By Mike Walden
North Carolina’s hospitality industry, consisting primarily of restaurants and hotels, is a multi-billion dollar industry in the state. As a percentage of the state’s economy, its share has grown over the past few decades. The industry accounts for one in 11 jobs in the state. On average, every $1 million in new hospitality spending creates 15 direct jobs in the industry and another five jobs in other industries.
During the pandemic, the hospitality industry has suffered some of the largest losses of any industry. Employment fell by 44% against 12% for the economy as a whole. Even at the start of 2022, employment in hospitality was 5% lower than it was before the pandemic, while employment across the economy has fully recovered. Surveys show that hospitality is one of the sectors where many pre-pandemic employees have moved on to other jobs rather than returning to work in restaurants and hotels.
As a result, hospitality is an industry, along with personal services, construction and manufacturing, where there are a large number of unfilled jobs. Recent job vacancies data in the state shows that 10% of all hospitality jobs are vacant, the highest of any industry.
The good news is that consumers are returning to restaurants and hotels. Industry revenues are now 2% higher than before the pandemic, even after adjusting for inflation. The concern for hotel operators is how they can meet growing consumer demand with so many vacancies.
Compounding industry challenges are demographic trends. Young workers are a key component of employment in the restaurant industry, which employs seven times more workers than the hospitality industry. Due to the declining birth rate – both in the country and in North Carolina – the population of young people between the ages of 16 and 24 is expected to grow the slowest of all age categories. For example, between 2020 and 2050, individuals aged 16 to 24 in North Carolina will increase by 16%, half the rate of the total population.
What are the answers to these challenges for the hospitality industry in North Carolina to thrive? I think there are three approaches to consider.
First, to compete with other industries for workers, the hospitality sector will need to make working in the industry more lucrative. The salary should be increased. Indeed, the industry is already doing this. In 2021, the average hourly wage in North Carolina hospitality companies grew almost twice as fast as in all industries in the state. This will probably have to be continued.
Today’s workers also like the certainty of their schedules and opportunities for advancement. Unfortunately, this can be more difficult to achieve in hospitality than in other fields. Nonetheless, hospitality business owners and managers will need to get creative in structuring work schedules and promotions in order to “stay in the game” for workers.
In the second approach, owners and managers examine the efficiency of their operations to save labor and money. The objective is to find the effort and time wasted in providing the final product and service. Sometimes wasted effort is due to a lack of communication between workers. Or, often the work will not be properly distributed among the workers to achieve the end result at the lowest cost. In the end, too often, owners and managers don’t step back and look at operations with a view to saving money without compromising production.
The third approach is perhaps the most important – the use of technology and automation to replace human labor. In the future, technology and automation will increasingly be applied to all industries, but for the hospitality industry, it can mean the difference between success and failure.
We are already seeing this transition at work. Hotels are using robots for cleaning and check-in has become automated. Some fast food restaurants are using digital order boards to replace humans taking customer orders at the counter. Some sit-down restaurants require customers to use tablets to order and pay the bill. There are also stories of high-end restaurants delivering meals to customers with robots and using other robots to help chefs and cooks.
As technology advances, these uses in the hospitality industry will be perfected and also become more common. And while it can be expensive to switch from humans to bots, the long-term economics of change can make it inevitable.
The hospitality industry has taken a heavy hit during the pandemic. And although it has seen a strong recovery, labor and financial issues suggest that the industry will undergo major changes in the future. I believe most of us will continue to eat out for some of our meals, as well as stay in hotels when we visit the wonderful sights of North Carolina. But what will our restaurants and hotels of the future look like? You decide.
Walden is William Neal Reynolds Professor Emeritus at North Carolina State University.