The booming hospitality industry of India displays an ever increasing appetite to absorb talent; but how ready is it for this explosive growth? An empirical study on the problem of human resource and its probable solutions.

Introduction
It is party time for hotel companies in India! Domestic companies are aggressively adding rooms and setting up greenfield projects. Foreign hotel companies are making full use of the relaxed norms for foreign direct investment in India. In the next five years, we should expect to see around 40 different hotel brands dotting the Indian landscape.

The addition of many new hospitality products, and a much larger and more sophisticated hotel industry in India will bring with it a new set of pressures. Four years ago, hotel managers talked of raising occupancy and average rate as their biggest challenge. Matters like Human Resources were low on their list of priorities. Today, however, hotels are vying with each other to capture the best talent. Most of the time, it simply a matter of numbers: as more rooms and more properties are added, a larger number of people are needed – to lead, to manage and to execute the various functions involved in operating a hotel. Hotel managers are acknowledging the short supply of quality manpower to be the biggest obstacle they face. Trained personnel are being actively recruited not only by competing hotel companies but also by sunrise sectors like retail, BPO and aviation. The ‘balance of power' is steadily shifting from employers to employees. The addition of even one new hotel in a city seriously impacts the HR equilibrium of existing hotels with similar market orientation. If the present situation is disturbing, the not-so-distant future is frightening!

Imagine a hotel without hoteliers! This article aims to assess the human resource requirement for the Indian hospitality industry from 2006 to 2011. Our findings are based on HVS' research into various important hotel markets in India, and our knowledge of new room supply in these cities, specifically pertaining to brand affiliated hotels. We have tried to present a detailed illustration of manpower demand, which will provide the broad indicators to analyse the forthcoming requirement for hotels in 10 major cities in India. Our estimates of demand in each city have been subdivided for different categories of hotels – luxury, mid-market, first class and budget, for the purpose of comparison.

Table 1 illustrates the new room supply expected to enter 10 key hotel markets in India. This encompasses the development of branded as well as quality independent hotels.

More than 53,000 hotel rooms, all corresponding to hotels with brand affiliation, are in various stages of planning and development in the above ten cities, and expected to enter in a phased manner by 2011. Despite all the interest generated by mid-market and budget hotel development, around 53% of the development is still concentrated in the luxury and first class (Five-star Deluxe and Five-star) segment. This segment is also characterised by its higher service orientation, which makes it particularly vulnerable to the manpower crunch.

Table 2 presents room supply expected to enter the afore-mentioned 10 markets, in each year for the period 2006 to 2011.

The year 2006 will witness approximately 1,100 rooms being added in the branded segment, which translates to a meagre 2% of the proposed supply of 53,000 rooms. The impact of these new rooms on the existing hotel set will remain local in 2006; the present war for talent is more the result of ‘poaching' by existing hotels and other sectors. The bulk of the projected supply will be added between 2007 and 2011, and we expect the employee shortfall to assume vast proportions in the next five years. This shortfall in manpower every year due to additions in room inventory can be gauged by an Impact Multiple. The impact would be six times greater in 2007, when compared to the base year 2006. In other words, the shortfall will multiply six times in 2007… and 18 times in 2009! These indications clearly point toward a major talent drought.

HVS research indicates that the average employee to room ratio is 1.8 in hotels in India, across all market orientations. The only exception is the three-star hotel category where the ratio drops to 1.5 per room. Though Indian hotels remain overstaffed by 20-25% compared to international standards, we have used these very ratios to estimate the requirement of manpower.

Table 3 presents the manpower requirement (across all hotels segments) by the new supply and its growth in 2006-2011.

As indicated by the above table, branded hotels in the ten selected hotel markets would require approximately 94,000 fresh employees in the next five years, more than twice the existing requirement. With the larger volume of new rooms being added in the luxury and first class hotels, these segments would, naturally, have the larger manpower requirement. A major chunk of demand is from cities like Delhi/NCR and Mumbai, which account for around 23% and 21%, respectively. However, the real challenge will be presented by cities like Bangalore, Hyderabad and Pune. Though individually they only require around 12%, 11% and 6.5% of the demand pie, the percentage increase in manpower is the highest in these markets, ranging between 500% -900%. These cities have a relatively low room base and hence would find it more difficult to cope up with the explosive growth. Presently, these three cities offer a comparatively lower cost of living and higher quality of life, to their residents. The cost to company of an employee in these cities will start increasing once demand starts kicking in. It is expected to be comparable to Delhi and Mumbai by 2008. Thereafter, the low manpower base and comparable salary levels would force these cities to look at established hotel markets like Mumbai and Delhi to obtain managerial and supervisory levels of hotel staff.

