Title:

How is Labor Turnover a Problem in the Hospitality Industry?

 A case study on international hotels into the aspects of labor turnover

Introduction

What is labor turnover to a manager or employee, to an organization, and to the hospitality industry as a whole?  Knowing and understanding labor turnover is important in hotels and hospitality especially with such historically high turnover rates. Hospitality and hotels are service-based industries that are continuously growing on a national and global scale. As a service based industry, there is a high dependency on the working labor, and with labor turnover rates being some of the highest in hospitality and hotels in comparison to other industries, there is an understandable cause for concern.

High labor turnover is continuously considered a problem in some industries which includes the hospitality and hotel who has struggled with the high rates for years as it has been characterized as having historically high labor turnover rates (Iverson & Deery, 1997). Iverson and Deery are just two researchers who have explored high labor turnover trends, and with vast and numerous amounts of study previously conducted, many have expressed the high rates to be problematic for the hospitality industry.

This dissertation looked to understand labor turnover through managerial and expert perspectives on what trends look like in hotels across the world, and how and why high turnover trends are problematic. There are also the concerns of how the external environments influence the outcome of year-on-year turnover rates, and what concerns the individual hotels.

The use of a case study allowed the comparison of multiple hotels from different continents, cultures, and companies. No two hotels expressed the same exact strategy in hiring, training or the culture within the hotel. Each manager reacted and responded differently to the idea of exploring the labor turnover rates in their hotel, and from each interview can draw varying conclusions to why high turnover is present and problematic. The experts were able to shed light on the topic from different perspectives, as well as acknowledge their own frustrations of the industry and potential strategies to ‘fix’ high labor turnover.

Results

Labor turnover, as it is historically observed as high in the hospitality industry, has been illustrated and concluded continuously in literature and research to be problematic.  Managers, experts, and organizations are not shy to say it is a continuous trend of high turnover which is cause for concern in the hospitality industry, but why does it continue?

As an industry, hospitality including hotels has characteristics that make the industry both attractive and unattractive. Job seekers see hotels to provide early managerial responsibilities. There are far more negative and unattractive aspects revealed in literature that are qualities considered to be potential influencers of the current turnover rates. There is a lack of internal labor market (Carbery et al 2003), along with long hours, emotional labor (Kusluvan et al, 2010), physical demand which comes with some positions, and role ambiguity (Deery & Shaw, 1999) of employee positions.

This study saw that the response of whether labor turnover is problematic or not, has depended on the trends within a manager’s organization, but overall, including the experts, there was concern and acknowledgement expressed over the continued high trends across the industry over decades because the actions of turnover have their effects.  There are both problems and benefits found in labor turnover, and that the movement of employees effects more than the bottom line. The organization and management are affected along with co-workers and it is imperative not to forget the effect on the guests/customers (Carbery et al 2003). It is essential to not forget the benefits of turnover though as well; some turnover is important, such as gaining fresh blood and ideas, expressed by both literature and interviewees.

If high labor turnover is cause for concern, then why an employee leaves is important to understand.  Studies, literature, and industry experts have different and varying answers, as well as many aspects in which they agree on the causes of turnover, for example internal culture (Iverson & Deery, 1997) and lack of satisfaction in the job (Khatri et al, 2010). There are many reasons employees leave, previous literature covers reasons which are best summed up based off of controllable, uncontrollable, and external factors unrelated to the job which influence intent to leave. Addressing the unattractive aspects of the industry that can factor into intent to leave are aspect of low pay and the management (Simons & Hinkin 2001).

The case study proved three main areas in which influence intent to leave – the monetary and non-monetary rewards of the job, the internal job environment of the organization, and the opportunities available to employees internally and externally, which both dependently and interdependently can affect employees and the organization. The importance of understanding why employees leave allow an organization to strategize, but the organization and management has to be willing to accept all reasons even when it is something they desire not to believe as the management may be in part causing the problem.

