How HR Budgets are Met in Hospitality

In the hospitality industry, there is constant and direct interaction between employees and customers; there are many opportunities to either reinforce a positive customer experience or create a negative one. As such, the hotel management needs to assure a profound process of workforce planning – for example, scheduling the right number of employees, whether it is for a certain department, shift, or an event, as understaffing may affect the service and overstaffing may generate excessive costs.

The majority of the hotels we met across Europe manage their own HR budget. Some of them use sophisticated techniques, while others simply transfer the previous year's HR costs, and make minor changes reflecting factors such as seasonality, the expectation for economy growth, slowdown, or upcoming events. At the end of the process, the hotel has a yearly budget plan based on the number of employees needed to provide services for the expected occupancy.

The next logical step is to determine whether the management will be able to procure the required number of personnel. The process needs to take into consideration expected absences, internal movements between departments, promotions, and a number of other factors. Once the hotel’s personnel demand and supply are forecasted, they must be balanced and transferred to each department. The final process should be continuous control and evaluation of budget allocations against plans (for example, comparing the actual employee hours and the cost of work to the planned forecasts).

In most hotels, differences between the planned and the actual hours worked are part of the routine. The only question is when we should deal with these differences and what the implications are. The ability to track hours worked and compare them to the planned hours allows managers to reduce the working hours in the following day, and consequently correct the accumulated deviation. This can be achieved by a decision to call employees only at “peak” times, or temporarily transfer employees from another department.
 
Hotel budget deviations usually result in either layoffs or deep cuts in the budget, which in turn damage the service and result in a loss of talent. Constant reality checks of the gaps between budgeted and actual costs offer an outlet – the ability to act upon small deviations because of regular monitoring of labour costs in real-time  eliminates the surprise effect at the end of the month, quarter or year, when it is too late to take corrective action.

As I heard recently from one of our customers, referring to the need to have a better HR budget process, "meeting the HR budget is a cultural issue, as it represents the quality of management in a department.  A department that is constantly not meeting its budgets has a management issue.  It could either be lacking employee skills or management skills.”