When the COVID-19 pandemic forced hotels all over the world to close temporarily, company executives made the difficult but necessary decision to lay off staff at those shuttered properties. Now, as hotels have reopened and guests are returning, those executives are faced with an equally difficult task: rehiring.

Many laid-off or furloughed hotel industry workers have moved on to other industries; many who are willing to stay demand more pay.

The resultant labor shortage is impinging on hotel service, including reduced housekeeping in many cases. Some hoteliers are struggling with how to limit guest bookings due to not having enough staff to clean the rooms.

During calls with analysts to discuss earnings in the second quarter, hotel executives shared how their companies are coping with labor challenges, and how it is affecting performance.

• Click here for more coverage of second quarter earnings at hotel companies and real estate investment trusts.

“While these results are impressive and our teams have worked diligently to maximize performance, we continue to experience challenges finding and hiring employees in a number of markets. So we expect payroll costs to stabilize higher than where they are currently as we are able to reach desired staffing levels over time. Comparable hotel rooms expenses, excluding labor, were down 22% per occupied room compared to 2019 for the quarter, with almost half of the savings coming from adjustments to complimentary breakfast and evening social offerings. Since the onset of the pandemic, we have spent considerable time with our brands and our management companies discussing ways to modify long-term brand standards and rethink property-level staffing models to ensure that a portion of these savings remains throughout the recovery and beyond, while ensuring that we provide an exceptional guest experience. …

“I led into the second quarter talking about April and the first quarter that we were really efficient and that we were looking for people, and that remains the case. We've added back some labor over the course of the quarter. But we still have open positions. And so I think July, we'll have to wait and see, but [it] has the recipe for being a strong month from a margin perspective.

“But we face the challenges that everyone faces with labor, the cost of labor. We're starting to see some increase with wages, although when I look back at the increases in wages or the visibility that we had with the increase in '19 over '18 not significantly more than that, at least to date. But we have some things that we need to hedge for and think through. …

“There's been some talk about post-Labor Day, some of the challenges around labor easing a bit, we'll see. We certainly received more applicants in areas where some of the stimulus benefits have pulled back some. So we're encouraged by that. And we've added back labor along the way.

“We're probably at 50% of our stabilized [full-time employees] over the course of the summer last year. In April, I think we were at around 60% of stabilized FTEs. July, I think we're probably around 70%. So we still have we saw significant savings, probably a little bit more than we'd like.”

“The labor model ... for the industry ... has fundamentally changed. We've never had to go through something like this where we zero-based every single hotel and we've gotten rid of positions. We permanently changed positions, [full-time employee] counts as an industry. ... Technology is benefiting us — mobile key, less people at the front desk, other sophisticated tools to monitor productivity, above property charges from the brands at the branded hotels have been reduced. So all of those are helping margins.

“What's going to be unique to us and what is already helping us is the conversion in the comp to the brand-managed hotels, the six of which we had last year. So, given the example of one change at Salt Lake City, we've been able to reduce the managers from 18 to 11 and we think we can maintain it roughly at that level. So, that's 39% less managers at that hotel. So, you can imagine how that runs through in profitability and margins not only now, but as we kind of return to prior peak, too.

“We're relatively optimistic on the margin front. There clearly is a nationwide shortage of labor and we are dealing with that, like everyone else. But I think there's a lot of reasons to be optimistic on the flow-through and maintaining margins.”

“Labor shortage is a real issue, probably the single biggest issue that we're dealing with that is definitely not just for Hilton but all service industries and manufacturing and a lot of your supply chain issues that you're reading about every day. All of this is interconnected to not having enough labor. At a high level, I think it will largely resolve itself over the next couple of quarters in the sense that I think there are a lot of complex reasons behind it.

“We've done a bunch of things in the crisis in terms of testing and learning on different ways to change the operating model particularly as it relates to housekeeping and food and beverage and then a whole host of other smaller things, where we think we can deliver great experience for our customers and do it more efficiently. And so I think when it all gets flushed through and we're on the other side of this and through the stresses and strains on the labor issues we're talking about I think we have developed a plan to have higher-margin businesses across all the major brands."

“We are also working to address the labor challenges we are seeing, mainly in the U.S. in markets such as Southern Florida, Texas and Arizona, where demand has rebounded quickly. To that end, we are increasing our social and targeted marketing of Marriott as a best employer with career advancement opportunities, as well as holding job fairs to reach qualified candidates. Hiring tools, including one-time sign-on bonuses and temporary incentives, sometimes in combination with base salary adjustments in select markets, are also being successfully employed.”

“Like the balance of the whole hospitality industry, we are suffering universally our share of labor shortages, some supply chain issues. They're not critical, but they are important. We've done everything we can.

“We've done incentives and other things to motivate people back to work. We all believe come the end of September, we'll hopefully see some increase in terms of people's willingness between the negotiations here, particularly with the legislature in Nevada, and unemployment, hopefully, weighing in some respects. But we've been managing through it and effectively. I think the team has done a really good job with it.

