For the past 16 years, thousands of hotel owners and operators have convened in Memphis, Tennessee for the annual Southern Lodging Summit to exchange ideas and expound upon the latest news, trends, and challenges in the hotel industry.
During last year’s event, Judy King, founder of Quality Management Services, spoke out about the industry’s top concern: “We’re in such a thin labor market that the practices we have in place for recruitment, retention, and for full productivity and engagement are all the more important. We have moved from labor being considered perhaps more expendable to being absolutely essential.”
Draining the Pool
King’s sentiments echo those of leaders throughout the sector. Labor has checked in as the industry’s most critical and urgent quandary. Low unemployment means the labor pool from which hotels typically dip is shallower than ever. And the businesses must also offer competitive wages to attract and retain qualified labor. Data from Randstad’s Employer Brand Research revealed that salary is a leading reason why employees both stay with and leave a job.
Robert Mandelbaum of CBRE – a resilience and property management company – stated that today’s low unemployment rates have “manifest challenges in many ways, one of which is the upward pressure on compensation.”
Too Many Vacancies
Of course, rising to meet higher wage expectations means elevated costs. Heap on top of this worker acquisition and training expenses. The Bureau of Labor and Statistics estimated that the hotel industry bears a 73.8% turnover rate. This figure is at the far end of the hall from what HR experts consider a healthy rate: 10-15%. Frequently replacing employees means more frequent financial output for finding, securing, and training new hires.
Additionally, many hotel operators agree that improving the quality of the training (thus increasing disbursements) can help curtail high turnover.
How Employment-Based Incentives Serve Up Savings for the Hospitality Industry
Labor expenditures reside as the industry’s most significant expense at 42 percent, overshadowing management fees and even operating costs (35 percent).
Ring the Bell for (WOTC) Service
So what can establishments do to combat some of these labor issues and related spending?
They can start with the WOTC – or the Work Opportunity Tax Credit. The WOTC is a federal tax incentive that grants employers $1,200 to $9,600 for hiring a qualifying employee from any one of 14 target groups.
The IRS calculates the exact credit amount based on the specific group, a percentage of wages, and the number of hours worked (at least 120 hours in the first year of employment).
When businesses participate in the program, the credits earned offset their income tax liability, generating savings that can help subsidize the cost of employee acquisition, compensation, and training.
And because the mandated groups consist of those who often encounter barriers finding employment, such as disabled vets and ex-felons, the WOTC opens up a potentially untapped resource of hotel workers.
Double Booking
Some states offer additional tax-saving opportunities to capture “piggyback“ credits that may be applied for at the same time as the WOTC. And still, others provide other training program assistance and incentives.
Combining all potential state programs with the federal WOTC serves up increased cashflow and affords hotels the skilled labor they require to power their business and serve customers.
Call the Concierge
The best way to understand all the WOTC complexities and capture maximum potential tax credits is to call upon a tax specialist. With an expert’s careful guidance and the WOTC at their service, hotels can take labor challenges ‘to the cleaners.’
