The U.S. hospitality industry has been promised light at the end of the COVID-19 tunnel for so long now that some pessimism might be understandable. However, for all the false starts and limited re-openings across travel, restaurants, lodging, and entertainment venue spaces since April 2020, the good news is finally starting to show. For example, The U.S. hotel industry neared the 50 percent occupancy mark, rising to 49.7 percent in the week ending January 29, kicking off a year in which the business is starting from a higher baseline than 2021. Restaurants are still having a tough time getting sustainable momentum, but the National Restaurant Association projects the foodservice industry will reach $898 billion in sales this year, up from $799 billion in 2021 and surpassing pre-pandemic sales levels from 2019 of $864 billion.
Now if only the industry’s staffing problems could show the same trajectory. While the restaurant and foodservice industry added back 1.7M jobs during 2021 for an end-of-year total of 14.5M employees, many restaurants remain severely understaffed, and this will continue to constrain industry growth in 2022. There's an estimated 1.8 million openings. A recent Bureau of Labor Statistics report confirms the damage that has been done. It showed 10 percent of pre-pandemic leisure and hospitality jobs remain lost due to the impact of COVID-19. That adds up to 61 percent of overall jobs in the U.S. that have been lost on account of the pandemic.
The great resignation doesn't come close to describing the workforce decimation that has hit the hospitality business. Some estimates say the business has lost one-third of its employees due to business closings and attrition since March 2020. One million quit in November 2021 alone, according to Florida International University. Why? Let's start with money. Leisure and hospitality workers were earning an average of $501 a week – including tips – as of December 2021, making them the worst-paid of all sectors according to Bureau of Labor Statistics data. That’s less than half of the average for all private workers and translates into an annual income of under $27,000 – based on 52 weeks of pay.
There are additional factors unique to the industry that have contributed to the number of workers leaving the business. Phys.org commissioned a qualitative survey in January that indicated the emotional toll of the pandemic has been especially significant on hospitality employees. Workers are expected to work long, and sometimes sporadic, schedules in environments classified as high-risk for COVID-19 exposure. Now work in the enforcement expectation. You’d be hard-pressed to find a restaurant or hotel worker that has signed up for keeping indignant anti-maskers in check.
So what now? Hospitality industry executives from HR to the CEO seem to be re-focusing their hiring efforts in three areas: new hiring tactics, wages, and benefits.
New Hiring Tactics
The moves that hospitality companies have made to staff their businesses have become creative, to say the least. Ex-New Orleans Saints quarterback Drew Brees is now the spokesperson for NYDIG – a bitcoin company. As part of its go-to-market plan, they are offering bitcoin to workers of restaurant giant Landry's. Other companies, QSR firms especially, have turned to physical and virtual job fairs – some of them becoming a new phenomenon known as “mass hiring events.” Chipotle had a virtual job fair during the early part of 2021 that drew in 15,000 applicants and hired 13,000 people.
Before you say this is obvious, remember that low pay has been a hospitality sore spot for decades. The pandemic brought new issues to bear, not just pay scales. Time magazine, citing research from ADP and the Bureau of Labor Statistics, reported that pay among hospitality workers rose 4.5 percent for new hires and 6.7 percent for existing workers. This goes to show that within the hotel and the wider hospitality industries, employers have found success in hiring and retaining employees through higher wages. Omni Hotels & Resorts President Peter Strebel said at a recent conference his company has tried sign-on bonuses, retention bonuses, and more paid time off. In Ottawa, the company raised its 2019 wage of $14 an hour for housekeepers to $20.
The most frequently requested benefit by employees, and in many cases an extended benefit, are wellness benefits. The pandemic took a toll on the mental wellbeing of Americans nationwide. According to Johns Hopkins, research finds that about 1 in 4 adults suffers from a diagnosable mental disorder in a given year. As a result, mental health has been top of mind for many employees and employers. Typically not covered by medical insurance, hospitality companies are responding to the demand by providing telehealth solutions, counseling and reduced co-pays allowing employees to seek mental health care at their will. Childcare benefits are also priority on employees’ benefits wish list. The Kaiser Family Foundation reports that 70 percent of part-time workers were forced into daycare at some point during the pandemic. In the leisure and hospitality sector, 498,000 jobs were lost in December 2021, with women accounting for 56.6 percent of these losses, despite making up 53.1 percent of the industry’s workforce, according to National Women’s Law Center.
Part of the solution to the staffing problem could lie in a combination of benefits and wages. For example, on-demand pay has been one of these hybrid wage benefits that has proven to be successful with the hospitality sector worker. Early access to pay and the ability to gain more transparency about how that paycheck is spent is particularly attractive when taken in a demographic context. According to a December 2021 survey of hospitality workers published by the University of Central Florida, 40 percent of respondents were single. Approximately 43 percent of respondents had only a high school education, and 37 percent earned less than $25,000 per year. Another 24.8 percent earned between $25,000 and $35,000. Three out of four respondents were hourly employees. Giving those employees flexibility in how they get paid without having to take out high-interest loans or credit cards is an attractive proposition. A study from ADP showed 60 percent of employees would take a job if they had more flexibility to access their paycheck.
And after they’re hired, on-demand pay is an example of a benefit that can engage them and retain them. We have found that it increases retention by 50 percent, finding those numbers through clients such as a group of Wendy’s franchises. It found benefits from the increase in speed and volume of new hires, worker satisfaction, worker productivity, extra shifts and reduction in turnover as a result.
About the Author
Jeanniey Walden is the award-winning Chief Innovation and Marketing Officer of DailyPay, the industry-leading financial technology platform that's disrupting the financial system. Jeanniey has led global Marketing and Growth teams for Fortune 1000 companies, including Ogilvy, Barnes & Noble, and JCPenney. She is a highly sought-after TED speaker and frequently shares her keen business insight on nationally syndicated and major market television and radio shows. To learn more, connect with Jeanniey on LinkedIn and Twitter.