Key takeaways
- Employment in hospitality is still lower than spending would imply
- Average wages for employees have risen steeply while hourly pay for flexible workers has stayed stable
- The enormous supply of labor for flexible work makes it an option hospitality businesses can't ignore
What a wild ride it's been for hospitality businesses. First the Covid-19 pandemic shut them down, then business came roaring back when the economy reopened – but only after millions of workers had left the sector. Today, the sector is still about 350,000 workers short of where it was before the pandemic began, yet it probably needs many more.
Earlier this year, our State of Hospitality Staffing report outlined some of the challenges facing hospitality businesses. More than a quarter of our survey respondents said they had to forgo at least 10% of potential revenue because of lack of staff. But on the whole, they expected to have an easier time with staffing in 2023. So how have things shaken out?
One gap closes, another doesn't
When huge swaths of the hospitality sector shut down in 2020, millions of workers were left without their main income. Not surprisingly, a lot of them left and moved into jobs that could be done remotely. Most people were stuck at home, so they started buying more food themselves rather than going out. A big gap opened up between food purchases and spending on hospitality – but now that gap has closed, and then some:
Thanks to a surge of demand in 2022, spending on hospitality is right back on its pre-pandemic trend. Yet staffing hasn't quite caught up.
Before the pandemic, there was a very close relationship between employment in food services and accommodation and the level of spending (adjusted for inflation) on food services and accommodation. This relationship even extended into the early months of the pandemic, with both trends taking a dive. But since late 2020, a gap has opened up between actual employment and the level that consumers' spending would predict:
While employment may be close to its pre-pandemic level, it's still well below the level that would normally be needed to service current demand. And this persistent gap is continuing to boost pay in the sector:
Pay had to rise in the early days of the pandemic, since in-person hospitality workers were risking exposure to a deadly disease. But even after vaccines became widely available, increases in average wages for employees have easily outpaced inflation, with gains of 11% between January 2022 and May 2023 while consumer prices have climbed by 7%. Not only are businesses facing diminishing returns as they struggle to keep hiring; they also have to pay more for their existing employees.
Tapping a new labor pool
So what's a hospitality business to do? Step one is realizing that not everyone wants to work full-time in hospitality, and step two is figuring out how to employ the people who don't. A growing number of hospitality professionals prefer to work flexible schedules, picking their own shifts. In fact, the labor supply for flexible work has exploded in the past couple of years, with the Instawork network alone numbering close to 5 million workers.
This explosion in supply has made hourly pay extraordinarily stable, in contrast to wages for employees. Here are the trends in average hourly pay on our platform for a variety of roles in hospitality:
In the same period when average wages for employees rose by 11%, hourly pay on our platform actually fell for some roles. Part of the change is due to our expansion into new, lower-cost markets. But even in high-cost markets, the stability has been remarkable. There is simply a huge appetite for shifts.
It's no surprise that fill rates for shifts are also sky-high, even with just 24 hours advance notice. Here are the fill rates this year for the most common roles in hospitality:
All of these shifts have been filling in an average of less than 12 hours, again demonstrating just how deep the labor pool is.
We think these numbers represent a new reality for hospitality staffing. Businesses can no longer afford to confine themselves to traditional staffing options. Many of the workers who left hospitality early in the pandemic – perhaps millions of them – will only return via newer, more flexible arrangements.
Yet this new situation also offers a host of benefits to businesses. Building a roster of trusted professionals who pick up a recurring set of shifts on a flexible schedule can help to reduce overtime and offer coverage for employees who have to miss work. It gives businesses a chance to nurture relationships with prospective employees, too, in a setting where they can try workers out before making hiring decisions.
Over the next couple of years, we think the sector will figure out how to balance these options, filling its staffing needs without leaving revenue on the table. And we're proud to be part of the solution, helping to create more opportunities for workers and businesses to connect.
Realtime metrics
These metrics, derived from data aggregated across the Instawork platform, compare the two weeks starting 7/27/2023 to the previous two weeks. To control for the overall growth of the Instawork marketplace, only shifts involving businesses that booked shifts in both periods are included:
- $0.00 change in hourly pay
- 0.5% point drop in share of short-notice shifts
- 0.0 hours change in hours per existing worker
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