REPORT FROM AUSTRALIA—Several organizations in Australia are calling out restrictive government practices that are making it difficult for hoteliers to fill jobs with the skilled and semi-skilled labor.
Many hoteliers also feel the country’s visa system does not support hospitality recruitment.
Australia’s hotel industry plays a significant role in the country’s overall economy, providing employment opportunities for more than 270,000 people. And according to a 2009 PricewaterhouseCoopers study (the most recent data available) commissioned by the Australian Hotels Association, hotels spent more than $70 million each year on staff training and development, while spending on wages and salaries amounted to 21.9% of total hotel expenses.
The criticism against the country’s labor practices, led by such organizations as the AHA, comes after news of a higher-than-expected 1.3% overall economic growth during the first part of 2012, allaying fears that the economy might be following the global downward trend.
Figures from Tourism Australia showed 2.5 million visitor arrivals to Australia during the five months to May 2012, an increase of 3.1% relative to the same period the previous year.
Increased demand has exacerbated the problem in many regions where there is not enough labor to go around.
In March of this year, the government of Western Australia improved its Regional Sponsored Migration Scheme—which allows employers in regional, remote or low population growth areas of Australia to sponsor employees who are foreign nationals for a permanent visa to work in Australia—making it easier for hotels to meet demand by lifting some red tape and testing.
“The changes made by the Western Australia state government in March have removed some of the red tape that holds back hospitality businesses meeting their demands for workers in the current labor market,” said Bradley Woods, CEO and executive director of the AHA for Western Australia.
AHA for Western Australia
“However, it will take time for this to have the desired effect in the hospitality workforce in Western Australia. Currently, the hospitality industry relies on the backpacker market and long stay temporary visas, known as 457 visas, for service staff … For those regions of Western Australia where semi-skilled positions cannot be filled with local staff, improvements in immigration requirements are needed.”
Simon McGrath, Accor’s COO for the Pacific, said removing the red tape is “crucial.” Accor has 205 hotels and 27,517 rooms in Australia.
He said the extension of the migration scheme will have a major impact in high demand markets such as Perth, where Accor has six hotels.
“We have been faced with the double disadvantage of Perth people leaving for remote mining areas and people from elsewhere thinking that it is too expensive to live in Perth. So access in Perth to a flow of skilled talent will definitely benefit our hotels, though it will take some time to see the full benefits,” McGrath said.
Marcus Tait, regional director of HR, Australasia for InterContinental Hotels Group, agreed that tight restrictions can be problematic.
“Working holiday visas only allow for six months with one employer,” he said. “A change by the federal government allowing up to 12 months would be an improvement. Also the federal government could reduce restrictions for working holiday-makers from English speaking countries like United Kingdom, Ireland, United States and Canada.”
InterContinental Hotels Group
While both Accor and IHG are working to recruit internally and implement extensive training programs, the general consensus is more needs to be done by officials to help recruit from across Australia and from abroad.
“The hospitality industry in Western Australia needs a semi-skilled visa category, which would allow people from overseas to come and work in the industry here,” IHG’s Tait said. “The Australian federal government could reduce the high standards currently required for skilled migrants for the hospitality sector and make the current working holiday visas more flexible.”
Minimum wage increases and penalty rates
A recent 2.9% increase in minimum wage has led to further concern about funding appropriate staffing levels as well as wider concern jobs might be at risk.
The AHA is concerned the move to award wages above the rate of the consumer price index will have a disproportionate impact on the hospitality sector.
“While we are not against wage increases, we believe they need to be connected to productivity and flexibility improvements for the industry, particularly in areas where it has undergone severe economic hardship,” Woods said. “… Resource-rich regions continue to perform strongly, but the majority of hotels are not benefiting from the mining boom and are facing flat trading conditions for the coming year. Last year’s significant increase resulted in a 7.8% reduction in working hours available in our industry, and hoteliers will again be forced to assess their rostering to minimize the additional costs on their businesses.”
McGrath said Accor “is appropriately managed financially to handle the wage increases effectively, but with the general economic slowdown there will be areas where the cost of labor has a greater and more harmful effect on (revenue per available room). In cities where demand is strong, the extra costs will be able to be passed on, but in other destinations where demand is weak it will be a major impost.”
Year to date through June, Australia posted a 1.3% increase in occupancy to 72.7%, a 3% increase in average daily rate to 174.10 Australian dollars ($183.95), and a 4.3% increase in revenue per available room to AU$126.51 ($133.67), according to STR Global, sister company of HotelNewsNow.com.
Further concerns about productivity and profitability arise with the “penalty rates” system, which allows for “time and a half” payments for working beyond 38 hours or “double time” for working on weekends or public holidays.
“The current level of penalty rates are the biggest negative factor on our business, because our industry tends to operate heavily in periods generally identified as penalty time periods …” McGrath said. “Altering penalty rates and pay rates to reflect and support the hospitality industry, such as raising base rates but reducing penalty rates, would allow business to operate during peak periods with the right level of staff.”
Although the economy still looks relatively strong and visitor numbers comparatively steady, further concerns for the industry will be compounded by July’s introduction of a carbon tax, which might have unintended consequences on room rates, the distance business and leisure guests, as well as a potential electricity cost increase of 20% to 30%.