HUMAN RESOURCE MANAGEMENT

RESEARCH PAPER

EMPLOYEE RETENTION IN THE

HOSPITALITY INDUSTRY

BY
Yashika Attri 10150
Anisha Arora 10142
Disha Chaudhary 10109
Merryl Biju Kizhake Kanichery 10085
Vanshika Khurana 10126

Course – Bcom(Hons)
Section – 2
Submitted to – Sonal Gupta Ma’am
ABSTRACT
Employees are the most important and useful assets of an organization and it is the utmost
priority of an organization to retain them as it allows them to make the most of the top talent
it has previously recruited, leading to wide sweeping growth opportunities. Ineffective
retention strategies can lead to decreased morale and engagement and increased turnover for
the organization. Widespread employee turnover is a costly problem for employers in the
hospitality industry. The high demands of the hospitality industry make employee retention
crucial. They require high levels of expertise to perform labor-intensive jobs and deliver
high-quality customer service. If a business has a high employee turnover rate, it can disrupt
the flow of operations and leave customers feeling dissatisfied. The current study, therefore,
aims to review and discuss the causes of low employee retention in the hospitality industry
and to highlight the strategies to overcome the problems faced by employers due to low
retention rates. The study is based on past literature, company documents, observations, and
peer-reviewed articles published in the past years. Low salary, work environment, lack of
trust in management, job security, managerial support, and policy issues were identified as
key areas that were found to have a direct impact on employee retention in the hospitality
industry. A key recommendation was for employers to incentivize long-term employment,
build an attractive hospitality company culture, help employees develop their careers, and
focus on providing good leadership. This is to ensure that employees are satisfied with their
jobs and have a higher possibility of remaining in the organization for the coming years.

Keywords:
 Employee retention
 Training and development
 Performance appraisal
 Organizational performance
 Organizational planning
 HRM practices
 Staffing

INTRODUCTION
The hospitality industry is booming in the current scene - indeed, the Indian hotel industry
will contribute to $1 trillion of the country’s GDP in 2047 (1) - and its importance cannot be
denied by anyone. Human resources is an important asset for customer satisfaction, service
quality, customer loyalty, organizational performance, and competitive advantage in
hospitality organizations (Kusluvan et. al., 2010). As the business environment is dynamic
and constantly changing the need for attracting and retaining potential and talented
employees is growing (Hilltrop, 1999). There is intense competition among organizations to
recruit high-performing and competent individuals who will become core employees for
organizations in the future (Yamamoto, 2011). However, all over the world, one of the
biggest challenges that is being faced by organizations in this dynamic and competitive
environment is the retention of competent employees (Pfeffer, 1994). (2) People are a
significant source of competitive advantage for organizations; they, therefore, adopt
numerous policies and procedures to retain their employees for the coming years in the
organization. As a result, employee retention has been categorized as one of the major forces
for organizational success, alongside reducing unnecessary expenses and improving
employees’ motivation and capabilities. (3) Researchers noted that many managers or
employers have still not addressed the problem of employee retention or have attempted to do
so with little success (Alexakis, 2011; Kucukusta, Denizci Guillet, & Lau, 2014). Robinson,
Kralj, Solnet, Goh, and Callan (2014) concluded that employees will stay with an
organization if given a combination of retention strategies that can make leaving seem less
than advantageous. (4) The workforce in the hospitality sector tends to have a high turnover
rate due to the dynamic expectations of customers and the unique nature of service-oriented
work. A study of restaurant employee turnover proved that the cost of losing and replacing
one hourly employee can be as high as $5864; and if a restaurant maintains a 73% annual
employee turnover rate, the restaurant potentially loses $428,072 or more annually as a result
(Tracey and Hinkin, 2006). Hospitality companies desire to minimize their operating costs,
which is why it is important to attempt to determine the causes of job turnover and to increase
employee retention (Lu and Gursoy, 2016). The higher a company’s job turnover rate, the
more money will have to be spent on recruiting, hiring, and training new employees. High job
turnover rates also cause resentment among seasoned employees who have to pick up the
slack for slower and less experienced colleagues (Dermody et al., 2004). (5) This begs the
question - how do we know how long the tenure of employees in the hospitality industry will
be? How do companies ensure their employees stay in the organization, and minimize
turnover? Job retention in the hospitality and tourism industry is a complex matter, and
through this literature review, we aim to dissect this topic in its entirety, exploring it from all
angles - analyzing the factors affecting retention in the hospitality industry, exploring
retention strategies of organizations, and so on.

