04 – When Hotel Security Supervisory Ratios Exceed What the Operation Requires
The security department comprised a security director, an assistant security director, 2 shift supervisors, and 8 security officers across 3 shifts. The su...
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The hotel had used a contract security firm for 7 years. The arrangement was priced on a per-officer-hour basis that sat below the hotel’s internal fully loaded cost for the equivalent in-house position. The contract was renewed annually on the basis of that rate comparison. In year 8, the director of finance asked a different question: what did the contract security arrangement actually cost the hotel when the management oversight, the training the hotel provided to contract staff, and the service failure recovery costs that contract performance gaps generated were included in the calculation. The answer was materially different from the per-hour rate comparison.
Hotel contract security cost comparisons built on the contracted officer rate versus the in-house officer rate consistently underestimate the true cost of the outsourced arrangement by omitting the costs that the hotel absorbs around the contract.
A hotel that outsources security to a contract firm does not outsource the management responsibility for security outcomes. The hotel’s security director, or the manager responsible for security oversight, still spends material time managing the contract relationship. Training contract officers on hotel-specific protocols. Reviewing performance against the hotel’s standards. Managing escalations when contract officer behavior generates a guest complaint. Participating in incident reviews when a contract officer’s response is questioned. Each of those activities consumes management time at a cost that the contracted officer rate does not include.
A security director spending 8 hours per week managing a contract security relationship is absorbing $400 to $600 per week in management cost, depending on their fully loaded compensation, that the contract rate comparison never accounts for. Across a full year, that is $20,000 to $30,000 in management absorption that exists directly because the hotel chose the outsourced arrangement. It does not appear in the savings calculation that made the contract look financially attractive.
“We’d been renewing the contract every year because the officer rate was lower than in-house. When we calculated what we were spending around the contract to make it work at our standard, the saving was much smaller than we’d assumed.”
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Learn MoreContract security firms experience higher officer turnover than in-house security departments in most markets. When contract officers turn over, the hotel absorbs the cost of training their replacements on hotel-specific protocols, access systems, emergency procedures, and brand standards. That training cost does not appear in the contract invoice. It appears in the hotel security director’s time, in the time of other hotel staff who support the onboarding process, and in the service quality deterioration that occurs during the period when replacement officers are not yet fully competent in the hotel’s specific operating environment.
A complete contract-versus-in-house security cost comparison requires calculating the contracted officer rate, adding the management absorption cost the hotel carries, adding the training cost of contract officer turnover, and adding the service recovery cost generated by contract performance gaps. When those components are placed against the fully loaded cost of an in-house security officer including wages, benefits, and supervision, the financial case for the outsourced arrangement is often less clear than the officer rate differential suggests. Hotels that have built that complete comparison before making or renewing a contract security decision find that the true cost of the outsourced arrangement frequently converges with or exceeds the in-house alternative. This is the total cost of security delivery that hotel security outsourcing cost versus in-house analysis produces when the comparison is built on complete financial data rather than on officer rate alone.
“The contract officer rate was $4 lower per hour than in-house. When we added up everything else the arrangement cost us, the actual saving was less than $1 per hour. The flexibility had a price we hadn’t been measuring.”
A contract security decision made on officer rate versus in-house wage is a decision made on 1 variable in a comparison that has 5 or 6 relevant variables. Hotels that include the full cost set before making or renewing a contract security arrangement make decisions that reflect the actual financial outcome rather than the one the rate comparison implies. Hotels that do not include the full cost set discover the true outcome through budget variances and management absorption that accumulates over the contract term without being formally attributed to the outsourcing decision that produced it.
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