“It’s no wonder then the hotel industry has become a target of well-meaning legislators and bureaucrats looking to save some precious water for the state. The California State Water Resources Control Board recently instituted new rules that among other things require foodservice establishments to provide water only to customers who request it and mandate hotels give an option to guests of not having linens and towels laundered daily.”
Let’s face it: The hotel industry in the United States over the past 20 years has mostly been paying lip service to sustainability issues. It’s difficult to blame hotel owners and operators for that attitude because environmental issues are seldom major operational or profitability concerns at most properties.
There are exceptions, of course, but for the owner of a typical mid-market suburban hotel, green issues typically are only seriously addressed for one of two reasons: the vague promise of operating cost savings or the public relations glow generated by being a good and green citizen.
That situation is beginning to change, especially in California and the Southwest. The culprit is water, or the lack thereof.
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Labor cost is a major expense item throughout all operated and undistributed departments within a hotel. Not surprisingly, the labor-intensive rooms and food and beverage departments have the highest labor cost ratios. In 2013, labor costs represented 61.1 percent of total expenses in the rooms department and 59.6 percent in the food and beverage department. At the other end of the spectrum, labor costs are less pervasive in the administrative and general (48.8 percent) and maintenance (51.5 percent) departments.
As revenues continue to grow for most U.S. hotels, the combined cost of salaries, wages, bonuses, and payroll-related expenditures has declined as a percent of total hotel revenue. In 2013, labor costs represented 32.3 percent of total revenue, down from a high of 34.8 percent in 2009 but still above the long-run average of 31.2 percent. Labor costs measured as a percent of total revenue run from a high of roughly 35 percent at convention and resort hotels to a low of 22 percent at limited-service and extended-stay properties.
Strong growth in revenue, however, has the potential to mask the struggles hotel managers face to control labor costs. Therefore, it is important to also measure movements in labor costs relative to changes in other hotel operating expenses. While labor cost as a percent of revenue has declined significantly in recent years, labor cost measured as a percent of total expenses has remained relatively constant.
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Ebola fears are most obvious in the airline sector. Shares of American Airlines Group (AAL) and Delta Air Lines (DAL) fell sharply on Wednesday, hurt by the news that the new Ebola patient flew the day before being diagnosed. Both airlines are down nearly 20% over the past month alone….Hotel stocks like Hilton Worldwide (HLT) and Starwood Hotels & Resorts Worldwide(HOT) have also been punished by the Ebola concerns.
The Ebola epidemic is starting to contaminate sentiment on Wall Street, which is already losing sleep over countless crises.
The arrival of Ebola in the U.S. has coincided with a period of extreme turbulence in the stock market, which has tumbled about 8% from record highs.
The deadly virus is clearly not the only factor behind the market slide, but it’s a major unknown that is increasingly weighing on market psychology. That was the case again on Wednesday as the Dow plummeted as much as 370 points and health officials revealed a second health-care worker in Dallas tested positive for Ebola.
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