Like hotels around the globe, The Saratoga Arms Hotel faced a daunting challenge as the hospitality industry emerged from the pandemic: recruiting and retaining staff in an environment where employees increasingly prioritize work-life balance over traditional compensation models. The owner and manager of this boutique hotel in Saratoga Springs, New York, responded to this challenge with an innovative compensation approach: dynamic pay. Inspired by yield management principles, this strategy has proven to be a game-changer for staffing issues.
In this case study, we explore how the hotel’s owner, Amy Smith, and its General Manager, Rachel Paley, developed and implemented this unique approach to compensation and the measurable results they’ve seen as they shared on the Hospitality Daily Podcast.
The Challenge of Recruiting and Retaining Staff in a Competitive Market
Coming out of the pandemic, Saratoga Arms, like many hotels, struggled to recruit and retain quality staff. The demand for flexible working conditions had risen dramatically, with potential employees often prioritizing work-life balance over traditional factors such as hourly pay or benefits. This created a staffing dilemma: how could the hotel meet employee expectations while ensuring the business could still run smoothly, especially during peak demand times?
As Amy observed, “We found that people were less interested in working late nights or weekends and more focused on how their job fits into their overall quality of life.”
Saratoga Springs is a small city, but it hosts many large hotel brands, meaning that Saratoga Arms had to compete fiercely for talent. With major chains offering competitive wages and traditional benefits, Amy and Rachel realized they needed to find a new way to attract and retain staff.
Adapting The Principles of Yield Management to Employee Compensation
The solution to the staffing challenge came from an unlikely source: yield management—the pricing strategy long used in hospitality to adjust room rates based on demand.
Rachel, who had a background in staffing for 24/7 retail operations, suggested applying this same principle to staff wages. Instead of paying employees a flat rate regardless of the time or day worked, Saratoga Arms introduced a dynamic pay grid. This system offered six different pay rates depending on the day of the week and time of the day. For example, employees working the standard Monday to Friday daytime shifts earned a base pay, while those covering weekend night shifts were paid significantly more.
“We structured it so that the most undesirable shifts, like overnight on weekends, were paid the highest,” Rachel explains. “This gave employees a direct incentive to fill these harder-to-cover shifts.”
Moreover, if an employee picked up an extra shift outside of their regular schedule, they were compensated based on the shift rate, not their usual pay. This created an environment where staff were motivated to cover for each other and fill in during high-demand times.
Rolling Out the Dynamic Pay System
Launching the dynamic pay system wasn’t without challenges. Implementing a grid with six different wage rates meant restructuring the payroll system and ensuring that shifts were consistently tracked. “It took some time to get it right, but once we set everything up in our payroll system, it became pretty easy to manage,” says Amy.
To ensure transparency and buy-in from the team, Amy and Rachel held informational meetings with their staff, explaining how the new system worked and emphasizing the flexibility and potential for higher earnings.
The response was overwhelmingly positive.
One particularly notable moment came when they rolled out the pay grid to a long-standing night auditor. His pay immediately jumped up, and he went from working five nights a week to four—without losing income. The impact was so surprising that he literally fell out of his chair upon hearing the news!
The Results: Boosted Morale, Better Flexibility, and a Recruiting Edge
The results of the dynamic pay system have been nothing short of transformative for Saratoga Arms.
- Higher morale: Staff are more engaged and satisfied, feeling fairly compensated for less desirable shifts. The system has also reduced absenteeism, as employees are now more willing to swap shifts and cover for one another, knowing they can earn more during peak times.
- Greater flexibility: Employees now have more control over their schedules. They can choose to pick up higher-paying shifts when they want, providing them with additional income and ensuring that the hotel is adequately staffed during peak hours.
- Improved retention: Saratoga Arms has seen lower turnover since introducing dynamic pay. Staff now feel incentivized to stay, knowing they can earn more for working nights and weekends without sacrificing work-life balance.
- A recruiting advantage: The hotel has also used this pay model as a powerful recruitment tool. With Rachel keeping a close watch on the wage scales of local competitors, she can confidently promote Saratoga Arms as a place where employees earn competitive wages and have a work-life balance. “We’re consistently able to offer better flexibility and pay than other hotels in the area,” says Rachel.
A New Model for Hospitality Staffing
Saratoga Arms has successfully tackled the dual challenge of staffing shortages and employee retention by implementing a dynamic pay model. This strategy has allowed them to offer more competitive compensation and flexibility, ensuring that staff are motivated to work during peak times while maintaining a work-life balance.
For hotels facing similar challenges, this case study demonstrates that innovative pay models can boost employee satisfaction and give businesses a competitive edge in recruitment and retention. While there are some logistical challenges to overcome in setting up such a system, the rewards are substantial.
Could “dynamic pay” be a solution to your hotel’s staffing challenges?
Listen to Amy and Rachel share more about this story here on the Hospitality Daily Podcast.
