Analysis of the Hospitality Industry s Introduction Hospitality

Contemporary Issues of HRJiayue Hu790680494

Analysis of the Hospitality Industry

Introduction

Hospitality is one of the fast-growing industries in the

world. Hotels around the world need more employees to meet the

growing demand of customers. However, the hospitality industry

faces a huge challenge. Compared to other industries, non-

management employees’ turnover rate in the hospitality industry

is the highest. According to the Bureau of Labor Statistics1, the

average separation rate (turnover rate) for 2013 among all

industries in the US was about 38%; however, the quits level of

Leisure and Hospitality was 64%, which is much higher than

average. The average voluntary leave rate was 20.3%, but the

voluntary leave rate was 39.9% in the hospitality industry. From

1 http://www.bls.gov/news.release/pdf/jolts.pdf

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2008 to 2013, the turnover rates are around 61% to 64%, which is

much higher than other industries. It is important for the

hospitality industry to figure out the reasons why there is a

high turnover rate.

Therefore, this paper will analyze the existing problems in

the hospitality industry. In the first part of this paper will

research the causes of the high turnover rate of the hospitality

industry. In the second part of the paper, recommendations will

be proposed to lower the turnover rate.

Influence of Turnover in the Hospitality Industry

The hospitality Industry consists of two aspects; the first

one is production and the other one is service. Service is

important to attract more new customers and retain existing ones.

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Therefore, employees are important, because customers receive

services through employees in this industry. According to Lewis,

the creation and the rendering of services from the hotel to the

customer are primarily achieved through the employees2. The

hospitality industry should ensure high quality and efficiency of

the employees in the organization. The development of an

efficient human resource management system is critical to

organizations to recruit and retain their best employees; thus,

these organizations can achieve their objectives.

Referring to Denvir and McMahon, there are two types of

labor turnovers; one is involuntary and the other is voluntary3,

which is unavoidable but controllable. High turnover rate has a

2 Lewis, R. C. 1989. “Hospitality Marketing: The Internal Approach”. The Cornell Hotel and Restaurant Administration Quarterly, 30(3): 40 -453 Denvir, A.& McMahon, F. 1992. “Labor turnover in London hotels and the costeffectiveness of preventative measures”. International Journal of Hospitality Management, 11(2): 143-154.

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great influence on frontline employees in the hospitality

industry, which has both a direct and indirect impact on the

organizations. According to Davidson, the direct impact is the

increasing costs that will be used to recruit and train new

employees4. The indirect impact is related to the decreasing

productivity of employees5, because of their poor service, low

job satisfaction and unfamiliarity with the organizations. Both

the direct and indirect impacts will lead to dissatisfaction of

customers.

Main causes of High Turnover Rate

Controllable cause

Seasonality

4 Davidson, M.C.G. & Timo, N.; Wang Y. 2010. “How much does labor turnover cost? A case studyof Australian four - and five -star hotels”. International Journal of Contemporary HospitalityManagement, 22(4): 451 -466.5 Tracey, J.B. & Hinkin, T.R.2006. “The costs of employee turnover: when the devil isin the details”. Cornell Hospitality Report, 6(15): 4 -16.

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According to Denvir and McMahon, one of the reasons of high

turnover rate in the hospitality industry is seasonality.

Managers in this industry are used to hire and fire employees in

accordance with seasonal fluctuations, but they are not prepared

and are unable to synchronize labor to demand, which makes these

hirings and firings less meaningful.

Negative culture

Another problem is the “turnover culture”6 in the hospitality

industry, leading to high turnover within the organization. Both

pre-employment and post-employment attitudes are related to role

ambiguity, payrolls, workloads and support of the organizations.

These elements may contribute to the frontline employees’

intentions to leave. Also, according to Iverson and Deery,

6 Iverson, E., & Deery, M. 1997. Turnover Culture in the hospitality industry. Human Resources Management Journal, 7(4), 71-82.

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environmental factors such as job opportunities and the

traditional culture in the hospitality industry are closely

related to termination intention. Frontline employees in the

hospitality industry are normally used to the high turnover rate

and care less about whether they are able to stay in the

organizations for a long time. Therefore, they feel free to leave

jobs and find new ones.

