Many of the issues facing the hospitality industry are reflective of broader shifts in the job market. For hospitality business leaders, the top challenges include employee retention, economic uncertainty, and workforce productivity. In an industry that revolves around the guest experience, it is critical to mitigate these back-office challenges to drive success on the front lines.
Hospitality roles often involve demanding hours in fast-paced environments, making it difficult to maintain consistent, high-caliber workforce productivity. Leaders are also facing a labor shortage, with the workforce participation rate hovering between 62.5% and 63%. This is driven by several factors, including early retirement, a lack of access to childcare, and an increased interest in entrepreneurship and flexible work.
To combat these issues, HR teams in the hospitality industry are seeking new strategies and tools to reduce labor shortages, save time and money, and improve retention. By leveraging AI and other technologies to streamline HR processes, hospitality leaders can better position themselves to thrive during the current economic instability.
As the business climate evolves, HR leaders in hospitality are looking for solutions to a number of challenges, including retention (59%), attracting talent (56%), and managing talent (52%). These issues can harm productivity and lead to poor employee engagement—major hurdles in a guest-centered industry. To move forward, companies must invest in more advanced, data-driven HR systems to mitigate current challenges and enhance operational efficiency.
Productivity loss caused by these challenges makes it difficult for HR leaders to support business goals using traditional practices. HR roles involve some of the most exhaustive administrative tasks, leading to an estimated annual loss of over $140,000 in productivity for businesses. The highest losses are in recruiting and onboarding ($18,818 annually), people management ($18,618 annually), and tracking employee hours ($15,173 annually).
Effective recruitment is especially important in hospitality, where seasonal hires are common. This means that recruiting, onboarding, training, and offboarding happen more frequently, requiring HR professionals to consistently refine and organize these processes to ensure multiple hiring cycles run smoothly throughout the year.
As leaders look to adopt new technology, many are considering outsourcing their most time-consuming tasks. Currently, almost a third of HR leaders in hospitality spend more than 10 hours a week on administrative HR duties. With employee turnover in the industry costing an average of $10,431 per worker, it significantly increases the HR workload.
This has prompted a pivot to HR outsourcing, with 59% of hospitality leaders planning to outsource HR administration in 2025. The top tasks identified for outsourcing are payroll processing (43%), benefits administration (12%), and managing employee performance (9%). Leaders expect this shift to result in fewer mistakes (48%), increased productivity (41%), and reduced costs (39%).
In an industry where customer satisfaction is paramount, any loss of efficiency directly impacts profitability and service quality. By automating routine administrative processes, HR teams can spend their time working on more strategic initiatives and elevate the overall guest experience by ensuring that employees are well-supported.
