Unemployment benefits ending, but hotels' labor woes may continue

At the Americas Lodging Investment Summit (ALIS) in Los Angeles at the end of July, a number of hotel executives expressed the belief that once the federal government’s weekly boost to unemployment checks expires in September, their current labor woes would ease. 

But a growing body of research indicates the issue is far more complex, and hoteliers should not anticipate a throng of applicants after Labor Day.

The Federal Pandemic Unemployment Compensation program currently adds $300 per week to existing unemployment benefits, and additional programs both extend the length of time an individual can receive payments and expand benefits to laborers not typically eligible for aid, such as gig workers. All of the programs are slated to end Sept. 6.

Meanwhile, hoteliers across the country are struggling to fill open positions. Peter Strebel, president of Omni Hotels and Resorts, said labor is the “hardest thing we’re dealing with.”

“For the first time in my life, we’re not able to sell out the hotels because we don’t have enough staff,” Strebel said. “We can’t open the restaurant because we don’t have enough bartenders, we don’t have enough servers. That’s kind of scary.”

If hotels were bringing back labor at the same rate that guests were returning, they would be down roughly 100,000 jobs from 2019 figures, STR analyst Kelsey Fenerty said during the Hotel Data Conference on Aug. 13. Instead, hotels are down 400,000 jobs.

“That’s a massive gap,” she said.

The federal government’s unemployment largesse, several people at ALIS argued, disincentivizes people from returning to the workforce.

“We’ve talked about unemployment generosity, and I think once that kind of federal kick sunsets in September, we’re going to see some people coming back into the labor force,” said David Eisen, HotStats director of hotel intelligence and customer solutions.

Homi Vazifdar, managing director at Canyon Equity, an investor in hotels, was less equivocal.

“What’s happened during Covid is there are all kinds of entitlements … and depending on what state you are in, it just goes on and on and on, so there’s no real incentive to come back to work,” he said. “So we got tough. We said if you don’t want to come back to work now, don’t bother coming back when the entitlements have worn off. And we got a whole lot of them back.”

Yet, new research casts doubt on whether that is likely to be the norm. In a July report, University of Massachusetts Amherst economist Arindrajit Dube examined data from 22 states that terminated the federal benefits in June. States that cut benefits did not see a significant boost in job applicants or hiring, even though ending the programs did lead to an increase in people reporting financial hardship. 

“Certainly there was no immediate boost to employment during the two to three weeks following the expiration of the pandemic benefits,” Dube stated.

And Gusto, a payroll-processing company, reported that job growth among small businesses in the service sector in states that axed weekly benefits was roughly similar to those that kept them. 

At ALIS, some executives pushed back on the belief that unemployment aid was behind employee shortages. “As an industry, we have to look at our pay scale and benefits package, which is not competitive,” Best Western Hotels and Resorts CEO David Kong said. “A lot of people point to the unemployment benefits [as a cause of the labor crisis], and that’s not really true, because we’re still running close to 6% unemployment, yet we can’t find people in many, many different industries.”

Kong cited competition for workers from companies like Amazon and the “reputational challenge” hoteliers face after laying off so many people in 2020.

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The reality, Cornell hospitality professor David Sherwyn said, likely lies somewhere in between.

“It’s a Republican talking point to say it’s all the stepped-up unemployment, and it’s a Democratic talking point that it’s not the stepped-up unemployment insurance at all,” he said. “It’s certainly adding to the lack of available employees, but there are other issues.”

Sherwyn added child care, immigration and fear of the pandemic as additional factors. Immigration was largely suspended in 2020, and, while the Biden administration restarted programs hoteliers rely upon for seasonal help such as H-2B visas, the labor pool continues to be constrained by travel restrictions, processing backlogs and consular delays.

In Hawaii, total visitors in June were 17% below the June 2019 figures, but according to the American Hotel and Lodging Association, the number of hotel jobs in the Aloha State was still 29% below 2019 levels.

University of Hawaii economist Jim Mak said that several factors are contributing to the hotel labor issues and suggested the pandemic gave both employers and employees an opportunity to assess their options.

Hotels are learning what services they can do without, such as daily room cleaning, and what can be done with new technology. Employees, on the other hand, are being discerning, as businesses compete for labor with incentives and wage bumps.

“The market power has shifted to the workers,” he said. “Everyone is trying to find the best deal for themselves, the workers and the hoteliers. The workers want more benefits and job security, while the hotels see the opportunity to shift to more technology and reduce labor and costs.” 

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