Even before the COVID-19 pandemic, it was well known that it was particularly difficult to find a suitable and skilled workforce in the HORECA sector. In 2020, a crisis with unprecedented and large-scale closures hit an industry that was already struggling with massive labor shortage and high fluctuations. The previously thriving sector has collapsed in a much shorter period of time than anyone could have predicted.
As a result, tens of thousands of people were left without jobs in the short term, which interestingly led to an alarmingly high shortage of skilled labor in the mid-term. Our series of articles in the coming weeks will try to explore the causes of the current situation and try to provide some possible solutions and practical advice to alleviate the crisis.
Now we’re right there whether hotels, despite the existing demand from their customers, need to think twice about restarting their full service or, in some cases, their entire business? What is the reason that, despite the reopening of accommodation, it is still difficult to find enough people to provide the most basic services? What could be the reason for this level of labor shortage?
The hospitality industry is heavily influenced by economic cycles and external factors such as global events, natural disasters, and health crises like the COVID-19 pandemic. Fluctuations in demand for travel and leisure activities can directly impact the stability of hospitality jobs. During economic downturns or times of crisis, businesses in the hospitality sector may experience decreased revenue and have to implement cost-cutting measures, including reducing staff hours, implementing layoffs, or even closing down temporarily or permanently.
Many hospitality businesses experience fluctuations in demand throughout the year, often tied to seasonal trends or peak tourist seasons. For example, hotels in resort areas may see higher occupancy rates during the summer months but lower rates during the off-season. This seasonality can lead to periods of high demand for workers followed by periods of reduced hours or layoffs, creating uncertainty for employees in terms of their income and job security.
Problems that aggravated the industry even before the COVID-19 crisis
Underpaid and undervalued employees
Basic salaries have always been depressingly low, even as tourism - hence the labor situation in the hotel and catering industry - has flourished, been stable and has enjoyed almost the best years in the industry’s history. The phenomenon was caused by the fact that companies were either unable or simply unwilling to pay the wages demanded by employees. The low basic wages are therefore balanced out with so called ‘gray income’ as high rates of tips and commissions. However, this kind of revenue was certainly never part of the original written agreement and of course it was the first that disappeared in the post-season or when things were just getting worse.
Higher paid positions were also difficult to fill as they usually involve a lot of unpaid overtime and almost 24 hour availability. Taken together, all of these factors have begun to make the industry less attractive to young people, who were and still are needed to fill vacancies.
It also makes it difficult to solve the problem that Generation Z expectations are unrealistically far from what a hotel position can offer a beginner. Low salaries are coming with unpredictable working hours and often weekend - night shifts, which are much less attractive to a recent graduate. Therefore, there is currently not enough supply in the sector, which only exacerbates the labor shortage in hospitality.
Hotels and restaurants have adapted their recruitment and retention practices in several ways to attract and retain skilled workers amidst increasing competition from other industries. Some have raised wages and improved benefits packages to make positions more attractive, while others have implemented flexible scheduling options to accommodate employees' personal needs. Additionally, businesses have invested in employee training and development programs to enhance skills and career progression opportunities. Some have also implemented referral programs to incentivize current employees to refer qualified candidates, and have focused on creating positive work environments with a strong emphasis on employee well-being.
Demographic reasons
Less commonly known but there are also demographic reasons for labor shortages. According to research from a 2015 European Labor Force Survey, people over the age of 55 currently make up 16% of the total workforce in the European Union. In more developed Western European countries, the proportion of mature workers is already close to one-fifth of the total workforce. By comparison, for every ten Generation Z workers, there are twelve working people aged 65 or over in the EU.
Labour flow
Another important reason for vacancies is the natural flow of labor between companies, partly due to a lack of adequate compensation. It is important to note that the majority of job changes are flows between firms, while redundancies and new hires represent a negligible change in the firm’s headcount.
For example, if an employee gets a better job offer from another company, moves away, or changes his or her needs for some other reason (e.g. wants to work less overtime for family reasons), he or she resigns and changes jobs. All outgoing employees are vacancies. A common solution for companies to do this is to lure a new employee from another company, but this will only create another vacancy. As finding the right employee can take up to several months, a change of job can create a chain of vacancies in the labor market, apparently leading to labor shortages.
Economic volatility
The hospitality industry is heavily influenced by economic cycles and external factors such as global events, natural disasters, and health crises like the COVID-19 pandemic. Fluctuations in demand for travel and leisure activities can directly impact the stability of hospitality jobs. During economic downturns or times of crisis, businesses in the hospitality sector may experience decreased revenue and have to implement cost-cutting measures, including reducing staff hours, implementing layoffs, or even closing down temporarily or permanently.
Seasonal nature of the industry
Many hospitality businesses experience fluctuations in demand throughout the year, often tied to seasonal trends or peak tourist seasons. For example, hotels in resort areas may see higher occupancy rates during the summer months but lower rates during the off-season. This seasonality can lead to periods of high demand for workers followed by periods of reduced hours or layoffs, creating uncertainty for employees in terms of their income and job security.
Issues which have arisen post COVID-19:
Coexistence with population and health concerns
High fluctuation is not always the fault of the employer. Almost everyone who has worked in hospitality has already experienced some kind of conflict with a guest. The truth is that not everyone wants and can cope with this kind of job. In addition, they usually have to handle travellers from all over the world. This, of course, increases the chance of becoming infected with Covid-19 or any other disease.
Many workers no longer want to take that risk as they have already witnessed an unprecedented epidemic in their lifetime. For this reason, some skilled potential workers choose that the risks to personal and family health outweigh any benefits their advancement in the hospitality industry may offer, further increasing the shortage of skilled labor.
The grass is actually greener - elsewhere
For many, the period of unemployment provided an opportunity to rethink their priorities and discover new directions and opportunities. Moreover, this period also highlighted the larger-scale industrial concerns that were already present before the epidemic, including the lack of support inside and outside working hours, the sometimes abusive work environment, and the almost non-existent work-life balance.
Workers who left the sector during COVID-19 realized that “the grass is indeed a little greener on the other side” after finding a higher-paying job with fewer working hours in other industries. Since the last lockdown was ordered, most of them have managed to move elsewhere. In some countries, many employees may feel that they have not received enough help in trouble, have been fired and understandably do not want to relive it.
Uncertainty is never appealing
Some of the seasonal “returning workers” will return only for income supplement and will not give up their new full-time job because they fear that restaurants and hotels will have to close again. As hospitality remains a precarious area due to the epidemic, it is difficult to attract skilled professionals to hotels or even restaurants.
Many newly hired employees are trained by inexperienced staff who themselves know very little about the PMS (Property Management System) and internal policies. This does not give you confidence and often leads to even greater fluctuations.
Here, I would like to return to the problem of ‘supply’ and emphasize once again that the lack of stability and the vulnerability of the hospitality sector have made this career a less attractive possible future goal for young people. For this reason, a real and serious threat in this area is that the volume of supply may be even smaller in the future, which will further widen the gap between supply and demand.
Even those who return are not happy with their previous income and probably ask for a higher salary, which in turn increases the cost of the business and results in higher prices. This may be one of the reasons we came across higher-than-usual prices in our favorite places after the re-opening. In addition, higher priced services are often provided by inexperienced staff, which leads to lower customer satisfaction and poor feedback, so in some cases it increases the rate of fluctuation again.
In summary
The industry today faces a challenge that can no longer be ignored and immediate action needs to be taken. You could say that many of these problems can only be solved only at government level, but you, as a responsible decision maker in a hotel, can do a lot. In our next article, we are going to review these options and have a look at how innovative PMS can help you.