The Biden government has proposed a new minimum wage of $ 15 an hour as part of its COVID-19 relief program.
Just as the hotel industry has felt the worst economic impact of the pandemic, hoteliers may have to bear an oversized stake in this new pay raise. A study of more than 5,000 hotels in the US found that 64% of hotel workers in the country currently earn less than $ 15 an hour. In some states this proportion reaches almost 90% of the workforce.
The annual cost of $ 20 billion is not evenly distributed across the country and has a greater impact on secondary and low density markets than on population centers. Hotels in these markets are typically owned by small family businesses.
Taylor Beauchamp, Hotel Effectiveness Chief Product Officer, said, “The workforce now accounts for more than 80% of the total cost of hotel ownership. The proposed wage increase combined with reduced [average daily rate]will pose major challenges for smaller companies. Our analysis does not take into account the impact of wage compression on positions with higher wages, so the real effect could be even greater. “
So far, less than half of all pre-COVID-19 hospitality jobs have been restored, according to Hotel Effectiveness labor management data, which samples more than 4,000 hotels in the same business and excludes hotels that closed during the period analyzed.
Higher wages can slow the pace of job restoration, put millions of hotel workers out of work, and put more pressure on current employees. As the occupancy rate increases, so do guests’ expectations. Brands are starting to reintroduce brand standards suspended during the pandemic, and fewer employees will make it difficult for hoteliers to meet the demands of their customers and franchisors.
Del Ross is the chief revenue officer for hotel effectiveness.
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