Hotel management companies overcome different sets of challenges each year, but the main ones from 2024 were a continuation of lingering issues from years past: labor and inflation.
Those two challenges play hand in hand with each other — high inflation leads to higher wages, which has only accentuated existing staffing problems, hoteliers said.
Gregg Forde, president and chief operating officer at West Palm Beach, Florida-based Island Hospitality, said that on a macro level, inflation was the key driver of operational challenges for the hotel industry this year.
"Our business is really predicated on two things: cost of labor and cost of goods. Inflation around goods and inflation around wage pressure was, unfortunately, significantly higher and higher than what we were seeing in [average daily rate] growth," he said.
Inflation has increased costs of property insurance and workers compensation health insurance by significant amounts, at times in the 25% to 35% range, said Kerry Ranson, president of operations at Raines.
"The economic and inflation stuff, it continues. It's continued squeezing of the middle of the page for us. Whether it's energy prices, insurance .... it just continues to squeeze and squeeze profit margins," he said.
Labor issues have been all-encompassing. Perhaps the defining operational challenge of this year was the nationwide labor strikes that saw tens of thousands of hotel workers walking out on the job in hopes of better pay and working conditions.
On top of that, U.S. unemployment numbers have stayed generally low, tightening the job market for skilled workers.
"The issue that remains after the pandemic, that is constant ever since, is qualified labor. Labor in general, but people who can come reliably to the job," said Gabriel Perez, chief operating officer of lodging at The Indigo Road Hospitality. "It is fair to say that a lot of people who should not be working are working. Therefore, there's a scarcity in talent and in people who want to do the job."
Even as hoteliers increase wages, it's sometimes not enough to retain employees who can earn more in a different industry. Labor shortages and high turnover rates have run prevalent in the hotel industry, Ranson said.
"Other people are raising [wage] rates and components even higher than what our average is to try and poach and steal," he said.
On top of that, new hires are struggling to meet the expectations of management companies. Ranson said some workers have had a tough time getting acclimated, even those with prior service experience transitioning into the hospitality industry.
Richard Jones, executive vice president and chief operating officer at Hospitality Ventures Management Group, said the biggest challenge for his company this year was driving profitability amid modest revenue growth. A main reason for that modest revenue growth was rising expenses, specifically in wages and general inflation, he added.
Outlook on challenges moving forward
Inflation in the U.S. has showed signs of easing in recent months, evidenced by the Federal Reserve slashing interest rates in three consecutive Fed meetings. Consumer prices did increase by 0.3% in November, however, which was the highest amount in seven months.
Recent data from the Labor Department showed unemployment claims come in at a higher rate than anticipated for the week ending Dec. 7, potentially a sign that the job market is beginning to ease up.
Perez said he's hopeful that the labor outlook will be less of an issue next year.
Ranson, however, said he is more pessimistic that the labor component will improve meaningfully next year. The hospitality industry as a whole hasn't done enough to show prospective employees the opportunities available to them, he said.
"I'll get on a soapbox — we've done a terrible job of promoting what our industry can and does offer for people," he said. "It's so funny to listen to these companies talk about gig economies and promoting what people can do for themselves. That is what a hotel is."
Wages in the industry are more competitive than they've ever been, and there's room for "significant" career development for employees, Ranson said. This hasn't translated into more hires, though.
Indigo Road is also breaking away from industry norms to fill gaps and boost its talent, such as hiring employees that can only work a couple of days of the week — if they have the requisite talent and skills.
"We will find a place within the space of our operations in which we can materialize the fact that he or she wants to show up [and use] their expertise, their performance, and make it easy," Perez said.
From top to bottom, it's been difficult hiring the right person for almost every role in the hospitality industry. Jones said finding a quality candidate for management and leadership positions has proven difficult due to wage increases.
There's nothing hoteliers can do about wage inflation, but what they can control is how they entice employees to stick around, Forde said. Retaining new hires will be an even larger focus for hotel management companies next year.
He called retention "our biggest focus this year going into the year. Taking care of all of our team members, managers and hourly, full-time, part-time, and trying to reduce our turnover rate in a significant way that then led to a better result on the hotel from a margin perspective and in turn, guest service."
Indigo Road is implementing retention bonuses at some of its properties and making its employees more involved in daily programming and activations. Raines is focused on promoting its culture to "attain and retain."