Agility – There is no denying that (for the hospitality industry) 2020 has been as close to Armageddon as it gets. Who would have predicted, a hotel could be flying high with 85% occupancy in February, only to be faced with closure and 0% occupancy in April? Whether you are a multi-national hotel chain or a small guest house you are in for a rough ride – for sure. The pandemic makes no distinction. It destroys equally.
Due to its high fixed costs, the hospitality industry traditionally struggles to adapt to a rapid and unexpected reduction in income. If a crisis hits, our sector is not agile enough to speedily acclimatise to the pending challenges. It is like expecting a chicken to become an eagle with a moment’s notice – impossible.
This lack of agility has caused: temporary layoffs, retrenchments and pay cuts of managerial and operational staff. To make quick savings, companies have looked to their highest fixed cost – the payroll. Human capital outlays in hotels are typically between 25% and 30% of revenue. Most likely, the largest overall expenditure. Suddenly, the ‘most important asset’ becomes a lead weight around the organisational neck, leaving a business with little option but to make salary savings to survive.
“We recognise, that in a time of crisis, and this is a crisis, there is an opportunity for real growth and change” John Bliss
Fundamentally, hotels and hospitality businesses need to utilise their human capital with far greater efficiency levels. Paradigms, mindsets, and traditions need to change and adapt quickly to an uncertain environment. This pandemic will not be our last disruptor, and it would be naive not to respond with new initiatives to mitigate the impact.
A flatter structure
Can a hotel operate with less management? Hotels have a very traditional hierarchy that often duplicates responsibility. Are there too many ‘inspectors’ overseeing people, who should be taking accountability for their own departments?
Variable pay for management
Management salaries are a high fixed cost. Perhaps hotels should look at encouraging managers to be more entrepreneurial: a lower fixed salary and a high incentive, based on performance.
Can a mundane task be replaced by tech.? Could robots be considered for functions like porterage, reservations, check-ins, room service and repetitive kitchen tasks.
Use of an independent procurement company, tasked with negotiating the best available prices on all consumables and operating equipment, for a fixed monthly fee. Offering services like menu costing and last-minute deliveries to reduce stock holdings. This can do away with ‘chefs preferred suppliers’ (not always the most cost effective).
Flexible, Multi-skilled teams
Contract with a professional hospitality staffing provider that will: manage, staff, and fully operate a department such as kitchen, events and conferencing. A company that can react quickly to a fluid and often last-minute environment. Staff should be paid for hours worked only (a service that can be easily costed for each event). A better alternative to a less productive, permanent staffing structure.
Cross functional utilisation
Multi-skilled, hospitality staff that can work in different areas of a hotel in one single shift. Team members that can be assigned, for instance: to breakfast service – to housekeeping – to room service in one shift, at the applicable salary rate for each job category, ensuring full productivity and less wasted time. Agility is essential.
A multi-skilled, highly functional, and flexible workforce that can be ‘switched on and off’ when needed. This coupled with: flexible management, human resources and IR services, payroll and training – can be a huge saving on fixed salary costs.
Specialist staffing companies are also able to give their flexible workforce, full time equivalent work with multiple clients. This often results in more motivated and experienced employees available as and when you need them.
This is an ideal time to start afresh. Those companies (around the world) that had instituted a flexible approach – by making labour costs a variable instead of a fixed cost – have fared better during the present crisis.
Right now (a hotel or any hospitality establishment) can look critically at their human capital expenses and efficiencies. Transform to a leaner, fitter and more cost-effective model. You never know, in future, we may be thanking this crisis for bringing about new agility and much needed change to outdated traditional thinking. It could be a winning formula.