Industry Update
Opinion Article13 January 2022

It’s 2022, but the Same Problems Persist for Hotels

By Rayna Katz, Writer

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If you thought 2021 was topsy-turvy, wait until you see 2022. Though the calendar has changed, the world remains saddled with many of the same issues faced last year. And now, with the advent of the Omicron strain, which some experts predict will infect everyone, the scenario is becoming clearer by the day: things have a way to go before we are back to business as usual.

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This virus is not done yet and it is causing a migraine for the global hotel industry, from a demand perspective, labor, expenses and a host of other variables.

It’s all causing confusion and angst for some industry insiders, but other hotel prognosticators reading the tea leaves are coming away with a clearer sense of the next 12 months.

For them, the writing on the wall is positive, with perhaps some footnotes warning of the need for caution.

“One of the reasons people are stuck on forecasting is they’re focused on the next few weeks and that shows how Omicron will continue to impact performance,” said Andrea Grigg, Senior Managing Director, Head of Global Hotel Asset Management, JLL Hotels & Hospitality. “We’ve never seen 1,100 flights canceled because a meaningful percentage of the labor force was home with COVID and those unforeseen situations are making everyone nervous."

“But we expect the momentum of 2021, and the optimistic forward steps we saw at the end of the year, to continue. We saw business travel coming back and conventions on the calendar,” she said, adding that some meetings are being postponed now, but only for later in the year.

A trickling back of commercial demand is also complemented by a rate strategy that has been a departure from crises of the past. To wit, hoteliers have held rather than slash rates, a beneficial strategy within the rebound.

According to HotStats data, average daily rate in the U.S. in November 2021 on a nominal basis was $6 higher than at the same time in 2019. In Europe, ADR was a full €10 higher in November 2021 v. November 2019.

Laboring Through

Leisure travel has been the one segment that has undergirded the hotel industry as others cratered. According to Del Ross, Chief Revenue Officer for Hotel Effectiveness, leisure demand is expected to remain strong, which puts more pressure on an already tenuous labor front.

There will be a surge of leisure travel beginning in mid-March that will go strong through the summer, Ross said. “This above-normal leisure demand caught us by surprise in 2021, but no one should be surprised this year,” he said. “[Hotels] need to plan to staff up early, invest in training before the surge, and put themselves into a better position to sell their rooms.”

How can hotels do that? According to Ross, “Hotels need to begin the labor capacity planning process now to avoid the same kind of staffing crisis they experienced in 2021."

Data is the key. Using labor standards, such as hours and payroll per occupied room, hotels can predict their needs under any demand scenario. “With enough advanced planning and good decision support tools, hoteliers can make smart decisions about labor sources, including new hires, overtime and contract labor,” Ross said.

Across the globe, the labor crunch has forced hoteliers to rethink the most efficient way to operate. Housekeeping has been one area of attention; at the outset of the pandemic, daily room cleanings basically halted, a move more out of guest and employee safety than anything else. But as demand returns and, with it, expectations around what qualifies for a hotel stay, hoteliers will have to consider ways to keep labor costs down while simultaneously delivering a superior guest experience.

The labor shortage, however, has initiated a rise in wages across most industries, including hospitality. Consider the U.S., where housekeeping labor on a per-occupied basis is at a level higher than it was pre-pandemic, $14.21 in November 2021 compared to $14.04 in November 2019.

Wage pressure is expected to continue, but that means technology has to be part of labor planning, said W Chris Green, President & CEO of Chesapeake Hospitality. “We will have more technology because at many hotels, [there’s still] no one manning the grab-and-go, there’s no housekeeping, etc,” he said. “But the banks and equity people are going to want the same performance and there’s only one way to get it. The cost of goods isn’t going down and we can’t raise rates fast enough to compete with rising costs. So the only place we can reduce costs is labor.”

The next 12 months will be a litmus test, said Grigg. “2022 is going to be a pivotal year because it’ll determine if we’re really out of the COVID decline. After two years, we’re ready for a new conversation.”

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Rayna Katz

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