While the pandemic naturally has been the biggest issue the hotel industry has had to deal with for the last two years, new troubles such as the labor shortage, supply chain delays and inflation have now surfaced.
During the latest Hotel Business Hot Topics session, “Optimizing performance in ’22: Improving your bottom line,” with sponsorship from Entegra, industry executives discussed these issues and more.
Moderated by TV personality Anthony Melchiorri, president, Argeo Hospitality, the panelists included Alex Cabanas, president, Benchmark Pyramid; Damien Calderini, president/CEO, Entegra Procurement Services; Ben Perelmuter, EVP, operations, Aimbridge Hospitality; Kerry Ranson, CEO, HP Hotels; and Jay Stein, CEO, Dream Hotel Group.
Melchiorri opened with a question about the impact of the “Great Resignation,” adding, “If I told you I had a great general manager candidate or a great front-office candidate, you’d probably drive to my house.”
Perelmuter and Cabanas both pointed out that general managers are exhausted, having to oftentimes fill in for missing staff members at positions such as the front desk and housekeeping. However, Perelmuter said, “We’re starting to see some boomerangs— people that have left hospitality coming back to the industry.”
Cabanas, who said Benchmark Pyramid has also seen boomerangs, offered advice to management, whether on property or off: “You’ve got to be able to put your arms around people and get them focused on the horizon. We’re going to be out of this soon and some of this stuff is going to level out.”
Food & beverage, Stein noted, has been really hit hard by the labor struggle. “We opened food and beverage in our hotels in New York before we opened the hotels, and it came back really busy on Thursday, Friday and Saturday,” he said. “Unfortunately, it wasn’t the seven-day busy F&B that we’re used to seeing in New York, which I’m still confident we’ll come back to once COVID is in the rearview mirror, and we’ll see that pickup back on the weekdays.”
Ranson noted that, due to inconsistent occupancies, “a lot of markets have become what we traditionally have looked at as seasonal markets. Unfortunately, our seasonal markets right now could be week-to-week, month-to-month [or]bi-weekly.”
Therefore, he said, “The challenge with those good team members that you are getting back is actually giving them full schedules that meet their needs. We’re getting them back, but the consistent demand component that’s still missing a bit still causes issues with retaining some of those good folks as they come back.”
Ranson also pointed out that hoteliers should stop looking at the traditional way the industry has hired and maintained staff. “We are in the world of a gig economy, and if we’re going to have a chance at actually sustaining some type of consistency, we better [be flexible]. The days of eight-hour shifts, three shifts a day are done,” he said, adding that the industry should let team members be themselves.
“We’ve always been so uniform driven—so no facial piercings, no tattoos—and you look at it and say, ‘Why wouldn’t we let people be themselves?’” he said. “I’ll walk into one of our lifestyle assets and I’ve got a night auditor in a jogging suit. It’s a little hard for me to digest, but it’s a good night auditor.”
Melchiorri brought up the topic of wage inflation and asked the panelists how they’d raise revenue to pay for the hikes without increasing ADR.
“All of us would love to pass that through ADR, but the reality is it’s going to be the markets that dictate that,” said Perelmuter. “In full-service hotels, there are amenities that historically we’ve not passed through the guest, such as the shuttle. We can look at situations like that. Then [we can take]advantage of scale, national agreements and leveraging commodities and suppliers. Those combined will chip away at it and then, ultimately, when the demand comes back roaring, which I believe it will very soon, we will see some ADR increases to offset [the rise in wages].”
Stein noted his company has added a robot that can deliver towels, food and other amenities to guestrooms at one hotel. It has worked so well, another robot is being deployed to Dream Hotel Hollywood. He did, however, believe that there will eventually be ADR increases.
“Everybody got used to paying $19 at their favorite place to go out to get a burger when they used to spend $13.50 only two years ago, and I don’t see anybody eating fewer burgers or going out to eat [less often],” he explained. “If the rate was $275, and it’s going to go to $325 or $350 once the demand is back, it’s going to pass through pretty nicely on the bottom line.”
Calderini brought up another type of inflation—the increased cost of goods and services—which the whole world is dealing with right now.
“When we think about inflation, people think it’s temporary; I’m telling you, some of it is here to stay,” he said. “All the inflation we’re seeing is not all due to COVID. What we’re seeing in terms of freight—those prices are going to remain high for the foreseeable future. The consensus is we’re probably not going to see anything going our way before 2027-2028.”
Melchiorri also asked Calderini about the supply chain issues that have been plaguing every industry. The Entegra executive provided some worrying figures.
“The fill rate for manufacturers into distribution, typically [for]our industry, if it’s below 98%, it’s a disaster; what we’re seeing these days is close to 80%,” he said. “So, there are a lot of product shortages out there. The average time of freight to go from Asia to North America, pre-COVID, was 60 days; now, we’re looking at 110-120 days. But, it’s actually worse than that because back then, the rate of ‘in full on time’—when you actually got what you ordered on the day you were supposed to get it—was 85%; it is now down to 30%, sometimes even 10%.
So, it’s actually double the time it used to take before and you rarely get everything you ordered. So, the disruption is massive out there.”
Calderini believes it will likely take another two years before the supply chain gets back to normal, “if it ever does.” He said, “The level of stress that has been put on the supply chain is something we’ve never seen before. Everyone is seeing those containers outside of those ports. They’re staying there and everyone thinks that’s [due to]COVID. Demand has increased by 30% and capacity has increased by 7%. The reality is, even if we were to do the investments that we need to do in order to solidify this, it’ll take 10 years. So, I think there are some structural bottlenecks in the supply chain that we’re going to have to learn to live with.”
Going back to the labor issue, Melchiorri asked about bringing in talent from other industries to alleviate some of the shortage. For some of them, it could also mean moving up the ladder to a managerial post.
“We know what we do is not brain surgery; it’s putting time in and getting a sense of maturity and understanding how to be a leader and motivate people,” said Stein. “So, we found some of these types of people and put them on a year-/year-and-a-half-long program and said, ‘If you can gain the respect of your teams and become a front office manager, you can become GM in a year-and-a-half if you have that natural talent to do it. And we’ve been quite successful finding people. Some came through the nightlife [side of hospitality]. They just didn’t want to be working at one or two in the morning and wanted to transition more into the hotel side of things. Some of them came from outside of hospitality completely.”
Another way to fix the labor issue, Cabanas said, is to bring in more immigrants, a group that has long served the hotel industry. “We had better fix [immigration],” he said. “This country was built on the ability to serve others, and that’s something that we will lose if we don’t continue to bring in the immigrant population and/or the visiting worker population that believes it’s a privilege to do what we do in our business. You cannot stay in hospitality unless you love to serve other people, and we need to be teaching our young people that serving others is an incredibly noble and worthy career.”
HP Hotels has focused on young people. “We’re meeting with high-school counselors and looking for the students that may want and need some ability to work on the outside,” said Ranson. “If it’s only two hours, one day a week, then so be it because we are the way to progress in life for some of these team members.”