Whether labor turnover is currently a problem or not in an organization, the strategy and approach of management and the organization have towards employee retention is important. How a hotel approaches their idea of hiring and training the employees potentially can foreshadow the future of the employees within an organization. The hotels in the study showed not only differences in labor turnover, but more importantly their strategies towards hiring and development proved to reflect their turnover rates. Hotels expressing their support for internal training, investment, and advancement had lower turnover rates. It is not a guaranteed fix to turnover problems since in some areas certain positions are not seen as long-term commitments as expressed by a manager, who saw certain positions to characteristically employ labor for a short-term period.

The study showed three areas which are significant when looking at retention strategy – the investment by the organization, the tenure of employees and management, and what norms and culture are within as well as surrounding the organization. It is important to realize that the effort and care put in by management can reflect down to the employees influencing an employee’s care towards their job beyond the basics, and when they no longer have a need for the organization it is over and another number is added to the turnover rates. On the other hand, if the hotel shows compassion for who is entering the organization and what opportunities there are internally, loyalty could grow stronger. Human resource management (HRM) has increasingly become more necessary in the service industries, and industries such as hotels have to embrace the need to strategize according to their vision and mission for the organization and its employees. Writers such as Harrison & Enz (2003) and Tanke (2001) clearly looked to HRM to express the importance of both the employees and the investment and care of these employees.

An employee’s intentions to leave are diverse and plentiful, as well as how organizations can approach strategy, but it should be remembered that there is diversity in international businesses and global organizations. Different cultures, regions, and countries will have different factors influencing turnover, while some aspects don’t show much differentiation within the industry.  Three external influencers that were noted in interviews, which can affect turnover in hotel organizations, were culture/country, economic, and social. The nature of the long, unconventional hours, along with low pay can create different social pressures from different cultures, such as family oriented cultures with mothers working nontraditional hours instead of being home, or amount of business hotels bring in may cause lower pay or fewer hours available prompting employees to find work elsewhere.  Such differences should be understood and taken into consideration when strategic plans are put in brand –wide.

With external factors contributing to levels of business the hotels receive and opportunities available to employees elsewhere, it may seem futile to try and counter the environment the hotel is in. What hotel management may or may not want to admit to them is they can have some control of turnover, and it is in the recruitment and development of employees. Literature says it, textbooks say it, and the managers in the case confirmed it: the hotels expressing more care in the hiring and training of employees showed lower turnover rates.

As previous literature also expressed, even with anonymity, respondents can still be hesitant and conservative with information put forth. This dissertation looked at a limited number of hotels and interviewed with a few experts, but even with such few hotels willing to participate, one can see that there are a variety of problems and benefits of labor turnover. The hotels with higher turnover rates proved less forthcoming of information, but if such hotels would be more open and willing to be observed and studied along with acceptance to take such considerations under advisement for change, turnover could take a different route. Exploring a larger number of hotels, allows for further exploration of strategies, problems, and benefits not yet uncovered. It appeared that the Bangkok hotels were more vested in the training and growth of employees within the organization, when compared to the London hotel. This may reflect Thailand’s culture of being hospitable or more interested in having full time, career driven jobs in the hotels.  

Recommendations & Future Research

Turnover has its highs and its lows, as statistics show there is a wide range of rates and trends, along with positives and negatives of turnover. In a study based in a western culture, Carbery et al (2003) expressed the drastic ranges in turnover rates from 1%-300%; 25%-300% in all employees, with 1%-129% range for managers. With statistics and trends ranging drastically, there is little that generalization for the industry can help; each organization needs a case by case scenario. There is a dependency on size, type, and location of the hotel, how long has it been in operation, the management’s involvement, and numerous other possible factors that should be considered to take turnover and change it, whether it is increasing or decreasing. Differences can be found due to what is being asked, the willingness of a hotel to participate, and the numbers are provided since there are voluntary rates, involuntary rates, and a combination of the two. Numbers and rates should not be as pertinent as looking to the why’s and how’s of turnover and addressing the problem to achieve an outcome of satisfaction to the organization, the brand, and its employees.

