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Many researchers say the hospitality industry experiences high employee turnovers than most sectors of the economy (Davidson & Wany 2011). Albeit this fact is widely undisputed, it is important to understand what researchers mean by “employee turnover.” Davidson & Wany (2011) say employee turnover denotes the rate at which a company gains and loses its workforce.
Companies that have a high rate of employee turnover tend to lose and gain their employees quickly, while companies that have a low employee turnover do not lose their employees often. Besides understanding the definition of employee turnover, it is also crucial to understand the hospitality industry and its subsections. Davis (2010) says the scope of jobs in the hospitality industry is wide.
Indeed, this industry includes several sectors (like restaurant and accommodation sectors). Simply, PROTEL (2013) says most jobs that involve hotels and resorts (or similar establishments) fall within the hospitality industry.
This paper identifies four key issues that emerge in the assessment of high employee turnovers in the hospitality industry.
They include high rates of employment turnovers (as a global phenomenon that affects accommodation and restaurant sectors), factors that cause high employee turnovers and the effectiveness of government and industry responses to this issue, implications of high employee turnovers in the hospitality industry, and recommendations that could address high employee turnovers in this sector.
However, this paper focuses on conducting a literature review that explores the first issue, by explaining the high rate of employee turnover as an age-old problem in the hospitality industry and its prevalence in certain sections of the sector.
Willie & Jayawardena (2008) say the high employee turnovers in the hospitality industry mirror the poor strategies of hoteliers (and similar entities) in motivating and retaining their employees. These strategies are however region-specific because different hoteliers adopt different managerial styles. This difference explains why different countries have varying rates of employee turnover.
The Australian hospitality sector is an example of this analysis. The Australian hospitality industry is an important sector of the Australian economy. Indeed, the sector accounts for about 8.7% of the total gross domestic product (GDP) and generates about 6% of the total jobs in the Australian economy (Griffith University 2006). The importance of the Australian tourism industry stems from its growth trajectory.
Griffith University (2006) says the sector’s employment potential has increased by about 8% (between 1997 and 2005). Despite the importance of the hospitality industry to the Australian economy, the figure below shows that it posts the highest rate of employee turnover in the economy
Figure One: Industry analysis of worker turnover in Australia (Source: PROTEL 2013)
A report by the Australia and the Sustainable Tourism Cooperative Research Centre showed that the annual turnover of operational employees in the accommodation industry was about 50.74% (Griffith University 2006).
The findings especially singled out the “Restaurant/Bar, Housekeeping, Kitchen, and Front Office departments” (Griffith University 2006, p. 4) as the highest contributors of the high turnover rate. Besides operational employees, the rate of turnover for departmental managers, general managers, and top-level executives was about 39% (higher than the global average).
Through the comparison of high turnover rates for low-level and top-level managers, Poulston (2008) explains that both groups of employees share the same experiences in the industry. For example, he said that both groups of employees look for better terms of employment and new opportunities to advance their careers (Poulston 2008).
However, Tanke (2001) believes that top-level managers are mainly motivated to change their jobs because of better terms of work and better working hours. From the identification of the above reasons for the high turnover rate in Australia, Griffith University (2006) suggests, “higher wages and better working hours (whether less hours or more flexible or suitable hours) are the major drivers for managerial employees to leave.
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Similarly, operational staffs seek better wages, better working hours, and improved career opportunities” (p. 4).
The high turnover rate in the Australian tourism industry has a huge cost to several hoteliers. Most of these costs trace to the amount of money spent to replace the employees. Griffith University (2006) says that most hotels incur about $109,000 to replace top-level executives alone.
In fact, Griffith University (2006) estimates (from a survey of about 64 hotels in Australia) that the cost of replacing top-level managers/executives could be as high as $7 million (for all the 64 hotels surveyed). Before the publication of the above findings, Griffith University (2006) also reported that the average cost of replacing one low-level employee was close to $10,000.
The study also established that the total cost of replacing all low-level employees, for the surveyed hotels, would be $42 million (these figures only relate to transaction costs and not costs that may associate with the loss of valuable skills, gaps in the decision-making process, and loss of business acumen).
Tanke (2001) says the high rate of turnover for the hospitality industry is a serious issue for most hotels. To affirm the seriousness of this issue, Griffith University (2006) shows that the total cost of the high turnover rate (for the hotels surveyed) was $49 million.
If we extrapolate this figure to the entire Australian hospitality industry, it may increase to hundreds of millions. Based on the seriousness of this issue, it is important to say that the high turnover rate for the industry is unsustainable.
Comparatively, the impact of high employee turnovers in the hospitality industry emerged in a recent report, by McGregor (2013), which highlighted a demonstration of fast-food restaurant staff in more than 50 cities in the United States (to raise public awareness regarding the plight of workers in the restaurant sector).
Uniquely, the protesting employees did not emerge from one company because they associated through a common plight of low wages and high employee turnovers across the hospitality sector. Many of them also felt that since they work for individual franchises, a change needed to occur at the national level (federal level), as opposed to the organisational level (McGregor 2013).
