The hospitality industry is experiencing a boom in demand yet faces a significant hurdle: a hiring crisis and a nationwide workforce shortage for key workers, including housekeepers, front desk staff, hotel managers, bartenders, servers, and banqueting staff.
This challenge, highlighted in a recent report by the American Hotel & Lodging Association (AHLA), impacts facilities and establishments of all sizes and locations.
In this article, we’ll deep dive into hospitality industry turnover and explore potential solutions to help employers navigate this challenging environment.
Current Employee Turnover Rates in the Hospitality Industry
New research recently found that 41% of frontline workers have changed jobs in the past year—this statistic rises to more than half for hospitality workers in bars, restaurants, and hotels.
Average Employee Turnover Rate in the Hospitality Industry
The average turnover rate in the hospitality sector is currently 4.9%, compared to the average of 3.2% across all industries.
Furthermore, a July 2024 report from Schmidt & Clark found that the leisure and hospitality industries recorded the highest employee exit rates in early 2024. Nearly 3 million people left their leisure and hospitality jobs between January and April this year, 204% above the national average quit rate. (Trade, transportation, and utilities came second, 180% higher than the national average.)
Root Causes of High Employee Turnover in Hospitality
The hospitality industry’s worker shortage can be attributed to multiple factors. Covid 19 played a significant role, with many employees leaving the industry for more stable, better paying, or remote opportunities. Meanwhile, the competition for talent has intensified, making it even harder for companies in the hospitality sector to attract and retain qualified workers.
Let’s examine more critical factors that may cause hospitality workers to leave their jobs.
Toxic Work Environments
Hospitality is renowned as a high-pressure work setting that can lead to elevated employee stress levels. Worse still, hospitality workers can be subjected to bullying and sexual harassment. Consider these statistics:
- Sexual harassment is ranked among the most prevalent issues by both hospitality students and hospitality employees.
- Between 54% and 81% of women report experiencing some level of sexual harassment at work. Workers in hospitality and food services account for 14% of harassment charges.
- Women who work for tips as their primary source of income are twice as likely to experience sexual harassment, including from customers.
Most employees can only sustain working in a toxic, stressful work environment for so long before seeking employment elsewhere.
Lack of Career Advancement Opportunities
The hospitality industry offers excellent opportunities for young people looking to join the workforce. These jobs often help them to pay their bills while they’re in school or college. However, many hospitality jobs provide minimal training and skills development, and rarely provide a clear pathway for career advancement.
While some workers get promoted into management roles, most hospitality workers must be content with a career path that only moves laterally. Employees looking for career advancement opportunities are forced to seek it in other fields that provide a better pathway for growth.
Low Wages
As of July 2024, the average hourly wage for hospitality workers in non-supervisory roles is just $19.61. This doesn’t provide a living wage in many parts of the country.
It’s easy to understand why workers on such low wages would turn to other industries that can provide them a better salary.
Long Hours and Unpredictable Schedules
Employee burnout has been one of the most significant factors driving the mass exodus of workers from the hospitality industry.
Most hospitality jobs require employees to work long shifts during non-traditional hours, including on nights, weekends, and holidays. This creates a situation where employees often work vastly different schedules from their family and friends, limiting their time to connect with their loved ones and enjoy many of the activities that others participate in.
Robot-Phobia
Using more robots in the hospitality industry to close labor gaps can backfire and cause more human workers to quit. A recent study involving more than 620 lodging and food service employees found that “robot-phobia”—the fear that robots and technology will take human jobs—increased employees’ job insecurity and stress, leading to greater intentions to quit. (The survey defined “robots” to include a range of robotic and automation technologies like human-like robot servers, automated robotic arms, and self-service kiosks and tabletop devices.)
The impact is more pronounced among workers who have direct experience working with robotic technology, but also affects managers and frontline workers.
