Blog: Focus on assets and labor during recovery

Labor costs alone were up 68.1 percent in April, data gathering firm HotStats said

Recovery from the COVID-19 pandemic could take a while, according to a blog from HotStats, meaning hotels should take steps to lower their costs to receive maximum benefits from slowly improving occupancy rates.

AS OCCUPANCY AND costs are gradually increasing for hotels, they should focus now on asset navigation and labor models, according to HotStats.

During the pandemic, asset managers had asked service providers to renegotiate contracts, and advise others to do the same, according to a HotStats blog post.

“If you never ask, you never know. Clients aren’t afraid to ask for lower rates or better services, so put yourself in their position, and if the answer is no, you’re where you were when you started,” the blog quoted Michael Doyle, managing director and executive vice president for hotel asset management company CHMWarnick. “Look at your contract terms with third-party providers, like cleaning services, and see where you can negotiate while taking a fair approach. We still have fairly suppressed demand so if you expect your property’s rebound to come in 2023, try backloading the agreement. Dangling contract extensions gets [suppliers] to open their eyes. That’s been very effective for us.”

In the U.S., labor costs per available room in April were $41.76, up 68.1 percent over the same time a year ago, when COVID-19 dug in. The blog quoted Michelle Russo, CEO and founder of asset manager and advisory firm hotelAVE, saying that properties should reconsider and make changes to the labor model.

“Our operational efficiency division built a dynamic staffing model, where occupancy defines staffing,” she said. “At every five-point increment [in occupancy], we review levels.”

According to Russo, costs can be easily cut in F&B staffing using technology.

“You can have guests order and pay with QR codes and other touchless tools, and then use runners, instead of servers, who take orders, bring food or even drop requested items, like ketchup,” she said. “Closer examination of labor forces hotels to consider whether they really need full-time managers in an area, such as a small restaurant for 20-30 guests, or if someone else on staff oversee it. I would rather be way more conservative about how I’m reintroducing cost, versus overdoing it.”

Doyle also suggests part-time labor.

“Part-timers can be more loyal and more qualified because you can run into teachers or other professionals looking for more working hours. It’s an important strategy long-term, given the cost of benefits,” he said.

Providing internships is another cost-saving device, and can be a source for future employees, if proper training is provided, he added.

In another recent report, HotStats said that profits for U.S. hotels continued to see some small improvements in March, one year after the beginning of the pandemic.