In part, some of the employees believed that the high employee turnover rate that has characterised the hospitality industry (for decades) has created little attention at the organisational level. Therefore, very few managers express the need to mitigate this worrying trend.
Studies by Deery (2008) have investigated the rates of employee turnover in the hospitality industry by categorising the phenomenon in two distinct categories – large firms and small firms. The researcher says the rate of employee turnover in a large firm is lower than the rate of employee turnover in small and medium enterprises (Deery 2008).
The differences between these turnovers stem from the adoption of employee-friendly human resource practices in large firms, compared to small firms. To explore this idea further, Deery (2008) says that large firms perceive their employees in a professional trajectory that small and medium enterprises do not.
Stated differently, there is a possibility that most employees who work in large firms may have prospects of advancing their careers, while employees in small and medium enterprises may lack this opportunity.
The accommodation and restaurant sectors post the highest levels of employee turnover in the hospitality industry. Researchers have advanced several reasons to explain this fact, but little pay (close to minimum wage) and intensive work schedules emerge as the main reasons for the high employee turnover in the accommodation and restaurant sectors (Deery 2008).
Moreover, the accommodation and restaurant sectors require their staff to be highly helpful to customers. This situation requires the staff to be highly enthusiastic and helpful, always. Certainly, since the accommodation and restaurant sectors are service-oriented, employees are required to have many emotional investments in their jobs, to keep the customers happy.
The lack of unionisation in the hospitality industry does not help to alleviate this situation because the workers do not have a reliable platform where they can bargain for better terms and conditions of work. The poor economic conditions that have characterised most global economies in recent decades have also aggravated this situation because many hoteliers have reported declining profitability (Deery 2008).
The reduced profitability has led to the absence of permanent jobs for workers in the accommodation and restaurant sectors. Most employers therefore hire their workers on a temporary basis and when the business is not doing well, they lay them off.
This situation explains why the restaurant and accommodation sectors report the highest rates of employee turnover. Furthermore, since these conditions are unfavourable to the workers, most of them have to depend on their clients for tips to supplement their incomes.
This paper shows that high employee turnover rate in the hospitality industry is a serious issue for the Australian economy. The need for mitigating this issue is therefore an important prerequisite for the success of the industry. However, mitigating this problem is a multifaceted issue.
This paper proposes that most hotels and companies that experience this high rate of turnover should start with the basics of hiring the right employees, as an effective and inexpensive strategy of reducing employee turnover rates. Many experts affirm this measure as being the first line of defence against high turnover rates (Tanke, 2001).
Stated differently, companies should not only interview potential employees to ascertain their skill levels, but also to understand how well they fit within the organisational culture. This way, they would be sure that whomever they employ feels comfortable to work in the organisation (employee satisfaction).
Since this paper shows that most employees leave their job for better salaries and better terms of work, it is also important to underscore the importance of companies to set the right pay standards for their employees.
Here, companies should use their human resource departments to come up with innovative ways on how they can introduce more flexibility to employee work schedules and how they can improve their employee pay frameworks – this process should however occur periodically (at least annually).
Hoteliers should also understand that they should accord a lot of sensitivity to the personal needs of employees (bolster employee engagements). In sum, managers should not overlook the importance of providing employees with a comfortable and satisfactory work environment to operate.
Indeed, as Tanke (2001) argues, employees appreciate a comfortable work environment where they feel appreciated and compensated for their contributions to the company.
Even though the high rate employee turnover in the hospitality industry is undesirable, many observers fear that this trend may persist in the future (Willie & Jayawardena 2008). Through this understanding, most analysts deem it is wise for players in the hospitality industry to formulate efficient strategic plans that would mitigate this problem (Willie & Jayawardena 2008).
The success of such plans may include the interventions of governments and industry players in this issue. From this understanding, it is inevitable to mention that the success of the hospitality industry depends on putting the interests of the employee first, in the same way as most organisations have strived to put the interests of their customers first.
Davidson, M & Wany, Y 2011, ‘Sustainable Labour Practices? Hotel Human Resources Managers Views on Turnover and Skills Shortages’, Journal of Human Resources in Hospitality and Tourism, vol. 10 no. 1, pp. 235-253.
Davis, G 2010, Why the staff turnover is so high in the hospitality industry. Web.
Deery, M 2008, ‘Talent management, work-life balance and retention strategies’, International Journal of Contemporary Hospitality Management, vol. 20 no. 7, pp. 792 – 806.
Griffith University 2006, Labour Turnover & Costs in the Australian Accommodation Industry. Web.
McGregor, J 2013, Fast food workers are staying longer on the job–and wanting more. Web.
Poulston, J 2008, ‘Hospitality workplace problems and poor training: a close relationship’, International Journal of Contemporary Hospitality Management, vol. 20 no. 4, pp. 412 – 427.
PROTEL 2013, High employee fluctuation in the hospitality industry. Web.
Tanke, M 2001, Human Resources Management for the Hospitality Industry, Cengage Learning, London.
Willie, P & Jayawardena, C 2008, ‘Attracting and retaining quality human resources for Niagara’s hospitality industry’, International Journal of Contemporary Hospitality Management, vol. 20 no. 3, pp. 293 – 302.