How Inaccurate Labor Standards Impact Budgets and Hotel Profitability

The budget is the property guide to revenue, cost, and hotel profitability requirements. The aim is to forecast revenue and cost taking into consideration such factors as seasonality, rate, and mix. The setting of labor standards provides a framework to identify the hours required to service demand.  All too often, labor standards fall into the trap of process redundancy and lack of scientific rigor leading to inflated costs and/or service breakdowns.

Process Redundancy within Standards

For instance, room attendants typically represent the largest labor spend and are instrumental in providing guest satisfaction. Through observation, we have seen that in a typical day, a room attendant can experience 25-50% of lost time. One simple example of lost time we regularly observe is making repeated trips between the cart and the supply room. Often this occurs due to lack of linen availability, linen quality issues and availability of supplies. Another contributor to lost time we see is the lack of a consistent sequence while cleaning a guest room. Not only do these situations inflate the time it takes to clean a room, they also introduce performance barriers for the team.

When barriers to performance remain, so does the inherent lost time required within the standard.  Once identified, it’s easy to see how this results in additional cost and a greater risk for decreased guest satisfaction as rooms are not turned as quickly or supplied adequately. 

Lack of Scientific Rigor

Labor standards are often developed based on historical performance, and in some cases,  outdated standards are applied even after the process itself has been redesigned and improved.  In the room attendant example, embedded lost time occurs when standard creation fails to account for the actual time required to complete value added cleaning activities. Such activities are influenced by room type, guest mix, cleaning sequence, and the workload disparity between stayovers and checkouts.

Depending on the mix of work, this inaccuracy can either contribute to planning less than a full shift of work, or conversely, set the team member up to require overtime to finish their assignments. The end result is not only in the form of excess cost, but also rooms not ready when needed, and team member frustration.

It is worth noting that the objective of creating a standard is not to achieve 100% productivity. The aim is to create an acceptable time in which to complete activities, with a buffer for variance that is likely to occur.

Removing barriers that create lost time in conjunction with a firm understanding of the time required to complete value added activities will improve the accuracy of standards, align budgets, and improve hotel profitability.