If you pay peanuts, you get...

I will not finish the sentence, which is somehow offensive, but if you know the hospitality industry, you’ll know how it ends.

The hospitality industry, renowned for its dedication to exceptional guest experiences, is facing a pressing challenge: the issue of low salaries. Despite the industry's pivotal role in creating memorable moments and serving as an economic driver, many professionals within the sector struggle to earn a livable wage. A lot has been discussed since the end of the pandemic about the lack of talent in the industry, and how challenging it’s being to find good professionals -if not just any professional-, with hotels and outlets not being able to fully open due to the lack of staff.

But the reality is that generally speaking, the hospitality industry employees are underpaid (15% on average, to be precise).

The Perception versus Reality Gap:

One of the primary factors contributing to low salaries in the hospitality industry is the discrepancy between the perceived value of the work and the remuneration offered. The general perception often fails to recognize the immense skill, effort, and dedication required to excel in hospitality roles. This causes frustration amamonghe industry’s workforce, who end up demotivated or quitting altogether.

Cost Constraints and Profit Margins:

Hospitality businesses operate within tight financial constraints due to various factors such as high operational costs, seasonality, and market competition. Maintaining profit margins while delivering exceptional service can sometimes pose challenges for employers when it comes to allocating funds for salaries. However the EBITDA and profit ratio of the industry are not as tight as other industries, so this reason seems to be more a custom from the past than a mere financial fact.

Industry-Wide Pay Scale:

The hospitality industry has traditionally had a lower pay scale compared to other sectors. This can be attributed to a variety of reasons, including the perception that hospitality jobs require fewer qualifications or skills, leading to a lower market value for these positions. As a result, talented professionals may seek higher-paying opportunities elsewhere, exacerbating the talent shortage within the industry.

Linking this point with the previous, we can see a warehouse associate role paying more than a hotel receptionist, or as mentioned previously, a corporate receptionist working Monday to Friday, getting paid more than a Hotel Front Desk agent working Monday to Sunday on rotational shifts.

Inequities in Compensation:

In some cases, there are disparities in compensation within the hospitality sector itself. While high-profile establishments may offer competitive salaries to attract top talent, smaller businesses, independent hotels, and local restaurants often struggle to match those wages. This creates a divide in the industry, with limited resources available for fair compensation across the board.

Historically, it’s been common practice in certain dedestinationso have team members without a contract, working unpaid overtime (or paid under the counter), and that has been seen as normal. That laxity with those practices is partially to blame too for the current scenario.

We have a great challenge with the lack of talent. Some of the main reasons for it are the ones highlighted above.

What now?

We should aim for industry advocacy:

Hospitality associations, trade unions, and industry leaders must advocate for fair compensation and work towards changing the perception of hospitality as a low-wage sector. By highlighting the skills, dedication, and value that hospitality professionals bring, the industry can challenge the existing pay norms and foster a culture of fair remuneration.

This should include collaboration with Government and local authorities, establishing minimum wage standards that consider the unique challenges of the industry, providing tax incentives or grants for businesses that offer competitive wages, and supporting training and education initiatives.

Focus on Employee Well-being:

Apart from competitive salaries, businesses can enhance employee satisfaction by offering comprehensive benefits packages, including medical insurance, retirement plans, and opportunities for career advancement. Creating a positive work environment that fosters work-life balance, and employee recognition can contribute to higher job satisfaction and reduce turnover. Additionally, implementing performance-based pay structures can incentivize employees to excel and be rewarded accordingly.

What are your thoughts? What else can be feasibly done?