Fallout From Marriott And Hilton’s Staggering Layoffs Isn't Easily Fixed
Major hotel companies are recognizing that trust issues lingering from pandemic furloughs and layoffs play a major part in the industry’s labor shortage crisis.
Two of the world’s largest hotel companies laid off tens of thousands of employees apiece during the pandemic, and the recovery won’t provide a rapid re-staffing solution.
Marriott dropped from roughly 174,000 employees at the end of 2019 to about 120,000 at the end of last year, according to the company’s most recent annual filing with the U.S. Securities and Exchange Commission. A vast majority of the employee count comes from the U.S. and those working at call centers, corporate offices, and certain hotels that Marriott manages.
Hilton’s headcount plummet was a little less severe but still went from 173,000 employees at the end of 2019 to 142,000 at the end of last year across the company’s owned, managed, and leased hotels as well as its corporate offices.
The drop in employment obviously wasn’t without motive: Hotels hit record-low vacancy rates amid government-ordered lockdowns. An uncertain outlook on when travel would revive drove companies to embark on waves of furloughs and layoffs and programs geared toward moving workers to other industries where skills were transferrable.
But both Marriott and Hilton indicated in their respective filings the degree of furloughs, reduced work schedules, and outright layoffs implemented during the pandemic play a part in their struggles to recruit workers back to hotels and even corporate offices during the accelerating travel recovery.
“The impact of COVID-19 on the hospitality industry, and actions that we and others in the hospitality industry took in response to COVID-19 … have adversely affected our ability to attract and retain associates,” Marriott’s filing states. “As lodging demand recovers from the lows seen in the early months of the pandemic, we have seen and continue to see industry-wide labor shortages causing challenges in hiring or re-hiring for certain positions, primarily in certain high-demand U.S. markets.”
Hilton similarly noted the labor shortage stems from actions taken during the pandemic — not stimulus checks or higher levels of federal unemployment benefits, which executives often pointed to as the source of their hiring ire until many of these benefits lapsed last year.
“Among the factors causing the labor shortages are the relative reduced appeal of working in the hospitality industry in a downturn, alternatives available in other industries and perceived health and safety concerns,” reads the Hilton filing.
The admission that the industry has a trust issue with the workers it so desperately needs to hire is a major narrative shift by some of the world’s largest hotel companies.
Former BWH Hotel Group CEO David Kong was the only major hotel executive over the last year to repeatedly say the industry’s labor shortage crisis was somewhat self-inflicted. It wasn’t until last fall when a tonal shift materialized from blaming the shortage on stimulus to realizing it was partially self-induced.
Hotels were already dealing with labor shortages well before the pandemic began, and the health crisis only exacerbated the industry’s pre-existing condition.
“The baggage we carry as a result of laying off so many people in the pandemic … That is a hard one to overcome,” Kong said at a conference last year. “People always feel like you’re going to abandon them in a crisis and there’s no safety net.”
There are some levers the industry pulled to solve its swelling labor crunch. Marriott, as of the start of February, received $170 million in Employee Retention Tax Credit refunds from the U.S. Treasury Department, according to the company’s S.E.C. filing.
The ERTC is a refundable tax credit equal to half the wages the employer pays its staff and was made available during the pandemic through federal stimulus. The program aimed to keep as many workers employed during the worst of the pandemic. Marriott passed $142 million of the refunds it received onto the property level at hotels it manages.
As for how many jobs specifically that may have saved, a Marriott spokesperson said, “…that is information I do not have, and we would probably not disclose if I did have it.”
Hilton’s leadership team worked during the pandemic to tackle its own labor shortage issues with efficiencies at the property level. This meant new initiatives like opt-in housekeeping, where rooms were only cleaned during a guest’s stay if specifically requested.
Wage inflation is another solution that publicly traded companies caution about in various filings but also recognize is ultimately necessary to compete for workers against other hotels and even outside industries. Amazon, which typically pays higher starting wages than a hotel, is widely seen as a major factor in workers leaving the hotel industry.
Pay increases at Hyatt averaged between 10 and 20 percent depending on the job and the city, the company’s CEO Mark Hoplamazian indicated on an earnings call last year. Marriott’s filing indicated wage increases occur “where needed to maintain competitiveness.”
But the company’s leadership team is also vocal on their push to better market hotels against direct competitors as well as outside industries as a place to work. Hotels provide better upward mobility than an Amazon warehouse, the thinking goes.
Leeny Oberg, Marriott’s chief financial officer, told Skift last month the number of job openings at the company are moving back to 2019 levels. The company’s own push for efficiencies helps offset wage inflation.
“I do think that we’re seeing things stabilize a bit on the hiring front, and we’ll obviously continue to watch inflation extremely carefully,” she said. “We put a host of productivity improvements in place over the last couple years — some that help us schedule our folks in a much more flexible manner, both for them and for the hotel. All of that will really help with mitigating the wage cost increases.”
As for how well the marketing efforts are working to win back workers, the industry gets its next test this Friday with the release of the latest U.S. jobs report.