Staffing, distribution and energy costs were just a few of the issues taxing hotels at this year’s Hospace event, held in London.
With Brexit overshadowing the next six months, the role of the brands was raised as the OTAs continued their perceived rise.
Hotels continued to rely on rely heavily on EU employees, was the message to delegates at the event from Professor Chris Cowls, CEO, Eproductive and Professor Andrew Lockwood, Forte Professor of Hospitality Management, School of Hospitality and Tourism Management, University of Surrey.
The pair revisited last year’s study, and reported that, in their sample of four hotel chains, EU employees accounted for nearly one third of hours worked in the year to June 2018.
The pair reported that in the first two years of the study, the decrease recorded in total hours worked by staff was mainly in UK employees. This year had seen a marked decrease (of nearly 7%) in
hours worked by EU staff for the first time. The percentage of hours worked by staff from the rest of the world was relatively stable, albeit at a much lower base.
As a percentage of total hours worked, UK had risen by 0.4% in June 2017 to June 2018. In the same period, EU hours were down by 6.7%.
This year’s report also analysed sources of staff by contract type and department, with results showing that EU staff worked more flexibly than staff from the UK and the rest of the world. Around 30% of contracts with EU staff were casual, with 69% on permanent contracts and the remainder fixed terms. Lockwood said: “If we want flexibility and the majority comes from EU labour, we’re going to have some problems, particularly in F&B and rooms.”
The study also noted that, over the three years hotel revenue had gone up, but the number of hours has decreased, so productivity had improved.
Lockwood said: “Over the past three years sales revenue has consistently increased, so the reduction in hours has meant an increased in productivity – but an increase in service? I don’t know.”
Staffing issues and the attendant costs were a feature of the day, with HVS chairman Russell Kett commenting that sourcing staff, increasing payroll costs and rising business rates continued to be of concern to the sector, despite some good news in the recent Budget.
Kett said: “The reduction in employment costs and business rates, particularly for smaller businesses and a reduction in the cost of apprenticeships for SMEs is welcome news, as is the freeze on excise duties on beer, cider and spirits. But the biggest issue by far, for all businesses, remains whether Theresa May will pull off a satisfactory Brexit deal, then be able to sell the deal to her party, to Westminster and to the country as a whole.”
Other costs perplexing the sector came from distribution, with Clive Hillier, consultant, Colliers Hotel Asset Management Division, commenting: “There has been a cost erosion because of the cost of acquisition, now we have energy cost inflation, food price inflation and wage cost erosion. So it is very worrying. It is also worrying from a moral point of view as so far revenue is not defined net of commission. The OTAs are a necessary partner and like all partners you hope that they will not dominate the relationship.”
Carmen Hui, commercial director, booking.com, responded: “We need to create an apples -to-apples comparison. We are sometimes told that our costs are too transparent, compared to others. Our costs may look high, but that’s one charge – we spend money on sales and marketing and we have 17,000 people doing customer service.
“The next generation merges their physical reality and digital reality – phigital. If you think about it that way, which channels will you partner with to help you distribute your rooms? Because that’s all we’re trying to do, help you distribute your rooms.”
As to whether the brands should hand over distribution entirely, Hillier concluded: “It’s inevitable that the brands have to fight back. They chose to get out of real estate and became brand companies. If they were happy to franchise and see the growth of white label operators and have given up management, then if they then give up selling rooms, then their existence becomes questionable. They have to fight back. But it’s a bit of a King Canute exercise.”
HA Perspective [by Katherine Doggrell]: Hotels could be forgiven for feeling that they were being swept away by King Canute’s rising tide, but the water has always been there, it just feels as though it’s more of a tsunami these days.
In part the fear that hotels are trying to tame a force of nature comes with the control which has been rescinded – to the brands, to the OTAs – in the hope of more customers or more growth or both. With so many layers in hotel operations, so much outsourcing can lead to the feeling that it was harder to take the power back when costs start rising seemingly out of control.
A good place to start, said Hui, in distribution at least, was looking at the ROI on each channel. Only then can you get a grip on what works and what needs to change. As someone once said of Gordon Ramsay: “Calm down man, it’s just a bit of dinner.”