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Labor Forecasting Post-COVID 19 – Why Using “Old” Productivity Metrics and Job Classifications Doesn’t Work

By Jordan Bell, Vice President Hotel Operations and Management Consulting for hotelAVE
17 August 2020
6 min read
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As hotels gear up to reopen, owners and operators will rely heavily on their property teams to produce operating forecasts to guide their bumpy ride back to stabilization. An important part of these forecasts will be the estimates of future labor needs required in a post-COVID-19 operating environment – both in terms of covering core job functions and the additional activities that the pandemic necessitates in the near term.

Start by Forecasting Core Functions Accurately
Recent history suggests that, by and large, the industry’s approach to labor modelling has been characterized by a “continuous improvement” framework, where properties aim to incrementally improve on historical labor productivity in a stable operating environment. In the past, property finance & accounting teams would commonly use historical productivity metrics (such as Hours per Occupied Room or Hours per Cover) to help estimate labor requirements on a monthly or quarterly basis, while departmental managers would typically use labor standards for their weekly scheduling purposes.

The applications of productivity metrics and labor standards might seem interchangeable on the surface. However, there is an important distinction to be made as hotels begin to model their post-COVID-19 recovery paths: Labor standards help departmental managers match the supply of labor to the core workload requirements created by guest demand, daily tasks, maintenance routines etc. For most positions, labor standards are scalable which makes them especially useful in constructing zero-based or “ground up” labor estimates.

Alternatively, a “short hand” approach using historical productivity metrics is often used by property finance & accounting teams to measure as an index to business volumes. Past productivity metrics gauge historical outcomes accurately, but they can present problems if they are used to forecast labor requirements when business volumes are unstable.

In the current low-occupancy environment, using old productivity metrics runs the risk of understating the actual number of bodies – and thus understating the actual labor cost needed to staff an area. This occurs because the historical ability to flex labor and achieve natural efficiencies is diminished when low occupancy forces minimum staffing scenarios for extended periods.

Using Front Desk labor as an example:

  • Minimum front desk coverage typically requires 168 hours weekly (24 hours a day, 7 days per week)
  • Front Desk productivity metrics are typically measured by Hours per Arrival + Departure [H/(A+D)], with some additional labor associated to rooms in-house
  • For an operation that previously achieved 0.15 [H/(A+D)], a forecast of 400-in and 400-out would understate the labor needs for that week by 48 hours of required coverage.

              o (400 Arrivals + 400 Departures) x 0.15 [H/(A+D)] = only 120 hours

  • If finance & accounting teams are not accustomed to performing minimum staffing tests in their forecasts, 120 hours would get budgeted that week but the front desk manager would likely be forced to overrun as s/he schedules the required 168 hours.

Properties that have forecasted using the approach outlined above should consider how understating labor expenses will impact their re-opening decisions months down the road. From a break-even perspective, understating variable costs in such a way risks triggering a re-opening decision at too low an occupancy and/or too low a rate. Some of those properties might ultimately find that the better outcome would have been to stay closed for longer.

For all these reasons, property teams should be relying on labor standards to zero-base their core labor requirements and should be shelving “short-hand” productivity metrics at least until business levels start to normalize.

Reopening Models Must Also Identify Cross-Utilization and Incremental COVID-19 Tasks
In the example above, the projected check-ins and outs would only require 70% of minimum front desk staffing, creating an opportunity to execute other job functions during the 30% idle time. Properties, therefore, must consider how best to cross-utilize various positions to help boost productivity at lower occupancy levels as they reopen. Some positions that have been traditionally siloed from one another will need to be re-engineered to effectively balance future labor needs with changing guest demands. In the example above, front desk could be combined with concierge and/or PBX at different times.

There are also new COVID-19 protocols that are sure to require additional labor to perform. Room cleaning processes, public area sanitation, increased guest requests etc., are all examples where additional attention will certainly be required. Inevitably though, there will also be areas that experience a reduction in demand as some guests opt-out of high-touch points of service.

For both cross-utilization and evolving protocols, the key to success is in understanding the expected utilization of each position in an area. By understanding the required activities for each position, the times to complete them and the frequency with which they occur, managers can start to estimate utilization by position based on expected volume. With that information, managers can begin to explore how one position might have the available capacity to absorb another’s tasks; or how a group of underutilized positions might be able to platoon some new COVID-19 protocols without adding additional bodies or detracting from their respective core activities.

With a little time and effort sunk into analyzing the details, saving on labor costs by effectively cross-utilizing and absorbing new tasks could very well be the difference between re-opening that extra month early or not.

Forecasting Labor for Low Volume Requires a Zero-Based Approach
Given the level of uncertainty besetting the industry, it’s hard to be definitive on how to best handle issues like labor management. It’s probably best to simply say that the approach to estimating re-opening labor needs to be more precise. Owners must be diligent in understanding the forecast methodology and operators need to recognize how the accuracy of past approaches might be challenged in the current environment. Likewise, operators will need to revisit the fundamentals of labor standard construction if they are going to successfully navigate the path to recovery in the most profitable way. This is the new normal.

About PostScript
Post Script is a division of hotelAVE that specializes in Operational Efficiency. By focusing on process design and leveraging tens of thousands of hours of field analysis, Post Script has been helping clients manage the labor-related challenges during the COVID-19 crisis by redefining the labor model to expedite a hotel’s recovery to profitability.