PURPOSE
The purpose of this research paper is to study the challenges faced by the hospitality industry
in the retention of their employees. It also studies the importance, methods & ways of
employee retention.
In today’s highly competitive environment, it is very difficult to survive and succeed in a
market filled with competitors. Having and retaining skilled employees plays an

Important role in this process, because employees’ knowledge and skills have become

The key is for companies to be economically competitive (Hiltrop 1999). [32]

Human resources are known as the lifeblood of an organization and play a crucial role in
achieving and sustaining a competitive position in the business environment. Due to the
increased stiff competition, the opportunities for employees have also increased, thus making
skilled employees the major differentiating factor for most organizations. Employee retention
is a very critical tool in the hands of organizations and acts as a key business driver for the
success of the organizations and is by far a significant factor for organizations to be
economically competitive.[33]
Retention of employees is not only beneficial to employees but also to the organization.
Some benefits include cost reduction, high morale of employees, experienced employees,
increased revenue, productivity boost, improved culture, etc.
When an organization loses a talented employee there is a huge negative impact on
innovation and services provided. The standard of the services provided by the organization
declines which in turn affects the organization's growth and profitability. The impact of
employee turnover affects other HR functions like manpower planning, recruitment, selection
training, etc. It is observed from past studies that when employees are satisfied with the
organization's retention strategies they are more dedicated to doing their jobs and work for
the organization's growth and sustain the advantage of competitiveness over the rivals.
Therefore, securing and retention of skilled workforce plays a vital role for any organization
because to knowledge and skills of the employees are central to the institution’s ability to be
economically competitive for growth and sustainability. [31]

REVIEW OF LITERATURE
Employee retention involves the encouragement of employees to stay with the organization
for the long term or as long as possible. It’s a strategic approach essential for a firm’s success,
aimed at maintaining a skilled workforce while fulfilling operational needs.(Bassam Shafiq
hassan 2020) Employee retention is intricate in a competitive market, vital for long-term
competitive advantage and organizational success and longevity (Das and Baruah, 2013;
Arachchillage and Senevirathna, 2017; Kaur, 2017; Mahan et al., 2018; Paul and Vincent,
2018). The problem of employee retention came into the picture only when psychologists
began to believe that there are several factors affecting the decision of the employee to stay
within the organization (Rowland and Ferris,1982) Human resources being the most
important source for the company to achieve its objectives (Bibi, Ahmad, and mijid 2016).
Employees tend to achieve personal as well as economic objectives by exploiting themselves
to a large extent, they prefer those organizations which has better environments, career
development opportunities, salaries, payoffs, recognition, and job security. It is not
economical for the company to recruit a new employee in place of an old employee(dess and
Shaw 2001). Giving better packages can also give the organization a better competitive
advantage rather than forming the basis for employees to retain in an organization (Mendonsa
1998). Various authors have given their hypothesis that determines various social, economic,
cultural, and psychological factors affecting employee retention. based on the above research,
the following questions arise:
How does compensation affect employees' decision to stay in the organization?
How business environment have a bearing impact on employee retention?
What are performance appraisal implications on employee retention?

Training and Development:

