Are hoteliers’ expat days numbered?
 
Are hoteliers’ expat days numbered?
11 APRIL 2019 7:00 AM

Many hoteliers have worked as expatriates in hotels around the world—but that could change if companies turn to hiring local employees to cut costs.

While in Singapore in March of this year, I was fortunate enough to be given a tour of a newly opened luxury hotel by the front-office manager. As we wandered the halls, it occurred to me that while the demand for a beautifully designed, 5-star property overflowing with luxurious services and experiences shows no sign of diminishing, the guy showing me around might be one of a dying breed.

A German national, the front-office manager had transferred to Singapore for the hotel’s opening following several years working his way up the career ladder within the same group across three different cities and hotels in China. Our business is full of people who have made similar journeys away from home, exploring the world, leading an expatriate life. Indeed, for many, it is one of the appeals that attracts them to the industry in the first place. I first met a good friend of mine in the business while we were both working in New York. In the ensuing 20 years that we have known one another, he and his family have worked and lived in six different cities across the United States, the Middle East and Asia.

One wonders, however, if the days of the expatriate are numbered, and if those entering the business 10 to 20 years from now will have the same options open to them. My visit to Singapore also included the HICAP Update conference. During the “Investment outlook” panel, when asked to name his No. 1 cost-saving measure in relation to his firm’s hotel portfolio, one of the region’s leading investors half-jokingly replied, “Get rid of the expats.” While this raised a chuckle from the audience—at least 50% expats themselves—there is some seriousness in his statement that reflects an increasing move to localize many management positions in the hotel sector. The fact is that foreign executives are expensive when compared to local hires, often requiring significant additional cost above base pay in terms of allowances and benefits, such as housing, schooling, relocation, insurances, etc. With labor costs typically being one of the heaviest line items on a P&L, it is no wonder that hotel owners are keen to lessen their dependency on imported expertise.

Many governments are also pushing for greater localization of jobs. Singapore, for example, has seen a prioritization of hiring Singaporeans since the introduction of the Fair Consideration Framework. As China’s hospitality market evolves and matures, localization of top management jobs becomes a major concern for many international hotels operating under heightened cost pressure from ownership. While the availability and insufficient standard level of local talent still compels many hotels—especially in the luxury segment—to recruit management expertise from abroad, the “bells and whistles” compensation packages of yesterday are being phased out. Allowances for housing, transportation, utilities, relocation, business-class flights home, schooling, etc., are subject to greater scrutiny and limitation by ownership. In destinations such as Dubai, where there is simply not a large enough local national workforce population to fill every job, we are witnessing a change in the profile of the foreign worker as a result. Jobs once held by Western workers, from the likes of Europe, Australia and South Africa, are increasingly being filled by cheaper sources of labor from markets such as South Asia at salaries that are 60% of what they were previously.

Over time, as training and experience levels increase, many positions today held by expats will be filled by local employees, or by foreigners but on local employment terms. Given the global village nature of the hotel sector, experience in multiple international locations is valued. Indeed, we have seen the number of hotel group CEOs with prior international experience increase by one-third over the last 14 years, according to AETHOS’ CEO Turnover Study 2018). However, those embarking on a global career in the industry may find themselves in the future having to accept either a local package or be willing to work in emerging markets—such as Vietnam currently—where a premium is still paid for foreign expertise.

Chris Mumford is Managing Director of the London office of AETHOS Consulting Group, the global hospitality human-capital advisory serving the hotel, restaurant, casino, cruise line, club and travel technology sectors. Core competencies include executive search, compensation consulting, organizational development and psychometric assessments. With over 20 years of hospitality-related executive search and human capital consulting experience globally, Chris is particularly active in the Asia, Europe, and Middle East regions advising hospitality organizations on compensation, leadership and organizational issues while also facilitating senior executive appointments. Chris can be reached at cmumford@aethoscg.com.

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