Why prioritizing employee development has the ROI for owners too
A lot has been said about why we have such a labor crisis in hospitality. Some would say it is no wonder because we have forgotten – or better still allowed – the forces that be, to drive the agenda around how we invest in and manage our hotels.
So how did we get into this mess, what is the solution, and the best part – how can it pay off?
First of all, to understand how to fix a problem one person once said you need to understand what the problem is and why we have that problem in the first place. The problem is people do not want to work for a company, owner or brand that is not loyal to them. What our industry did in 2021 with massive layoffs and furloughs was not right and I think if the pandemic happened 40 years ago there would not have been the same mass exodus. That is because the brands had a vision driven by a commitment to service and their people.
Back then the major brands were still predominantly owner operators and the name on the door was the name on your paycheck. Well, as you know, all of that has changed. Owners largely call the shots today and the brands do the dirty work. The need for quarterly results is all that matters to many owners so to take drastic action when there are headwinds is the result. I believe and I am open to being wrong, but back in the day, it would have been handled differently.
On top of the lack of loyalty to our people, the current environment dictates as little investment into human capital as possible in many instances. This investment was always the reason why people came for a summer and stayed a lifetime. That trade-off of hard work and commitment on the part of our leaders and staff was because there was something there to keep the family together. A reason to stay because there was a future, even if it was not going to be this year or maybe even next year. Remember “Don’t throw the baby out with the bath water.” People were invested in their hotel company because they were invested in the person, which meant today, tomorrow and next year.
Companies that really valued their people meant it. They showed you this by their actions. When we say the hotel business is still the kind of business you can start out washing dishes and one day be running the company has all but lost its believability. But that said, it does not mean that we cannot get back there again.
It is a fact that hotels that looked after their staff as best they could during Covid are having the least trouble getting staff back and finding new hires. People talk and they know who to work for and who to stay away from. The cream always rises to the top.
What about the investment?
If we want to build back better, we need to have the best employee development and management programs. People clearly need to see that their efforts will be met with substantive investment directed toward their personal and professional development. People still want a place to call home, but will owners realize there is no shortcut to solving their labor problems? Owners, like brands, and people, need to drink the Kool Aid.
Let’s look at some math. Take the cost of the lost profitability directly linked to the lack of talented staff and leadership and multiply that by 20 – that is a cap rate of 5. Let’s use a drop of $250k from 2021 as an example. Profit lost because we did not have the ability to staff all our facilities and services. That $250k in lost GOP is worth $5 million in asset value. And that $250k could easily be $2 or $3 million, in a large operation even more. That is what owners have lost by not having people in place.
All of this could have been avoided, or at the very least greatly mitigated, if we had continued to invest in our people. I know hotels that lost very few employees because they did everything in their power to retain them and they had strong relationships before Covid. You reap what you sow.
If hotels want to have and create a different future, it means getting back to the original bargain of hospitality. Look after your people and they will look after your guests. Happy guests mean guests spend more, they tell their friends good things, and they return more often. In this scenario looking after the guests and our people means looking after the money too.
Brands have tools to hold the owner’s feet to the fire. The HMA, the standard, the quiet enjoyment, they all point to the need for stability in the long run and not profit this quarter no matter what the cost is to our collective future.
In hospitality, we have a choice about the culture we build going forward but it will not happen by itself, and it will not happen unless brands step up.
David Lund – The Hotel Financial Coach
Contact David at (415) 696-9593
Email: david@hotelfinancialcoach.com
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