Solving the Staffing Shortage in Hospitality

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1:33There's no safe like SimpliSafe. Back in February, my family and I went on a vacation in Jamaica. We stayed at this very nice resort. We were there to celebrate my wife's dad's 75th birthday. So we wanted to go all out and we had a great time. Lovely resort, wonderful country. but everything there took forever. Food took forever to arrive. If you needed something delivered to your room, good luck. And we all started to wonder, what's going on here? Is this resort just poorly run? And then we wondered, is there a labor shortage? So I did some research, found some local papers, and indeed, that is exactly what it was, a huge labor shortage in the Jamaican hospitality sector.

2:18You could just see it play out at the resort. The people who worked there, they were so great and they were trying so hard and they were clearly so stressed because there just weren't enough people to accomplish the bazillion things that need to happen for a resort to really function. And the more that I read, the more I realized this actually isn't just Jamaica. This is kind of everywhere. A full global industry-wide labor shortage. The reasons are many and sometimes specific to the area. It is systemic, it is economic, and the industry just does not seem to have a good answer for it. I came home from that trip really interested in this subject because, you know, labor shortages have been happening everywhere.

3:06But there's something really striking about them happening at these nice resorts, which promise a luxury experience, an escape. But that luxury experience is premised upon having a robust and trained staff. So what if a resort can't hold onto their talent? What happens? It's a spiral, spiral downward as far as I can see. And what is the solution? Because the industry really needs one. And then I heard about this guy. My name is Leo, Leo Gittes. Leo is the CEO of Nayara, a collection of six resorts in Costa Rica, Chile, and Panama. They're very high-end luxury resorts in remote rural locations.

3:47Go look them up on their website. It really looks pretty. And like everyone in the industry, Leo thinks a lot about staffing, and he has seen his own share of issues. In the rural areas where his resorts operate, a big problem is housing. Once an area becomes popular, the local real estate owners start converting their housing stock into short-term rentals for tourists. So that means that you have this small rural area where there was already a limited supply of housing. And now a lot of that housing is being used by tourists, which means that there isn't enough housing left for all the people who work at these resorts.

4:22A lot of the people that work for us, when their leases expire, we're getting kicked out. I mean, it's not only have rents gone up tremendously, but the problem is that they are not wanted anymore. Because, you know, why continue to rent to the locals when you can make a lot more money on short-term rentals to tourists? So Leo came up with a solution to this, which goes at the heart of the issue. It is something he is just starting now, but he has invested real money into this, and if it works, he's going to double down, and he hopes to inspire many others in the industry to follow. So that's what we're going to talk about today.

5:03If you are thinking about how to solve a labor shortage issue, or you're just interested in how the hospitality space operates, well, look, Leo's solution isn't going to work for everyone. But I hope that you're inspired by how he's thinking and how he gets underneath the problem. Because big problems require big thinking. And that's coming up after the break. Entrepreneurs, we all love a problem solver. So did you know that Hertz Rental Car has a free membership program to help small and mid-sized businesses save whenever they hit the road? It's called Hertz Business Rewards. Sign up in minutes and save at least 20 % every time you rent a car.

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7:08All right, we're back. I'm talking with Leo Giddes, the CEO of Nyada, a collection of six resorts where a very interesting experiment is taking place to try to solve, well, like I said, one of the most difficult and potentially destructive problems in hospitality, labor shortage. So here's where we're gonna start the conversation. Leo is explaining to me, and this is where we'll pick it up. Leo is explaining to me about how his staff is impacted and particularly who in his staff is impacted when these shifts in the local real estate economy happen, when local landlords stop renting to locals and just start converting their homes and their buildings into short-term rentals for tourists.

7:56Who does that leave behind the most? It's just having a very, very, very tough impact. And I would say that the people that are the most affected are the most vulnerable section of the people that work with us. And sadly, that tends to be single parents. And they're, again, unfortunately, mostly women. I think the great, great majority are women that, I don't know why this happens so often. is really terrible, but so many women get abandoned by boyfriends or husbands, and they end up having to take care of their children. So, I mean, you're seeing a situation where they are typically the most vulnerable segment of the people that work with us, and I would assume that work pretty much in every industry.

