Post by Christopher Muller, Ph.D.
Boston University, School of Hospitality Administration
I have just sent a new graduating class of future leaders off to work. I have also been listening to my industry friends as they discuss their views on the ups and downs of the industry and I have been reading the usual reports tracking the trends of the business for the past few quarters. I see an interesting connection among these three activities.
First, as a dean at a leading Hospitality Management school much of my life is spent talking about employment. Specifically my day is driven by this question “What kind of jobs are your students offered when they graduate?” Parents, students, recruiters and administrators all want to know how our graduates are making it in this unsettled economy.
As an institution of higher learning our strategic mission is to educate young people, but as a professional management program our goal is to help them find meaningful careers when they leave. I am pleased to say that the Class of 2011 of Boston University’s School of Hospitality Administration had a very good year in this respect. We will know final numbers in a few months, but from our records more than 90 percent of the class found meaningful jobs with competitive salaries, some being offered positions months before they actually finished in May.
This fact, that our graduating students are being offered solid jobs, seems to catch many of my industry friends a bit by surprise. We all hear how slow the national recovery remains, how the still struggling housing market, the high price of gasoline and the looming national debt are keeping the public in a perpetual state of despair. How can hospitality companies possibly be offering great jobs to young people when times are so tough?
This brings me to the industry reports and the ups and downs of the hotel trade. In the constant battle for increasing daily rate and occupancy percentage, leading to better REVPAR and higher EBITDA, occasionally we forget what the foundation of our business is really built upon--people. For at least two and possibly three years many national and local lodging and foodservice companies were not interested in employment growth. The prevailing logic is that labor must shrink in a down-trending economy, wages must be kept low through the tough times, and no company can afford to hire new entry level management.
Yet my senior friends in operations have started to complain about the “limited bench strength” in their companies, how they don’t have the depth of trained talent to meet current demand much less expand their business tomorrow. Where are the good people going to come from to manage and work in the hotels and restaurants in which they have so heavily invested?
Here’s a thought, take a look at this quotation:
“It is true that petty business can work on the capital-labor-public mistake, but big business cannot, nor can little business grow big on the theory that it can grind down its employees. The plain fact is that the public which buys from you does not come from nowhere. The owner, the employees, and the buying public are all one and the same, and unless an industry can so manage itself as to keep wages high and prices low, it destroys itself, for otherwise it limits the number of its customers.
One’s own employees ought to be one’s own best customers.”
The industrialist Henry Ford, the committed capitalist, wrote this in his book “Today and Tomorrow” in 1926. At the very core of his vision for a profitable enterprise was the belief in the “wage motive.” When Ford increased the buying power of his own people they increased the buying power of other people “and so on and on.”
Hospitality companies stand as some of the largest employers of management and hourly workers in the U.S. economy. McDonald’s understood that when they announced the hiring of 50,000 people in April. They also know that the best way to drive sales at the local McDonalds is to drive the buying power of their own people.
It’s no wonder our Class of 2011 had a good hiring season. It’s good business. The fastest way to drive Occupancy and Daily Rate is to invest EBITDA in our best customers, by simply hiring more of them.