Strategies to Reduce Employee Turnover in Hospitality
Despite these challenges, there are some critical steps hospitality employers can take to reduce and manage their turnover rates. Here are a few key strategies:
Provide Competitive Wages and Benefits
One way to better attract and retain top talent is to offer competitive salaries, attractive benefit packages (including health insurance, paid time off (PTO), and retirement plans), and flexible scheduling options.
Offer Free Financial Wellness Programs
Financial wellness programs provide employees with information, coaching, and support to better equip them to manage their day-to-day financial challenges and concerns. Such programs might include online, telephone, and even in-person counseling and workshops.
Target Diverse Candidate Groups
To tap into a wider talent pool, look for workers from diverse backgrounds, for example:
- Students.
- People with disabilities.
- Retirees.
- Gig workers.
- Veterans.
Invest in Technology
New technologies can streamline and make hospitality operations more efficient. For example, implementing solutions for guest self-check-in, housekeeping automation, and online booking management can free up valuable time for your existing team, allowing them to focus on improving guests’ experience and building relationships.
Digital apps for employees can also make internal communications more inclusive and seamless. These tools need to be mobile-first and aligned to support people’s working processes, such as technologies that allow them to choose and swap shifts in real time.
Robots and automation can be great ways to augment service in the hospitality industry, especially when it comes to performing more tedious tasks people typically don’t like doing, such as washing dishes and handling hotel laundry. However, the danger comes if your robotic additions cause more human workers to quit.
Employers should communicate the benefits and the limitations of this technology, placing a particular emphasis on the role their human workers play. So, if you’re introducing a new technology, don’t just focus on how good or efficient it will be. Focus on how people and technology can work together.
Introduce On-Demand Pay
On-demand pay, also known as Earned Wage Access (EWA), is an optional financial tool that lets employees access their wages in real-time. It’s a departure from the traditional biweekly or monthly payroll model.
EWA is particularly valued by lower-income or hourly workers who often find themselves living paycheck to paycheck. It’s an effective way to allow your employees timely and dignified access to cash if they find themselves financially stretched in between paydays.
EWA programs aren’t loans. Employees have already performed the work for which they’re being paid. EWA simply gives employees the option of collecting some of the wages they’ve earned ahead of their regular payday. They can transfer these funds into their bank account or onto their card in real-time.
Hone Your Recruitment Processes and Procedures
While it’s impossible to prevent employee turnover altogether, here are some methods you can use to fill open roles left by departing workers faster:
- Regularly review and update the job descriptions in your job postings.
- Use an Applicant Tracking System (ATS) to create a seamless application process on your career page.
- Ensure your application is mobile-friendly.
- Incorporate pre-screening questions into the process.
- Offer site tours, meet-and-greets, and company-branded giveaways to prospective hires.
- Ensure everyone in the recruiting process supports your communications strategy.
- Streamline your offer management process to make offers contingent on background checks and drug screenings.
A Hospitality Retention Success Story
Charton Management has been in the Quick Service Restaurant (QSR) business for more than 40 years. They have faced many challenges along the way, but have always managed to stay ahead of the curve with innovative business strategies.
One of the biggest challenges facing fast-food and fast-casual restaurants is extraordinarily high employee turnover. Most restaurants can expect a turnover of around 80%, but the QSR business experiences up to 130%, turning over more than its entire workforce every year. Retaining employees and attracting new ones is not only essential in keeping the Charton business going, it often takes up a huge amount of their management’s time.
“Staffing has been an issue in the QSR industry lately, and everybody’s competing for the same employee. Early access to pay may be the deciding factor of where an applicant decides to work,” says Ord Delaney, Director of Operations, Charton Management, Inc.
Offering employees financial wellness benefits from Payactiv ensures Charton Management can keep their current employees longer than their competition and attract new applicants.
Read the full case study.
Onward and Upward
A strong team is the backbone of any successful organization in the hospitality industry. By prioritizing your workforce and following the guidance shared in this article, you can build a competitive advantage and ensure your company thrives in the coming years.
Why not consider Payactiv’s popular EWA service and complementary financial wellness program as part of your employee benefits package? Click here to schedule a demo or get in touch to speak to one of our expert team today.
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