Labor Shortage in Hospitality Industry: Addressing Challenges

If you've been keeping an eye on the hospitality sector, you're likely aware of the challenges it's been grappling with. From hotels to restaurants, many hospitality businesses are experiencing staffing shortages that are affecting their operations and the overall guest experience.

In fact, the AHLA found that, as of February '25, as many as two-thirds of hotels were short-staffed, with 9% declaring they were "severely short-staffed". While that figure is lower than that of their '24 figure, it's still too high. So, unsurprisingly, the term "labour shortage" has become a frequent topic of discussion within the hospitality industry. It's not just about filling open positions. No, it's about retaining staff, providing better work-life balance, and ensuring the mental well-being of hospitality workers.

In this blog, we'll explore the root causes of the labour shortage in the hospitality industry, examine the challenges it presents for hotel owners and operators, and discuss innovative solutions to address this staffing crisis. From increasing wages to providing more schedule flexibility, we'll uncover common tactics employed by businesses to attract and retain skilled workers.

But it's not all doom and gloom. Throughout our exploration, we'll also highlight success stories and industry best practices that offer hope for a brighter future. So, buckle up as we dive into the big picture of labour shortage in the hospitality industry and explore how businesses are navigating these challenging times.

Understanding the causes of labour shortage:

Before talking solutions, it's crucial to grasp the underlying factors contributing to the labour shortage in the hospitality industry. This shortage is the culmination of various economic, demographic, and societal shifts.

Economic factors

First and foremost, let's talk economics. The average wages in the hospitality sector have traditionally been lower compared to other industries, making it challenging to attract and retain talent, especially in a competitive job market. Despite efforts to increase wages, many hospitality workers still find themselves struggling to make ends meet, leading to high turnover rates.

Alongside that, hospitality businesses struggle to fill their vacancies. The AHLA found that 71% of hotels have job openings they couldn't fill despite actively recruiting to find people for those roles!

Demographic shifts

Demographic changes also play a significant role in the labour shortage equation. As the workforce ages, fewer young people are entering the hospitality industry, exacerbating the shortage of skilled workers. Moreover, declining birth rates mean there are fewer new entrants to the labour market, further widening the gap between supply and demand for hospitality jobs.

Shifting workforce attitudes

In addition to economic and demographic factors, shifting attitudes and preferences among workers are reshaping the labour landscape. Many hospitality workers, particularly millennials and Gen Z, prioritise work-life balance and seek employers who offer flexible work arrangements and better benefits. Unfortunately, the restaurant, cafe, and hotel industries have struggled to meet these expectations, leading to dissatisfaction among employees and higher turnover rates.

A World Travel and Tourism Council report tells us the labour shortfall across the hospitality industry is around 18% of the required staffing, or 8.6 million, demonstrating the struggle of attracting workers to the industry, and that figure isn't expected to change much.

External influences:

External factors, such as pandemics and changes in immigration policies, have also played a role in exacerbating the labour shortage. The COVID-19 pandemic, in particular, dealt a severe blow to the hospitality industry, forcing many businesses to lay off staff or shut down operations temporarily. While the industry is slowly recovering, the lingering effects of the pandemic continue to impact staffing levels.

Hospitality staffing challenges

Navigating the labour shortage in the hospitality industry presents numerous hurdles for businesses. From staffing difficulties to financial strains, the sector is grappling with a range of challenges that impact operations and guest satisfaction. Below, we explain the key challenges confronting hospitality businesses due to the labour shortage and their implications.

Staffing issues

One of the most pressing challenges confronting the restaurant and hotel industry is staffing issues. Businesses across the sector struggle with recruitment difficulties and high turnover rates, making it challenging to fill open positions and maintain a stable workforce. The AHLA survey we mentioned earlier also shows that almost half of hotels offer higher wages to attract workers. The constant need to hire and train new employees not only increases operational costs but also disrupts business continuity and affects the quality of service provided to guests.

The problems caused by the struggle to fill roles is compounded by the high turnover rate across hospitality, estimated at 15.5% annually, the highest of any industry, suggesting that even replenishing the staff a business loses can be difficult.

TIP: Check out our complete guide on how to avoid hospitality staffing shortages for more information!

Operational challenges

The labour shortage in the restaurant and hotel industry poses significant operational challenges for businesses. Reduced staffing levels mean that existing employees are often stretched thin, leading to increased workloads, a poor work-life balance, and decreased productivity. This, in turn, can compromise service quality and impact the overall guest experience. Additionally, staffing shortages may force businesses to cut back on certain services or operating hours, further exacerbating the situation.

TIP: Check out our top 3 tips to improve mental health in hospitality in our complete guide.

Financial implications

The labour shortage has significant financial implications for hospitality businesses. Increased competition for workers has led to rising labour costs, as businesses are forced to offer higher wages and better benefits to attract and retain talent.

Additionally, the need to invest in recruitment and training programs adds to operational expenses. On the other hand, staffing shortages can result in lost revenue opportunities, as businesses may be unable to fully capitalise on demand during peak periods.