Training has been defined as a systematically planned activity wherein the basic technical
know-how required to do a job is imparted (forges 2009). Training will help not only the
employees but also organizations at the same time. Employees will be more proficient in
managing and working on new machinery, they will be motivated and satisfied with working
in the organization, employee movement will become easier as they will equip skills required
for upper-level management and employees will pave their path towards career development.
Kundu (2000 )was convinced that firms must invest extensively in training and development
for their employees where the services are consumer-oriented. Dealing with consumers is not
an easy task so training the employees becomes essential so that they can deal with
consumers in the right way. Bitner and Zeithmal (2004) have given their support to the fact
that training and development can give a competitive advantage to firms as they work in an
increasingly dynamic environment. Juventus (2007) saw a correlation between performance
appraisal and training. The higher the amount of training given to the employees for different
skills more will be the productivity of the employees thus, the performance of the employees
will automatically increase. Training and development become a necessity in today’s world
so that the skills possessed by its employees get up to date. Development is a broader term
that covers the wholesome improvement of an individual. It is not job-specific as training.
Performance appraisal:
Performance appraisal is the process where the superior analyzes and evaluates the
performance of the employees against some set standards and provides the employees with
the requisite feedback. Performance appraisal in turn can improve efficiency as well as
effectiveness of the employees working in the organisation. For the performance appraisal to
become successful it requires setting up objective and achievable standards, the right method
of observing the performance, and the correct way of providing feedback. There is a positive
relation between performance appraisal and the efficiency of the employees. Lee and Lee
(2007) were convinced that a performance appraisal system can improve quality and
productivity. Saang (2005) introduced a new term -client-based performance appraisal.
Rahman (2006) saw performance appraisal as a source for increasing employee commitment
and loyalty toward an organization. Cook and Crossman (2004) saw the relationship between
the employee and the superior to be guided by performance. The better the performance more
satisfied will be the superior. Performance appraisal is the best source for recognition of
career development and promotion of employees.
Organization performance:
Organizations tend to provide both financial and non-financial incentives to the employees to
improve the performance of the employees and retain the employees in the organization
(khan 2010). Financial incentives include bonuses, salary, retirement schemes, profit sharing,
etc. Non-financial incentives include recognition, job security, organization environment, job
enrichment, participation of employees, etc. There can be some problems faced by an
organization to provide incentives as there can be a lack of appropriate data on employees
working, skills possessed, and financial reporting (Hoskins et al 2000). As the authors are
increasingly researching this topic, they have identified various factors such as job
satisfaction, stress levels, quality of products and service, trust in management, commitment,
etc ( baseline et al 2005 Huselid 1995 Chang and Chen 2002)
Organizational planning:
Establishing organizational goals and objectives Influences job retention and job efficiency.
Susskind et al (2000) were convinced that organizational support is a very important factor in
determining employee retention. The US Department of Labour (1993) conducted a study to
show that including employees in decision-making, giving them more autonomy and a good
working environment would increase job satisfaction. Many other work practices such as top
quality management and productivity gains have a positive impact on motivation. High
turnover companies tend to give their employees such an environment and follow practices
like MBO( management by objectives ) to retain its employees. Companies such as Wipro
and Google have play areas for their employees.
HRM practices:
Hrm (human resource management policies ) refers to the policies and practices followed by
the organization to deal with the human aspect. Khan (2010) identified five HRM practices
such as training and development, recruitment and selection, compensation and reward,
performance appraisal, and employee participation.HRM practices have an impact on all of
these mentioned above.HRM practices must be formulated with utmost care and concern as
dealing with human beings is a complex process.
Staffing:
Staffing is the process of keeping the right people at the right place. It plays a very important
role in the workforce planning process. The people with the right type of skill set required for
the job will improve organizational performance and efficiency ( Gobler and Zock 2010)
Proper recruitment and selection will help in matching the correct people with the correct
positions in the organization. Hagan et al (2006) made a significant observation that correct
staffing would depend upon understanding the job as well as standards.
Hospitality Industry:
The hospitality industry is a broad group of businesses that provide services to customers.
The industry can be broken down into three basic areas: accommodations, food and beverage,
and travel and tourism. All of these areas are customer-focused, but they sometimes provide
different levels of service. Branches of the hospitality industry have a sole focus on the
customer. Providing quality customer service and a memorable experience means that
customers will be likely to return and have the experience again. This leads to future
stimulation of the leisure market. Since these experiences are not a necessity and come at a
cost to the consumer, making a positive impression is important for businesses within the
hospitality industry to remain thriving. For instance, a plumber does not need to necessarily
provide quality service because consumers need water, but hotels do need to make a lasting
impression since hotels are not a necessity of life.
Work environment:
The work environment comprises the formal as well as informal environment surrounding the
work area. The work environment has a significant impact on employee’s decision to stay
within the organization and their motivation and satisfaction. A good work environment will
help employees to exhibit improved performance.
OBJECTIVES
The overall aim of this research is to review the previous research and documents of the
company and to find out the causes of low employee retention rates in the hospitality
industry. In addition to that the research also includes the strategies that would improve the
retention rate in the hospitality sector. Therefore, the objectives of this study can be classified
into two major categories:
1. Identify the causes of low retention rate in the hospitality sector
2. Developing strategies for improving the retention rate in the hospitality sector

