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HR: Hospitality should Revise their HR Strategy
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Hospitality should Revise their HR Strategy
Upsides and the downsides of two HR strategies: Retention or reducing
酒店业应该重新考虑他们的人力资源管理政策——两种人力资源管理政策的利弊
By Alex S.

24008Does the leisure and tourism workforce need to be rescued? Considering the industry contributes 10.4% of global GDP, supporting one in ten jobs on the planet, we can affirm that the tourism industry is one of the principal job providers. Furthermore, business recovery is expected to be slow: the UNWTO has estimated a 20%–30% global decline in international tourist arrivals.
 

Major hotel chains are reducing their workforce. The business is performing 50% below normal levels in the European market and Asia Pacific, excluding China; Marriott hotel business is running almost 75% below normal levels.
 

All the way down to the hotel operation level, international brands are facing the critical issue of redundancy during this current COVID-19 crisis, regardless of each owner's specific cash flow situation.


新冠疫情导致全球服务业受到巨大冲击,而酒店业就是其中一种。旅游业贡献了全球GDP的10.4%,提供了地球上十分之一的就业机会。人们无法旅游,就不会出去住宿,这导致全球国际游客人数在2020年下降了20%-30%。因此,酒店业的确需要重新规划他们的人力资源管理政策。于是,酒店开始裁员。如果不裁员,保持已有员工和规模,会有什么优点和缺点?那要是缩小规模呢?本文将详细探讨以下两种策略的优缺点:保持,或缩小规模,同时,我们将为您提供示例和解读,力求让您理解到不同策略的意义。

BT 202008 HR 02What are your underlying drivers for retention or downsizing strategies?

This article will navigate through the upsides and the downsides of these two strategies: Retention or downsizing. We will provide you with examples and reflections that you may find useful to evaluate your best actions.


The underlying variables of the post-COVID-19 business plan are related to economic and governmental policies, and they are not consistent worldwide. Therefore, in this document, we are going to provide neither our opinion nor our recommendations. Nevertheless, our hotel asset management team can examine best practices and adapted approaches for each particular hotel.
 

STRATEGY ONE: TO AVOID COVID-19 LAYOFFS

BT 202008 HR 03PROS
Instilling Loyalty Among Your Staff

The corporate value of international hotel brands includes the relevant element of employee care. For example, Marriott states that they put people first and their value is "Take care of our associates and they will take care of our customers." Besides the written contract, the hotel chains have built psychological contracts with their employee that create unwritten expectations in the employment relationship.
 

As such, the handling of employee-related issues would determine if the psychological contract is perceived as being kept or breached. A breach can severely damage the motivation and performance of the staff.


In this hyper-connected world, information about mishandling labour-related issues could be quickly propagated and could damage the employer branding of the hotel chains. However, it could be an opportunity for hotel chains to show that they care for the well-being of their employees. For instance, Hilton has announced that it will team up with 30 leading companies to provide temporary jobs, in addition to the common practice of covering health benefits. Furthermore, Accor will allocate EUR 70 million in a fund to cover those employees without medical insurance or social security that present COVID-19 health issues, and to support front-line healthcare professionals and non-profit organizations. The fund has been raised from unpaid 2019 dividends.


The determination to maintain a positive attitude towards staff care and experience throughout the crisis is crucial for the recovery phase. There is no doubt that the different hotel brands will restart the competition for the talents in the industry once the market starts to recover. Good employer branding can be a competitive edge. Moreover, employees do not forget when you support them during tough periods.


CONS

Adding Substantial Pressure to Your Cash flow

When occupancy is plummeting to single digits, cash flow management becomes the lifeline of nearly all hotels. As labour costs, regardless of the hotel category, generally represent the largest component of operational expenses, multiple hotel chains, including Marriott, Hilton, Hyatt, Accor and MGM, have announced furlough schemes as a component of their COVID-19 responses in order to slash costs. Furthermore, these hotel chains have also declared a different degree of pay cuts for the remaining employees. For example, CEOs put a halt to cash dividends and reduced salaries to senior executive teams by 50%.


The cost-saving exercise should be conducted in a way that allows the hotel to recover quickly once the demand comes back. To survive, a salary cut policy is required at every level; in other words, we all need to tighten our belts until the ramp-up stage.
 

The significance is that if the termination of the employment contract is not an option, some businesses may be left with only one choice––a total shut down. When planning different financial scenarios, it is essential to manage the working capital for both the short term and the medium term. Owners need to start proactive discussions with their banks or other investors to increase their debt service.


On 28th March, the Wujiang Hotel Chain, an emerging hotel chain that was formed under the investment of C-trip last year, was the first hotel chain to collapse in this crisis. Xiaodong Ma, the CEO of this hotel chain, announced that they would terminate all employment contracts by 30th April. There is no doubt that the ban on unilateral termination of employment contracts in China during the lockdown greatly contributed to the downfall of this one-year-old hotel chain.


STRATEGY 2: TO EXECUTE COVID-19 LAYOFFS

BT 202008 HR 04PROS
Team optimisation and transformation


The drastic drop in business has forced many hotels into a minimum level of operation. At the same time, the crisis has made it easier for the operators to identify who are the core staff and who are the weaker team players. We all know that layoffs are necessary and that they open up an opportunity to review the organization to optimize productivity, reduce long term costs and often improve the overall operation/guest experience.


In addition, the Human Resources department should optimize the workforce according to several variables that will impact the labour cost structure. They should:


•adjust the business plan with several tentative re-opening dates.
•adapt the workforce to different ramp-up occupancy levels.
•reorganize the F&B team for the gradual opening of the various outlets (the same applies to other operating departments).
•ensure the well-being of employees: motivate, train (e.g., new hygiene procedures) and reassure the team after this challenging period.
 

CONS
Consideration of recruitment and re-training costs, and reputation


As China's economy is slowly shifting towards recovery mode, many labour-intensive companies, including hotels, have found themselves short of workforce. The reason for this labour shortage varies, but one of the reasons is that some employees were reluctant to return for fear of infection.


Since 2016, many industry analysts have been expressing concerns over a labour shortage at all levels, especially in the operational departments. This phenomenon is highly detrimental to the industry, as hotel operation requires a set of expertise in every department. The labour shortage can be statistically proven by the increasing labour cost percentage at hotels.


Also, other than payroll, there is a key factor that justifies the value of raising the labour costs: training. When hotel management executes a training plan for different levels of staff, the costs included in this are for training materials, supplies, certification programs and instructor fees. A thorough training will have a direct positive impact on productivity, customer satisfaction, and revenue growth through upselling, and enhance employee satisfaction, which leads to lower turnover.


It is logical to interpret similar situations that would occur in other sectors in the recovery phase; keeping the current staff may be a sound strategy for minimizing the cost of rehiring. As hotels in China rely on the domestic labour force, it can be estimated that the increase in hiring costs after the crisis can be even steeper for countries which are mainly relying on foreign labour.


Last but not least, owners and operators should consider that downsizing has a reputational risk, especially if the crisis is short-lived. Before making any decision, it is important to consider the following: What are the hotel’s core values? How do owners and operators want to be recognized in the market? How will this impact business in the recovery period?


The list of pros and cons of each strategy seems to be limitless, and we are listing only the general considerations. Therefore, please do not hesitate to share with us your thoughts and considerations on your staff retention and downsizing strategies.
 

We encourage you to start planning the labour cost structure, to adapt your staff level according to the operation’s immediate needs, and to consider the reputational risk.

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