Hotel room prices are skyrocketing due to labor shortages and declining service

  • Global hotel prices are up 184% from a year ago, according to Travel Daily Media.
  • This is due to a sudden increase in travel demand, a shortage of manpower and a shortage of rooms.
  • Hotels have introduced sign-up bonuses of up to $2,000 to overcome labor shortages.

When the Covid pandemic first hit in early 2020, more than 142 countries instituted full or partial border closures, with 91% of the world’s population restricted from traveling in March 2020, according to the Pew Research Center.

But now, as travel has resumed faster than expected following an accelerated rollout of vaccinations in high-income countries, hotels around the world cannot meet pent-up demand amid labor shortages. labor, causing room rates to skyrocket.

UK platform Buy Now Pay Later (BNPL) and partner travel agency Butter found that hotel room rates increased by 184% between October 2020 and October 2021, according to Travel Daily Media. And yet, demand for hotel stays in New York increased by 361%, driving prices up 28% across the city. Meanwhile, in Europe, Rome and Lisbon saw room rate increases of 23% and 20%, respectively.

While the price increases are partly due to the sudden increase in travel demand, the lack of supply of rooms and staff adds to the problem, experts told Insider.

Tourist enjoying a swim in a private pool

Most hotels cannot open at full capacity due to a labor shortage.

Martin Harvey/Getty Images

Lim Hui Ting, co-founder of ultra-luxury travel agency UniqLuxe, told Insider that many hotels still cannot open at full capacity, with many operating at 60% to 70% occupancy.

The reasons for the reduction in room capacity vary: while a few hotels have taken advantage of the travel downtime to renovate, the majority cannot fully reopen due to a labor shortage caused by the hotels that let staff stay afloat at the height of the pandemic, Lim added.

In March, the US Bureau of Labor Statistics reported that the leisure and hospitality industry was facing a quit rate of 5.7%. The high resignation rate is mainly due to the burnout of service staff, many of whom have had to double shifts to cover colleagues who have been laid off, according to The Economist.

Still, the price spike hasn’t fazed deep-pocketed consumers.

According to Lim, his customers have taken the new hotel rates very well, noting that people have been postponing trips for the past two years and are eager to be pampered. “Even if the entry-level rooms are sold out, they are accepting to book the higher categories,” Lim said.

However, as hotels enjoy a boost in revenue after a two-year lull, staffing shortages could ultimately be a double-edged sword, as

net value

travelers always expect five-star service. Leaving them unsatisfied on their vacation will in turn lead them to become detractors.

This is what happened to Wendy Chong, 55, when she stayed at the 5-star Amara Sanctuary Resort Singapore. Chong told Channel News Asia that her room – for which she paid SG$2,000 ($1,440) for a three-night stay – was not ready until two hours after the stipulated check-in time. Despite the delay, the concierge did not apologize, prompting Chong to leave a bad review on Facebook.

A 40-year-old hotelier who works for a luxury group and asked to remain anonymous to protect his job told Insider: “Service levels are expected to drop with so many guests and not enough staff to serve them. But if customers are dissatisfied, they won’t book anymore. Hotels will be forced to lower prices in the long run.”

A labor shortage leads to department changes and exorbitant hiring bonuses

Cleaning in a hotel

Marriott’s global director told CNBC “more and more [Marriott’s] the guests actually requested that [housekeeping doesn’t] come to their room. »

Nastasic/Getty Images

Many hotels have also changed the amount of services they offer guests during their stays, albeit in very different ways. At Hilton hotels in the United States, housekeeping will only be performed on the fifth day of stay – unless guests opt-in for additional housekeeping services – to compensate for the lack of housekeeping staff. Hotels are defending their stance to scrap daily housekeeping by saying guests aren’t comfortable with people entering their rooms after checking in after the pandemic. Ray Bennett, global director of Marriott, told CNBC that “more and more [Marriott’s] the guests actually requested that [housekeeping doesn’t] come to their room. »

Meanwhile, hotels in Europe and Asia-Pacific have made housekeeping staff adhere to a stricter post-Covid cleaning regime, which requires increased disinfection of rooms.

To overcome the labor shortage, hotels introduced sign-up bonuses of up to $2,000 for housekeeping and kitchen positions to attract staff. The bonuses are paid over several months to ensure the retention of employees.

But such one-off incentives may not be attractive enough to solve the long-term labor shortage. According to CBRE Hotels’ March 2022 State of the Union Report for American Hotels, frontline hotel employees earn 12.8% less than retail employees. Hotels should start reassessing their salaries if they want to attract and retain employees in an industry that no longer seems stable after the pandemic, per Skift.

But as hotels struggle to hire and retain a workforce in a post-pandemic environment, those who can afford apparently have no qualms spending more money on top-notch service.

“While I empathize with housekeepers’ struggles, I’d rather pay top dollar to ensure I find a hotel with better service,” Beatrice, a 29-year-old financier who preferred not to, told Insider. disclose his last name.

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