It might employ 2.1 million people and contribute nearly £53 billion to the UK economy, but the hospitality and tourism industry is one of the least productive in the nation, a new report says.
The Gross Value Added (GVA) that the industry provides – the value of goods and services generated – stands at £25,899 per person each year. It is only half the figure for the manufacturing and passenger-transport sectors, and below that of retail.
In other words, the people working in the UK hospitality and tourism sector are not as productive as those in other parts of industry.
Take into account that Office for National Statistics (ONS) data shows that the UK as a whole trails well behind the US, Germany and France in the international productivity league, and it seems clear there should plenty of scope for improvement.
Now People 1st, the employment and training organisation for hospitality and tourism, has quantified the problem and laid out some suggestions in a new report on the problem.
The report, titled ‘The Performance and Talent Management Revolution: Driving Productivity in Hospitality & Tourism’, is based on interviews with senior HR professionals across 40 large hospitality and tourism businesses, including major contract caterers as well as pub, restaurant and hotel groups.
People 1st executive director Martin-Christian Kent, who authored of the report, says, “We found that two-thirds of major employers are actively considering how to improve their productivity.
“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.”
He adds, “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. These challenges are compounded by the fact that we are in a period of political and economic uncertainty.”
The report explores how businesses in the hospitality and tourism sector are addressing the growing challenge of how to increase their productivity and performance to stay competitive.
It is based on input from large businesses representing a cross-section of the UK hospitality and tourism sector. Kent says that larger businesses are critically important because they employ 44% of the sector’s workforce, and it is likely that many of their actions and best practice will trickle down to have an impact on smaller employers.
“The UK’s hospitality and tourism sector is facing a perfect storm of rising costs, increasing recruitment difficulties and changing employee attitudes. Compounding this is the political and economic uncertainty around Brexit,” he says.
“As a result, many UK businesses are starting to focus on productivity improvements to help offset costs. About a third of the businesses we interviewed described themselves as being at an early stage in considering how to increase productivity levels.
“A number are looking at their current activities as part of their people strategy and assessing what additional interventions are needed to improve productivity.”
In fact, some of the figures for hospitality suggest things are going well. The workforce has grown 16% to 2.1 million and the sector’s GVA has increased 52% between 2008 and 2015, rising from £34.9 billion to £52.9 billion.
While this rise is much greater than comparable sectors such as manufacturing, construction and retail, the actual level of GVA is much lower - three times lower, in the case of manufacturing.
Kent says the report identifies poor skills levels within the sector as a major contributor to this problem. “In 2015, 18% of hospitality and tourism businesses reported that their staff lacked the necessary skills to meet their business needs,” he says.
“The good news is that, unlike other sectors, the percentage of reported skill gaps has dropped slightly since 2011, which is possibly a response to the increasing emphasis on staff retention.”
Rising costs are another factor. With the National Living Wage rising to £7.50 from April 2017, hourly wages have risen at the same rate in the past two years as they did in the previous five.
In the report, one employer says, “This is what is causing us to stop and think; a realisation that we are going to have to get our head around the whole productivity piece over the next year.”
Nevertheless, pay in the hospitality and tourism sector remains low compared to other sectors. Hourly pay is £5.88 more in manufacturing and even £0.80 more in the retail sector.
Recruitment is also becoming increasingly challenging for many UK employers. The latest Employer Skills Survey showed that 25% of hospitality and tourism businesses reported vacancies. Of these businesses, 38% considered the vacancies hard to fill. Just four years previously, the number of employers reporting vacancies was 10%.
Current projections suggest that by 2024, the hospitality and tourism sector will need to find an additional 1.3 million people, with 971,313 staff needed simply to replace existing staff. This includes 226,000 people in management positions and 11,000 chefs.
By 2022, there will be 700,000 fewer employees aged 16-25 but 3.7 million more over-50s, which is important considering a third of the sector’s workforce is under 25. This is twice the proportion across the economy as a whole.
The projections are prompting hospitality employers to put more emphasis on staff retention, with many reporting they now target staff from other sectors to attract employees with the same interpersonal skills that they are seeking.
Kent adds, “Some are also targeting older workers and women returners. Many are engaging universities to attract graduates to fill first-line management positions and, as a result, businesses are again placing more emphasis on graduate programmes, as well as looking into higher-level apprenticeships.”
Catering employers also say they are taking steps to address the negative perception of jobs and careers in the sector. Some are ramping up their local community activities, and engaging with careers advisors and other influencers to demonstrate the positive aspects of working in the sector and the career potential.
But this is not being done by ignoring the negative aspects. One employer comments, “We are really focusing on the first interview. Making it much more of a realistic preview of the job, so that when they join in two weeks’ time, they have a realistic perception of the job.”
Poor management is another factor identified by many businesses that leads to increasing staff turnover. Many now acknowledge that managers have been promoted without the necessary development and support, thus lacking the skills and experience to manage, motivate and retain staff effectively. By focusing much more learning and development on managers, employers hope to help them become better ‘people managers’.
“We are changing the mind-set from ‘if you have got a problem with your employees, go see HR’, to ‘let’s just make sure we don’t have those problems to start with’,” says one employer.
And in pursuit of greater productivity, the industry is embracing greater use of technology. “We’re looking at tablets, and diary and table management systems to operate our restaurants much more efficiently,” says one employer.
Other areas where technology is having an impact on productivity include stock control, staff scheduling, absence management and staff monitoring, hand-held kitchen ordering devices, new payment systems, and hand-held checklists for room attendants.
Kent says, “There has probably never been a more exciting – or more challenging – time to be working in HR in the hospitality and tourism sector, and with the uncertainty over Brexit and the economy as a whole, it is a fluid picture.
“There is a clear rupture from the ways large businesses have operated in the past and these changes present some critical opportunities.”
He concludes, “There is a new focus on retaining talent, and this impacts on how businesses are recruiting and taking forward learning and development.
“The three key drivers of rising costs, recruitment difficulties and changing employee expectations are also increasing the number of businesses homing in on productivity improvements to help offset costs, and maximise customer experience and profitability.”