8:53and we were noticing that they were getting evicted from the homes and apartments where they had lived for many, many years. We tried to figure out what to do about it. So we did a pilot project. We're still working on it. It's not completely done. And what we did, I mean, at the beginning, we started lending money to help them. We bought a few apartments, but the problem is more serious than that. So some time ago, we bought a large parcel of land as close as possible to the hotel. And what we're doing is we are bringing water, sewer and electricity to this parcel. We're subdividing the property in lots and teamed up with one of the major banks in Costa Rica.

9:45And we told this bank, I mean, this is really not a typical deal for the bank. It's really a social project, which is the way we see it. And what we did is we looked at the people that work with us. And again, we selected those that we felt were more in need, again, more vulnerable. And we have allocated those slots that we subdivided to those people. The project is underway. In Costa Rica, getting permits is very, very difficult because the country is just so careful with the way we develop. So we are waiting to get the last permit, but the idea is to start construction very soon. We, as I told you, we team up with a local bank and we're very happy that we were able to do that.

10:31And the bank has provided subsidized mortgages to these people that are going to be moving into this community. And a concern that I've always had is that, especially in situations where you have single parents, and in this case, mostly single mothers, children tend to grow up by themselves. And they're just so susceptible and so vulnerable to drugs and crime. And the idea now is that all of these families, all of these children are going to grow up together in a community. The property that we purchase is beautiful. There's a forest and we're going to have a playground. But the most important thing is that all of these kids are going to be part of a close knit community.

11:19They're going to grow up together. And I think that way they will be less susceptible to what I was describing, drugs and crime. Probably the one point that I want to make is this for us, this is not a tool or a retention tool to keep our employees. that once anybody who's moving into this community signs on the dotted line with the bank, the home is theirs or hers, and they can quit the following day. There's just, there's no strings attached. We're doing this because we believe in social responsibility. Again, this is one of the reasons why I got into the business. And I love to talk about this because we are too small.

12:10as a small hospitality company, it's hard for us to call a problem as serious as this housing shortage that we're seeing everywhere. But I believe, I'm convinced actually, that most business people have the ability to do what we're doing. And I'm hoping that if the word gets out, which we're trying to do, other people will do what we're doing. If most business people join us in this effort, I think we can make a huge impact on this shortage, this housing shortage that I was describing. So Leo, I'm curious about how you think about this project going forward. You had just said, and you kind of anticipated a question that I was going to ask you that I'm sure many others do, which is the reason why you jumped into it, which is whether or not housing is tied to employment.

13:04You said it's not. but doesn't that mean that you're going to run out of new housing stock fairly fast? And to maintain this kind of solution requires building more and more housing. That's the idea, Jason. That's exactly the idea. We're starting with this project. And if it works out, and I'm totally convinced that it's going to work out, the idea is to continue doing this. So we'll start with this project. And then the idea is that we'll find another parcel of land and we will do the same. And the idea is that eventually we're going to be able to help. I wouldn't say all of them because some people already own homes and they don't need help, luckily.

13:51But the idea is that we continue doing this so that we can help the people that are most in need. So that's the idea. And we're starting this in Costa Rica. The idea is that we also do it outside of the country. And so this sounds like, it sounds like a totally different business that you're entering into. You're now a residential developer. But Jason, it is not a business. I mean, we're not making any money. It is actually costing us money. But it's part of our responsibility as an important employer in this area of Costa Rica, where we have three hotels. We are the largest employer by far in that area.

14:34And I don't remember the number, but someone once mentioned that we're 30 or 40 percent of all the... I mean, because remember that there's also this indirect effect. Not only do you have the families of the people that work with us, but you also have all of the suppliers. And it's also part of our philosophy and mission. We buy, we make a huge effort to source all supplies from the local areas or suppliers are all local people. So when you take all of that into account, we end up becoming a very large percentage of the people that we employ or basically positively impact a huge percentage of the people that work in these rural communities.

