Being in a service industry, it will come as no surprise to learn that the payroll is the largest cost a hotel incurs. In some environments it could be as much as 30 per cent of revenue, whilst in others below 15 per cent may be the norm.
Hotels need staff in all areas – from the front door to the back door, from the porter to the security guard in the receiving bay. Some spend all their time with the guests, others may never see one, but each has an important role to play. Staff are there to ensure the smooth running of the hotel, both “on stage” and behind the scenes, and to meet the customers’ expectations. And it is the latter that determines the level to which a hotel is staffed-up.
At the top of the quality tree, in deluxe hotels, the customer’s expectation is that every need is catered for – they are met at the airport in a limousine (= driver), the car door is opened for them on arrival (= doorman), their luggage is taken from the car into the hotel (= porter), a refreshing towel is there waiting for them in the lobby (= customer relations), even, in some hotels, a member of staff just to press the lift button for you (= true luxury!) – you can see where this is going, at that level of quality the guest expects and pays for service, and it takes multiple staff members to deliver that.
At the other end of the scale, the budget hotel has reduced everything to a minimum, where they are basically selling “sleep”, to a customer who doesn’t expect much more, and is certainly not prepared to pay for it. Self-park, self-tote, increasingly even self-service check-in – at the extreme, our budget hotel customer may not even see a member of staff, nor need to.
But if the deluxe hotel customer pays more to get more service, and the budget hotel customer pays and receives less, why the range of cost to the hotel investor?
There are many reasons – natural differences in wages from one country to another, the level of unionisation, housing, transport and other benefits paid, legislation on working hours, the accrual of end-of-service payments – all these can make a difference. As can the practice of charging service charges to customers - in Nigeria, it is normal practice for hotels to charge 10 per cent on top of the quoted room rate as a service charge, and this is distributed to staff according to complicated points systems, or as a flat rate.
Accordingly, staff in the leading hotels enjoy higher pay than their counterparts in other sectors of the economy, particularly when the hotels are experiencing high occupancies and average room rates. A waiter with a basic monthly wage of around US$150 per month could see that figure doubled or tripled when the hotel is doing well.
Another factor can be the employment of expatriate staff. Large hotels may have 10 or more expatriates working there, at a cost per person ranging from around US$50,000 per year, to in excess of US$200,000. This cost includes the basic salary, but also flights home two or three times per year, housing, schooling, medical benefits, pension and so on.
International management companies will normally want to bring in expatriate staff to any hotel they manage in Africa in order to benefit from their international experience, and their knowledge of the brand’s operating systems and philosophies. Such skills are not always available locally, but a succession plan needs to be put in place (to comply with the law in some countries) so that the post can be indigenised over time.
Investors need to be aware of and monitor the employment costs associated with the operation, but must also understand that the hospitality business cannot function without well-trained and experienced staff and managers – unless they can invent the “automatic hotel” which, by the way, I will not be staying in!
W Hospitality Group, Lagos