The Real Impact on Guests When Hotels Cut Services |

Given the high cost of labor and to combat labor shortages, the smartest decision you can make might be to outsource your hotel voice channel.

By John Smallwood, CEO of Travel Outlook – 5.10.2022

Over the past decade, labor costs have risen sharply. Post-pandemic, labor shortages are plaguing businesses around the world, and the hospitality industry is no exception. Demand for labor has never been higher, but universal labor shortages persist, causing problems for hotels, despite a surge in travel.

Two years removed from the pandemic; travel is back in full force. Hotels around the world are preparing for what is sure to be a record summer of travel, but they are doing so with one hand tied behind their backs, thanks to recent labor shortages.

With wages rising and the supply of workers dwindling, hotels are struggling to stay afloat in these unprecedented times. A hotel’s operating costs have a direct impact on an establishment’s bottom line. So it’s no surprise that labor shortages and rising costs are taking their toll. For the real impact of rising labor costs on hotels and their guests, keep reading below.

How operating costs affect the bottom line

The operating cost of a hotel directly impacts the profitability of an establishment. Unnecessary spending eats up profit margins and threatens the financial health and long-term viability of a property. Hotels must find a balance between overspending and sacrificing vital services that will negatively impact the guest experience.

While it is true that you get what you pay for in terms of labor and service, given the new high cost of labor, hotels need to find new ways to cut costs without affect customer experience.

Revenue Management

The first step to controlling hotel operating costs is to practice proper revenue management. Rather than managing revenue with outdated models based on fixed price systems, adopt a model that more accurately reflects today’s dynamic market.

At its core, revenue management “is the strategic use of performance data, local market data, competitor pricing, and other applied analytics to help forecast consumer demand to optimize pricing and distribution in such a way as to maximize revenues and profits”. In simpler terms, it’s about selling the right room, to the right customer, at the right time, at the right price, through the right distribution channel, at the best cost.

Dynamic pricing allows hotels to manage revenue in today’s fast-paced economy. It uses flexible pricing for a product or service based on market demand. In a dynamic pricing model, companies charge more as demand increases.

Labor shortage and new high price of labor

According to the data provided on labor cost trends in 2020, labor and related costs have been reduced by more than 50% to compensate for the nearly 60% drop in total revenue . The previous year, total labor costs accounted for just over 50% of hotel spend through the GOP. This meant that reducing operating costs was the obvious solution to minimizing hotel profit losses.

Now that there is light at the end of the tunnel, hotels are looking to regain full operating capacity. But the new high cost of labor is hampering their ability to get back to normal.

The impact on customers

Kimberly Berry, Director of Digital Business Development at Travel Outlook

As travel continues to increase, hotels will be challenged to maintain the necessary staff following the reductions made in 2020. In addition to a sharp increase in occupancy, hotels will soon reopen some of the services and amenities phased out in 2020 to compete with and justify room rate increases.

“If hotels don’t find a solution to their staff shortages, they will struggle to provide adequate service to guests who still expect high levels of customer service when they return from their trip,” said Kimberly Berry, director of development digital sales rep at Travel Perspectives. “That means customers are likely to experience long phone wait times, front desk queues and stretched concierge service.”

Given the high cost of labor and to combat labor shortages, the smartest decision you can make might be to outsource your hotel voice channel to a call center. premium hotel calling that uses the next generation of hospitality-specific technologies so your staff can focus on your valuable customers.

Only the industry-leading hotel call center can respond to hiring and staffing challenges immediately. This includes answering up to 60% of calls for your front desk, answering FAQs specific to your property, understanding multiple languages, routing calls, sending follow-up text messages, and much more. And do it cheaply.

Are you ready for the next generation of voice bots designed specifically for the hospitality industry? Find out how an AI-powered virtual hotel call center agent can improve your hotel’s voice channel while saving on fixed labor costs.

A veteran of the hospitality industry, John has owned, developed and managed hotels for many years. After earning a BBA from New Mexico State University, he began his career at AT&T, gaining invaluable knowledge and experience during the early years of the data revolution. His technology and hospitality experience merged in his development of Travel Outlook, the world-class hospitality contact center. More recently, it has branched out with the creation of ExpressRez, the first contact center for the B&B industry, and with the creation of Visit Bella™, The Virtual Hotel Agent™, the first voice-powered robot by AI for the hospitality industry. .

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