2020 was a very unkind year for hotels. Occupancy rates plunged to record-low levels as travelers opted to stay home rather than face COVID-19-related restrictions or, worse yet, increase their risk of contracting the virus itself. A glaring lack of business travel also hurt hotels, and so far, it looks like it may be quite some time before that picks up.
Leisure travel, on the other hand, is already booming. In fact, in a recent Deloitte survey, 40% of Americans said they intend to take at least one trip between Memorial Day and the end of September. And since private vacation rentals have been selling out in short order, travelers are, in the coming weeks, apt to turn to hotels for a roof over their heads.
There's just one problem. Hotels are facing a major labor shortage at a time when demand is finally up. And if they don't manage to resolve it soon, their recovery could be seriously hindered.
Workers aren't biting
Working in hospitality has long meant grappling with tough conditions and poor wages. And at this point, it looks like employees have had enough of it.
In a recent survey by Joblist, more than half of hospitality workers said they won't be going back to their old jobs, and more than one-third said they won't even consider returning to the hospitality industry as a whole. The reasons cited included wanting better pay and jobs that are less physically demanding.
Of course, that sentiment doesn't apply solely to hotels -- it encompasses restaurants, too. But the reality is that the hospitality industry is known for its lackluster wages, and when working in a hotel environment also means taking on the risk of coming into contact with countless guests, it becomes a harder sell.
Compounding the problem is that right now, unemployment benefits are still getting a $300 weekly boost in 24 states. That boost was approved as part of the American Rescue Plan, the $1.9 trillion relief package that also pumped $1,400 stimulus checks into people's bank accounts. While 26 states have pulled the plug on those extra benefits, citing local labor shortages as the reason, in the remaining states, they're not set to expire until early September.
Hotel workers who are jobless and getting that extra money may very well opt to stay unemployed through Labor Day, especially if returning to a job means taking a pay cut (which, to be clear, is the reality for lower-wage earners right now).
But because those boosted benefits aren't set to expire for almost another two months, hotels might seriously lose out on the chance to hire staff in time for the summertime crunch. And if hotels can't find employees, they can't welcome guests back at full capacity to fuel their recoveries.
Of course, a widespread labor shortage is bad news for hotel REIT (real estate investment trust) investors, many of whom spent the better part of 2020 worried about their portfolios.
At this point, hotels are getting creative in an effort to entice job applicants. Some are offering expanded health benefits, higher wages, free fitness equipment, and cash bonuses to sign on. But whether that's enough to lure workers back is yet to be determined, and coming off a terrible 2020, it stands to reason that hotel investors may, at this point, be very worried.