METHODOLOGY
The method we used to research “Employee Retention in the Hospitality Industry” was a
questionnaire. We developed a questionnaire to determine what factors can affect the
employee's decision to stay within the organization and their views on what they think of
employee poaching. The questionnaire was short and made with the view to understand the
opinion of employees. The questionnaire consisted of both objective and subjective questions
which would give a better clarity of their thoughts or opinions.
The questionnaire was studied properly before reaching any judgment. For making this
research paper, we also undertook a study of similar research papers by different authors and
students to understand their perspectives and the methods they used to do the research.
DISCUSSION
EMPLOYEE RETENTION IN THE HOTEL INDUSTRY
Job retention has become a major challenge for the hospitality industry yet most of the
operators and owners feel powerless to stop the incredible amount of industry turnover. The
hotel industry, all over the world is facing this crisis. This leads to the employees ‘job-
hopping’ from time to time [Amah (2009); Kurja, Ondigi, and Wanderi (2012)]. As per the
Bureau of Labour Statistics, there is an annual employee turnover of over 70% in the industry
which is more than 6% of employees leaving every single month. This is an alarming figure
in itself, but the biggest question is: just how much does turnover cost to the hospitality
business? The answer is a lot. With such a large number of employees departing from the
workforce, there is a need to employ more people each year, which leads to increased
recruitment, selection, and training costs for the company. The money that companies are
forced to spend on the after-effects of employee turnover, can be put to productive uses such
as property renovations, acquiring more land, marketing, giving raises to employees, and
other initiatives that enhance the bottom line. High labor turnover rates result in a lack of
inspiration in the employees, unsuccessful businesses, and a lack of appeal to talented
employees [Holston-Okae (2017)]. This not only affects the attitude of the current employees
but also, leads the valuable employees to leave the organization and simultaneously lowers
productivity. Hence, employee retention is critical [Alonso & O’Neil (2009); Dickerson
(2009); Cho et al., (2006)]. The most crucial step in retaining the employees in the company
is to first identify the causes of turnover. Is it that the employees are simply lured by the
packages, both monetary and non-monetary, that other hotel companies offer them, or is it
that they do not like the work culture and environment, or is it something different and
unique to the already-known, most common reasons?

CAUSES FOR EMPLOYEE TURNOVER

If the rate of turnover of employees is high in an organization, it affects the profitability and
competitiveness of the organization. This happens due to the loss of human resources in the
organization. The high staff turnover in the hospitality industry is due to many factors few of
which may be: employees feeling that they are not adequately compensated as measured
against the work they put in, minimal career growth opportunities, inadequate work
engagement, poor relationships between the managers and subordinates, and long, tiring, and
inflexible working hours [Ezeuduji and Mbane (2017)]. Difficult and pressurizing situations
and stress and fatigue are also some of the governing factors. Compensation, motivation,
engagement, work environment, and job satisfaction among employees are arguably the
major reasons for employee turnover [Holston-Okae and Mushi (2018)]. Hospitality
employees in one organization were made to identify the most probable causes for employee
turnover and these were their responses: behavior of the managers towards subordinates, long
and excruciating working hours, job pressure, scheduling, training, better opportunities in
some other organization and physical demands of the job [Fallon (2010)].
RETENTION STRATEGIES
Several researches show that labor turnover continues to be an endemic concern for various
hospitality businesses all over the world. Since the hospitality industry is people-driven, it is
essential that the employees remain happy, motivated, and feel content with their jobs so that
they can interact with the guests patiently, politely, and mannerly. This would also help them
to understand and resonate with the guests more and therefore, would be better at solving
their concerns. Only then can the company attain a competitive advantage over its rivals?
Staff retention refers to an organization's efforts to create a positive work environment that
motivates employees to remain with the company for an extended period. Retaining
employees has become a crucial strategic issue for many organizations worldwide, and
human capital management researchers and practitioners are increasingly focusing on this
topic. However, turnover remains high although the existing literature on the topic provides
both intrinsic and extrinsic retention techniques [Lee & Way (2010); Davidson et al., (2006);
Lam et al., (2002)].
The following practices can help with the retention of the employees:

