THE cost of doing business in the hotel sector is rising, with penalty wage rates among the more contentious issues for operators who claim to face the highest running costs in the world.
Before penalty rates are even applied, Australia’s hospitality industry has labour costs twice that of the UK and Europe, 120 per cent higher on an hourly rate than the US, and 15 times higher than Bali.
Australian Hotels Association WA chief executive Bradley Woods said the matter was complicated by a lack of staff for an industry that is reliant on labour.
“We are a highly labour-dependent part of the economy. The service sector needs trained staff and the increasingly high costs of labour are making it frustratingly difficult for a lot of operators,” he said.
Penalty wage rates add to the burden, where double time and 2.5-time is the norm for Saturday and Sunday trading.
“We are treated as a five-days-a-week industry, whereas we are a 24 hours, seven-days-a-week industry,” Mr Woods told a recent WA Business News forum.
“The current Fair Work Act and awards that operate within our sector do not reflect that, and that is the constant battle we have with the unions, to ensure that we have a market that reflects an appropriate workforce.”
Mr Woods said the award rates had been tied to the metal trades award rates and that those sectors had driven up wages artificially.
Guests at the forum said the issue of penalty rates was a constant throughout the sector.
Hyatt Regency general manager Adam Myott said operational costs could hinder international competitiveness.
“I don’t know what the answer is, but the cost of doing business in Australia is horrendous and that is the thing that separates us from other parts of the world where other successful hotel operators exist,” he said.
“It is all to do with the cost of labour. It is all to do with the cost of doing business in particular on the weekends. It is bad enough Monday to Friday but the fact we pay exorbitant penalty rates on the busiest days of the week is what makes it extremely difficult.”
My Hotels group owner Pauline Tew has had her eye on the Barrack Street site intended for the Riverside Pier Hotel for the past four years.
The Riverside Pier Hotel project had been planned since the 1990s, courting controversy when 300 investors backed the development with $15 million through South Perth-based Finchley Central Funds Management. The project failed and the investors received just 20 cents in the dollar when it was eventually sold off.
Ms Tew has conducted numerous feasibility studies on the site but said high operational costs continued to make development of the site unfeasible.
“It has a plinth ready to go and it can have 86 rooms. Everything works when I do the feasibility if I don’t pay too much for land, but when I get into operation I keep losing money. That is where the losses are,” Ms Tew said, adding that it takes 10 years on average to break-even, given ‘average’ room and occupancy rates.
“We have to look at our cost structure in tourism. It is not just about building,” she said.
Mr Woods said the solution to the problem could not be to lower wage rates.
“We have to find better ways of being productive. We are not going to see a reduction in wage rates, but we have to see more productivity and a greater level of productivity from the workforce to deliver an overall competitive product and environment,” he said.
The quality of staff in the industry has been a bugbear for many operators over time, with the mining industry acting as a labour drain and more stringent rules on visas contributing to the difficulty in finding good people.
“There are very few work visas that support our industry. The federal government has done a lot of damage to our industry in the last two years, with changes making visas more restrictive, particularly in the area of chefs and managers,” Mr Woods said.
“We are reliant on things like working holiday visas, critically. What we don’t have are semi-skilled visas that reflect the nature of our industry.”
Last year, a Deloitte Access Economics study of projected regional demand and supply for tourism workers to 2015 found that an estimated 35,800 tourism vacancies exist across Australia, and that by 2015 an additional 56,000 people will be needed to fill vacancies, including 26,000 skilled positions.
Western Australia has the second highest unfilled vacancy rate at 10 per cent, second to the Northern Territory at 16 per cent.
WA experiences the second highest level of recruitment difficulty at 67 per cent, and has the second highest skills deficiencies at 58 per cent.
