By Dai Williams, Managing Director – EMEA, SiteMinder
A severe skills shortage, a “revolving door” employment culture, and a lack of clear pathways for staff are among the causes of a productivity crisis costing the hospitality and tourism industry billions of pounds a year and damaging bottom lines throughout the sector.
That’s the verdict of a report by UK skills and workforce development charity People 1st, which says high staff turnover is costing the industry £272 million a year and causing it to lag well behind comparable industries.
According to the data, the industry’s Gross Value Add (a measure of the value of products and services within an industry sector) is £47 billion, a significant distance behind manufacturing (£157 billion), construction (£80 billion) and retail (£135 billion).
On an individual level, a hospitality and tourism industry employee contributes £21,600 to the industry, 53% lower than their equivalent in retail (£46,000), 39% lower than in construction (£35,000), and 58% lower than a manufacturing employee (£52,000).
Although the sector is growing, with the workforce rising by 493,000 to 2.4 million after a slump caused largely by the global economic crisis in 2009, the figures in the report leave little doubt about the huge productivity challenge ahead.
The incentive to change industry productivity practices is clear, with the report noting that an improvement of just 1% in productivity would drive an additional £1.43 billion in revenue to the industry.
One of the most glaring issues to address is the poor skills base within the sector, with 21% of hospitality and tourism businesses reporting that their staff lack essential skills. This compares poorly to the overall UK economy, where the figure is 15%.
But perhaps the biggest challenge is addressing an employment culture that means 88% (870,000) of the 993,000 staff needed in the next seven years will be replacing existing staff.
Among the problems this creates are the costs associated with training new recruits and the subsequent diversion of funds away from the development of existing staff. As a result of this lack of on-the-job development and of clearly identified pathways within the industry, businesses often have trouble both retaining staff and finding suitable candidates to fill positions.
THE VITAL STATISTICS
• High turnover costs hospitality & tourism £272 million a year
• A 1% increase in productivity would drive £1.43 billion in revenue
• 88% of staff needed in the next 7 years will replace existing staff
• 21% of hospitality firms lack essential skills – UK average is 15%
• The industry’s GVA is £111 billion less than manufacturing
The recruitment challenges in an industry with a traditionally high temporary workforce will not surprise anyone, but the report states that businesses may benefit from seeking internal solutions.
“Evidence suggests that paying more attention to staff retention would help not only to tackle our recruitment problems, but also increase the competency of the hospitality and tourism workforce,” it reads.
“The recruitment of transient staff is largely driving the high rates of turnover, however few businesses are looking at diversifying their recruitment pools, which could help address their recruitment problems as well as aid retention.”
Currently 34% of the hospitality and tourism workforce are under 25, nearly three times the national average. The report ascribes this partly to the perception that those employees are more open to working unsociable hours and better able to handle the physical aspects of some jobs.
The industry has also long looked to migrant workers to fill vacancies, particularly in London where 70% of the hospitality and tourism workers (compared to 25% nationally) hail from abroad. These numbers are expected to increase with falling unemployment in the UK and high levels of unemployment in the Eurozone.
Again though, the nature of migrant workers means retention rates are likely to be low, another contributor to high turnover rates. As a result, Simon Tarr, the managing director of People 1st believes targeting areas of the labour market away from the those the industry typically looks at would be beneficial.
“We believe diversifying recruitment to include older workers and maternity returners as well as putting in place strategies to reduce turnover with a greater focus on career progression, will have a positive impact on productivity.” His company’s report also pointed to increased employee engagement and more systematic training and development planning as ways to increase productivity.