Why Hospitality May Be The Gig Economy’s Next Frontier

Digital platforms have the potential to reshape the way work is done, how workers find work, and even who gets the work.

Writ large, matching workers and employers can be done across a cellphone, across a site and with haste. The critical mass may indeed be there, as the data show that roughly a third of U.S. workers are also part of the gig economy. As noted in the PYMNTS Gig Economy Index, gig workers’ earnings in 2018 were estimated to exceed $1.7 trillion.

Drill down a bit, and demand bubbles up in certain verticals, including the hospitality sector, where gigs are short-term and turnover can be high — think restaurants that need cooks, or hotels that need housekeepers. Long hours, along with unpredictable demand and pay, mean keeping staff may be hard, and getting staff may be even more difficult.

It’s a vertical that may be tailor-made for a platform matching work available with those who want to work — perhaps on a shift-by-shift basis. The emphasis is on speed, and shifts may start within hours if the demand is there. Keeping up with the ebb and flow requires technology.

Against that backdrop, Instawork, which has set its sights on the hospitality sector, has made inroads into cities such as Los Angeles with its platform offering over the past few years, and with $18 million raised in a funding round, will target additional cities.

Focusing on Smaller Firms

In an interview with PYMNTS, Instawork CEO and Co-Founder Sumir Meghani said the focal point — and pain point in the firm’s crosshairs — rests with the smaller firms that make up the hospitality industry, where turnover is high. As he illustrated, a restaurant in San Francisco may encounter 100 percent turnover, as measured annually, particularly in what may be termed “back of the house” positions in the kitchen. This means the restaurant will likely resort to traditional methods of finding workers, such as job boards or signs in the window. Huge numbers of workers may show up, and hundreds of interviews conducted, just to hire one person. And as soon as they’ve been hired, another worker departs, which means the cycle is never ending and may be occurring across several positions at once.

“As a result, the business suffers,” Meghani said. “Their existing staff has to take on more responsibility in this crisis cycle.” The effects are exacerbated by the fact that many of these restaurants also have other revenue sources available such as Doordash and Caviar — but if they do not have the staff to meet the lunchtime on-demand, on-delivery rush, they lose out.

Drilling down even more, there are demographic shifts in place too, he said, where big cities have become increasingly unaffordable for hospitality workers. Meghani said these workers skew younger, and for them, “the most important things they want in their lifestyle and work is flexibility.” A steady supply of work on demand can mean making the rent, staying in place and in turn keeping those small hospitality firms afloat.

While many observers of the on-demand economy may point to the explosion of Uber and Lyft and any number of on-wheels options open to gig economy workers, Meghani pointed out that “there is a large segment of the labor force that doesn’t have a nice car or that doesn’t particularly want to spend their day driving people around.” Instawork, he said, has been focused on “democratizing the gig economy for a larger group of people that includes millennials and immigrants. You only need a cell phone and a desire to work.”

The Mechanics

The platform posts shifts on offer for those workers, and the workers who download the firm’s free app, as Meghani said, are required to post identifying information such as name, address, work experience and references. The onboarding process, he said, has enough friction in it to ensure that “the people signing up are truly qualified to be successful — the same people willing to go through the work [to sign up] are the ones willing to show up.”

They get rated, too, after the gig is done — and as the executive further detailed, the workers rate their short-term employers too. The ratings are done across a five-star system; highly-rated workers eventually are eligible for bonuses or access to special events.

The company has said it has a system in place that suspends contractors if they cancel a job within 24 hours. Those who are repeat offenders may see their accounts deactivated, and those who do not show up at all without documentation as to why they were no-shows are banned.

Instawork charges booking fees per shift and ensures that 1099 requirements are met. And Instawork, he said, partners with companies to process credit card or ACH payments; workers are paid every week.

Looking ahead, and with a nod to the $18 million just raised, Meghani said the funds will be used to expand into new markets, including Las Vegas, Chicago and Phoenix. There’s ample opportunity for growth, he said, as there are about a million small hospitality businesses in the United States, employing tens of millions of workers.