By Steve Renard
NEW YORK CITY — The NYU International Hospitality Industry Investment Conference was held in New York City in June. Hosted by the Jonathan M. Tisch Center of Hospitality, the conference featured general sessions, and networking events that provide data, analysis, perspectives, insights, and opportunities.
Five topics were top of mind during the panel discussions:
- Luxury travel being reduced.
- Potential recession
- Lack of new hotel inventory
- Saudi hotel boom
- Ukraine Crisis
Insights from NYU Conference
The luxury-travel market has been booming this year, as unfettered travellers make the most of their recently acquired freedoms to not only travel, but to treat themselves. However, there may be a warning for the West from the luxury-retail sector that the good times may not last indefinitely and that the axis might shift East, as Asian high-net-worth individuals stay closer to home.
The first warning of a change in the mood music came recently when high-flying luxury retail stocks crashed down to earth mid-May, with spooked investors offloading shares amid fears over the impact of a softening U.S. economy and lower spending from the wealthy, dubbed a “richcession.”
Rising interest rates, squeezed consumer spending, and a looming recession mean the macroeconomic outlook appears bleak and although a shift in consumer spending towards experiences should soften the blow to hotels, recovery is already slowing. A contraction at the top end of the market would also have ramifications lower down with rates compressed between the segments.
“According to the results of our latest U.S. Consumer Pulse Survey, [consumers are] worried about rising prices and job security, yet they’re optimistic and still spending. They’re switching to less expensive brands to save money, but they’re also willing to splurge on certain goods and services,” said Tamara Charm, partner at McKinsey & Co.
Is it time to divest your commercial office?
Post-pandemic, kids are back in school, retirees are back on cruiseships, and physical stores are doing better than expected. But commercial spaces are hurting perhaps more than most observers realize, and the consequences for landlords, banks, municipal governments, and even individual portfolios will be far-reaching. In some cases, the consequences will be catastrophic. But this crisis, like all crises, also represents an opportunity to re-consider many of our assumptions about work and cities.
During the first three months of 2023, U.S. office vacancy topped 20 per cent for the first time in decades. In San Francisco, Dallas, and Houston, vacancy rates are as high as 25 per cent. These figures understate the severity of the crisis because they only cover spaces that are no longer leased. Most office leases were signed before the pandemic and have yet to come up for renewal. Actual office use points to a further decrease in demand. Attendance in the 10 largest business districts is still below 50 per cent of its pre-COVID level, as white-collar employees spend an estimated 28 per cent of their workdays at home. Why not repurpose this space as hotels on long-term stay accommodation?
The U.S. staffing crisis
At the start of 2023, the U.S. Bureau of Labor Statistics released a report showing the overall economy added 517,000 jobs. The leisure and hospitality sector accounted for about 25 per cent of that, adding more jobs than any other sector. At the same time, the industry had two million open jobs despite returning to pre-pandemic employment levels, according to the U.S. Travel Association. What’s more, while many industries have recovered their workforce, the leisure-and-hospitality sector is still about half a million employees short of where it was before COVID-19.
Further research from the American Hotel & Lodging Association shows that 79 per cent of hoteliers report staffing shortages. As a result, 71 per cent of hoteliers are increasing wages, 64 per cent are offering more flexible hours and 33 per cent are expanding benefits. Yet, 81 per cent of hoteliers are still unable to fill open positions, according to the AHLA.
“People left our industry over the last three years when they were forced to, and many are not coming back when there are many options and jobs available,” said Laura Presnol, VP of Talent and Culture for Davidson Hospitality.
“The labour shortage is our new reality,” said Bob Habeeb, CEO at Maverick Hotels and Restaurants. “As seasonal demand grows later this year, we will again be facing acute shortages.”
Trying to fill the gaps can prove almost impossible. Turnover, which is already historically high for the industry, has become even worse now, according to Dan Paola, VP of Operations at Raines Co. “You always had turnover or hotel hoppers. But now you’re pulling in people from different industries, maybe warehousing or retail, and they think they can do housekeeping or the front desk. It’s a big jump. People don’t recognize what they’re getting into.”
Labour challenges are leading to new career opportunities for hotel employees, especially when it comes to wages. As of December, the national average hotel wage was at an all-time high of more than $23 per hour, according to the AHLA. In a survey conducted by Interwork’s Economic Research Division, 52 per cent of hospitality businesses will raise wages to attract and retain workers and 73 per cent of those who said they’d increase pay already did so by $2 an hour or more in 2022.
But hoteliers shouldn’t put all their eggs in the “Higher-wages” basket. As the data show, wages alone won’t fill all the open jobs for the industry. “It’s about culture and engagement. You need to give people a great place to work,” Paola said. “Wages can only go so far. What are those other things that employees want?” To find out, Paola said Raines is making use of employee-engagement surveys to measure and find opportunities and to make sure employees are getting the right training and have the tools and resources necessary to do their jobs. Raines has also implemented daily pay so employees can access earned income the day of or the day after, which Paola said has been a selling point for team members.
“People look at jobs today as a commodity, which is easily replaced. To win the retention battle, employees must feel a sense of belonging and purpose,” Habeeb said. “It’s all about relatability and authenticity.”
Presnol said the hotel industry is now competing with remote roles, gig shifts and other positions that might have a more surface-level appeal: “It continues to be a challenge to convince those that have not tried the hospitality industry to join. There is a perception and, quite frankly, a history of not being flexible with schedules, not being competitive with compensation or creative with benefits.”
Filling the gaps
Service is the biggest gap to fill right now; not just because it’s more difficult to find frontline employees today, but also because there’s a lack of skill out there.
“It’s finding people who genuinely care. You can’t teach caring, and you can’t teach genuine human connection,” Paola said.
The industry has surely changed, and Presnol said hoteliers need to have an open mind and be more forward-thinking about operations.” You have to be open to people that have not worked in hotels,” she said. “If you do make that commitment, it goes even deeper. It now involves the greater commitment to onboarding them and training them for success. It is not plug and play. It is committing to giving them knowledge, building their confidence and, in turn, it will win over their loyalty.”
Paola said that while tech and automation will continue to find their way into the industry to help fill some labour gaps, it’s also essential for success to engage employees early on because tech can never be a replacement.
“You have to hire for personality over experience. You have to show them you can make a great career in hospitality,” he said. “We have so many stories of people starting in housekeeping and are now in the corporate office. We need to tell those stories, especially early on in orientation.”
Presnol said hoteliers should stay focused on internal talent and succession planning.
“Focus on the careers that can be built from the ground up. Our CEO got his start as a bellman,” she said. “There have to be bellmen in our hotels today that will be the future CEO. It just takes someone to be focused on building an internal bench or taking that bellman under their wing.”
At the end of the day, Paola said hoteliers need to work to adapt. “Too often we’re thinking about how people need to adapt to us in the workforce. Now it’s about taking the focus off that and asking how do we adapt.”