“It has hampered some midweek occupancies. And we've pushed up our business and therefore, our [average daily rates], and we've yielded effectively.

“We’re currently running at about ... 50% of labor relative to our 2019 levels on a 60% occupancy. We recognize that there’s a labor issue, which is well-documented and that we’re going to put some labor back in as occupancy continues to rise. But we do have some level of competence that we’re not going to need to go back to, all the way back in 2019 levels of occupancy.

"We have a number of properties, particularly in the leisure and Sunbelt markets, that are running occupancies in the 80% to 95% range. For example, South Florida, our portfolio there is running 80% to 95%, but we only have 75% of our 2019 labor.

"We recognize we have to put some of that back, but we’re pretty confident based on the way that we’re operating today and the occupancies that we’re running and efficiencies that we’ve learned that we will not have to go back to 2019 levels of labor."

On cost savings in labor: “Where you have a fixed-service model like in the Embassy Suites and the Residence Inn, it’s easier to control the labor model — the offering and the hours of operation relative to your traditional full-service hotels that have a menu and variety and the customers expect something differently.

"On housekeeping ... I don’t think that we’re going to go back to the old model. We’re moving into an opt-in structure, which you obviously have heard Hilton come out and publicly state. And clearly that’s going to be predicated on the take rate.”

“Historically we ran on average at about 35 [full-time employees] across the portfolio. We're running half or just slightly less than half of that level today. Part of that is just the challenges of us being able to find labor, and that's been well documented across the industry. And part of that is we are adapting the operating model to what is still a unique environment and still lower than normal occupancies.

"I do think we'll continue to add [full-time employees] back. I don't think 17 is the right stabilized number. I do think there are opportunities for 35 — again this is an average — to be lower going forward. And a lot of that's going to be based on how brand standards evolve. We're encouraged by the opportunity that cleaning on stayovers is going to be something that is optional and not a brand standard — that's the most meaningful lot for us from a margin perspective. And we're reevaluating things like our breakfast offering and all the other kind of services and amenities that were put in place pre-pandemic. Food trucks and social hours, and airport shuttles ... a lot of these other amenities and services that are costly and labor-intensive likely come back in a slightly different form, but overall, generally help profitability of the hotel level.”

“For our economy and midscale hotels, [the labor shortage is] certainly … much less of an issue in the select-service space. Our economy and midscale hotels do not have restaurants. They do not have banqueting halls, they do not have convention facilities. And look, labor has been an issue in this industry long before the pandemic.

“Before COVID back in '19, our industry had 10 million jobs available and only nine million of them were filled. But it is certainly at what is estimated to be in the economy segments 12% of gross operating revenue as — from a cost basis to your question versus 35% of gross operating revenue for the overall U.S. industry. It's still very much an issue.

“And it's been the driver of so much of what our teams have been working on the elimination of breakfasts for our large economy brands, which have reduced our economy breakfast cost for our franchisees by around 50%. The stayover cleaning on request, which has certainly helped and then embraced by Franchise Advisory Council. And we will continue to focus on and trying to eliminate other costs as we move to more digital to drive additional savings for our franchisees. But yes, I mean, our industry needs more housekeepers. We need more guest service agents.

“We need more culinary team members. And our operation support teams are working very hard to educating our owners on what they can be doing from a daily labor monitoring basis. We've got a lot of tools and software out there. What we could be providing to attract employees and associates better benefits workers flexibility, and how we could leverage staff among neighboring hotels. Our franchisees, our small business owners are working very hard at recruiting and trying to get the word out on just what a great industry this is.”

“Overall, the management teams at our hotels have done an excellent job of managing expenses in a continually evolving environment with numerous cost headwinds, including the cost of food, operating supplies and labor. Our hotels are continuing to experience challenges in sourcing labor. However, our management teams continue to implement innovative programs to attract and retain labor in order to satisfy the needs of our hotels' guests. In markets where supplemental unemployment has ended, we are seeing modest increases in interest and applications. …

“In markets where … they're no longer getting supplemental unemployment, we have seen increases in the number of applicants and ultimately number of hires. So when that happens, we've gone in immediately with job fairs, and we are seeing more than what we would have seen a month prior. It's not exponential, but it is notable and has helped fill the ranks in a number of our hotels, particularly in the Sunbelt markets, Florida and Texas. …

“It's very fair to say that we have no hotels in the portfolio that wouldn't take more staff if they could get them right now. And I think they're truly trying to balance a couple of things, one of which is making sure that we're not increasing the overall wage model over time by hiring more employees today than we can comfortably take on and changing the entire wage structure of our hotels. Quite frankly, our industry [has] always tried to balance [that] to ensure that we don't get staffing ahead of where demand levels are, because in this environment, we want to make sure that we're not overstaffing. Again, that's not to say we wouldn't take more employees in any of our hotels.”