International Business Report (IBR)

Doing more with less. But at what cost?

Claus Koskelin Claus Koskelin

Gillian Saunders discusses the implications for youth unemployment of a slowdown in sector job growth

Business leaders in the hospitality & tourism sector are continuing to do ‘more with less’ according to the Grant Thornton International Business Report (IBR) Q3 results. Expectations for business growth remain robust, but job creation is fairly stagnant, reflecting a broader drive for efficiencies within the sector.

The overall picture is positive: businesses in the sector are growing. Expectations for both revenue (61%) and profitability (42%) are above the respective global averages, and have been for the past four quarters. Moreover, growth prospects are not restricted to certain regions. Businesses in the EU, emerging Asia Pacific and North America are all bullish about growth prospects.

Considering the fragile state of the global economy and hospitality & tourism’s reliance on discretionary spend, it is very encouraging that business leaders are so optimistic about expanding their operations.

This growth is expected to come from squeezing more from existing staff, rather than taking on anyone new. Just 8% of hospitality & tourism businesses expect to take on new staff over the next 12 months – the fourth straight quarterly decline. The global average is 25%. And this is not something new: over the past 12 months, on average just 9% of sector businesses have hired more people, the lowest of all sectors and less than half the global average.

In some respects this is to be expected: improvements in labour markets tend to lag recoveries as businesses look for signs of sustained growth before they take on extra people. But here’s the broader concern: where are the ‘skills escalator’ jobs the hospitality & tourism sector traditionally provides going to come from? By that, I mean the entry-level jobs which help many young people make a start in their careers. I’m thinking about waiting and bar staff, chamber maids and hotel porters.

Youth unemployment is already so severe a problem that commentators are talking about a ‘lost generation’. In Greece, Spain and South Africa, more than 50% of young people are jobless. In France, the UK and the US, around one in five young people cannot find work. The Economist estimates that more than 30% of 15-24 year-olds in South Asia, rising to over 40% in the Middle East and North Africa, are either unemployed or inactive. This does not only threaten growth today; it also drags down future growth potential.

As the recovery gains momentum, I’m hoping to see businesses in the sector ramp up their hiring plans. I don’t advocate any employer taking on people they can’t afford, but youth unemployment is a global issue. And the hospitality & tourism sector could have a major role to play.

Gillian Saunders is global leader for hospitality & tourism at Grant Thornton.