Easily Ignored Factors

Woods and Macaulay7 identified that abnormal phenomena of

employment, such as irregular working hours and night shifts, are

actually attractions to employees in the hospitality industry.

However, it is other factors like the quality of supervision and

benefit package that greatly influence the turnover of the

7 Porter,L, W., & Steers, R.M. 1973. Organizational commitment, work, and personal factors in employee turnover and absenteeism. Psychological Bulletin, 80, 151-176.

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employees in the hospitality industry. This study implies that

human resource managers should pay attention to the factors that

are easily ignored by most people. They cannot take everything

for granted.

Opportunities for Promotion

The Bureau of Labor Statistics says that the hospitality

industry employs many young workers and first-time job holders in

part-time and seasonal jobs, indicating that before companies

recruit new employees, they seldom think that they want to retain

these employees for a long time. However, it is likely for the

employees to leave the companies even though they feel satisfied

their jobs. The reason is that they cannot see the possibility to

be promoted in the future. Equity of promotions cannot be

guaranteed. Companies in the hospitality industry should be

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really careful about dealing with issues associated with

promotion. There is a high possibility for the companies to lower

the turnover rate if they can make their career advancement

policies clear to both full-time and part-time employees

Workload Stress

In the hospitality industry, the stress of workloads is huge.

Employees in this industry are known as “24/7” workers. It

doesn’t mean that they will work 24 hours a day and seven days a

week; it implies that they have much longer working hours.

Employees spend a huge amount of time communicating with

customers and solving problems. Monachello8 highlighted that the

high turnover rate is related to high levels of stress from time

pressure, long hours of work and constant interactions with

8 Riley, M. 1996. Human resource management in the hospitality and tourism industry.Oxford: Butterworth-Heinemann.

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people. If employees in the hospitality industry have difficult

customers, they are not able to get much help form supervisors,

because supervisors have other responsibilities and duties. Also,

a certain percentage of the supervisors have no background human

resource background. They do not know how to deal with their

employees.

Low Salaries

As mentioned above, the nature of the hospitality industry is

seasonal and organizations always hire part-time employees.

Compared to full-time employees, part-time employees’ salaries

are lower. They have a high level of routine work within the

organizations. They have less possibility to be promoted, because

they are considered part-time performers. Their salaries are

always under the average and their own expectation, which also

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contributes to the high turnover rate in the hospitality

industry.

Younger Work Force

In the hospitality industry, employees are generally younger.

They are mostly Generation Ys. According to the Generation

Snapshot provided in the class, they are eager to build multiple

careers and want to face great challenges and develop new career

paths. This implies that the employees in this industry will have

a tendency to leave their jobs to experience high risks and high

rewards.

Uncontrollable causes

Increases of Pay in Other Industries:

With the help of the Bureau of Labor Statistics, employees

can access average income information in different industries. In

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the hospitality industry, employees receive lower wages. What is

even worse is that they are highly dependent on tips, which means

that they may have fluctuating income. As early as 2003, Phillips

and Connell pointed that there was a growing trend of higher

voluntary leave in the hospitality industry9, because employees

are willing to seek jobs with better pay.

In a prosperous economy background, there are more available

jobs with higher salaries. Employees can access information

easily on the Internet and other communication channels. Most

employees in the hospitality industry feel that they are worth

more that what they are paid. There is always a gap between what

employees want and what organizations offer. Pay is beyond their

salaries. It includes wages, bonuses, tips and other

9 Phillips, J.A and Connel, G.T. (2003). Accountability in Human ResourceManagement. Boston: Butterworth-Heinemann.

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compensation. Part-time employees in the hospitality industry

have lower pay than their counterparts in the other industries.

Pay is the most critical outcome of organizational membership for

employees10.

Cost of the High Turnover Rate

Organizations in the hospitality industry have to manage

their high turnover rate, because the cost associated with it is

high. As mentioned above, the high turnover rate will result in

both direct and indirect influences.

The direct costs can be easily calculated. According to Tank,

replacement costs accounted for 33% of salary, which is really a

high portion. Also, employees with different levels will incur

10 Gupta, N. and Shaw,J.(2001). Pay fairness and Employee outcomes. Exacerbation andattenuation effects of financial needs. Journal of Occupational and Organizational Psychology Vol 74(3), p 22.

