A new survey of restaurant and hotel operators shows industry profitability and operations continue to be hampered by a web of factors.
The Michigan Restaurant & Lodging Association (MRLA) last month released the results of a recent hospitality industry operational survey it conducted covering topics of workforce, inflation, commodities, housing and supply chain issues as the industry continues to rebuild following two years of pandemic-related decimation.
The last similar survey of hospitality operators was conducted in August 2021.
“While there is growing evidence the worst is behind us, the data in this survey paint a clear picture that the hospitality industry continues to operate in a particularly challenging environment,” said MRLA President and CEO Justin Winslow. “Inflation, supply chain and an inadequate workforce (are combining) to suppress profitability and imperil a much-needed comeback for Michigan’s hotels and restaurants.”
Winslow compared the industry to a hospital patient just getting out of the emergency room and now facing a host of chronic conditions, and the top condition that needs treating is the inadequate labor force participation rate.
He said a targeted campaign to “educate, train and recruit a world-class hospitality workforce” is needed, and the MRLA hopes to partner with the governor and Legislature to quickly achieve that goal.
“I think for this industry … the rate by which it has increased wages is more than twice the amount of the economy overall, in terms of all businesses raising wages over the past year, and despite that, and despite more offering signing bonuses and better benefits, this industry is still (struggling). Four out of five restaurants and hotels don’t have enough staff to meet the demand that’s out there,” Winslow said.
“That’s a challenge and something that we’re trying to combat here at the association long term. We created a training institute to try to help that process, to help recruit and to properly train the workforce that this industry does have right now, and so that’s something we’re focused on a lot here.”
Other key findings
- 80.5% of respondents are operating with an inadequate labor supply to meet demand, with one in five establishments more than 30% below needs.
- 59% are operating with fewer hours or days due to inadequate staffing, but that is down 18% from last August.
- 99% have increased wages over the past 12 months, with 40% of operators increasing wages by more than 15% in that period. Larger wage increases were up significantly from August.
- 77% of operators have experienced commodity inflation in the past 12 months that is greater than 10%.
- 87% of restaurants have increased menu prices in the past 12 months, most between 5% and 10%, and most made two increases over that period.
- 74% of hotels raised room rates over the past 12 months — 5% to 10% was the range most selected, but greater than 20% was a close second.
- 60% of all operators said “inadequate affordable housing” for their specific workforce was a challenge, with 89% of hotel operators saying so.
- 62% report profitability right now, but 61% report a decrease in profitability over the past six months. Only 21% now report their business is at risk for permanent closure over the next six months.
“We were surprised by the degree to which the availability of affordable housing is negatively impacting the hospitality workforce statewide,” Winslow said. “It would appear this issue is no longer limited strictly to tourism-centric locations (such as Traverse City and Harbor Springs, where many housing units have become short-term rentals), suggesting the need for a legislative solution to address this issue before it gets worse.”
Winslow pointed to efforts such as a bipartisan statewide coalition called Housing Michigan that is advocating for legislation that would help the shortage of workforce housing. It is comprised of business and interest groups, builders, government entities and more, and the executive committee includes the Grand Rapids Area Chamber of Commerce, which long has recognized the crisis in West Michigan and has been working toward solutions.
“We’re hopeful to see some positive outcomes,” Winslow said.
He added that what the hospitality industry needs more than anything right now “is stability, so it can make some informed decisions that will help it operate profitably long term.”
“And I just don’t think we have (that) environment yet; that is where we are,” he said.
The survey was conducted May 2-9 by the MRLA and included 146 responses from Michigan restaurant and hotel operators, representing over 500 locations and nearly 15,000 employees statewide. MRLA members and nonmembers both had the opportunity to complete the survey.
The full report is online.
Founded in 1921 as the Michigan Restaurant Association and now known as the Michigan Restaurant & Lodging Association, the MRLA provides services to Michigan’s hospitality industry. The association represents over 5,000 Michigan foodservice and lodging establishments. Michigan’s hospitality industry employs more than 595,000 people and creates nearly $40 billion in annual sales.