Yorkshire Times
Weekend Edition
Woody Barlow
Hospitality Correspondent
12:00 AM 22nd June 2024

Hospitality Wages: A Big Threat Or An Opportunity?

As the owner of two bustling pubs in Cheshire – The Swan at Tarporley and The Lion in Malpas - I’ve had the unique opportunity to witness first-hand the highs and lows of the hospitality industry. The conversation around hospitality wages is currently at the forefront of industry discussions, and for good reason. The debate often centres on rising wages are their threat to our bottom lines or a golden opportunity to revolutionise the industry. In my opinion, this issue is multifaceted, presenting both significant challenges and remarkable opportunities.

The Threat of Rising Costs

Operating a pub or any hospitality venue comes with a thin margin for error. The cost of supplies, utilities, and rent are substantial, but employee costs are the most significant (15 years ago, employee costs may have made up 20% of all costs, that figure is now nearer 40%). An increase in wages can potentially squeeze these margins even further.

For many small pub owners, this scenario can seem daunting. Higher wages mean higher payroll taxes and benefits costs. With minimum wage hikes, we also face the challenge of wage compression, where long-term employees expect raises to maintain their pay advantage over newer hires. This scenario can lead to an upward spiral of costs.

Additionally, the hospitality industry is notoriously price-sensitive. Regular customers might resist even small increases in the cost of their favourite pint or meal. This sensitivity restricts our ability to pass on the increased employee costs to customers without risking a decline in business.

The Opportunity to Redefine the Industry

Despite these challenges, I firmly believe that rising wages also present an unprecedented opportunity to redefine hospitality as a viable long-term career. Historically, many view jobs in hospitality as transient positions, a stopover on the path to something “better.” This perception is largely driven by low wages and the lack of career development opportunities.

However, if we look at European models, particularly in countries like Germany and Switzerland, we see a different story. There, hospitality workers often enjoy higher wages, better job security, and comprehensive training programs. More competitive wages would also present the opportunity to recruit from different industries as wage levels match or even surpass roles that historically would have had a 15-20% premium.

These factors contribute to a perception of hospitality as a respectable, long-term profession. Workers are more committed and provide higher levels of service, which in turn attracts more customers and drives higher profits.

Attracting and Retaining Staff

Higher wages can significantly improve our ability to attract and retain quality staff. Turnover is one of the most significant hidden costs in our industry. Training new staff is time-consuming and expensive, and frequent staff changes can disrupt service quality and customer satisfaction.

By offering competitive wages, we can reduce turnover and retain experienced staff who are well-versed in the nuances of our pub. Long-term employees build relationships with regular customers, creating a welcoming atmosphere that encourages repeat business. At our pubs our entire ethos is to create a place people want to come back to. I want everyone to say they ‘came for a drink, and stayed for the people.’ Those people are not just the other customers but our team as well. They are crucial to the atmosphere you create. Additionally, with higher wages, we can be more selective in our hiring process, choosing individuals who are truly passionate about hospitality.

Investing in our staff by paying them well also opens the door to creating more comprehensive training and development programmes. When employees see a clear path for advancement and professional growth, they are more likely to stay and invest their energy in the business’s success. This shift can transform the hospitality industry from a transient job sector to a professional field with clear career trajectories.

Learning from the US Model

The United States offers a mixed but interesting model. In states with higher minimum wages and tip credits, like California, there’s been a push towards better wages and benefits for hospitality workers. Restaurants in these states often have higher menu prices, but they also tend to have better customer service ratings and lower turnover rates.

On the flip side, in states with lower minimum wages and heavy reliance on tips, the hospitality industry struggles with high turnover and less job satisfaction. This disparity suggests that a balance can be struck: by providing a fair base wage, supplemented by tips, we can ensure that workers are compensated fairly while maintaining the incentive for excellent service.

Embracing Change for a Sustainable Future

The discussion around hospitality wages is complex, balancing immediate financial challenges with long-term benefits. For pub owners like myself, the initial increase in employee costs is undoubtedly a concern. However, the potential to transform the industry into one that offers sustainable, long-term careers cannot be overlooked.

By embracing higher wages, we can foster a more committed, skilled workforce, reduce turnover, and enhance the overall customer experience. Drawing from European models, we see that this approach is not only viable but also beneficial in the long run. As we navigate these changes, it’s crucial to focus on the bigger picture: creating a vibrant, professional hospitality industry that attracts talent and retains it.

In the end, higher wages should not be seen as a threat but as an opportunity to elevate our industry. It’s about time we redefine what it means to work in hospitality, making it a career of choice rather than a last resort. By doing so, we can ensure a bright and sustainable future for pubs and the broader hospitality sector.

Woody (Edward) Barlow, founder of Bear inns, has worked in the hospitality industry for over 30 years, opening and establishing a number of award-winning venues. Woody is a member of the voting academy for Top 50 Gastro Pubs and is passionate about creating amazing pubs that have a joyful, lively atmosphere created by people, not only its guests but those delivering genuinely great hospitality.