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different costs. The costs associated with turnover include five

aspects: separation costs, recruitment costs, selection costs,

hiring cost and lost productivity costs. Even after companies

recruit a new employee, he/she will experience a learning curve

that will lower efficiency and incur unnecessary costs.

Indirect costs are not easy to identify; however, as

mentioned in the section of the influence of turnover, if

employees are not satisfied with their jobs, their motivation to

offer better service to customers will decrease. Low quality of

service will raise dissatisfaction from customers, ultimately

leading to a bad effect on companies.

The high turnover rate is a central problem for management.

Therefore, human resource departments should develop some

strategies to cope with tough problems and lead to an industry

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with a healthy turnover rate.

Recommendations to Organizations in the Hospitality

Industry

There are a lot of remedies recommended in different kinds of

literature. Before developing a strategy to improve turnover,

there are two common threads that cannot be forgotten. First,

human resource departments should ensure that they select the

right person for the job. Not only do the candidates need to

perform tasks, but also they need to fit the organizations and

contribute to their development. The pre-class materials that

discuss the A,B ,C players prove that it is important to select

the right person for the right position. Second, organizations

should develop a culture where employees want to stay for a long

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period of time. The hospitality industry with a turnover culture

will discourage employees to stay. A better working environment

will stimulate the employees’ motivation to provide better

services and decrease the turnover rate.

Selection of Right Candidates

A better recruitment program can help avoid employee turnover

at the starting point. During recruitment and training processes,

human resource departments can assess whether the characteristics

of the candidates fit the organization.

Human resource departments can use an interview and training

programs to know more about job candidates. Referring to the

class materials, there are four types of interview styles. In the

hospitality industry, employees face various situations and

customers. Also, they are required to solve problems of customers

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in a timely manner. Situations are often urgent. Therefore, it is

better for the organization to use the style of “Hot Seat or

Stress.” In this interview style, interviewers can get to know

the applicants from different aspects of observations. Rapid fire

questions can test the candidates’ ability to deal with

situations that may happen in the workplace.

The article Hiring for Emotional Intelligence mentioned that

EQ “accounts for anywhere from 24% to 69% of performance

success.11” In the hospitality industry, if an employee has high

emotional intelligence, he/she will increase service quality and

bring greater customer experience, because employees with high EQ

can control their emotions when they are in a bad mood. Also,

they can learn from others’ mistakes and improve themselves. The

11 Class material: Christina Bielaszka- DuVernay- Hiring for Emotional Intelligence

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most important thing is that they can understand demands of

customers. If human resource departments want to choose better

candidates, they should ensure that they design interview

questions or situations to test the emotional intelligence of

candidates.

Employees with high EQ normally can adjust themselves to stay

in balance; thus, they feel less anxiety and dissatisfaction,

which may contribute to lowering the turnover rate.

Realizing the Real Organization

As mentioned above, there is always a gap between employees’

expectations and what organizations offer. Organizations can use

recruiting programs to get job candidates acquainted with the

“real” organization. Real job preview (RJP) can be used by the

human resource departments.

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RJPs have been consistently associated with reduced

turnover12. Therefore, during the RJP, human resource should

communicate with the candidates and provide them with information

the candidates want to know. Human resource departments should

provide candidates with realistic information about both the

positive and negative aspects of a job and working environment.

Giving negative aspects of jobs will close the gap between

employees’ expectations and their realization in the future. For

example, the hospitality industry often requires employees to

work long hours. Also, organizations should inform their

candidates that they will communicate with customers frequently

during their working hours. As mentioned above, employees in the

hospitality industry will have high time pressure and workload

12 EARNEST, D. R., ALLEN, D. G. and LANDIS, R. S. (2011), MECHANISMS LINKING REALISTICJOB PREVIEWS WITH TURNOVER: A META-ANALYTIC PATH ANALYSIS. Personnel Psychology,64: 865–897. doi: 10.1111/j.1744-6570.2011.01230.x

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pressure. Also, employees in the hospitality industry cannot get

much help from their supervisors. Realistic information allows

job candidates to think about whether they should continue with

the recruitment process and accept the job. As mentioned above,

the employees in the hospitality industry get less help from

their supervisor. Most of time, they will have to deal with the

problems by their own. Human resource department should clarify

the roles these candidates will play in their future career.