As the industry continues to grow, it will be important that management and strategy grows alongside, whether that means accepting the turnover and working with it or strategizing to counter and control it. Turnover will never go away, but whether one chooses to let external factors alone control it, or change internal practices to take some control back, is up to individual brands, organizations, and the management. The importance of turnover should not be forgotten or ignored, movement and additions of employees are important to organizations, expressed by both literature and interviews. It creates the demand for a balance between turnover and retention within the organization, brands, and industry.

When managing labor turnover or retention in a hotel, the organization, along with the brand, should decide how the organization approaches retention strategy. If labor turnover is an important aspect to maintain, then strategies have to be drafted and tested to see if it would work in the organization. The cost of the strategy and program should be considered, along with other resources, if they are available to the hotel to be used. The cost and demand of resources required for retention strategy and programs are important to consider. Hotels, like the people working them, come in many different shapes and sizes with different experiences and strategies.

An exploration into brand loyalty is important to understand when approaching the turnover rates of an organization which is part of a global whole, but there is no talk or publicized calculations of turnover based on brands, only organizations. Future research, or at least company based observations should explore turnover and brand loyalty and how the two may compare. With the cooperation of both organizations and their corporate company, the exploration can be expanded into organization and brand strategy and objectives. Many brands offer internal transfers which can affect the turnover rates of individual hotels and potential training costs of new employees.

As an industry known to have transient workforce one might see turnover to be expected in a hotel organization. If a hotel is less interested in spending the time and money on decreasing labor turnover, then they may approach the training and investment differently, and will be more susceptible to economic changes. Movement in demand and skilled supplies are important to understand with both general strategy and changes in environment.

Approaching labor turnover and problems associated with the high rates, it’s important to be mindful of what is behind the numbers, along with the positive aspects of labor turnover. It goes back to an interviewee who expressed how terrifying raw data can be. Labor turnover statistics are based on individual organizations, but how different would they look if it was calculated and compared to other statistics? Global hotel brands have internal hiring systems, like many other industries which allow employees to move to another organization, while staying in the brand. What are the statistics of employees that are moving within the brand or the industry?

Knowing demographics can create biases and cause discrimination. Demographics are generally taken into consideration for statistics and research, but this study took an approach to not directly investigate demographics behind labor turnover. Future strategies, especially in countries upholding discrimination law, should not focus on the demographics. If a manager knows that women are more likely to be committed to an organization than men, will the manager more often choose to train and develop the women since the likelihood is that they will be a better investment?

Literature theories have targeted most aspects of the industry as a potential reason why someone may leave the organization, so creating strategy and using human resources strategically to aide in a solution for problematic turnover. If reduction or stability of labor turnover is desired, then an organization has to strategize towards retaining employees. Internal training, movement, and development are solutions to potentially keep employees satisfied and could allow employees to move and grow in a position more suited to the employee. The hiring of employees is also important, not just as to why they leave but why they join and are hired. If an organization hires part-time, casual employees, then they are more likely to leave, so human resources should plan the hiring to attract, hire, and train employees with a desire to commit to the industry and organization. Strategize to the mission and objectives of the organization and build strength against factors that could negatively affect the organization and its retention & turnover.

Labor turnover has its similarities and its differences, just like organizations, therefore each organization should look to what its problems are with turnover and how those problems can be solved. Yes high turnover can be problematic, and as an industry that is characterized by its casual, transient labor, so with transient labor comes turnover, and the approach to the turnover has to reflect such characteristics and trends. There is no clear cut answer to turn the problem of high labor turnover to be more beneficial for the entire industry, yet there are methods and strategies that can change the problematic situation of labor turnover in the hotel and hospitality industries.

 Lindsey M. Goff is from West Chester, Pennsylvania.  She received her bachelor of science degree in International Business from Elizabethtown College and furthered her education through the MBA program of Mountbatten Institute.  In this program, Ms. Goff travelled to England for a year, where she both studied and completed an internship.  She continued abroad in Thailand to finish her research and succeeding dissertation.  Ms. Goff enjoys traveling and aspires to find a career that will allow her to do so both nationally and internationally.

Please feel free to contact: LmGoff10@gmail.com or http://www.linkedin.com/in/lindseygoff