Impact on customer experience and reputation

Perhaps most importantly, the labour shortage in the restaurant and hotel industry can have a detrimental impact on the customer experience and overall reputation of businesses. Longer wait times, reduced service quality, and limited availability of amenities can frustrate guests and drive them to seek alternatives.

Negative experiences are likely to be shared through online reviews and word-of-mouth, further tarnishing the reputation of businesses and potentially leading to long-term consequences for customer loyalty and satisfaction.

Strategies to address labour shortage:

As the hospitality industry grapples with the ongoing labour shortage, it's essential for businesses to explore proactive measures to mitigate its impact. In this section, we discuss key strategies aimed at attracting, retaining, and optimising the workforce to navigate the challenges posed by the labour shortage effectively. From innovative recruitment tactics to leveraging technology, these strategies offer a roadmap for hospitality businesses seeking to address staffing gaps and enhance operational resilience.

Attracting and retaining talent

To combat the labour shortage, hospitality businesses must focus on attracting and retaining talent. This involves offering competitive compensation and benefits packages to entice prospective employees and incentivise current staff to stay. Creating a positive work environment and culture, while providing training and career development opportunities, can also improve employee retention rates and foster a loyal workforce.

TIP: Want more information on this? Read our how to retain good employees guide today for some actionable tips!

Increasing workforce diversity and inclusion

Embracing workforce diversity and inclusion is essential for addressing the labour shortage in the hospitality industry. Implementing inclusive hiring practices and providing cultural sensitivity training can help attract a broader pool of candidates from different backgrounds and experiences. This not only enhances the overall workplace environment but also enables businesses to better meet the diverse needs of their guests.

Embracing technology and automation

Incorporating technology and automation into operations is another effective strategy for mitigating the impacts of the labour shortage. Investing in labour-saving technologies and streamlining processes can help reduce reliance on human labour and increase operational efficiency. From automated check-in systems to robotic housekeeping assistants, innovative solutions can help hospitality businesses optimise staffing levels and improve productivity.

Collaboration and industry partnerships

Collaboration and industry partnerships are crucial for addressing the labour shortage in the hospitality sector. By sharing best practices and insights with peers, businesses can learn from each other's experiences and identify innovative solutions to common challenges. Additionally, advocating for policy changes and initiatives that support the industry's workforce needs can help address systemic issues contributing to the labour shortage.

Flexible work arrangements

Offering flexible work arrangements is becoming increasingly important in being able to attract and retain hotel staff and restaurant talent in the hospitality industry. Providing options such as part-time schedules, remote work opportunities, and flexible shifts can accommodate employees' varying needs and preferences. This not only improves work-life balance but also enhances employee satisfaction and loyalty.

Upskilling and cross-training

Investing in upskilling and cross-training programs can help hospitality businesses optimise their existing workforce and fill skill gaps more effectively. By providing employees with opportunities to learn new skills and take on different roles within the organisation, businesses can increase workforce agility and adaptability, ultimately improving operational resilience in the face of staffing challenges.

Managing seasonal staffing shortages

For the hospitality industry, there are many highs and lows throughout the year. But that means when the holiday surges, tourism spikes, or big events show up, the big spikes in guest numbers can make it hard to avoid a staff shortage. The heavy workload can lead to too much pressure and stress, burnout, and ultimately, poorer service from your regular team.

That's why an effective seasonal workforce strategy is super important in hospitality. You can use your calendar, market position, and historic data to anticipate when the busy periods will come, and make sure you implement a hiring timeline with temporary contracts that help you stay ready for these surges in trade.

Here are some tips and strategies for creating an effective approach to seasonal staffing:

• Offering seasonal contracts, flexible schedules, and clear expectations helps attract the right candidates who are looking for short-term or supplementary work.
• You could partner with local colleges, tourism boards, or recruitment agencies which help broaden the pool of available seasonal staff.
• Build strong relationships with your seasonal workers and stay in touch. If a past seasonal worker comes back, that means reduced training and recruitment costs, and a higher standard of service as it can be difficult to get an experienced seasonal team (Offering loyalty incentives to returning holiday workers can also boost retention).
• Cross-training both permanent and seasonal employees can increase your flexibility. Train FOH for BOH work and vice-versa, getting your team ready to adapt when sickness, leave, or other factors put strain on the different parts of your business.

With thoughtful planning and a people-focused approach, seasonal staffing challenges can transform from a source of stress into an opportunity for resilience and growth within your hospitality workforce!

