NASHVILLE, Tennessee — Rising cost pressures, particularly from skyrocketing wages, are making it more difficult to maintain profits at hotels, but hoteliers say a combination of strong rate growth and more efficient operating models have helped keep their businesses thriving.
Speaking during the "The Lean, Mean (and profitable) Operating Machine" session at the 2022 Hotel Data Conference, Andrew Rubinacci, executive vice president of commercial and revenue strategy for Aimbridge Hospitality, said wage increases are now a universal phenomenon.
"We've kind of reset the industry and reset labor prices," he said. "A lot of people left and we need to incentivize people to come back to the industry. You see that across the board. Housekeeping and front desk [wages] are the ones that really went up the most, and [salaried positions] are starting to follow, although it's a little less volatile."
Eve Moore, divisional vice president of operations for Remington Hotels, said one thing hoteliers must do now is take a closer look at data and make sure they're using all the business intelligence tools they have to avoid overstaffing.
"One example is we were able to see that food and beverage was really recovering faster on the weekends, and that helped us schedule more effectively with a smaller number of folks," she said.
She said Remington has a team at the corporate level whose specific goal is to help under-performing properties best allocate resources to areas that maximize guest experience and cut down on costs. She said having that corporate-level support is key.
"We're talking to our [general managers and operations managers] and folks that are still kind of struggling sometimes to get through the day to day with the volatility of staffing," Moore said.
Lars Schrader, vice president of operational strategies for Atrium Hospitality, said the labor environment has eased somewhat over the past few months, but his company is still operating at roughly 85% employment levels compared to 2019. He said various parts of the business, from rooms to food-and-beverage outlets, have ramped up employment in tandem with demand, and he thinks that will continue into the new year.
"My personal opinion is I think that in 2023, we're going to see a lot of hotels back to [employment] levels that they were in 2019," he said.
Evan Wimpey, director of analytics strategy for Elder Research, said coping with day-to-day volatility is a key challenge for hotels looking to streamline operations.
"It comes down to being able to staff appropriately," he said. "Staffing is a challenge for everybody, but we certainly hurt the bottom line when we're overstaffed for a day when there's perhaps not as many people."
Because of that, Wimpey said forecasting for hotels has grown "more compressed and more granular."
Rubinacci said labor costs have increased roughly 20% over the past two years, which means hotels must innovate their operating model to continue to combat those costs.
"Part of [Aimbridge's] benefit is our scale," he said. "I have 70 hotels in Houston, and we're doing things like moving labor around between them. If you do have that spike, like you have a conference come in, we can move people around quite a bit."
Moore noted various forces are pushing in opposite directions for profitability.
"Revenues are at a similar level — give or take 10 points to where you were before — and you have wages that are up, but you're also not able to fully staff and there are positions you're not going to bring back," she said. "We're in a very unique point in time right now where profits are very strong, but it'll be interesting when we start to rebuild positions at new wage rates. We'll have to see."
Panelists noted one key to the equation is boosting retention efforts, as they are often more cost effective than spending on recruiting new employees.
Schrader said Atrium has focused on making back-of-house improvements, like better break rooms.
"We have 65-inch televisions and stainless steel fridges — just stuff that makes you feel good about being at work," he said. "We've all walked the back of the house at a hotel, and you're just depressed when you walk in because nothing has been done to it in years. That's not what we want."