Home » News » Race to improve productivity in hospitality and tourism – rising costs, recruitment difficulties an

Race to improve productivity in hospitality and tourism – rising costs, recruitment difficulties and Brexit create perfect storm

A new report by People 1st, The performance and talent management revolution: Driving productivity in hospitality & tourism, has found that two thirds of major employers in hospitality and tourism are actively considering how to improve productivity, at a time when the only G7 countries with weaker productivity levels than the UK are Japan and Canada.

The findings, based on interviews with senior HR professionals across 40 large businesses in the UK’s hospitality and tourism sector, highlight why solving the ‘productivity puzzle’ is such a key priority for a post-Brexit economy.

Against a backdrop of rising costs, recruitment difficulties and changing employee expectations, the report provides a snapshot of the challenges employers are facing in the race to improve productivity amid economic uncertainty and risk. 

Despite contributing some £53bn to the UK economy, an increase of 52% since 2008, the hospitality and tourism sector’s Gross Value Added (GVA) per head is just £25,899, half that of the manufacturing and passenger transport sectors, and just below retail. Meanwhile, average labour turnover in the sector is 75% (compared to the UK average of some 15%) and, by 2024, current projections suggest the sector will need to recruit an additional 1.3m people, with 971,000 needed just to replace existing staff.

“With a crippling labour turnover rate of 75%, the three key drivers of change - rising costs, recruitment difficulties and changing employee expectations - are forcing businesses to rethink the way they invest in and develop their people,” said the report’s author, Martin-Christian Kent, executive director at People 1st.

“That’s why tackling productivity is increasingly important and why things that were traditionally seen as ‘HR issues’ like retention, performance management and learning and development are now viewed as business-critical.”

When it comes to improving productivity in hospitality and tourism, some key themes emerge:

Only a strategic, long-term approach to tackle retention can improve productivity. Almost all the employers interviewed see improving retention as a business priority.  This has resulted in greater focus on recruiting staff who are more likely to stay with their business.  “It’s about encouraging people to spend the time it requires to recruit the best person, rather than just someone to come in and do the job” one interviewee said.

Skills are a critical factor. Many businesses interviewed to acknowledge that poor management skills are an acute problem contributing directly to staff turnover and decreased productivity. Equipping managers with the skills and confidence to manage, motivate and retain staff effectively is a key element in boosting productivity. As such, improving managers’ people management skills has become a key learning and development focus.

High turnover and talent shortages have a direct impact on productivity. In an attempt to dispel the industry reputation for low pay and low skilled jobs, employers are actively targeting graduates for first line management positions, as well as offering higher-level apprenticeships as an alternative to the university route. An increasing number are also targeting older workers, women returners and staff from other sectors.

The impact of changing employee expectations is a challenge. Employers consistently highlighted that millennials are motivated by different factors and need to be engaged and managed differently to previous generations. This was considered a challenge by the majority of the companies interviewed.

Organisational design can improve productivity. Many businesses interviewed are beginning to look at whether jobs can be redesigned to increase efficiency and flexibility. The introduction of technology as part of the customer journey is often the catalyst for such a redesign, although businesses interviewed acknowledge that they are at an early stage in their thinking.

Measuring retention and turnover is key to improving productivity. Half of the businesses interviewed felt that they had good systems in place to measure staff retention and turnover and the remainder were focusing on putting these in place.  “Every single week, I look at these reports and at the reasons for leaving, particularly the general managers,” and said one interviewee.

To view the full report visit: www.people1st.co.uk/performance-talent-revolution

To help businesses navigate these journeys, People 1st has established ‘The Wire’, a free-to-join and largely virtual network that helps businesses engage with the key themes emerging from this report, share experiences and hear from experts in their respective fields. In this way, People 1st aim to connect businesses with some of the leading brands that are making progress to tackle the common challenges and transforming their business to improve the productivity and performance of their teams. To join the wire go to www.people1st.co.uk/the-wire/