Hospitality staff shortage calls for creativity

The labour market in the hospitality industry has been under pressure for some time. Although the cooling of the economy may provide some temporary relief, the tightness is structural. More than ever, hospitality entrepreneurs need to be creative in recruiting and retaining employees. Investing in life-phase-conscious personnel policy, clear sustainability ambitions and employee welfare offers opportunities.

With the outbreak of the corona pandemic at the beginning of 2020, the number of vacancies in the hospitality industry fell sharply. This was because the hospitality industry was forced to close, which meant that no new staff were needed and existing staff left for other jobs. In early 2021, the hospitality industry was slowly allowed to reopen, leading to an explosion in the vacancy rate - the number of vacancies per 1,000 jobs.

Meanwhile, the vacancy rate has fallen slightly, but it is still well above the total business sector and above the level before the corona pandemic. Incidentally, the vacancy rate is always slightly higher compared to the overall business sector. This is due to high staff turnover in the sector. Almost 40 per cent of staff are students or scholars; they often have flexible contracts and leave the sector relatively quickly, for example after completing their studies.

Number of vactures per 1,000 jobs at the end of the quarter, in the hospitality industry and in the total Dutch economy

While consumers are buying fewer products in the retail sector, they are still spending heavily in the hospitality industry. Turnover in restaurants and cafés increased by 21 and 18 per cent respectively between January and June 2023 compared to a year earlier, according to Statistics Netherlands (CBS). This is partly due to a strong return of tourists, but also to a shift from products to services in Dutch consumers' spending patterns.

Besides the huge pent-up demand after the pandemic, the search for staff was also initially boosted by the growth in the number of hospitality businesses, including in delivery (see our publication: attracting young people to hospitality jobs difficult). However, the number of catering establishments fell by more than 400 between January and October this year, partly due to a relatively high number of closures. This can be expected to reduce the demand for staff.

Until the second quarter of this year, based on data from the Chamber of Commerce (CoC), the number of business closures is still above the level before the corona pandemic. Bankruptcies, which are part of the closures, also still show high levels in the more currently available figures. The situation in the hospitality industry with sharply increased costs for energy, rent, procurement and increased interest rates topped by having to repay government support is causing more businesses to face acute problems. In particular, the number of restaurant bankruptcies has shown an upward trend since March last year.

For now, competition for staff with other sectors is fierce. Even the closure of large-scale corona testing centres and the phasing out of source and contact testing has not necessarily led to a return of staff to the hospitality industry. For instance, more than a third of hospitality entrepreneurs indicate that the fact that potential workers are choosing to work more outside the sector is the biggest obstacle to getting good staff; this is true for 37 per cent of restaurants and pubs and for 35 per cent of hoteliers, according to CBS's Business Cycle Survey. Hospitality entrepreneurs also indicate as a major obstacle that potential employees have demands that entrepreneurs cannot always meet.

Another possible cause is the decline in the number of students in hospitality courses. For instance, the number of mbo students declined from over 25,000 in 2018 to less than 22,000 in 2022. Fortunately, in 2022, the intake of mbo hospitality students increased somewhat again. The number of hbo students remained fairly stable, but the intake did show a decline in 2021 and 2022; probably due to poorer prospects during these corona years. Students following a hospitality course also tend to flow out to other sectors.

As a result of staff shortages, labour costs are rising. This is an issue for 26 per cent of restaurant and pub entrepreneurs and even over 38 per cent of hoteliers. They also see a higher workload among existing staff as a major consequence of the labour shortage. This plays out mainly among restaurants and cafés (35 per cent) and to a slightly lesser extent among hotels (25 per cent).

Staff shortages can be filled if staff come over from other sectors. So far, however, the number of industries where bankruptcies are on the rise is still limited and, moreover, other industries are far from doing work comparable to the hospitality industry. But as the economy cools down a bit and more bankruptcies follow, we expect some easing in the labour market.

