Losing the wage war

Minimum Wage

The minimum wage is starting to feel a lot more like maximum wage. Just as predicted in these pages back in January, the current minimum is rising in two key places. And the ripples of change in New York and California are sure to turn into a pay increase tsunami across the remainder of the country.

By 2022, all of California will see the minimum wage rise to $15, while New York City and some outlying portions will get there by 2020. Other areas in New York will rise to $12.50 with additional increases tied to inflation and what’s being dubbed as  “other economic indicators.” New York, for example, is currently at $9.00.

As I said back in that January column, you can’t fight society’s will to change something and higher wages at the lowest rung was always an inevitability, and will most likely force wage boosts for other folks above minimum wage too. So get set for that sea change, too.

What It Means For Hotels
It’s a fundamental change in the model that could potentially have widespread effects on the hotel business. And, no, it is not all bad news either, as smart hoteliers know there is a solution to everything.

“Fighting against minimum wage is nonproductive,” said Steve Joyce, president and CEO of Choice Hotels International last week during a general session panel held at AAHOA, where I was given the honor of hosting that session as moderator.

I’m reminded of this meme focusing on McDonald’s that says “$15 an hour? Meet your replacement,” with a photo of automated kiosks that take orders. Pretty prescient and something I expect to see more if in the hotel industry.

Joyce predicts technology being utilized more frequently as a means to satisfying customers in ways that do not need human interaction.

“All of us are focused on making technology less labor intense,” said Geoff Ballotti, president & CEO of Wyndham Hotel Group during that same session.

“Technology reduces costs with keyless entry, for example. I also see automated distribution systems so there is no need for revenue management at the property [level],” added Joyce, with one major caveat. “The experience in the hotel cannot change.”

At Best Western, president and CEO David Kong agrees. “Any time we can use automation to empower the guest it is a far better experience,” he said.

Makes sense. But the real trick will be reorienting a slimmer workforce focusing on guest experience rather than handling transaction such as check-ins.

"All of us want our colleagues to have a better standard of living," said Elie Maalouf, CEO, The Americas with IHG. "But it has to be sustainable. You can’t legislate prosperity."

That’s a much more interesting challenge and one I think the hotel industry is up to. The best way to handle this is to reevaluate critical guest touchpoints. Kong says that perhaps a specific breakfast attendant is a key person and should earn more for their efforts above the minimum wage.

Daniel G.M. Marre, a partner with Perkins Coie LLP, said that as soon as fast food raises the minimum wage above other segments such as hotels, it will be much harder hiring people. “They will go where the money is. Hotel operators will have to raise prices or find ways to save.”

Meanwhile Michael Harrell, CEO and Founder of the ownership group Vista Host, warned it will be harder in general to find workers because they could “make nearly as much on welfare as working at the hotel.”

Scary thought, but possible if not likely. He added, “I don’t see because we pay more we will see more people. The model we are familiar with will have to change. Maybe we will no longer have daily housekeeping. Something will have to give.”

How do you see handling this conundrum once it sweeps through your properties? Let me know at [email protected] or on Twitter and Instagram @TravelingGlenn.