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Downsizing: Checkout time for hotel staff

Parul Gupta

With business travel on the downslide and no significant increase in tourist numbers, the country's leading hotel chains have been left with no option but to hand out pink slips.

Consider this: the Taj, Oberoi and the ITC Welcom- group chains have downsized by about 1,800 during the last few years. And more is round the corner. The government-owned India Tourism Development Corporation could see another 1,500 employees bloating the ranks of the jobless once the 26 hotels owned by it are privatised.

About 1,200 employees of the Tatas-promoted Indian Hotels Company Ltd, which runs the Taj chain of hotels, have opted for VRS which was introduced in April 2001 at a total cost which will be amortised over a period of six years. The company has so far spent Rs 5.96 on the VRS.

In case of East India Hotels, which operates under the Oberoi, Trident, Raj Vilas and Amar Vilas brands, about 465 employees opted for voluntary separation in Delhi, Bombay and Calcutta properties since 1999.

The total cost of Rs 2.1 billion is being amortised over a period of five years. At ITC Hotels, about 140 employees have opted for the retirement scheme and the total cost incurred by the company is to the tune of Rs 50 million.

But the mother of all job cuts in the industry will happen once the government privatises the ITDC and the Hotel Corporation of India properties.

According to an official estimate, about 15-20 per cent of the total work force will have to be offered VRS depending upon the location and the hotel category.

There were about 7,860 permanent employees in ITDC in 1999-2000. This means that about 1,180-1,570 employees will have to be offered VRS at a cost of about Rs 310-Rs 470 million.

Officials say that in the Ashoka in Delhi, ITDC's prized property, about 55 per cent of the staff of 1,200 will have to be offered pink slips.

Market players say that like any other business sector, hotels have been grossly overstaffed. The time has now come for them to take a closer look at their wage bills.

"Three years of slowdown and no signs of quick recovery have forced the hotels to right size. Besides other costs including that of raw materials, food and energy costs are also going up everyday. Then, in order to remain contemporary, the hotels are expected to renovate after every few years, so they are trying to rationalise the man-power costs," says Rabindra Seth, a hotel consultant.

On their part, the hotels say that they are downsizing because they want to bring down their staff to room ratio (number of people employed per room) to 1.5:1 from the present high of 2:1 in order to rationalise their cost structure.

"Internationally, the room-staff ratio is to the tune of 0.8:1 but, the Indian hotel industry cannot cut it down to those levels because of various statutory compliances.

"Also internationally, most of the services including laundry and garbage disposal are outsourced which does not happen in India and hence, the requirement of an additional labour force," a senior official of a leading hotel chain pointed out.

This is despite the fact that internationally, even at a low staff level per room, the man-power costs account for about 30-32 per cent of the total costs compared to about 18-20 per cent in India.

"Since we have to pay more as luxury and entertainment tax, we have to earn more and save more. Cutting on the man-power costs up to a certain level makes a lot of sense," the official said.

Interestingly, most of the employees opting for VRS belong to the senior age-groups. An ITC official said that it was because the hotel industry being a service industry required a younger staff.

Adds a multinational hotel consultant: "It is an international trend that the hotel industry is moving towards younger staff because the work includes standing for long hours and still looking fresh." Industry experts say that hotel chains are looking at bringing the average age of their staff to below 30 years.

"Also, the hotels are now looking at cutting less value-added assignments including laundry and are rationalising their cost structure by outsourcing such activities in accordance with the international standards," says AK Sinha, HR manager, Park Hotels.

Some hotel chains, including Bharat Hotels (owner of the Intercontinental hotels in Delhi and Srinagar), Asian Hotels (which runs the Hyatt chain of hotels in India), Radisson and Leela hotels, have, however, bucked the trend and some are in fact recruiting more people across the board.

"We are a young hotel chain and haven't yet reached a position to offer VRS.

On the contrary, we are expanding and this year alone, we are opening four new properties in Jalandhar, Katra, Lonavala and Calcutta, so we would be inducting about 500 employees across-the-board in these four properties alone," said K B Kachru, senior vice president, Carlson Hospitality India.

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