVE LEFT . The hotel industry is built on hourly wages and some people have migrated to other industries , or other areas , often in search of higher hourly wages . This has pruned the talent pool and bringing those workers back could prove a challenge .
VISAS . In the U . S ., many positions within the hotel industry are filled by migrant workers , but COVID-19 has stymied the flow . H2B visas , for instance , are given to nonimmigrants hired temporarily to fill seasonal or intermittent nonagricultural job openings . They have been curtailed , however , because of COVID-19 . The good news is that The Department of Homeland Security recently announced that the U . S . would approve an additional 22,000 seasonal worker visas on top of the annual limit of 66,000 set by Congress .
UNEMPLOYMENT INSURANCE . Some hotel workers who were laid off are loath to come back because they can earn more money not working off unemployment . The stimulus packages provided temporary boosts to unemployment benefits , starting at an extra US $ 600 a week through the CARES Act . In March , the American Rescue Plan provided an additional US $ 300 in weekly jobless aid .
In sum , the total labor supply pool has dwindled and is not coming back as quick as room night demand . Meanwhile , according to HotStats data , labor costs on a per available room basis , though down year-over-year , are rising globally . In the U . S ., and as of March 2021 , they are up US $ 10 over their April 2020 nadir , while in China , they are up more than US $ 12 . With summer approaching , and pent-up demand calling , employers will labor to find labor .
Chris Nassetta ’ s hopes of efficiency are well founded . But he also might not be completely convinced . “ When you get to a normalized environment ,” he said , “ the working capital things sort of go back to the way they were .”
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