Utilising a hospitality POS system to address labour shortage

Innovative technology solutions, such as Hospitality Point of Sale (POS) systems, can play a crucial role in helping hospitality businesses navigate the challenges posed by labour shortages. Here's how:

• Streamlining operations: A hospitality POS system streamlines various operational tasks, reducing the manual workload for staff members. With features such as automated order-taking, inventory management, and billing processes, businesses can operate more efficiently with fewer staff members, alleviating the strain caused by staffing shortages.
• Optimising staff allocation: Hospitality POS systems provide real-time insights into sales data, customer traffic patterns, and employee performance metrics. By analysing this data, businesses can optimise staff allocation, ensuring that the right number of employees are scheduled to meet demand during peak hours while minimising labour costs during slower periods.
• Enhancing guest experience: Efficient service delivery is essential for maintaining a positive guest experience, even amidst staffing challenges. A Hospitality POS system facilitates quick and accurate order processing, reducing wait times and ensuring that guests receive prompt service. Additionally, features such as tableside ordering and payment enable staff to cater to guests more efficiently, enhancing overall satisfaction.
• Simplifying training: With labour shortages often resulting in frequent turnover and the need to onboard new employees quickly, a Hospitality POS system can simplify the training process. User-friendly interfaces and intuitive workflows make it easier for new staff members to learn the system and perform their duties effectively, reducing the time and resources required for training.
• Improving communication: Effective communication among restaurant and hotel staff members is essential for smooth operations, particularly in a fast-paced hospitality environment. A Hospitality POS system facilitates seamless communication by enabling staff to relay orders, updates, and special requests instantly, ensuring that everyone stays informed and coordinated even with limited staffing.
• Reducing errors and fraud: Manual order-taking and payment processing are prone to errors and susceptible to fraud, especially during busy periods when staff members are under pressure. A Hospitality POS system minimises the risk of errors and fraud by automating these processes and implementing security features such as user authentication and transaction tracking.

Technology-based staffing tools

POS systems are a crucial part of any hospitality enterprise, but they're not the only tools you can use to boost efficiency in your business. Here are some other tools you may want to consider using in your hospitality business:

Self-service technology

Self-service check-in and checkout tools allow guests to manage their arrival and departure independently, reducing the need and dependence on front-desk staff. These have become commonplace in hotels and increasingly common in restaurants, too.

Kiosks, mobile apps, or digital key systems all help streamline the customer experience and staffing requirements for your hotel business, and can improve convenience for travellers who often prefer contactless interactions. Alongside these tools, self-service ordering kiosks and online ordering apps are now widespread in restaurants, takeaways, and other dining establishments, helping them operate more efficiently during peak periods or staffing shortages by reducing reliance on manual processes. Staff can then shift focus towards higher-value interactions, upselling all while improving overall service quality!

AI-powered chatbots and guest communication

As with self-service technology, AI chatbots and automated guest comms let your team focus on the interactions that really matter, taking care of the day-to-day enquiries and transactions. They're also available instantly, 24/7, which is perfect for your guests!

Chatbots can be integrated into websites, apps, social platforms, or displayed screens across your site. Not only do they improve response times, AI tools can also analyse conversation trends to identify common guest needs and self-optimise their services. This results in faster resolutions, fewer missed enquiries, and more efficient use of staff time, while still allowing complex or sensitive interactions to be handled by trained team members. What's not to like?

Workforce management software

Staff management software is often integrated into your POS system, but can also come as an independent tool. In either case, it helps you with scheduling, staff level management, and payroll.

These systems track shifts, calculate wages, generate reports on employee performance, and help you create staff rotas. Combined with sales data, these tools can help ensure the right number of employees are working at the right times, reducing both overstaffing and understaffing, keeping your business efficient and your hospitality staff happy!

Many platforms also include features such as digital timesheets, attendance tracking, and shift-swap tools, improving transparency and communication between managers and staff. By streamlining administration and reducing manual scheduling tasks, workforce management software saves time, lowers labour costs, and helps employees get the shifts they need, supporting their work-life balance.

Automated housekeeping systems

Housekeeping systems manage cleaning schedules, room status updates, and task assignments. These tools provide real-time visibility into which rooms are occupied, ready for cleaning, or prepared for check-in, ensuring staff are allocated where they are needed most.

Automated systems sync with PMS systems to create mobile dashboards. These let housekeeping teams to receive task updates instantly, reduce delays, and minimise miscommunication. Managers can also use them to monitor productivity, track maintenance issues, and prioritise urgent requests.

Putting the "Hospitality" Back in "Hospitality staffing"

As we've explored in this blog, the root causes of labour shortage are complex and multifaceted, ranging from economic factors to demographic shifts and changing workforce attitudes. However, amidst these challenges lie opportunities for growth and adaptation.

By implementing strategies such as offering competitive compensation, promoting workforce diversity, embracing technology, and providing flexible work arrangements, hospitality businesses can mitigate the impacts of labour shortage and position themselves for long-term success. Additionally, leveraging innovative solutions like Hospitality POS systems can streamline operations, optimise staff allocation, and enhance guest experience, further contributing to overcoming staffing challenges.

While the road ahead may be fraught with obstacles, the hospitality industry has always been resilient and resourceful. By staying agile, proactive, and open to collaboration, businesses can overcome the challenges posed by labour shortage and continue to deliver exceptional experiences to guests, ensuring that the spirit of hospitality remains alive and well.

So, let's raise a toast to the future of the hospitality industry - one where every guest is welcomed with warmth, every employee is valued and empowered, and every challenge is met with creativity and determination. 

Looking for more insights on managing your hospitality business? Check out our How to manage employees in a small business guide. Discover practical tips and strategies to optimise your workforce management and take your hospitality business to new heights!