North American hotels are experiencing record revenue as the economy continues to grow, but there is a downside to all this economic growth. Wages in the hotel business are rising faster than rates, which can cut into a hotel’s margins.
The Bureau of Labor Statistics estimates that total compensation for U.S. hospitality employees has increased more than 3 percent a year between 2013 and 2016. And according to CBRE, labor-related costs are the largest operating expense for hotels, making up nearly 43 percent of operating costs. If hotel operators can’t avoid the higher cost of labor, they will have to find other ways to maintain existing profit margins, such as lowering operating costs. Here are two major ways hotels can do that.
Switching to modern, more cost-effective technology
Modern, cloud-based hotel technology is often more cost-effective than older, premise-based technology. Cloud-based hotel systems eliminate the need for costly, upfront hardware expenses and software licenses, as well as ongoing maintenance expenses related to equipment that could fail or become obsolete. With today’s modern cloud-based platforms, the need for a large IT department footprint is minimized since these systems are kept up to date by the technology vendor.
One of the most convenient benefits of a cloud-based system is the ability to manage a property from almost any place at any time. This allows an owner or general manager to manage rates or arrange housekeeping schedules from home. Plus, management and owners have access to hundreds of reporting features remotely.
With a cloud-based property management system (PMS), for example, hoteliers can connect to every piece of technology that they rely on to operate a hotel. For example, an energy management system that uses automated temperature controls can help lower heating and cooling costs while guests are not in their room, thus saving on energy costs. A modern PMS should allow hoteliers to manage key areas of technology that are revenue drivers for a property. Managing guest WiFi, in-room entertainment, and room service should all be easier and less labor intensive, which lowers costs and earns an operator more money.
Better, faster training for hotel employees
In a high-turnover environment such as a hotel, the more time an employee spends training, the less time he or she spends on revenue-producing duties. CBRE numbers show that managers in all property types are spending a significant sum on training their staff. In fact, according to 2016 numbers, extended-stay hotels spent $309.12 PAR on training employees. Limited-service service properties were not far behind at $214.48 PAR.
Less complicated technology can often lower hotel staff training time. Modern, cloud-based solutions typically offer a highly-intuitive and simple-to-use interface, allowing newly-hired, front-desk employees to rely less on general manager support for training. More and more, today’s hotel staff have grown up using iPad’s and having software with a modern user interface combined with online eLearning empowers new and existing employees to train themselves.
To extract value from rising labor costs, the training of hotel employees is critical. Proper training can lead to increased productivity, improved guest satisfaction, revenue growth through upselling, and enhanced employee satisfaction that leads to lower turnover. All this can improve both revenues and profits.
Yes, labor-related challenges threaten to weigh down the typical hotel’s bottom line. But through the use of new cloud-based technology and by partnering with the right partner, these new ways to control expenses reveal themselves even as wages continue to increase.
About the Author
Rui Pereira is a Senior Sales Engineer at SkyTouch Technology. Pereira is a hotel technology professional with more than 20 years of IT and operations leadership experience in the hospitality industry.