That 2009 wasn’t the best of years for the hotel industry is an understatement. According to at least one published report, it was the worst since 1932 in terms of revenue decline. And the expenses are still there, if not mounting. The largest price tag to hotels – labor costs. They take up nearly 33 percent of revenue and nearly 46 percent of operating costs.

The good news is labor costs are arguably some of the easiest expenses to control. That is, until the emergence of national health care reform.  While the legislation is aimed at reducing the rate of inflation within the health care system, the costs of bringing more employees under the health care umbrella could be significant.

That’s because the hospitality industry lags behind other industries in how much availability their workforce has to company-sponsored health care. According to the Bureau of Labor Statistic’s 2008 National Compensation Survey, just 40 percent of accommodation and food service staff are offered employer-based health insurance. The national average across all other industries – 70 percent. If you’re in the hotel industry, prepare for impact.

According to research by PKF Hospitality Research, the larger the payroll, the larger the health care benefits costs. The study shows that hotels with less than $500,000 in payroll spend just over 25 percent on health benefits. Hotels with payroll over $20 million spend over 49 percent for the benefits.

If you’re unsure how the health care legislation will affect your expenses, contact me. I can help you determine the estimated increase in labor costs, and help you find ways to reduce expenses in other areas to offset some or most of those costs. The jury is out on whether reduced competition will curb out-of-control health care costs. For now, hoteliers are wise to plan for the worst and reduce expenses elsewhere.

How do you think the new health care program will affect your business operations?

Flickr photo credit: a.drian