Hotel industry grapples with high attrition, rising staff cost

R. Ravikumar Chennai | Updated on April 22, 2011

BL23_HOTEL   -  Business Line

The hotel industry in India is reeling under a severe manpower shortage.

Currently, there are a little over one lakh quality rooms available in the country.

On an average, the room to staff ratio is 1:1.75. Quoting Deloitte data, industry sources say there are over 400 projects under various stages of development with over 70,000 rooms in the next couple of years across the country.

With more and more hotel projects being announced and the room inventory expected to almost double in the next five years, the demand for trained manpower will shoot up.

Mr T. Natarajan, Secretary, South India Hotels and Restaurants Association and also CEO of the Chennai-headquartered GRT Hotels and Resorts, says more than getting skilled manpower, employee retention has become a bigger challenge now.

“People are prepared to hop to another hotel just for a couple of thousands of rupees more, without considering their career growth prospects and opportunities the current employer offers in the long run.”

Manpower shortage and attrition is “the single largest problem the hospitality industry is trying to address today,” says Mr Rajeev Menon, Vice-President, Marriott International.

Attrition woes

According to sources, attrition in the industry currently hovers at 25-30 per cent — across different levels. To check attrition, hotel companies announced considerable salary hikes in the last six months, resulting in up to 30 per cent growth in employee cost.

Being a service industry, where talent redeems the brand promise, employee cost on an average would be 20 per cent. In the last one year, that has gone up to 30-35 per cent, denting the profitability of the company in many cases.

Rising employee cost

Industry biggies such as Indian Hotels Company (that owns the Taj brand of hotels), EIH Ltd (part of the Oberoi group) and Hotel Leela Venture have reported 17 to 29 per cent increase in employee cost during calendar 2010. For example, the employee cost for Indian Hotels moved up to Rs 113.37 crore for the quarter ended December 31, 2010 from Rs 88 crore in the comparable quarter of the previous year, rising by a third. Other expenses such as raw materials, power and fuel, on the other hand, grew on an average by 12 and 15 per cent respectively

While India's government-run and private sector hotel management schools turn out a little over 10,000 graduates a year, the yearly requirement is at least three times this number.

“To top it all, IT-service, retail and aviation industries too nibble at the available talent pool, leaving only a fraction of this for the hotel industry,” says Mr Menon of Marriott.

Mushrooming stand-alone restaurants too poach trained hands from hotels, leading to attrition, says Mr Natarajan.

In-house training

To ensure availability of enough talent, ITC Hotels, for example, has increased the number of candidates for management training three times to sixty, from this year. “The idea is to have enough number of people in pipeline to meet our future requirement as we are expanding fast,” says Mr Virendar Razdan, General Manager, Sheraton Park, Chennai.

Unless hotel companies have in-house training and development programmes, it will be difficult to staff their properties well, says Mr Ajay K. Bakaya, Executive Director, Sarover Hotels and Resorts. Of course, Sarover too has been experiencing attrition issues, but manages to keep the numbers low, “as we recruit people at lower level and put them through our training and development programmes and then promote them as executives. The loyalty factor works,” says Mr Bakaya.

“This is not enough,” says Mr Menon adding, “The industry must come together to create enough talent and groom them to be industry-ready, preferably through public private partnerships.”

Published on April 22, 2011

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