Labor scarcity driving business changes
Pub Date: 7/1/2007
By Cole Boehler
The Montana Tavern Times has been covering the adult beverage, gaming and foodservice business for almost 11 years. We have seen many changes but, viewed over the long run, these changes are more evolutionary than revolutionary. The evolution seems to be driven by social impulses as well as purely economic ones.
In the 1970s and 1980s, social pressures were brought to bear upon the scourge of drunk driving. Since then, the incidence of drunk driving-caused highway fatalities has been reduced by more than half a major improvement.
As awareness of the problem grew, tavern customers changed their drinking behaviors. Instead of putting down five or six before heading home, most will now only consume one or two, fully aware of how much alcohol consumed at what rate will put a person near the range of impairment or, worse, an illegal blood alcohol content (BAC) for driving and the severe legal consequences that now follow from an arrest for this crime.
For tavern owners, some of the volume decline and negative impact on receipts has been made up by customers who are now choosing more expensive and presumably higher quality, more enjoyable beer, wine and spirits.
Yet the real decline in the on-premise adult beverage business is undeniable and was seen coming from a long way off. And that was a chief impetus in the Legislature's decisions during the late 1980s to allow businesses licensed that sell alcohol to also operate limited gambling.
Gambling remains a profitable department relative to beverage sales for most tavern operations. So it is no wonder more tavern businesses increasingly emphasize that consumer offering.
They may expand the area dedicated to gaming activities, increase the number of machines in operation or upgrade the quality of the machines to yield more entertainment value and, hopefully, more traffic.
Licensees may also more visibly market this aspect of their businesses with more newspaper, TV and radio advertising, but could also ramp up their outside advertising to enhance attention. This may lead some to conclude we have more "casinos" than before, whereas in fact we have no more licensed gaming venues than we did 10 years ago. Businesses are simply emphasizing that aspect of their offerings more as other products decline.
In addition, the Legislature has seen fit in recent sessions to effectively cap the number of gaming licenses and, in the long run, reduce them. The new restaurant beer and wine "cabaret" licenses carry no gambling options. Even "floater" licenses coming into growing population areas from those with shrinking populations cannot transfer their existing gaming privileges along with licensed alcohol sales.
Now we may be seeing a further shift away from alcohol sales to gaming entertainment in establishments with full licenses as another profound dynamic one not in play in Montana for decades takes hold.
Exceedingly low unemployment rates are nudging some hospitality businesses away from activities that require relatively large quantities of increasingly expensive labor, and toward those that require less.
Commercial foodservice is notoriously labor intensive, requiring many hands in food preparation, wait staff, bussers and dishwashers. Adult beverage service can only be provided by live individuals (though we saw a robotic bartender demonstrated a few years ago no thanks!) but it can yield more revenue per worker than foodservice.
How does gaming, as a consumer commodity and business department, compare? In Montana, we have some games such as live poker and keno that require living, breathing workers. But most gaming is of the automated variety offered on video gaming machines.
This kind of gaming requires relatively little labor to be able to operate it, especially if you've opted to have your location vended, in which case the vendor provides the labor to install, maintain and upgrade the equipment, and even performs all the labor-intensive compliance functions. The phrase "plug and play" comes to mind.
So it seems social and economic pressures continue to affect the configuration of licensed businesses, and it appears that may mean a decreasing emphasis on food and beverage along with incentives to further develop entertainment offerings, chiefly gaming.
interestingly, the low unemployment rates and increasingly scarce and expensive workers are having an effect almost universally across a state with radically different economies in the east and west state.
Businesses in booming mountainous western Montana note hospitality service workers have migrated to higher paying jobs in construction and tech industries, or to even better paying jobs in the broader service sector. Or that household incomes have increased to the point where a second income isn't required to make ends meet, so part-time workers are hard to come by. Some businesses have resorted to hiring foreign laborers on temporary work visas.
In rural, agricultural eastern Montana, where farming aggravated by persistent drought has been a struggle for years, and where the government now pays farmers well to not cultivate or plant, there is little opportunity or incentive for able-bodied workers to stay. They may have migrated to western Montana, left the state, or taken one of the high-paying jobs in the booming oil fields.
The end result is that Montana hospitality businesses, whether located where the economy is booming or going bust, face a constant and often critical shortage of labor. Is it any wonder, as owners consider their business prospects, they tend to place more emphasis on the business departments that require the least labor, then more visibly market that department?
We wonder what changes the next decade or two will bring to the licensed hospitality business. Hopefully, not robots.
Source: The Montana Tavern Times, July, 2007, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.