Surging costs related to labor, utilities, food and more are eating into margins for owners and operators around the world.
As a result, since the outset of the pandemic, hoteliers have been considering every cost-saving tactic they can to control spiraling costs.
HOTELS reached out to some operators to get some practical advice about managing the cost of labor and goods in the new normal.
HOTELS: What has been your most effective labor management tactic applied since business started coming back last summer?
Barry Dawson, senior vice president finance, Aimbridge EMEA, London: During the pandemic, the vast majority of our hotels across the EMEA region remained open. This allowed us to retain key talent, putting us ahead of the curve when business bounced back with talented teams already firmly in place who had adapted to new ways of working.
We also used this time to review our operating structures to ensure our EMEA hotels had the ability to flex up and scale back in line with emerging business patterns. As part of this exercise, we moved away from traditional departmental roles and job titles to a structure where our guest service assistants work across multiple outlets which gives the hotels greater flexibility with workforce planning and increases cross-training and productivity across the team.
As travel demand has returned in the U.K., we’ve employed scheduling technology to maximize labor efficiencies based on each hotel’s varying business needs and patterns. It is now our standard practice for all hotels to have a rolling five weeks of schedules which enables our general managers to identify any gaps and address them accordingly. The five-week rolling rotation also benefits the employee as they have visibility of the business needs further out and can also plan accordingly.
Another effective tool in our talent strategy has been pay. We found that by increasing pay above minimum wage, staff retention has increased and thereby reducing the higher costs associated with recruiting and onboarding new team members. It has also helped to reduce our requirements for agency staff in the business.
While we offer our employees industry-competitive pay rates, we understand that it isn’t the only factor that is important to them. We’re focusing on the overall employee experience and our employer value proposition to make our locations the best places to work, and building a reputation where people know our hotels are great places to grow their careers.
Enhancing our leadership capability, being innovative, flexible, brave, and nurturing and investing in our people with training and development opportunities are really important factors for staff retention, and these values are embedded across Aimbridge EMEA.
Kirk Pederson, president, Sightline Hospitality, San Francisco: Conducting market wage surveys often and remaining competitive and offering great benefits. In addition to this, we provided incentives to current associates to help us attract talent. Current associates communicate the culture of the hotel/company and why it is great to work for Sightline.
Chris Green, divisional president, Remington Hotels, Dallas: Our most effective strategy has been the pairing of multiple technologies to alleviate “noise” in the servicing process of our properties – whether that’s advanced ordering systems in food and beverage, AI communications to guests’ most frequent needs, or demand- and location-based labor allocations. By pairing multiple technologies, we have been able to meet and exceed our guests’ rising expectations in this difficult environment.
Albert Rothman, senior vice president of Food & Beverage, EOS Hospitality: We have strategically altered outlet availability to match labor availability. In resort destinations where labor has been acutely tight almost all hotels have had to alter days open and hours of operation to balance guest demand and manpower.
H: As inflation spirals, what has been your most effective procurement strategy change to control costs and get what you need to serve guests?
Barry Dawson: The majority of our U.K. hotels have benefited from our energy procurement program whereby we had hedged our gas and electricity well in advance of the market volatility. This has resulted in significant savings to our owners compared to the market rate for the first nine months of 2022.
We have implemented a new e-procurement solution across the U.K. portfolio which gives us enhanced control over the supply chain, ensuring that we are buying products from our nominated supplier at the lowest price available while at the same time automating the procure-to-pay process providing improved back-office efficiencies.
The investment into a new procurement program will give us enhanced control on expenditure at hotels and above the property level as well as improved business intelligence to help drive further efficiencies as we continue to leverage our global scale through a series of vendor and contract reviews across all areas of the business.
Our procurement teams have been engaging with our strategic supply partners to ensure the continuity of supply of goods despite the logistics challenges faced by suppliers across the industry. The procurement team in EMEA has continued to leverage our global scale with our strategic supply partners to fend off price increases and in some cases obtain price reductions, and also negotiate highly competitive multi-year price cap guarantees.
Kirk Pederson: In markets where we are more isolated such as Hawaii, we have focused on buying local, getting brand waivers for brand standard products and pushing for locally sourced (no shipping wait times or costs, less expensive and fresher). In Hawaii, Hyatt worked with Sightline to modify the brand’s standard breakfast offering, which allows us to buy local products instead of the Hyatt spec from the mainland.
Chris Green: Using data to refine our offerings at each key opportunity point ensures that our significant purchasing power is directed at the items our guests want most. Streamlined purchasing that still delivers a unique experience while eliminating waste or inventory hold costs has been necessary for our overall success.
Albert Rothman: While we haven’t altered our procurement strategy due to inflation, we have empowered our property teams to increase the value proposition of menu offerings so that our guests feel good about spending more at our restaurants/resorts. While some pass along increased costs, we generally feel that doing so without adding additional value detracts from our brands. When effective, we can both preserve our financial performance and enhance the guest experience.