The talent crunch: Why fresh graduates are fleeing the hospitality sector

As occupancy peaks, hospitality firms find themselves competing with retail, e-commerce, real estate and IT for employees

Behind the façade of impeccable service, glitz and glamour associated with the hospitality sector lies an unpleasant reality: Fresh graduates from hotel and hospitality management schools are ditching the profession in favour of other industries in the services sector. Even those who have put in a few years of service are leaving for greener pastures.

A large portion of the existing workforce, said Sanjay Bose, executive vice-president and head - HR, at ITC Hotel Group, have returned to their home locations or picked up alternative careers/livelihoods. “To add to this mix, the campus hiring pipeline, which has been the main channel for frontline talent, has not been utilised for the last two years leading to further talent crunch.” 

When it comes to talent, hotels are no longer competing within themselves. Ins­tead, they have competition from allied sectors such as retail, e-commerce, real estate and even IT. With multiple options on the table, those once employed at hotels and laid off during the peak of the pandemic have left the industry for good. “Right now, while multinational hotels in India are seeing an increased attrition rate at 15-16 per cent, Indian brands have managed to stem it at 6 to 8 per cent,” said Anjali Dureja, MD, executive search, at consultancy Hotelivate.

In the short term, organisations may be dealing with the crunch by poaching from competition. But in the long term, industry executives pointed out, hotel brands need to bring their HR practices on a par with allied sectors that are absorbing talent from their pool.

“It’s a boomerang effect,” said Gaurav Pokhariyal, senior vice-president and global head, HR, Indian Hotels. He was speaking at a panel discussion titled “Who ate our talent?” at the Hotel Investment Confer­ence-South Asia in Mumbai a fortnight ago. Pokhariyal pointed out that the current scenario is an opportunity for hotel brands to revisit everything, redesign jobs and make them more exciting.

To be sure, the human resource crunch comes at a time when brands of all descriptions — from budget and mid-market to upscale brands — are seeing occupancies peak to pre-Covid levels even as average daily rates are yet to match those heights. Most have chalked up an aggressive expansion plan to tap into the burgeoning dem­and from domestic and inbound travellers.

With significant improvement in demand, RevPARs (revenue per available room) are expected to improve to pre-Covid levels in FY23 against the earlier expectation of FY24, ICRA said last week. A fourth Covid wave cannot be ruled out, but wider vaccination coverage and reducing disruption with each wave offer some comfort. ICRA expects a month of complete lockdown could impact FY23 pan-India occupancy by around 5 percentage points.

The long working hours — a minimum of 12 hours — compensation that compares poorly with, say, retail, e-commerce and IT, and slow career progression have been chronic problems for the industry. The pandemic, which forced many hotel brands to let go of people or furlough them, has taken the sheen off the sector even more.

Services has been one of the fastest growing sectors in recent times, but the country’s academic infrastructure has not caught up with industry-specific courses, Bose pointed out. The hotel industry will need to reorient itself and align its talent practices to be competitive with a large spectrum of industries, he added.

“Hospitality was among the most severely hit industries and it is estimated that approximately 40 per cent jobs were impacted during the last two years,” he said, adding that the impact at ITC Hotels was minimal, as the workforce remained largely intact during this period.

Sample this: In the years before the pandemic, out of the 32,000 students who applied for a course at various hotel management schools, only 8,000 chose to stick with it. But after having spent three years familiarising themselves with all aspects of hotel management — from front desk and housekeeping to food and beverage operations — only 40 per cent chose to join the sector. The rest either went to retail, IT services, e-commerce or some other industry in the services sector.

Drill down further and the numbers are even more startling. Out of the 40 per cent who joined popular hotel chains, less than 50 per cent stayed in the industry three years down the line — this was the situation in the pre-Covid years, according to top HR professionals at hospitality firms. Post-pandemic, the number of people who chose hos­pitality as an option was only 6 per cent. That’s the severity of the talent crunch facing a sector that has just picked itself up af­ter being battered by three waves of Covid.

Among other things, a disparity in compensation is a key reason hotel management graduates are swearing off the sector, said Hotelivate’s Dureja. For instance, the annual cost-to-company package of a centre director (equivalent to a hotel general manager) at an upscale retail brand is Rs 55-75 lakh; the comparable package of her counterpart at a five-star hotel chain is Rs 36-50 lakh. Take a step down and the disparity is evident even there. A head of department at a branded retail store draws Rs 25-38 lakh a year; her five-star hotel counterpart gets Rs 24-26 lakh for a similar job profile.

“The disparity in compensation is across levels. Unless one corrects the base, it’s tough to get people to join the hospitality sector and retain those who are being poached by retail and other sectors. The options outside not only warrants a better compensation but also a work-life balance,” Dureja added.

No one can vouch for the sector losing charm among the youngsters better than Dilip Puri, founder and CEO at Indian School of Hospitality, who has been a hotelier with three decades of experience. “Less than 20 per cent of the graduating batch of the ISH would be joining hotel companies in operations,” he said.

Hospitality schools train students in soft skills, business management, customer relationship management and other nuances. Therefore, they have been the favourite hunting ground for retail brands such as Shoppers Stop, Lifestyle, Louis Vuitton, Prada and Gucci for some time now, Puri pointed out, adding that the post-pandemic boom in retail and other industries have accelerated the trend.

But, he said, with both Indian or multinational hotel chains cognisant of the crisis at hand, it’s no longer about hiring more but hiring right.

Others are also optimistic. According to ITC’s Bose, the high attrition will settle down in the next six to 12 months as the usual pipelines for talent would fall into place. Can the migration out of the sector be reversed? Up-skilling, multi-skilling, double hatting (dual roles), rewards and recognition programmes, apart from better compensation, are some of the ways in which hotel brands can attract and retain talent and even get those who have quit the industry back, Dureja suggested.