The Labor Crunch Is Hitting Hotels Hard

When the April jobs report came out, there was widespread disappointment.

Nonfarm payrolls rose by only 266,000 and the unemployment rate hit 6.1% “amid an escalating shortage of available workers,” according to CNBC.

That lack of available workers was especially difficult for certain segments of the lodging industry, trying to dig out of its issues related to a decline in revenue during the pandemic.

For full-service hotels having workers to provide the level of service that customers expect is essential. “If you’re paying close to $1,000 for a beachfront accommodation, the expectation is that you’re not going to lose service,” says Scott Berman, leader of hotels and hospitality sector at PricewaterhouseCoopers. “In fact, you should gain services. That’s the rub here—meeting expectations. The stories of general managers cleaning hotel rooms are not exaggerated.”

Berman says the labor issues are most acute in high-demand markets that are achieving high occupancy, such as Miami, Orlando, Austin, Phoenix and Nashville. In some cases, companies are giving hiring bonuses. “That’s just unheard of,” Berman says. “That is what we’ve resorted to, and that’s because the demand for the employees is at an all-time high. There’s no question that the tech companies and the delivery companies and the food service companies are all looking for the same talent.”

Berman thinks the initial shock of the COVID shutdowns and the rapid declaration of business, and now the difficulty finding labor, has taken its toll on the hospitality sector.

For hotel operators, the labor squeeze may loosen soon.

“There’s no question that government subsidies are playing some role in this,” Berman says. “I think we’ve got to let things stabilize and see where things fall out in the Fall. I think it is at a point where we will start to begin to see an acceleration of corporate and group business returning again at a very deliberate and gradual pace.”

Even though the labor problems are an obstacle, Berman doesn’t see them potentially putting properties at risk and causing more distress.

“I think consumer expectation is the greatest risk–delivering expectations and services that a traditional hotel guest, a repeat guest or a loyal guest is accustomed to having,” Berman says.

The hospitality business is, most of all, about people, according to Berman.

“CEOs will tell you this is a people business,” Berman says. “It is about touch. This is about the delivery of our brand and our programs at our standards. I think there’s recognition that those are under pressure.”

But as they have with the COVID challenge, Berman thinks hotel operators will get through this situation.

“The owners of the real estate are very much margin driven,” Berman says. “It is about, in many cases, survival and paying debt service and getting through this. But we have not seen a level of distress that we certainly saw during the recession.”