The hospitality industry, aka the hospitality industry, has become one of the earliest and hardest hit sectors by the pandemic and its restrictions. Even established industry players stumbled when occupancy fell to 33% in FY21 from over 65% earlier, while the average daily rate (ADR) fell by 51%. A redeployment of the workforce and a renegotiation of remuneration followed.
The current year has seen the beginning of green shoots of falling case numbers, reduced travel restrictions and a renewed appetite for business and leisure travel. FY23 hotel occupancy rates are expected to return to FY20 levels and ADRs and revenue per available room (RevPAR) are rising again. Demands for real estate labor have increased and most wage cuts have been reversed, with wages in some cases exceeding pre-pandemic levels. However, the industry is undergoing tectonic shifts both from a consumer and service delivery perspective.
The workforce shortage is estimated at 300,000. To understand the talent challenges in the industry, particularly from the perspective of rewards, performance and potential, there are critical insights that need to be addressed to make industry talent accretive. Here is an overview:
U.S. against them
The profiles and skills at the company level are different from those at the property level, requiring different levels of remuneration. But there is a stark disparity between total cost to business (TCB) minus long-term incentives at the ownership and firm level. For example, for the same career level, a functional manager within the company will earn 183% more than their counterpart in a property. A property employee, who plays a crucial role in shaping the guest experience on the ground, receives a relatively small pay raise, even with career progression. However, in companies, there is more emphasis on the value of the incumbent rather than the value of the job, which leads to further dilution of internal parities at all career levels.
Progressive organizations ensure pay parity between homogeneous cohorts at one level and address this disparity across the organization through specialized pay governance frameworks and increased transparency. Also, it’s important to note that property ranks are treated at a lower level than corporate roles (for example, manager of a property will equate to assistant manager in a company). Ownership roles provide more benefits like extended stay at the property (lodging), free meals, discounts for family and friends, company-owned vehicle, etc. to ensure that wage disparity does not lead to unrest.
What’s in it for me?
Apart from the pay disparity between companies and properties, there is also a marked difference in the rate of compression for each field, i.e. the highest salary versus the lowest salary in a field. For properties, it ranges from 2.67 in IT to 9.79 for front office/rooms, while in business it ranges from 2.97 for admin to 29.70 for finance. An increase in responsibilities with a less than proportional increase in pay is likely to dampen motivation levels. Additionally, corporate professionals at higher levels also earn a higher percentage of short-term incentives, varying by up to five percentage points across corporate function heads relative to ownership.
Compression ratio allows an employee to estimate the expected lifestyle (earning potential proxy) as they age. The higher the compression ratio, the more willingness there could be to deliver and ride. It therefore becomes imperative for organizations (both Indian and multinational in the sector) to pivot their talent management practices on two principles – the principle of line of sight and employee preferences. New age chains (in the hospitality industry) are using this as a competitive advantage.
Age is just a number… but significant
In addition to the pay gaps between career levels and between companies and properties within the same career levels, come the pay disparities between those in the same career level, field and configuration, but only in depending on their age. For example, an administrative staff (AS), who is Gen Z, will earn 28.6% (corporate)/40.2% (real estate) less than the median salary for that grade, while a baby -boomer earns 31.7% (business)/12.1%. percent (property) above the median wage – for essentially similar work. Viewed slightly differently, this means that a Boomer at the AS level in a property earns the same as a Gen Z two career levels up, somewhat diluting the drive to move forward.
A plausible solution to this is to marry remuneration to competence. As we have matured in the relationship between compensation and performance, the next step is to develop the potential management system.
Location. Location. Location.
This is not only a recipe for success for properties, but also an excellent strategy from a human practices perspective to address the growing labor shortage. Talent acquisition and internal mobility present the same make vs buy alternative as any other industry. Considering the cost of living, acquiring new talent in cities such as Mumbai and NCR carries a significant premium in terms of compensation and benefits. A viable alternative for hotel chains would be to hire more in mid-range locations (such as Haryana, excluding NCR; West Bengal, eg Kolkata; or Telangana, eg Hyderabad), and then d Improve skills and redistribute at premium prices and in- demand slots.
This has the dual benefits of shaping the Tier 2 talent landscape in India and embedding your signature DNA throughout the workforce, from the day your talent is born. This practice is seen across all industries in varying proportions – Tier 2 Arbitrage.
saved by the bell
According to the bell curve, performance ratings at the property level are more demanding compared to those at the enterprise level. Sixty-seven percent of company employees received a “meets expectations” rating compared to 51% for properties. The lower concentration in the middle order is offset by higher proportions of real estate employees ranked in the top two and bottom two ratings, signaling that incumbents either overshot at a higher rate or undershot. performed at a higher rate. Both can be seen as consequences of the observations of the previous points regarding promotions and compensation.
The dissonance captured in this article between businesses and properties in the hospitality industry is powerful enough to create an exodus of employees. Having already undergone specialized training and worked in a customer-focused industry, hospitality employees are ideally suited for jobs and industries that require a customer-centric mindset and soft skills that are better honed, but offer better compensation and a better work-life balance. In a scenario of expected demand growth after the COVID-19 trough, industry players would not want to find themselves in a situation where an exodus of talent leads to a loss of valuable business. The need of the hour is to close that gap and make hospitality a hospitable career choice – for all kinds of talent.
The industry is heading for some tectonic shifts that will reset and fix a myriad of things, talent-wise. With surgical pay fixes, targeted career progression, and structured talent development, there are plenty of positive changes that can bring the industry back to glory. Additionally, Level 2 Arbitration, a strategy that has been cyclically embraced by the industry as a whole, can not only fill the growing talent gap, but also create a sense of consistency within the workforce. work. The important thing to remember here is that while compensation is king, it’s the customer-centric mindset that makes all the difference in this industry. What would bode well for hotel chains would be to hone the business spirit within their workforce from the outset. In addition, the ubiquity of technology, whose relevance continues to grow in industry and in applications, can help improve employee productivity, while optimizing costs. In an experience-driven economy, technologies such as IoT and AI provide endless opportunities to create and differentiate the overall customer experience.
Sources: Deloitte Awards and Performance Report 2021-22 – Indian Hospitality Forum; Deloitte research.
The author is director, Deloitte India.