Table 4: Citywise Employee Requirement

It is to be noted that our estimates do not include demand arising from the loss of hotel personnel to another sector because of the absence of relevant data.

The Road Ahead
Practically, all hotel companies in India have embarked upon a compensation revision exercise in the last three years. Salaries for the managerial level have taken a quantum leap, anywhere between 60-100%. Compensation at this level is expected to rise further and be commensurate with international standards in the next three years. This will have a twin effect; firstly, lesser number of managers will be lost to other sectors owing to purely financial reasons. Secondly, more and more Indian companies will be able to open the gates for expatriates for key positions. While a crunch for managers will still be felt, the real challenge will emanate from the supervisory/ junior management positions. It takes around 3-4 years to prepare people at this level because of the skilled nature of the job and its accompanying high service orientation index.

Our interaction with the HR heads of various hotel corporations in India reveals only about 20% of new hotel management graduates are deemed employable. An erratic mix of budget hotels, unbranded hotels, QSF restaurants, food service industry, airline and the BPO sector absorbs the rest.

HVS Executive Search remains a close partner to the hospitality industry. We feel that the industry has not yet fully realized – or come to terms with – the magnitude of the problem that is. So, what 's the way out? My recommendations to address the twin issue of talent acquisition and retention:

• Start now! Well established hospitality organizations will need to start immediately to meet the severe resource crunch 2008 afterwards.
• Scale up the intake - The industry will need to learn to absorb people in huge numbers. Attrition will be imminent. The emergence of the Retail industry is expected to adversely affect Hospitality, just like what the BPO industry did in late-nineties. Hotels will need to strengthen their HR and training processes to face the churn. Valuable lessons can be learnt from the BPO and ITeS sectors in India, which operate with a market-wide attrition rate of 30%.
• Improving industry interface with academia - It is a common knowledge that the best MBA schools regularly use the services of practicing industry experts as guest/visiting faculty. However, even the relatively well-known hotel schools of India witness negligible involvement from the industry. Complaints about the bad quality and low employability factor of fresh hotel school graduates need to be addressed holistically. Hotel companies, especially those in the luxury segment, need to get together and share industry knowledge with students of accredited schools.
• Conducive work environment - In order to attract quality talent, hotels need to be seen as fun places to work in by today's generation. The stiff, hierarchal set-up is passé. Transparency and communication can be used effectively to get the employees involved with the growth of the company. It is appalling to understand that a significant number of employees in some of the top hotel companies wish to have an improved performance management system and HR participation.
• Work-life balance - This is the soft underbelly of hotels. A majority of hoteliers looking out of this sector mention work-life balance as the main reason. The fast-changing family system in India and increased responsibility of both sexes has made it difficult for even die-hard hoteliers to ignore the social and personal aspects of their lives. Haphazard steps have been taken in this direction but they are certainly not adequate.
• Outsourcing - Hotels need to learn to outsource areas of operation where they do not possess key competence. Internationally, hotels manage to save millions of dollars per year by outsourcing activities like restaurants, security, accounting, housekeeping, amenities, maintenance etc. This has to be complemented by a comprehensive Quality Control mechanism to ensure the outsourced function conforms to the brand standards.
• Temporary workforce - Hotel companies need to develop a flexible workforce, which can be summoned when the need arises. One globally accepted method is to induce a part-time workforce from college or universities. The extent of usage of this flexible staffing is generally inversely proportional to the market orientation of the hotels. This, therefore, will be a more fruitful strategy for the mid-market and budget segments. While, temping for hotels is not a full-scale solution, this is an area worth exploring. Interested hotel companies will need to support entrepreneurs to establish such temp-workforce in local markets.
• Technological intervention - The industry needs to wake up to the benefits of superior technology to achieve a higher operational efficiency. The luxury and first class hotel segment could focus towards standardization and product enhancement via technology. The mid-–market and budget segment needs to reduce the ratio of employee to room by the innovative use of technology.

Saurabh Gupta, heads the Hospitality vertical for HVS Executive Search, India. He has an extensive knowledge on the dynamics of human resource element in service industry. His operational experience in hotels and restaurants helps him to conduct assignments in various sectors like hospitality, retail, consulting, healthcare and real estate. He is also involved with the execution of key expatriate searches. sgupta@hvs.com