With more formal and real information available to the pre-

candidates, employees will feel the honesty of the organizations.

Furthermore, the negative aspects will prepare the candidates for

their challenges in the future; thus, when they enter the

organization, they will feel less dissatisfaction and discomfort,

which will contribute to lowering the turnover rate.

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Concerns with the seasonality of the hospitality industry

Seasonality of the hospitality industry partly contributes to

the turnover. When human resource departments hire seasonal or

part-time employees, the employees are quickly thrown into the

work environment with little mentoring. These employees will face

a lot of confusion in their work, and will leave the organization

after a short period of time. Actually, human resource

departments can also offer them RJP so that they can understand

the organization and their jobs clearly. Some part-time employees

can be good prospects if they want to stay within the

organizations for a long time.

Development of Trust within the Organization

A model provided in the class identified five elements that

are critical to build trust between employees and organizations.

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Among the five elements, human resource departments in the

hospitality industry should focus on fairness. As mentioned in

the causes of high turnover, promotion opportunities in the

hospitality industry are not equally distributed.

Human resource departments, therefore, should build a fair

reward system. Internal rewards should consist of succession

planning, professional development programs and compensation

packages. With a professional development program, opportunities

are provided to employees to develop their professional skills

and knowledge, which will also help employees to seek the

opportunities of advancement. When there are attainable

opportunities available within the organizations, employees will

be less likely to leave.

Seasonal employees have fewer opportunities than full-time

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employees in the hospitality industry, because rewards and

promotions are based on seniority (If an employee stays longer in

the organization, he/she will have more opportunities to get

promoted and rewarded); so the human resource department should

make sure that the reward and advancement opportunities are based

on employees’ performance. According to Riley, if employees

experience equity and have equal opportunities for promotions,

they are less likely to leave the organization13.

Organizations in the hospitality industry should also care

for employees as individuals with personal lives. There is a

report that employees in the hospitality industries will face

13 32. Riley, D., 2006. Turnover Intention: The Mediation MIS employees’ turnoverintentions: A structural Effects of Job Satisfaction, Effective Commitment andequation model. Communication of the ACM, Continuance Commitment. Master of Applied35(2): 1-16. Psychology, The University of Waikato

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more family issues14, which also contribute to the turnover of

these employees. Working in a hospitality industry means long and

irregular working hours; employees will spend less time with

their families. Therefore, organizations can provide family-

supportive policies, such as flexible schedules, for its

employees. A study showed that family-supportive work policies

such as flexible scheduling positively influence employee

perceptions of control, which in turn decrease work–family

conflicts15. For those who have children, an organization can

provide childcare programs. In this way, employees can be more

engaged with their own work.

14Jeanette, N.C., 2007. WORK AND FAMILY ISSUES IN THE HOSPITALITY INDUSTRY:PERSPECTIVESOF ENTRANTS,MANAGERS, AND SPOUSES. Journal of Hospitality & Tourism Research, Vol. 31,No. 3, August 2007, 275-298 DOI: 10.1177/109634800729991915 Thomas, L. T., & Ganster, D. C. (1995). Impact of family-supportive work variableson work-family conflict and strain: A control perspective. Journal of AppliedPsychology, 80(1), 6-15.

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HR managers need to build a sense of “family environment”,

because employees spend a huge amount of time with their

colleagues. For employees in a hospitality industry, the

organizations are their secondary families. Organizations can

develop some outdoor activities during holidays for their

employees. Employees can bring their family members and meet

others. A strong connection among employees is beneficial to

family supportive policies, because employees are more willing to

take care of their counterparts when they are off duty.

Building an environment with trust will help their employees

strengthen the relationship between the organizations and their

employees. A positive organizational culture can retain the best

employees and reduce turnover rate.

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Conclusions

Human resource departments in the hospitality industry are

faced with intense pressure from high turnover rates. Different

organizations will face different problems. HR managers should

design different programs to improve the working environment so

that employees will feel secure and comfortable. Also, managers

should make sure that all employees are treated equally. It is

impossible to avoid turnover, but human resource departments can

help to reduce the turnover rate, leading to an organization with

a healthier atmosphere for everyone.

AWiIn

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Analysis of the Hospitality Industry s Introduction Hospitality

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