Productivity: The Achilles heel in tourism and hospitality

In addition to the scarce production factor "capital", another one is now becoming scarce in many countries, such as in Switzerland: labor. But the elephant in the room is hardly ever named: lack of productivity. Some thoughts on that issue.

The pandemic has almost brutally exposed the lack of attractiveness of tourism and hospitality professions. To put it briefly: Those who find or have found something "better" are leaving or have already left - perhaps forever. Others may not even include these professions in their future plans. The reasons for this are well known: Compared to other sectors, there are often harsh working conditions, coupled with a lack of long-term and increasingly uncertain prospects - and often with rather modest wages and benefits.

The free and steady migration or short-term movement of persons between areas with income gaps have so far ensured a steady flow of workers to high-income countries. However, this has paved the way for a serious problem: numerous tourism and hospitality processes do not create enough value and are thus not optimally configured for an adequate compensation of central production factors - capital and now increasingly also labor. Or to put it bluntly: Many processes only create value at all because they can access (too?) favorable production factors. The effects of the pandemic have now ripped away this band-aid - and exposed the lack of productivity in tourism and hospitality service processes.

Well: The level of wages and benefits may be only one of many criteria for the choice of profession and job. One can counter that these are a so-called must-have factor, a necessary and minimal condition to be met. Their importance should not be underestimated in light of the wide range between salaries in productive sectors (for example, in pharmaceuticals at nearly 10,000 EUR gross) and less productive sectors (for example, in hospitality and retail at less than 4'000 EUR gross).

Similar to a financial sustainability calculation, it therefore becomes necessary for companies to review their operational processes for "portability" in terms of human resources. This means turning away from filling existing positions with suitable specialists. Instead, it is a matter of increasingly aligning processes with the available and often scarce human and financial resources. This also entails a review of the service content, whereby it is necessary to consider which processes are actually managed and designed in what way - including the question of the type and extent of staffing. The key question here is to what extent the execution of a process is linked to an interaction between the company and the guest and to what extent an added value is created which triggers a willingness to pay and which at least covers the costs of this personal interaction.

Here are some examples of process redesigns that have already been observed:

• Technology-supported (re)delegation of individual processes to guests using self-service technology. For example: check-in and check-out in hotels, (electronic) ordering or pick-up at a counter in restaurants, daily access through online ticketing in ski resorts.
  
  
• Transformation of cost centers into profit centers and thus unbundling of services on a pay-per-use basis. For example: Housekeeping-on-demand.
  
  
• Execution of various interpersonal processes centrally in one place and by the same personnel. For example: check-in or concierge services at the hotel bar.
  
  
• Technology-driven transformation of individual processes (automation to robotization). For example: internal and external billing, cooking processes.
  
  
• Cross-operational centralization of processes (mostly backstage). For example: administrative processes, central (large) kitchens, supply and disposal services.
  
  
• Outsourcing of individual processes or entire process groups. For example: F&B of a hotel to selected restaurants in the surrounding area.
  
  
• Taking over third-party processes in order to exploit synergies. For example: Hotel or mountain railroad as a hub of services related to the management of vacation apartments. The possible manifestations of business models provide valuable clues here.

Last but not least, such considerations should not only be made with the aim of strengthening immediate operational efficiency and effectiveness. Rather, processes should also be reconfigured in such a way that, at the end of the day, the usually fixed standby costs can be reduced. New buildings and conversions should also be designed in such a way that they uncover potential for operational improvements.

The way to increase productivity in tourism and hospitality is therefore through the - perhaps joint - optimization of individual and cross-company processes. If we take this idea further, we ultimately end up with the redesign of cross-company business models.

Processes must be increasingly aligned with the available and often scarce human and financial resources.