The hospitality industry labor pool has shrunk. The cause for the drop in hospitality employment can be traced to the initial layoffs associated with the Pandemic, followed by the Great Resignation, the economic downturn, better pay and benefits, and the desire for change. Regardless of the drivers, it appears that these employees will not be returning to hospitality.
According to Hospitalitynet, many of these employees have increased their skill levels and moved on to other industries offering better stability. According to the US Bureau of Statistics, as of April 2023, the US job availability rate stood at 10 million, of which 1.1 million was in the hospitality sector. This is the highest percentage of any industry tracked by this bureau. This shortage of labor has driven up wages above the national average. In 2022, the average US wage rate rose 2.9%, with the hospitality wage rate rising the highest, 6.0%. What is the net effect of this? The market is responding with innovative means of meeting food and beverage demand with less workers.
Innovation Comes Knocking
This response includes many changes such as new methods of remote ordering, contactless delivery, and virtual kitchens. These innovations offer a means to meet foodservice demand with an apparent long-term labor pool deficit. According to DoorDash, 35% of customers report an increase in ordering restaurant delivery over the past year, and 37% report an increase in their use of remote restaurant ordering takeout/pickup services. Delivery options also take advantage of technology over human workers. Remote orders can be fulfilled by an expeditor where items are placed in a pick-up area; shelves, or a temperature-controlled, secure locker. This reduces the tasks necessary for a human order taker, delivery person, host, cashier, and service staff such as servers, bussers, and food runners.
Another innovation is the use of delivery robots. This technology is being adapted to many different food and beverage sectors, such as restaurants and colleges and universities. They can be programmed to deliver to a specific residence and even a specific restaurant table, reducing the need for human food runners and delivery persons. According to Markets and Markets, the American robot delivery industry for the total Food and Beverage/Retail/Healthcare/Postal industries is expected to grow from $400 million in 2023 to $1.8 billion in 2028. Allied Market Research states that worldwide, the delivery market is expected to increase from $3.4 billion in 2020 to $30.05 billion in 2030, with Asian Pacific food and beverage industry being the strongest growth market for robotic delivery.
The Ghost Kitchen trend is another potential solution to the labor shortage. Also known as a cloud kitchen, commissary kitchen, or virtual kitchen, the concept is based on efficiency. The pandemic-fueled surge in use of GrubHub and DoorDash spurned the expansion of Ghost Kitchens. Now they are being used in many additional hospitality sectors, hotels, and higher education, in particular. Provided the menu engineering is thorough, the potential labor savings are great, for both back and front of house. One company, CloudKitchens in Washington, DC., states that its kitchen can produce and deliver the same amount of menu items with 4 employees as a traditional operation employing 25. This can go a long way toward meeting customer demand with a very limited job pool.
A New Era
The Pandemic brought in a new paradigm in hospitality food and beverage operations, including a massive reduction of the hospitality food and beverage labor force. Along with this smaller employment pool, we also have seen increased demand for foodservice delivery, and the innovation necessary to meet this demand. Hospitality executives must contend with this sea change in the employment pool and continue to use creative technology to meet growing hospitality food and beverage demand. Ghost Kitchens and remote delivery are two trading options that the markets are increasingly implementing.
By: Tim O’Mara, Project Manager | Management Advisory Services