15:23So we feel, and it's part, again, I mentioned before, it's part of our mission to be an agent, basically an agent for improvements. I mean, the idea is for us to do good, to help not only the people that work with us, but the communities. And by doing all of this is what we're hoping to accomplish. where so you said we always just to say that i mean we describe ourselves as a force for good and that that's why everybody's talking about sustainability and we also believe very strongly in that but we believe that sustainability is not enough i mean to preserve nature is super important but we also need to worry about the people that work for us and the communities we operating.

16:16You said that this is something that you hope will be replicated throughout the industry. So I'd be curious how you make the case from a business perspective to others. What does it look like? And I don't know anything about the hospitality industry, so I don't know what kind of margins a resort operates on or how much extra cash a resort tends to have on hand for these kinds of projects or what kind of bandwidth the executive team that you have has on hand for this. Does this require any kind of rethinking or restructuring of the business? Or is this something that you feel like if it was a priority of many resorts around the world that they could accomplish this?

16:59Based on what it took for you to do something like this, what would you tell others? I would tell others that the great majority of businesses can afford to do this. And I think you, I mean, you touch on that from the beginning for conversation, you started asking about the fact that companies are having trouble, are facing short, you know, human capital shortages. And I would submit to a lot of people in this industry and other industries that one of the ways that you can work, I mean, that you can find good people and retain good people is by helping deal with this housing shortage. And I did mention to you, and I'm very proud of that, that this is not a tool to retain employees and that this is absolutely not the idea behind it.

17:54But I think. And you're clear with them about that? I mean, because that was the I think what people would expect from the beginning is, oh, this is a way to hold on to employees. It's 100 percent clear. I mean, I would tell you probably that what makes this project most proud for me is the fact that there are no string attached, that we're doing it as a social project. It's not a tool to retain anyone. Sorry, before you go on, I'm just curious. It just makes me think, can you just give me some of the parameters? Like, does somebody have to have worked for the resort for a certain amount of time before they become available for something like this?

18:33We don't have set rules and I'm not the one who decides who, who gets to go into this community, but they, but they, they, they, the biggest parameter is need. And, and if some, I mean, if we feel that someone needs our help, we do it. Obviously if it's someone that just started working with us two weeks ago, she or he will not have the same priority, but it's not based on seniority, to answer your question. It's not based on seniority, it's based on need. Okay. So, right. So you're saying, and can you maybe just give us a quick peek into the business of a resort to help appreciate the point that you just made, which is that a lot of resorts could afford to do this.

19:31um what is it uh what what does that what does that mean um help help me as someone who doesn't understand the business of resorts appreciate what you mean when you say that you know you you know you know money in money out from a resort i don't what does it look like to build this and and how taxing or not would it be on you know sort of the general profit margin of a resort it does have an impact on the profit margin, most definitely. It has a bigger impact on cash flow. But I think

20:13all of us as business people have a responsibility to make the world a better place for future generations.

20:27and if we have to take part of those profits that we generate to make the world a better place, that's what you do. And I would also submit to you that when you do things like this, it's good for business as well. Not only do people in the general area know that you're a responsible business person and they want to work for you. So I would tell my friends and people in general in the industry, when the word gets out that you're socially responsible and that you care about your team, you care about the community you operate, people will want to go work for you. And so that's reason number one. Reason number two is equally powerful.

21:23And this, for me, this was a huge surprise in my business.

21:31I, much to my surprise, and it's a wonderful surprise, I learned that a lot of the guests that come to our hotels come to our hotel because they've heard about the projects that we do. And you and I have just been talking about this community that we're developing. There are so many more things that we do. And really, a lot of publications have written about their commitment to sustainability. We are one of the leaders in the world about regenerative travel. And people have heard about it. and guests come to Nayara in all of our resorts because they want to be part of what we're doing. And I always say that we are incredibly fortunate because we have the best employees or team members working with us, but we also have the most wonderful guests in the world.

