Tourism Industry hit Hard by Labor Crisis

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Higher wages and more flexible conditions could help ease labor shortage problems in the hospitality industry, according to experts the Budapest Business Journal spoke with.

Summer heat and summer holidays are again throwing the spotlight on hotels and restaurants which, often filled to bursting, are struggling to find and retain workforce.  

A constant problem that has become even more acute recently, the labor shortage comes down to a number factors.

Lately, the number of new facilities, especially hotels, have increased in Budapest and the countryside, which creates significantly greater demand for staff, Csaba Baldauf, general vice president of the Hungarian Hotel and Restaurant Association (MSZÉSZ) tells the BBJ. The addition of new facilities has also outpaced the closing of older ones, he adds.  

Salary levels are very low, making working in the hospitality industry less attractive. “This is not country-specific, in Western Europe it is also less popular due to different and longer working hours, or weekend work, especially for the young”, Baldauf says.  

A further complication is that neighboring countries that offer more competitive wages have been filling their own vacancies with Hungarian workers.  

“If we could pay 75-80% of what they do, migration could be reversed and we could also employ people from other countries,” Baldauf says. Yet, as long as a waiter in Austria can earn net EUR 1,500 (about HUF 450,000) as opposed to HUF 250,000 here that is not likely to happen, he says.  

Csaba Baldauf.

Whitening the Industry

This doesn’t mean that one cannot earn better in Hungary, but they are likely to be employed off the book. The whitening of the industry has started but there are still a high number of employers who avoid taxes.

The solution? “We need to raise wages, that is the burning interest of the industry,” Baldauf says. The planned VAT-reduction on commercial accommodation from 18% to 5%, expected to come into effect next January (if approved in the upcoming budget) can be a source of pay raise. At the same time, a 4% tourism contribution will be introduced in the sector.

But working conditions also need to be improved in order to attract more young people. “We need to provide them with, for example, service homes and more flexible working conditions,” the expert says. The same applies for the workforce already working in the industry. They need to be “cherished” in order to be retained, Baldauf adds.

Bad as it is, in Budapest the shortage is not as acute as in the countryside. “In the capital, there is workforce, it just costs more,” Tamás Flesch, president of MSZÉSZ tells the BBJ.  

Labor costs are continuously rising but it is difficult to determine an average as it varies with position and category.  

“The wages of chefs, house maids, waiters are all rising. A housekeeper could see a 10-12% rise this year,” Flesch says.  

Alternate Careers

Talking about migration of workers, Flesch highlights the poaching effect of other industries as much as countries.

“A shelf-stacker in a hypermarket chain can earn more than a house maid. And working as one is far less hard and stressful than working as a housemaid,” he explains.  

With rising labor costs, profitability declines. Once again, exactly how much depends on the category, but all areas see their profitability drop.  

“Since labor and related costs make up a third of overall costs, no one is spared,” Flesch says. The expert also sees part of the solution in the VAT-reduction for hotels.

In terms of quality of workforce, both representatives of MSZÉSZ underlie the need to return to longer internship periods. This is already in the pipeline and will increase the current period to two months, Flesch says.

Training the Next Generation

“For a long time, hospitality jobs have been perceived quite negatively; not too many have looked at them as serious professions,” Andrea Lugasi, dean of the Budapest Business School tells the BBJ.

“What we hear from our business partners is that they have a hard time finding both skilled and qualified workforce,” she adds.  

“Yet with the rise of gastronomy and the arrival of new global trends, this mindset is changing. Many of our students – though they earn a degree – are interested in manual jobs such as chefs,” Lugasi notes.

One also needs to understand working in this industry is hard work, both physically and mentally, which also makes it less attractive for many.

“A student of mine who waits tables as a side hustle told me one day he walked [a total of] 28 kilometers during one shift.”

Most students who return from their mandatory internship have already been offered a position. No wonder: once they know what they can expect, they are more likely to stay as a permanent worker.  

Attendance Rising

One bright prospect is that, while the labor shortage is acute, the number of students applying to hospitality faculties has actually been increasing in the past few years, Lugasi says.  

“Following a setback in 2012-2013, we have seen their number rising constantly. Last year, we recorded about a 10% increase compared to a year earlier.”  

The Budapest Business School Faculty of Commerce, Hospitality and Tourism runs both Hungarian and English-language bachelor courses, plus a higher educational vocational training in Hungarian (that does not award a degree). Overall, it has more than 700 students enrolled at the beginning of the new semester, 60-70% of whom finish their studies.  

Regarding the quality of training, there is a gap between secondary and higher level education. For many reasons, the former has not yet been able to follow the changes in the industry and much of the equipment used and material taught is outdated.  

“Here at the university, we try and incorporate the most recent knowhow, providing our students with state-of-the-art equipment, and collaborate with the industry. We invite them to hold lecture and also visit them at their facilities. This mindset helps us stay up to date,” Lugasi says.

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