4 ms·

No, the issue is quite clear here, hotels dont want to pay a living wage for labor. How much clearer can it be?

andrewla 4y ago
This is assuming that hotels are making enough money to be able to afford to pay more. If margins are thin, they have to increase prices or reduce expenditures in order to get more money. A hotel is not a license to print money; it has to come from somewhere. This can resolve itself in many ways. The classical outcome is that some hotels go out of business, and the supply of hotel rooms drops to the point where the demand means that a more realistic price level can be reached. The potentially better outcome is that smaller business that rely on non-wage workers (like family-run businesses) can effectively employ "workers" at a much lower rate in the hopes of outlasting the contraction of the hotel room market. The worse outcome is that big corporations can allow certain markets to lose money, because they are drawing sufficient income from other markets, and wait out the first culling, which will disproportionately affect local hotels that both rely on wage workers and do not have a capital backstop. Or, the market can just recover organically due to circumstances completely out of the hotel's control -- the local labor market could contract meaning that workers are willing to take a lower salary, or the tourist market could expand meaning they can book more rooms, or business expenditures for hotel rooms could increase faster than price levels overall.
- ghaff 4y ago
  You also have the lever demonstrated in this article. You institute more automation, self-service, and cut back on services (like daily room cleanings) that a lot of customers don't really value.
  - andrewla 4y ago
    Yes, agreed, this method can work, but it isn't magic. I kind of lumped that in with "cost cutting", because in almost every case it results in a lower quality of service. Supply and demand operates on the margins; even though a lot of customers don't value the services, enough might to cut into your income, at least over time, and risk sacrificing some customer goodwill.
    - ghaff 4y ago
      Oh. I agree self-service, for example, can either be generally better than dealing with a person (e.g. getting cash at an ATM) or something of a mixed bag (self-service checkout). However, cutting back on room service seems like a general win especially if you'll service rooms on request. After all, there's such a thing as serviced apartments that explicitly only service once a week unless you pay for more.
ghaff 4y ago
Hotels would be happy to pay everyone more if customers would happily pay more for a room. The parent is providing an example of how their company categorically won't pay more.
- Scoundreller 4y ago
  Sounds like the words of someone that overpaid for a business/property. Or extracted too much capital when they could instead of paying down debt and got trapped under a rock when interest rates went up.
  - phpisthebest 4y ago
    The hotel or the businesses with the cap? Speaking for my org personally we have zero debt, and are cash positive largely because policies like a hotel expense cap that prevent sales people from draining to company coffers
    - Scoundreller 4y ago
      The hotel, or any other business really. If I buy a farm/restaurant/hotel/retailer for top dollar and complain about cost of wages making it unprofitable, the problem isn’t the wages. But you’re stuck with your acquisition price, so you’ll lobby for lower wages and make no mention of your sunk costs.

This is assuming that hotels are making enough money to be able to afford to pay more. If margins are thin, they have to increase prices or reduce expenditures in order to get more money. A hotel is not a license to print money; it has to come from somewhere. This can resolve itself in many ways. The classical outcome is that some hotels go out of business, and the supply of hotel rooms drops to the point where the demand means that a more realistic price level can be reached. The potentially better outcome is that smaller business that rely on non-wage workers (like family-run businesses) can effectively employ "workers" at a much lower rate in the hopes of outlasting the contraction of the hotel room market. The worse outcome is that big corporations can allow certain markets to lose money, because they are drawing sufficient income from other markets, and wait out the first culling, which will disproportionately affect local hotels that both rely on wage workers and do not have a capital backstop. Or, the market can just recover organically due to circumstances completely out of the hotel's control -- the local labor market could contract meaning that workers are willing to take a lower salary, or the tourist market could expand meaning they can book more rooms, or business expenditures for hotel rooms could increase faster than price levels overall.

ghaff 4y ago
You also have the lever demonstrated in this article. You institute more automation, self-service, and cut back on services (like daily room cleanings) that a lot of customers don't really value.
- andrewla 4y ago
  Yes, agreed, this method can work, but it isn't magic. I kind of lumped that in with "cost cutting", because in almost every case it results in a lower quality of service. Supply and demand operates on the margins; even though a lot of customers don't value the services, enough might to cut into your income, at least over time, and risk sacrificing some customer goodwill.
  - ghaff 4y ago
    Oh. I agree self-service, for example, can either be generally better than dealing with a person (e.g. getting cash at an ATM) or something of a mixed bag (self-service checkout). However, cutting back on room service seems like a general win especially if you'll service rooms on request. After all, there's such a thing as serviced apartments that explicitly only service once a week unless you pay for more.

ghaff 4y ago

Hotels would be happy to pay everyone more if customers would happily pay more for a room. The parent is providing an example of how their company categorically won't pay more.

Scoundreller 4y ago
Sounds like the words of someone that overpaid for a business/property. Or extracted too much capital when they could instead of paying down debt and got trapped under a rock when interest rates went up.
- phpisthebest 4y ago
  The hotel or the businesses with the cap? Speaking for my org personally we have zero debt, and are cash positive largely because policies like a hotel expense cap that prevent sales people from draining to company coffers
  - Scoundreller 4y ago
    The hotel, or any other business really. If I buy a farm/restaurant/hotel/retailer for top dollar and complain about cost of wages making it unprofitable, the problem isn’t the wages. But you’re stuck with your acquisition price, so you’ll lobby for lower wages and make no mention of your sunk costs.