COSTA MESA, Calif. — During the recent California Lodging Investment Conference, held at The Westin South Coast Plaza, a panel of industry insiders examined the ongoing labor challenges facing hoteliers and discussed how employers can leverage policy to their benefit.
The labor problem, moderator Steve Van, president of Prism Hotels & Resorts, said, will not be solved with financial engineering: “It's going to require a shift, as you'll hear from our panelists today, in emotional intelligence.”
Retention and Promotion
Geoff Graf, VP of business development at Hogan Hospitality Group, said his company has become a little bit more lenient when it comes to employees needing flexibility in scheduling—or in other issues. Actions that might have been met with termination in the past are now more forgivable, he said. "We're more likely to counsel that you work with that employee to get through it.”
Graf encouraged hoteliers to talk with their workers, particularly about career goals. “How often do you go out and sit down with a housekeeper, a houseman or somebody at the front desk and ask them, ‘So how are you doing and what are your goals?’ And then [ask], ‘how can we help you achieve that?’” This kind of communication, he added, will accomplish two things. “It's going to make the employee feel as if … they're valued in the company and also that they might have a future in the industry to move up. Providing that stability has really been a big help as we move through the process.” Ultimately, he said, “do what you can to keep your employees with you.”
Kyle Allison, GM at Reading Hospitality Management and managing partner at HospitalityMD, agreed, noting that turnover is expensive for hoteliers, as is paying overtime for the workers who have to take on extra shifts when a property is understaffed. Worse, employee burnout can cost hoteliers money in unexpected ways, such as exhausted front desk agents rejecting a last-minute group that needs emergency lodging for the night. “Tired people turn down business when you're not looking,” he said. “If we're being self aware, we need to examine the model that we've set forward for how we operate, because we're having a conversation about labor and at the same time having a conversation about cutting labor costs. Which one are we doing?” Ultimately, he said, “the only way to solve the labor shortage is by solving the labor model. Think about the impact of one more person [on your team] and how that might make people's lives easier.”
The new generation of hoteliers does not want to spend 20 years to become a GM, said Bijal Patel, CEO and principal partner at Coast Redwood Hospitality and member of the board of the California Hotel & Lodging Association. “They want quicker promotions. They want titles, they want progression, they want touch points with their managers and supervisors.” As such, the normal schedule of progress within the field needs to accelerate, he added.
Scott Arnim, a consultant with A.J. Gallagher & Co., recalled polling employees of a hotel to ask what they wanted from their employers: “Work-life balance was No. 1. Pay was No. 2. Benefits was [No.] 3,” he said. When employers and their HR teams have a good sense of what their workers want, he added, word will get out to the broader workforce. “When you care about them, they're gonna tell their friends and then that will help you recruit and retain people.”
Policy and Governance
Kirsten Smiley, SVP and Southern California region director at HVS, noted the recent Hotel Worker Protection Ordinance issued last year that limits housekeepers to cleaning 3,500 square feet of floor space in hotels with 60 or more guestrooms each day or paying twice the housekeeper’s salary. With this policy in place, Smiley said that hoteliers expect salary and wages to increase anywhere between 50 to 100 percent. “That is a huge number,” she said. “If you were running at an expense ratio of 30 percent of your revenue in 2022, you will probably be seeing this number go up to 33 or 35 percent. And that is a huge increase if your revenue stayed flat.” This, she added, could potentially translate into a 10 to 15 percent decline in value if the hotelier’s revenues stay flat. Van said that Prism has several owners who have lost “tens of millions of dollars” because of the ordinance.
Travis Gemoets, a partner with Jeffer Mangels Butler & Mitchell, highlighted a recent decision from the United States Court of Appeals for the Ninth Circuit that overturned California’s ban on mandated arbitration agreements for employees, which he called a “huge” benefit for employers. “One of the greatest scourges in the litigation world facing our industry—and really employers in all industries—are class actions for unpaid overtime, for missed meals and rest periods and then, of course, for violations of the dreaded Private Attorney General's Act known as PAGA.” The ruling now allows employers to “force” their workers into binding arbitration agreements rather than letting them start class action lawsuits. “Obviously, do it in a nice way,” he added.
While major union victories at corporations like Starbucks and Amazon have made headlines recently, Gemoets noted that the overall unionized private sector workforce still is hovering in the 7 percent range. “Whereas in our industry, it's much, much, higher,” he said. Collective bargaining agreements all contain grievance and arbitration provisions, Gemoets said, and these can be tailored during negotiations to supplant any employee’s right to bring a class action claim against their employer.
Patel, meanwhile, pointed out that unions are often successful because they are engaged with their local communities. “They're engaged with their mayors," he said. "They're engaged with their city council. We have to get better about engaging on the local level.”