Rent’s effect on labor and the top line
 
Rent’s effect on labor and the top line
21 OCTOBER 2019 7:26 AM

Labor is the big issue of 2019 and 2020 in the hotel industry, and in certain parts of the United Kingdom the high cost of rent and the competition to find accommodations have led to more pressure on finding staff and fueling businesses’ top lines.

Currently, there is no subject in the United Kingdom hotel industry more worrying than the state of labor—how to get it, how to keep it, how much to pay for it and where it might come from.

Conference after conference during this autumn conference season has panelists answering “labor” to the inevitable question as to what is keeping hoteliers up at night.

Rent plays a large part in where staff live and where staff members choose to work.

It has only been recently, I would argue, that rents have become so high that renters have lived with other renters who they are not romantically entwined with.

The BBC last week published findings from a U.K. realtors/estate agent as to which cities are seeing the highest rent costs and rent-cost inflation, and not surprisingly London is leading by a length, so much so that its contribution is dragging the average for all the United Kingdom and all England to above that of any other individual city.

A huge chunk of the British population lives in the southeast of the country, and that is where the majority of international visitors and hotel guests head and stay, too.

It is a competitive slice of Europe, and rents reflect that in the normal demand-and-supply manner, but that is all well and good when wages keep track.

In the hotel industry, wages for many are at the lower end of the scale and perhaps do not keep up to speed, and this begs a question as to where hotel staff end up living.

I have heard of hotel companies trying to do something about this, but that is not easy. Some hotel firms provide staff housing in London, even if it is not in Central London.

Others provide staff dining and other perks that offset the pain of rent.

At some point there might be so many staff living in the same building, hoteliers might as well put a brand flag out front and add it to their hotel portfolio.

The National Living Wage in the U.K. is set to go up again in 2020, as long has been the plan, with the idea of the NLW reaching 60% of median U.K. earnings, and that puts more pressure on hoteliers, as does the idea that NLW will be paid to all those over 21 years of age, not just the currently 25 years and older, by the mid-2020s.

Sajid Javid, the government’s chancellor of the exchequer, our treasury secretary, pledged at the Conservative Party conference last month that the NLW would be £10.50 ($13.32) per hour by 2024, an increase of approximately 27%.

Increasing the NLW or whatever the minimum wage was called is traditionally a Labour Party call, and the fact that the Conservative Party is trumping this either might mean it believes in the correctness of such policy or is trying to beat left-leaning politicians at their own game.

Either way, it heaps on the cost to hoteliers’ top lines, and while it also might mean staff has more money for rent, it equally might mean that more money will chase finite accommodations and lead to further inflation.

The reaction from the hotel industry’s principal lobby organization, UKHospitality, has been swift, with CEO Katie Nicholls stating “the chancellor’s announcement threatens a double whammy of a further unprecedented cost increase for employers and an adjustment down in terms of age, so we will need a clear regulatory framework with an independent review by (the) Low Pay Commission. There needs to be a way to adjust NLW levels to react to economic changes; no fixed end point to achieving 66% median earnings and mitigation measures.”

Email Terence Baker or find him on Twitter.

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1 Comment

  • Richard Welch October 21, 2019 4:10 PM Reply

    This isn't really anything new. In the US this has been happening in many areas where rents are high. I remember in Key West, FL about 15 years ago people were having to have 2 and 3 roommates just to be able to survive.

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