Despite this possible relief, it is worth remembering that the labour shortage is mainly structural in nature. This is caused by an ageing population. The share of over-65s in the total population is expected to grow from 20 per cent in 2023 to 25 per cent in 2030. Betting on retention and thus automatically increasing the average age of the workforce is therefore advisable. Interesting here is the idea of life-phase-aware personnel management, which takes into account the different life stages of employees. For instance, an employee with a young family may have a greater need to work part-time than an employee whose children have just left home.

Hospitality entrepreneurs still do not know how to attract young people after the pandemic. Many young people left during the pandemic and do not seem to have returned. What is striking here is that the positive trend of the group 'older than 30' from before corona continues after the pandemic.

The growth in unemployment among the youth (the 15-25 age group) could help reduce the deficit. In this group, unemployment has steadily increased from 7.5 per cent in December 2022 to 8.8 per cent in September 2023. Should hospitality entrepreneurs manage to enthuse these young people to come and work for their restaurant or café, it could provide some relief from the staff shortage.

More and more young people - besides receiving a good salary and having solid working conditions - want to work at companies that share their values and make a positive contribution to overall well-being. Paul Polman, former CEO of Unilever, speaks of conscious quitting in this case. To win over young people, it is important for a company to set clear sustainability ambitions and actually act on them.

So competition for staff in business is still quite high. However, we do expect the pressure to ease as the economy cools somewhat and more bankruptcies follow. To attract vacant staff and retain existing ones, hospitality entrepreneurs would do well to focus on increasing work-life balance, health and personal development, according to the latest edition of ABN AMRO's Sectoral Wellbeing Monitor. This monitor measures employee well-being by sector using dozens of variables in seven categories: personal development, equal opportunities, health, safety, economy, climate and work-life balance.

Although scores on the indicators personal development and work-life balance have increased, these two categories continue to score well below the industry average in the hospitality industry. The variables determining the degree of health all score worse in the hospitality industry than in the past two years. Continued attention on these three themes is recommended.

In our 2021 publication on employee welfare, we found that the hospitality industry would do well to give employees more autonomy in making decisions and taking leave. In particular, the freedom to take leave when desired is considered very important by employees. The Welfare Monitor shows that by 2022, the freedom to take leave in the hospitality industry has increased as well as the freedom in determining working hours. The latter is now even at the average of the total business sector.

For instance, the early 2022 hospitality collective agreement stipulates that employees are entitled to at least two connected rest days in a fortnight, rosters must be known in advance, and time off as compensation for working on public holidays must be offered in the short term.

There is still much to be gained in the area of employee health; the six indicators from the Wellbeing Monitor all show deterioration. After improving during the corona pandemic, a growing number of hospitality workers now report morning fatigue (21 per cent) and feeling empty at work (31 per cent). Being emotionally exhausted is another complaint that has now risen from 11 per cent of workers in 2020 to over 19 per cent in 2022. One explanation for all this could be that hospitality workers are experiencing more work pressure due to the large staff shortages.

Overall, satisfaction with work and working conditions is increasing. However, pay growth in the hospitality industry does lag behind the rest of the business sector, according to earlier research by ABN AMRO. The new CBA is expected to result in a substantial wage increase, although this is currently still being negotiated. At the same time, the entire wage structure will have to be scrutinised. Unlike the retail sector, where wage groups have risen along with the increased minimum wage this year, this is not the case in the hospitality industry. As a result, the bottom five tiers of the wage structure in the hospitality industry are now at minimum wage level, and that amounts to about half of all positions.

One variable of personal development is participation in training. Although there are many examples of hospitality companies betting on training, the hospitality sector scores lowest here within the overall business sector. McDonalds is a positive example of a company that has established a comprehensive programme focusing on the development of the person behind the employee.

The company believes that training should match what fascinates its employees, allowing them to grow both professionally and personally. McDonalds does this by means of its own Academy and by cooperating with external training courses such as SVO Vakopleiding Food, among others. Because not all employees have the same background, it also looks at ways to create equal opportunities for them. For example, by helping employees become financially resilient or by offering language training.

When determining training courses, it is important to know what the employee's desired career path is. It is therefore important that employers pay attention to and listen to the wants and needs of each individual employee.