22:35And I'll give you an example that is very close to me. when the pandemic hit, it was really tough for us. It was really terrible because in the country where we operate, we don't have the kind of support, the kind of safety net that business in the U.S. has and had where the government came to help. So we had an issue that we had no help from any government and we just didn't want to let just hire our employees because we couldn't do that. And what's really interesting is that our guests learned that we were just struggling to meet payroll at the same time that we had zero income, zero because a lot of these countries had closer borders.

23:26And unbeknownst to us, our guests organized a fund to help us pay for employees. So those are, I mean, and so those are the kind of guests that we have. And I would tell you that the loyalty that we have generated from our guests is because they believe in what we believe in. Leo, I'm gonna ask you one final question inspired by that answer, which I loved, which as you were talking, it made me think about how

24:02your industry in particular, there are lots of other industries that are like this, but yours I found to be in particular, where leaders don't like publicly engaging in the idea of problems. Because, of course, the thing that you are offering is an escape from problems. The people come to your resorts, they pay good money, they travel far to escape their problem. They want to think about problems. And as a result, of course, whenever I've talked to leaders in hospitality, they, you know, to be honest, say a lot of the things that, you know, you also have clearly trained yourself to hammer home on, right?

24:46Which is about, you know, the wonderful experience and so on. Um, and talking about people not being able to, employees not being able to afford local housing, uh, could, you know, pop that bubble a little bit. I'm curious as someone who works in a very image conscious industry, how you have engaged in these kinds of conversations. I mean, here in this one, we set it up. It's a show called Problem Solvers. You knew exactly what I was here to talk about. But how have you done that? Clearly, doing so has worked. You're saying that your guests like to hear about it. They sometimes choose you specifically because of it.

25:31But how have you navigated being on brand about talking about the wonderful experience that you are creating, but also having these harder conversations or engaging with these less sexy subjects that are usually at the core of social responsibility? Jason, great question. And a lot of people have the same concern that you just articulated. And I never felt that way. From the beginning, I felt that sustainability, social responsibility, and luxury hospitality not only are not incompatible, that they need to go together. And I've always felt very strongly that luxury hospitality requires dealing with problems.

26:29And yes, there may be some people that are turned off by the fact that you talk that there are real issues. but I found that perhaps I'm lucky but the guests that come to Nayara not only are not turned off by these topics they want to embrace these problems and they want to get involved in the solution and something that for me seems incredibly rewarding is that a lot of the guests that come to Nayara and the people that come to Nayara are, I mean, they're lucky, they're very well off, but they also care. The people that, I mean, Nayyara is not the place where people come to get drunk and lay under the sun.

27:22People that, the guests that come to Nayyara are people that are intellectually curious, they want to learn about the places where they go, and they want to help. So we offer guests always the opportunity to engage with the community. and they do want to help. So for us, and it may be that our business model is so different from other hotels that this applies mostly to us, but I will submit to you that a lot of hotels, a lot of resorts in our space have guests that will be, that will be attracted and will find very appealing that the hotels where they're staying also have a mission to improve the world.

28:19So it's about starting that conversation. And then once you've started it, you start attracting the people who want to engage with it, which may be more than you think. Exactly, exactly. So what I discovered is that being socially responsible is actually good for business. I mean, I did not do it thinking that it was going to be that way. I did not get into the business. Being social responsive was not, never for me, a way to make the hotel more appealing, but it turned out that way. Yeah, that's great. Leo, really appreciate your time. My pleasure, Jason. Thank you for your time as well. And that's our episode.

29:02I would love to hear what you think and maybe even about a problem that you solved, you can find me at my website, jasonfeifer.com. J-A-S-O-N-F-E-I-F-E-R.com. Also, I have some more useful stuff for you. I write a newsletter about how to future-proof yourself and become more adaptable and optimistic. I would love for you to sign up. It is at jasonfeifer.bulletin.com. Also, check out my other podcast. It's called Build for Tomorrow. In each episode, I take on some belief that we have that holds us back from progress and show you why it is not as bad as you think. Problem Solvers is a production of Entrepreneur Media and comes out every Monday morning.