Labor costs have risen sharply over the last decade. After the pandemic, labor shortages plagued businesses around the world, and the hospitality industry is no exception. Demand for workers has never been higher, but the general shortage of labor continues, which creates problems for hotels, despite the sharp increase in travel.
Two years removed from the pandemic; the journey returns in a big way. Hotels everywhere are preparing for what will surely be a record summer trip, but they are doing so with one hand tied behind their back, thanks to the recent shortage of manpower.
With rising wages and declining labor supply, hotels are struggling to stay afloat in these unprecedented times. The operating costs of the hotel have a direct impact on the final result of the property. So it’s no surprise that labor shortages and rising costs are taking their toll. To find out the real impact of rising labor costs on hotels and their guests, read on.
How operating costs affect the end result
The operating costs of the hotel directly affect the profitability of the property. Wasteful costs deplete profit margins and threaten the financial health and long-term viability of the property. Hotels need to find a balance between overspending and sacrificing vital services that will negatively impact the guest experience.
While it is true that you get what you pay for in terms of labor and service, given the new high cost of labor, hotels need to find new ways to reduce costs without affecting the guest experience.
The first step in keeping the hotel’s operating costs under control is to practice proper revenue management. Instead of managing revenue with outdated models based on fixed-price systems, adopt a model that more accurately reflects today’s dynamic market.
Basically, revenue management “Is the strategic use of performance data, local market data, competitor percentages and other applied analyzes to help predict consumer demand to optimize pricing and distribution in a way that maximizes revenue and profits.” That is, it is selling the right room, the right guest, the right time, the right price, through the right distribution channel, at the best price.
Dynamic pricing allows hotels to manage their revenues in today’s ever-changing economy. It uses flexible pricing for a product or service based on market demand. In the dynamic pricing model, companies charge more as demand increases.
The lack of workers and the new high cost of labor
According to the data provided to Trends in labor costs in 2020, labor costs and related costs were reduced by more than 50% to compensate for the almost 60% decline in total revenues. The year before, total labor costs were just over 50% of hotel costs through the GOP. This meant that reducing operating costs was the obvious solution to minimizing losses in hotel profits.
Now that there is light at the end of the tunnel, hotels are looking to return to full operational capacity. But the new high cost of labor is hampering their ability to return to normal.
The impact on guests
As travel continues to increase, hotels will face the challenge of maintaining the necessary depth of staff following the redundancies made in 2020. In addition to the sharp increase in employment, hotels will soon reopen some of the services and facilities removed in 2020 to compete and justify the increase in the price of the room.
“If hotels don’t find a solution to staff shortages, they will struggle to provide adequate customer service who still expect a high level of customer service when they return to travel,” said Kimberly Berry, director of digital business development at Outlook. Outlook. “This means that guests are likely to experience a long wait on the phone, queues at the reception and a stretched thin section of porters.”
Given the high cost of labor and to combat labor shortages, the smartest decision you can make might be to assign your hotel’s voice channel to first class hotel call center which uses the next generation of hospitality-specific technologies so that your staff can focus on your valuable clientele.
Only the industry-leading hotel call center can meet the hiring and staffing challenges immediately. This includes answering up to 60% of calls to your front desk, answering frequently asked questions specific to your property, understanding multiple languages, routing calls, sending follow-up texts, and more. And do it at an affordable price.
Are you ready for the next generation of voice bots designed specifically for the hospitality industry? Learn how an AI-powered virtual call center hotel agent can improve your hotel’s voice channel while saving fixed labor costs.
A veteran of the hospitality industry, John has owned, developed and operated hotels for many years. After winning a BBA from the State University of New Mexico, he began his career with AT&T, gaining invaluable insight and experience in the early years of the data revolution. His experience in technology and hospitality merged in his development Outlook Outlook, a world – class hospitality contact center. Most recently, it expanded with the creation of ExpressRez, a leading contact center for the bed and breakfast industry, and the creation of Visit Bella ™, The Virtual Hotel Agent ™the first AI-powered voice bot for the hospitality industry.
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