At a symposium held at Arizona State University late last year, members of the Federal Reserve Board of Governors responded to the premature notion that the economy’s “briar patch”, fed by inflation, would thin anytime soon. I warned you.

The Briar Patch remains impregnable and Tucson’s hospitality sector continues to feel the vise of inflation on all fronts. The impact of inflation continues to drag down the industry and squeeze margins as the industry continues to try to recoup losses from the pandemic.

Here are the trends unfolding for 2023:

Recovery continues, but not yet at 2019 levels

Tucson does a lot to attract business and tourist dollars, from the weather to a healthy sports economy and, of course, scenic and historic attractions. It’s helping to recover from the pandemic hit.

In fact, the hotel occupancy rate in 2023 is the highest in the country and is projected to rise from 67.90% to 68.60% in 2019. Tucson’s hospitality sector has recovered significantly from the impact of the pandemic, benefiting from a recovery in leisure travel. Additionally, with conventions and trade shows reviving, hoteliers and developers in Tucson and Pima counties are working to expand the supply of luxury hotels in the area to compete with Phoenix.

However, the industry remains under pressure from high interest rates, a favored policy tool to curb inflation. Many businesses struggle to refinance their debt. There is also concern about the impact of high costs on new property developments.

High interest rates are not a solid hedge against rising costs. This is especially true at a time when 79% of his hoteliers nationally told the American Hotel & Lodging Association that they are suffering from staffing shortages, and 22% say the problem is serious. Yes. But rising costs, coupled with disruptions to the ongoing supply chain, are impacting the products needed to operate. This could continue into the first half of the year as inflation for these products is expected to be 5% to 10% higher than normal.

In addition, Tucson operators are also under pressure from rising insurance premiums. Properties with amenities such as alcoholism and live entertainment or spa services in their accommodations could face tax rates that are at least 20% higher than in 2022.

managing labor shortages

A major barrier to a full recovery for Tucson’s hospitality industry is the shortage of workers. Domestic restaurants are short of 750,000 employees compared to 2019 levels. The hotel is about 400,000 short. With business and leisure travel on the rise, hotels are finding it difficult to find people who can deliver the standards of service they want to offer and the service their guests expect. Many tasks required a personal touch, and guests still appreciate that.

A huge number of solutions have been proposed. Some policymakers are proposing modifications to the US visa program, such as removing restrictions on hiring additional seasonal workers. A new visa category for non-agricultural hospitality workers was also proposed to make it easier to find help. Last year, Rep. Lloyd Smucker (Pennsylvania Republican) introduced a bill calling for the creation of a three-year, six-year renewable visa. It hasn’t been considered yet.

Public policy aside, the industry may start looking to other factors to make hospitality jobs more attractive. High wages are not always enough. However, looking at the workplace culture and employee experience can be helpful. That means looking beyond compensation, starting with benefits and a more flexible work environment.

Benefit programs should lay the foundation for personalized benefits programs tailored to individual needs. This is because we are focused on providing the best employee experience for our employees, wherever they are at work and in their personal lives. Some employees may be at a life stage where, for example, lack of childcare or caregiver support interferes with their work performance. Others may need help extending their paychecks and avoiding debt.

Invest in employee surveys. Workplace persona analysis and research can identify individual desires. The payoff comes in the form of higher loyalty and improved recruitment.

The double-edged sword of technology investment

Technology has proven to be a boon to lodging operations. Self-check-in kiosks and remote check-in and check-out capabilities help fill front desk staff shortages. Smart energy management and predictive maintenance deliver significant savings. Smart room service can improve the guest experience. Of course, guest engagement, acquisition and retention technology builds business and loyalty.

But the downside is security breaches, and the more the industry adopts technological solutions, the more vulnerable it becomes to cybercrime. is a good target. Sustained attacks are only a matter of time.

In fact, earlier this year, a threat actor in possession of the personal information of 3.7 million participants in the Hilton Hotel Honors program put data originating from the Hilton Tucson Conquistador Golf & Tennis Resort on the dark web for sale. The spokesperson denied reports of a data breach, but an anonymous source told his Information Security Buzz that the hotel group is investigating.

This makes cyber insurance an important protection, and in fact, hospitality franchisors are increasingly requiring franchisees to have it in place. increase. Some observers expect the number of businesses unable to afford or denied coverage to double in 2023 as premiums rise and capacity shrinks. increase. Risk mitigation is more important than ever, from security audits to multi-factor authentication to consistent employee training, and is expected by insurers.

Finally, Tucson operators must prepare for the unexpected. With natural disasters on the rise (not to mention underwriters), disaster preparedness plans need to be developed and prepared. And with property and casualty insurance prices rising by more than 20% in some circumstances, people in the riskiest areas should be prepared to pay more.

Jim Clements of CIC is Senior Vice President of Hub International Insurance Brokerage (formerly The Clements Group) and has over 20 years of experience working with clients and their property and casualty insurance needs across a variety of industries. He works with a variety of hospitality his clients including national restaurant chains, privately owned hotels, restaurants and 5 star resorts. His expertise in hospitality provides clients with his level of concierge service for his unique set of property and casualty insurance needs.