Contact Us

Workforce Shortages Hamstring Hotel Recovery As Leisure Travel Booms

In a small market in Texas, a new hotel operator decided to throw in the towel after less than one year. Despite being packed with guests, a chunk of the hotel's rooms remained out of service due to a chronic staffing issue that finally became too big a burden to bear.

"The owner called me and said, 'I just can't keep it. My wife is going to divorce me if I have to clean another bed,'" said Skyler Cooper, first vice president of investments and senior director of Marcus & Millichap’s Hospitality Division. "I sold the same hotel in the same year, which is unheard of — I've never done that in my 11-year career."

Hilton Garden Inn Downtown Dallas had to rethink the way it offers services when leisure travel became its primary source of business.

More than two years after the onset of the pandemic, a resurgence of leisure travel has ushered the hotel industry into recovery mode. First-quarter revenue per available room reached $72.20, a 61% increase year-over-year, according to CBRE Hotels. Most of that growth is driven by increases in the average daily rate, which is up by about 3% compared to the previous all-time high, per new data from Marcus & Millichap. 

Operators are breathing a collective sigh of relief as profit margins begin to normalize. But looming over the renewed zeal for travel is a persistent lack of staff. Data from Hotel Effectiveness showed the industry had recovered about 76% of its pre-pandemic workforce as of March, yet experts say the pool of available labor has shrunk significantly, and hiring is more difficult than ever. 

Hotel Effectiveness Chief Revenue Officer Del Ross said the majority of those who left the industry have not returned, and political policies surrounding immigration have put yet another dent in the pipeline. Hoteliers are now competing for employees with companies like Walmart, Amazon and Doordash, which in many cases offer less demanding hours, higher wages and more robust benefit packages.

“The shortage is universal across industries, but it is particularly acute for hotels,” Ross said. “Our jobs are very often hard, and they’re not necessarily the most pleasant.” 

In the months following the return of leisure travel, hotels began to rake in revenue driven by rising ADRs. Many hotels had not yet resumed basic amenities and services, such as daily housekeeping and free breakfast, which kept costs low and profit margins wide, CBRE Hotels Research Director Robert Mandelbaum said.

That all changed in mid-2021, when rising occupancy rates caused major hotel brands to insist properties resume normal operations. At the same time, inflation caused operational costs to increase across the board, perhaps most acutely in the area of labor, which tends to make up almost half of a hotel’s expenses, Mandelbaum said.

“Hotels were in this awkward position of revenue increasing, yet we were not offering commensurate service levels, which made hotels more efficient,” he said. “That’s been reversed — hotels are still profitable, but the margins are starting to decline again.”

Leisure-driven recovery of hotels has led to the return of many guest-facing positions, but the sluggish comeback of corporate travel has left many banquet and other food-and-beverage roles unfilled. Occupancy at the Renaissance Hotel in Plano, a suburb north of Dallas, has returned to pre-pandemic levels, but the hotel has yet to resume lunch service. That decision is directly tied to a lack of staff, said Daniel Moon, vice president of Sam Moon Group, the hotel’s management group.

“We can’t get it to pencil,” he said. “It’s better to keep the restaurant closed at lunch than it is to open it.” 

To combat worker shortages, hotels are increasing pay. Hotel wage growth in the U.S. continues to outpace most industries, according to Hotel Effectiveness, with average hourly rates experiencing annualized growth of between 6% and 11% based on position.


Markets that had relatively low wages prior to the pandemic have seen the biggest jumps, Ross said. Payroll expenses at Moon’s four hotels — three of which are in DFW — are up 20%-30% since the onset of the pandemic, which is on par with the national average increase of 23% since Q1 2019, according to Hotel Effectiveness. 

A good chunk of that increase is tied to the cost of contract workers, which many hotels now rely on to bridge the labor gap. Nationwide data from CBRE shows the percentage of total salaries and wages in the rooms department paid to contract staff grew from 15.1% in 2019 to 21.5% in 2021.

Brooke Beilby, general manager at Hilton Garden Inn in Downtown Dallas, said her hotel has tapped into the contract labor pool for F&B service as well as for housekeeping. This takes a toll on managers forced to constantly retrain a rotating group of employees, but the premium charged by the staffing agency is also taxing on the hotel’s budget.

“[Contract labor] is the Achilles' heel of making your business profitable,” Biely said, noting that labor costs have put a 5% dent in profits at the Hilton Garden Inn. “It just kills profitability because it’s so expensive.”

While the majority of hotel workers are still hourly employees, data from Hotel Effectiveness shows contract labor now comprises a growing segment of the workforce in most major metros. In Dallas, for example, 15% of the hotel workforce was made up of contract labor pre-pandemic versus 26% in December. In Atlanta, the segment grew from 25% to 27% in the same time frame.

Worker shortages may also have something to do with the shrinking pipeline of new hotel projects, Mandelbaum said. Long-run averages for changes in hotel supply are typically around 2%, but CBRE is only forecasting a 1.1% change this year and a 1.4% change in 2023.

“Labor hurts in two ways,” he said. “Construction labor is either not available or very expensive, and [some operators] are concerned about opening a hotel because they may not be able to staff it.” 

Barring major disruptive events, Hotel Effectiveness predicts that 90% of hotel jobs in the U.S. should be restored by December. But hotels may never return to pre-pandemic staffing levels, which means operators must find ways to maximize efficiency.


In many cases, this means moving away from the rigid scheduling hotels used in the past. Operators used to staff days of the week based on traditional occupancy, but with so much volatility in the market, this practice no longer works, Cooper said.

“You’ve got to get really flexible and creative with your scheduling,” he said. 

Beilby said smarter scheduling has become critical to ensuring she has adequate coverage throughout the week. Low guest satisfaction scores mean patience on the part of brand management is wearing thin, and Beilby said she has no choice but to work with what she has.

“We have to stop doing things the way we’ve always done them,” she said. “The messaging was clear from the brand — you guys figure it out, because our brand reputation can’t take this anymore.”

Revenue increases driven by higher ADRs have allowed hotel operators to afford the rising cost of labor thus far. But Ross said that could change if leisure travel — which commands higher rates than business travel — begins to slow in the coming months.

“There’s so much leisure demand right now that hotels are able to charge record-high rates in many markets,” he said. “The risk is, if we see a drop in demand or just a normalization of demand, the ability to push rates is going to decline, but your costs are going to continue to go up.”

The industry is banking on the return of corporate travel to pick up the baton, but the looming threat of recession could further delay the resurgence of that segment, Cooper said.

“Are we scaling back what we were gearing to scale up?” he said. “We’re at a point where business travel was set to really see some gains — there’s a concern that now it kind of plateaus again.”

Opinions vary on when corporate travel might return in full. Some optimists predict the end of this year, while more pragmatic observers, like Ross, are eyeing 2024. In the meantime, the industry hopes a new segment of traveler — remote workers — will provide an additional income stream.

“We all believe corporate transient travel will eventually get back to normal levels,” he said. “The big bet is when.”