Hotels swing from one labor extreme to the next
Hotels swing from one labor extreme to the next
17 APRIL 2020 8:59 AM

Hoteliers’ concerns have shifted from a shortage of labor to staff hotels to a precipitous drop in demand that forced massive furloughs and layoffs across the industry. Data from Oxford Economics and Hotel Effectiveness shows some of the impact throughout the hotel business.

REPORT FROM THE U.S.—In early March, the U.S. hotel industry was still struggling to staff its hotels in a tight, low-unemployment labor market.

Nationwide, at that time, there were just shy of 1 million job openings nationwide in hospitality, according to Chip Rogers, president of the American Hotel Lodging Association.

About a month later, “4 million to 5 million hotel industry employees are idle,” he said. “There’s never been any shift like that perhaps in any industry before. ... It’s really bad.”

Rogers said about 75% of hotel employees are not working—having either been laid off or furloughed, which means they are not working now (and in most cases, not being paid) but maintain employment status and can be brought quickly back onto payroll.

“Many are still being paid by their employers; some have been let go; some are on unemployment insurance, with the expectation that they will come back to work hopefully this summer,” he said.

The sudden, dramatic impact on employment is a result of the drop-off in hotel demand due to the COVID-19 pandemic, which prompted government stay-at-home orders and shut down travel across the U.S.

“Hotel job layoffs and furloughs have been exceptionally severe, brought about by the sudden stop in almost all travel,” Aran Ryan, director of Lodging Analytics at Tourism Economics, said by email.

For comparison, “in the prior two recessions, we saw U.S. hotel job losses accumulate gradually over 18 months; in the current situation, the timeline is measured in weeks,” he said.

In the context of the broader U.S. economy, “our Oxford Economics U.S. macro team now anticipates 24 million jobs lost in April, with accommodations one of the most impacted sectors,” he said.

There’s no way to “even begin to equate” what is essentially a shutdown of the U.S. economy to any past temporary or regional impact, Rogers said. He recalled flying into New York City a week after the 9/11 terror attacks to stay in a hotel.

“The hotels weren’t full, but one week later, most were operational,” he said.

The payroll picture
Labor management firm Hotel Effectiveness, which tracks real-time data on hotel payroll and hours worked, recorded a 66% drop in employees in a same-store sample of 3,300 hotels in the weeks of 14 and 21 March, according to Del Ross, the company’s chief revenue officer.

Hotel Effectiveness data estimates 29% of the U.S. hotel workforce, approximately 2.4 million workers, was terminated in the 30 days since 14 March, Ross said.

“This is incredibly explosive … (showing) that the average number of employees per hotel has dropped like a rock – down more than 70% to 7.8 employees per hotel, from an average of 27,” he said.

Hotel Effectiveness’ data also shows the impact on employment is progressively greater for hotels the higher they are on the chain scale.

Full-time employees at upper-upscale hotels in the sample dropped 80%, from a pre-COVID-19 average of 77.1 to 15.4 FTEs as of the week of 7 April.

Upscale hotels posted a 71.5% decline in FTEs over the same time period, from an average of 27.7 per hotel in February to 7.9.

The drop in FTEs was 64% at upper-midscale hotels (from an average of 16.9 to 6.1), and 57.4% at midscale hotels (from 12.9 to 5.5).

Economy hotels in the sample, staffed by 6.6 full-time employees on average before the effects of the pandemic were felt, were relatively stable, posting a 23% decline in FTEs to an average of 5.1 per hotel.

‘Fundamentally altered’
Hoteliers who weather the current crisis will be focused on bringing their employees back to work, but the environment they return to is likely to be different than the one they left, Tourism Economics’ Ryan said.

“Many job losses will prove temporary and staffing will be brought back as the virus is contained and demand returns. But hotel team composition and responsibilities will be fundamentally altered in this new environment, likely in ways that we can’t yet fully anticipate,” he said.

Rogers said AHLA expects it will take two to three years to build the hotel industry back up so it can again support 8.3 million employees.

“We won’t be there this year for certain, and maybe not next year,” he said. “We can shoot for 2022.”

By then, he acknowledged, many might have moved on from hospitality as a career.

“We’re going to have to redouble our efforts to attract people back into the industry,” he said. “I don’t think people will look at what’s happened and think this can happen any time in the industry. It’s never happened before.”

The industry will have to work together on “how we can create the demand environment where those jobs are needed,” he said, but the first priority will be: “how do I hold on to my hotels so there are jobs people can come back to?”

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