Rethinking labor costs, upskilling in investment

GLOBAL REPORT – One of the biggest challenges in hotel investment has always been labor, a major driver of turnover, absenteeism, and acquisition costs, which significantly impacts the balance sheet.

So, what does upskilling mean for the industry’s No. 1 expense? That’s actually the wrong question, as it views people merely as costs. In reality, people are catalysts for business growth. The right question is: What does investing in your people through upskilling mean for the future success and profitability of your business? Shifting the view of your workforce can unlock entirely new opportunities. Upskilling can lead to better decision-making, enhanced financial performance, and improved ROI for hotel owners, developers, and lenders.

ROI of upskilling

Viewing people as drivers of growth transforms how ROI is measured, impacting the entire talent ecosystem—from acquisition to retention and culture. In the hotel industry, upskilling delivers substantial financial and operational benefits:

Talent attraction: Attracts talent by offering immediate benefits and long-term career potential, making hotels and brands more appealing.

Increased productivity: Engaged employees, supported in their development, contribute more discretionary effort, benefitting guests and operations.

Reduced vacancy costs: Retention improves, vacancies decrease, and productivity rises as internal talent fills roles faster, ensuring operational continuity.

Lower absenteeism: Employees with clear growth opportunities are less likely to miss work.

Decreased turnover: A clear growth path reduces turnover, cutting replacement costs and minimizing the need for frequent hiring.

Internal mobility: Helping employees transition into critical roles reduces recruitment costs and increases promotion rates, saving significant amounts.

Brand and reputation: Companies investing in upskilling build a reputation as employers of choice, strengthening talent pipelines and market position.

Workforce diversity and agility: Upskilling creates a diverse, adaptable workforce aligned with evolving business needs.

Tracking ROI from upskilling can yield significant cost savings. For example, a 10%-plus increase in employee engagement driven by development efforts can translate into millions in productivity gains, depending on workforce size.

Strategic upskilling, workforce development

An effective upskilling strategy starts by identifying business talent needs and aligning them with targeted skill-building. Programs in AI, analytics, and digital skills are transforming hotel operations, enabling hotels to meet evolving guest expectations and optimize operations.

Many hotel companies are investing in leadership development—from emerging leaders to targeted programs—across brands from Choice Hotels to IHG. By providing programs and pathways, companies demonstrate how leadership and digital skills are preparing employees for the future.

Hotel investors already use economic insights to enter new markets; the same approach should apply to workforce development. Once you’ve entered a market—particularly with entry-level positions—you need to focus on retaining and developing the people who will drive your business forward. Retaining and developing talent, especially in entry-level roles, is key to improving the P&L. Upskilling reduces turnover, absenteeism, and reliance on costly temporary labor and overtime.

Hilton offers a range of upskilling opportunities, from high school completion to language courses to degree programs. More efforts like these are needed to establish strategic workforce development as standard industry practice, with a greater focus on upskilling front-line workers and middle-level leaders, who are essential for operational success and long-term growth.

Building brand, culture that inspires

People want to work for companies that have a clear vision and are truly committed to their workforce. By investing in their development, you not only retain talent longer but also motivate them to deliver exceptional guest experiences, directly impacting satisfaction and loyalty. Real-life examples show how upskilling can transform lives:

“I am so proud to have fulfilled my dream of becoming a college graduate while also being promoted.”

“(I now have) the tools to understand people on multiple levels. Through persuasion and influence I can de-escalate guest situations and help to turn a negative into a positive”

Upskilling efforts are not limited to front-line hourly employees; they also play a critical role in leadership development.

Today’s leaders face evolving expectations, while still required to deliver results. Investing in communication, collaboration, trust-building, and developing others provides compounding returns. These skills enhance leadership effectiveness, directly impacting team performance and guest service quality. Leaders empowered through upskilling also develop their teams, cultivating the next generation of talent.

Additionally, leadership skills in analytics and problem-solving equips managers to make more informed strategic decisions that improve profitability and guest service. Upskilling leaders in these areas directly contributes to better financial performance and a more agile, forward-thinking organization.

Contributed by Chris Trout, founder and principal, Donlon Consulting, Orlando, Florida

The views and opinions expressed in this column do not necessarily reflect the opinions of Hotel Investment Today or Northstar Travel Group and its affiliated companies.