With Colorado and other states requiring an increase in wages for hospitality workers and tipped employees, many hospitality workers and managers are worried about the potential ramifications. Will it lead to fewer hires, less staff on hand to take care of customer demands, and fewer hours for existing workers, or will it lead to growth and prosperity within the hospitality industry? Here’s the good news: rising wages in the hospitality industry could turn out to be a good thing.
The Potential Impact of Rising Wages
Rising wages in the hospitality industry isn’t just an issue that impacts hotels and restaurants. It’s an issue that could potentially have a huge economic impact. The growth in wages leads to a number of things:
- More people who are able to afford luxuries on their current salary
- Overall economic growth for the United States
- Fewer people who are unemployed across the United States
Staff wages may make up approximately 44% of the operating budget of many hotels and other hospitality businesses, but that doesn’t mean that an increase in the base wages of their workers will automatically lead to budget problems. Instead, far-sighted hotels and hospitality businesses will embrace the coming change and use it to advance their businesses.
Historically, when wages have increased, the hospitality industry has experienced a greater increase in income than it has lost income due to rising wages.
How to Make the Most of Rising Wages: Short-Term
For many hospitality businesses, a low increase in the price of their services or goods may be sufficient to offset the temporary shortfall that comes from raising employee wages. This can take several forms:
- Raising the price of rooms across a hotel by a relatively minimal amount.
- Decreasing the number of services that are covered by a room rental: for example, the on-site gym might require a daily fee.
- Raising the price of entrees by a small enough amount that it doesn’t impact customer interest, but it does impact the bottom line.
How to Make the Most of Rising Wages: Long-Term
Rising wages in the hospitality industry mean that hospitality workers across the United States now have disposable income. As other industries raise their rates to match, those workers will be spending their money on luxuries that they couldn’t previously afford. This means that they’ll be spending more money in places like hotels and restaurants. Families who previously couldn’t afford to eat out may be able to fit a weekly or monthly trip to a restaurant into their budget, increasing the income of a restaurant. Families who have put off travel or who have been unable to afford regular trips will be able to get out on the road more regularly, which means that hotels will benefit.
Instead, far-sighted hotels and hospitality businesses will embrace the coming change and use it to advance their businesses.
Historically, when wages have increased, the hospitality industry has experienced a greater increase in income than it has lost income due to rising wages. In order to take advantage of this, the hospitality industry can take several key steps:
- Create packages geared toward individuals who don’t often get to take advantage of vacations and hotel rooms. Offer small luxuries that will make them appreciate your business.
- Base pricing on what your target market will be able to afford without straining their budget to help them turn to you instead of your competitors.
- Look for ways to market to your preferred buyer personas to help bring them into your business.
As other states step up to the plate and increase the wages received by hospitality workers, it’s important to note states like California, where they passed similar laws but have experienced growth and prosperity as a result. The increase in wages for hospitality workers doesn’t have to be a headache. Instead, find ways to embrace this key shift in the industry in order to help your business grow and thrive.
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