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InstructorSavannah SamoszukShow bio
Savannah has over eight years of hotel management experience and holds a master's degree in leadership.
As with any industry, the hotel business has its share of issues that must be resolved for smoother operations. Explore three common operational issues and solutions in the hotel business: employee turnover, operating costs, and natural disasters.Updated: 04/26/2023
Table of Contents
- Operational Issues in Hotels
- Employee Turnover
- Operating Costs
- Natural Disasters
- Solutions
- Lesson Summary
Most people have stayed in a hotel at some point in their life. Some people love staying at hotels and look forward to it. What most travelers don't realize is the behind the scenes of the hotel business. The hotel industry is a comprised of businesses that provide accommodations to travelers as well as other amenities. Hotel businesses come with unique aspects that make it more challenging. Hotels are open 24/7 and provide an experience versus just a product or service like most businesses.
For example, most businesses you visit for an hour or less and receive the services they provide. In the hotel business, travelers can be at the hotel for twenty hours or more. These distinctive aspects come with challenges, including employee turnover, operating costs, and natural disasters. Let's take a look in more detail, and then look at some solutions for overcoming these challenges.
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The first most common operational issue in the hotel business is employee turnover. The around-the-clock hours means staff around the clock too. It is not your typical Monday through Friday office hours job. Therefore, finding long-term employees to work these hours can be difficult, not to mention ones that will work weekends and holidays.
The hotel business provides more than just a bed to sleep in, it's a service industry. The employees have to have the right personality to serve the type of customers that the hotel business attracts. Dealing with high volume customers can be trying, and may be a big reason hotels are known to have the highest employee turnover rate.
In addition to finding the right employees, the labor costs associated with employee turnover can have an impact on the hotel business. The money spent on advertising for the position, training for the position, uniforms, and other costs add up quickly. It's estimated that the turnover cost for an employee in the hotel business is 30 percent of their yearly salary. The high labor costs associated with employee turnover can impact operational issues.
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There are a few reasons that operating costs are becoming a problem for hotels. First, hotels are trying to keep up with the technology trends and each change adds expenses; for example, increasing Wi-Fi speeds and making it possible for travelers to check in on their phones. Having fast Wi-Fi networks adds costs. Hotels have to change out equipment and make sure their systems are compatible.
Have you been to a hotel recently and realized that they just renovated? Why bother? Well, some hotel companies require their hotels to renovate every two to four years to stay up to date. Renovating hotels can mean millions of dollars. All of these costs are increasing, while revenue may not, at least not at the same rate.
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Natural disasters can have a big detrimental impact on the hotel industry. It seems like every time you turn on the news there's a new natural disaster that has occurred. These natural disasters often times occur in tourism areas, like seasides or islands.
Dealing with a disaster like an earthquake or hurricane involves taking care of the travelers, and of course, the immense cleanup time. Hotels that are affected by natural disasters can take years to rebuild. The employees are, therefore, out of work, and the hotel, being closed, doesn't make any money. When they do reopen, they will basically have to start over when it comes to hiring.
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Additional unpredictable events that can be detrimental to the hotel industry include political unrest or disease outbreaks. Conflict in a particular area can prevent or limit safe travel and as a result, reduce tourism and hotel stays in that area.
Disease outbreaks like the COVID-19 global pandemic had nearly a catastrophic impact on the hotel business as travel was limited due to travel restrictions placed by many countries and U.S. states. Some of these hotel restrictions prevented hotel guests from visiting from certain countries, regions, or states. This was an ongoing situation well into 2022, and hotels are beginning to recover and receive pre-pandemic business levels. However, examples such as this are unpredictable and out of the control of the hotel industry, and most hotels had to adapt quickly to a changing environment in an effort to recover lost revenue.
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What can the hotel business do to try to overcome these issues? First, hotels can make the employment package attractive in order to reduce turnover. Disney is a great example of a company taking a not-so-glamorous industry and making it a sought after career choice. They make working for Disney an experience of a lifetime. Disney team members receive discounts on Disney items, such as park tickets as well as at many other stores, restaurants, and businesses. They also offer insurance benefits to all employees including part-time employees. If hotels were to create the same atmosphere, they would be able to attract more employees and keep them. The employees would not care about the long hours because they would be rewarded with different incentives and perks, as well as an environment that they enjoy working in.
When it comes to operating costs, the hotel business needs to be prepared. They should be aware of their brand standards when it comes to renovating and make sure it's in the budget for that year. In order to accurately budget for renovations and other operating costs, hotel businesses need to track and manage their costs. This will help with budgeting the following year if they have an idea of what was spent the previous year.
When it comes to technology, looking ahead can help. If a new trend is about to take place, the hotel might hold off on updating their technology. They should be prepared for these costs and do their research to make sure that they are not wasting money. Comparing the costs of technology can help to eliminate some of the unnecessary operating costs
Natural disasters are not always foreseeable, but there are a few things hotels can do to try to be prepared. Hotels should have emergency plans in place to deal with natural disasters that are known to their area. For example, if a hotel is in a hurricane area, they should have hurricane disaster plans. They need to have written plans that detail what to do before, during, and after a natural disaster occurs. The hotel business should have regular meetings and trainings to go over this information so that they're prepared as well as to update the information as needed. This can help relieve some of the operational issues at the time of the disaster.
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The hotel industry provides more than just a bed to travelers. The unique nature of the business can lead to operational issues. First, finding and keeping employees can be a challenge. Next, the hotel business faces increasing operational costs. Lastly, the hotel business has to be prepared for natural disasters, as it can be one of the biggest operational issues. The hotel business can make the industry more attractive for workers, prepare for operational costs, and create contingency plans for natural disasters.
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