The U.S. hotel industry generated more than $16 billion in room revenue in April, but it did so with only 1.7 million employees within the accommodations sector, according to the Bureau of Labor Statistics. At around $9,500 per employee, this jarring productivity value is much higher than it has ever been.
Between 2010 and 2019, annual room revenue per employee increased from $4,775 to $6,813, or about 4% a year. Over the past 12 months, between April 2021 and April 2022, the annual growth rate soared to 62%.
The change in the employee productivity equation reflects the drastic shift in hotel revenues and in the number of staff since the pandemic began. In April 2019, BLS recorded 2.1 million workers in the accommodations sector, but in April 2022, that number shrunk to 1.7 million. Worker shortages, wage increases and hotels being forced to curtail services have been the main topics on every hotel conference panel and indicate the severity and depth of this issue.
At the same time that nearly every hotel has faced staff shortages, room revenues have soared. A fully staffed industry in April 2019 generated $14.3 billion in monthly revenues. Three years later, and with 300,000 fewer workers, the industry produced revenues of $16.3 billion.
One undesirable side effect is that the quit rate in the industry has also never been higher. At the same time that customers are paying higher prices, hotels are being forced to cut back services, from housekeeping to restaurant hours, because of the lack of staff.
The question becomes, how long can this trend be sustained? Eventually, one assumes hotel guests will begin to chafe at paying more for less, likely translated into lower guest satisfaction scores.
Going forward, hotel industry participants know they have to solve the staffing challenge if they want to reap the benefits of ever-expanding top lines. Maintaining productivity at this level of staffing is not sustainable in the long run. Either guests will refuse to pay higher rates and trade down, or staffing levels will increase and then the per-employee revenue number will drop again to more balanced levels.
We are already starting to see examples of that. The Cosmopolitan Hotel and Casino in Las Vegas recently gave each of its employees a $5,000 bonus to boost retention. Across the U.S., hourly wages for line-level hotel staff are increasing. It is still too early to tell if these measures will attract and retain the talent that a service industry like hospitality so desperately needs.