How to manage Labour cost in your Hotel?

Labour cost is generally the biggest cost component in your hotel. So how do you manage labour cost in your hotel? It is essential to manage it properly to ensure that this cost is kept under check. In India, due to the variety of reasons, temporary staffing solutions don’t seem to work out in the hotel industry unless it is in few areas like security, public area housekeeping and kitchen stewarding.

If you manage the staff scheduling well, you will have the following benefit:

• Provide sufficient team members to handle the guest volume.
• Ensure guest satisfaction by making sure their needs are met.
• Ensure revenue maximization since the employees in areas like restaurant and front office can sell better.

You play a key role in making sure that your revenue is met at the same time employee cost are under control.

Understanding where you stand

In order to begin, take a look at your PnL statement and understand what percentage of your revenue goes to the labour cost.

The total cost of labour

Industry benchmark varies from 17 % – 25 % of total revenue for the hotels. If you are a restaurant or just starting your hotel, this cost may be higher. While you take a look at the overall hotel number, also take a look at every department to understand the relation to the overall picture.

Cost per employee:

While this is an average make sure that you understand the number so that you know the impact of adding or removing one position in your hotel. To get this number, take the total salaries and wages cost and then divide it by the number of employees in the hotel. Take all the employees, including the ones on contract so that you get the full picture. Often due to accounting practices, we don’t include people on contract in this calculation and that can change the statistics.

Revenue per employee:

Take the total sales and divide that by the total employees in your hotel. That is the contribution to the company that each employee makes.

Once you understand these 3 components, you can now plan strategies to maintain your labour cost.

3 strategies to manage Labour cost

Forecast accurately:

If you are in a business, you should be able to say when you will be busy. If you cant do that, the first step is to learn to forecast.

Forecasting is the science of estimating for the future period.

That can be a weekly forecast or a 20-year forecast. However, for the period of labour cost, you should at a minimum do a monthly forecast of your business volumes.

When do you need people so that you effectively meet demand by the guest? In many city hotels, rooms are busy during the week, however, the restaurant is busy during the weekend. It resorts, it may be busy during weekend and holidays.

Make a schedule or work roaster:

Certain functions in the hotel require people irrespective of occupancy. Like the Front desk or Engineering, but if the business is low, you don’t need to staff it 24 hrs. Or you can use a trained person from some other department.

Whatever your strategy, make a duty roaster by listing all the positions that need to be covered in the shift.

As an example in the morning shift of a restaurant, the department will need Section holders and Runners, Hostess, Busboys, someone to take care of the buffet etc. Depending on your business volumes, you may have to add people to manage the inflow of guest.

Once you understand the maximum people you need, schedule the people in so that they can work efficiently.

Consider the request for Days off, vacation etc. while making the schedule so that you know if you need to bring in additional staff.

Understand the business:

Ask the following question to gain clarity:

• What time should the employees start and end their shift? Are they doing break shift? Are you paying overtime?
• Is it better to overstaff or understaff a particular meal shift? How does that affect revenue or guest experience that you strive to deliver?
• What alternative do you have? Temp staff or trainees from institute?

Once you have clarity on all these questions, you can be confident in the fact that your labour cost will be in control since you have looked at all scenarios that help you save on labour cost and maximize guest experience