FLEXIBILITY:
Hoteliers should be allowed to have flexible working hours because as we all know,
housekeeping is one of the toughest and most tiring jobs in the building physically. So, it is
more important for these folks to have timings that work for them, and all the hoteliers would
agree with this. This would not only give them a sense of control over their working
conditions but also make them more willing to do the task as they were the ones who selected
the working hours. Do not force them to be on their toes for nine hours straight from 8 am to
4 pm. If they cannot work on these hours, let them start earlier or later. Give them the
freedom of choice. Chances are it will not hinder the functioning of the hotel and they will be
more likely to stick with their jobs.

POSITIVE WORK ENVIRONMENT:

The work environment in an organization plays a very critical role in the satisfaction of the
employees. It frames the employees’ perspective of the organization. A conducive and healthy
work environment enables employees to work more productively and feel more motivated to
achieve their targets and accomplish the objectives of the organization. Work environment
plays a significant role because depending upon how employees feel about the working
relations and the culture of the organization, they may plan to leave or stay in the
organization. The employee turnover rate in the hospitality industry is high due to low
employee satisfaction and poor work environment and leadership [Arnold, E. (2005).
Managing human resources to improve employee retention. The health care manager, 24(2),
132-140.]. Low morale, dissatisfaction, poor performance, low productivity, and emotional
exhaustion result from poor or negative work environments [Das, B. L., & Baruah, M.
(2013). Employee retention: A review of the literature. Journal of business and
management, 14(2), 8-16.]. A humanistic work environment, a culture of recognition, mutual
respect, and a diverse work environment are ideal [Rehman, N., & Mubashar, T. (2017). Job
stress, psychological capital and turnover intentions in employees of the hospitality
industry. Journal of Behavioural Sciences, 27(2), 59-79.].
COMPENSATION:
When the employees feel that they are compensated fairly, it enhances the worker's job
engagement and simultaneously lowers job withdrawal [Jung & Yoon (2015)]. When the
compensation received by the employees is unfair and is not equitable to the sector wage
level for the position the worker is in, then the workers are forced to leave the company and
look for opportunities in other companies. Lack of fairness in the distribution of rewards is
one of the main reasons for employee turnover in the hospitality industry as monetary
rewards are very applicable to hoteliers as their jobs are usually related to low salaries and
lowest tangible benefits [Nasurdin (2015)].

JOB SATISFACTION:
Another major tool for keeping the workers in the organization is improving their job
satisfaction. Job satisfaction describes how the workers perceive their jobs. If the workers in
an organization are satisfied, they are more motivated and more willing to do their jobs, and
this, in turn, reduces the employee turnover rate. Therefore, contentment is directly related to
the retention of workers. For a worker to have job satisfaction he should be given enough
freedom and power to make decisions and recognition in the organization. All of this is
reported to reduce the turnover of employees. It is further noted that a positive organizational
environment symbolized by honesty and cooperation further enhances the contentment of the
employees and is negatively correlated to the turnover of employees.

ENGAGEMENT AND EMBEDDEDNESS:

Work engagement refers to the degree to which workers experience inspiration and
commitment in their company. Factors affecting work engagement are job responsibilities,
work relationships, and growth opportunities offered. Work embeddedness exists when the
workers in the organization are attached to other workers and view themselves as fit within
the organization. It should be noted that the workers are part and parcel of what happens at
the workplace and they are more inclined to stick with their employer if there is healthy work
embeddedness in the company. It is believed that if the engagement of the workers is
increased their commitment and loyalty to the company also increase which will lead them to
stick with their employer. This makes the workers feel empowered and when they feel
empowered, they are more inclined to stay rather than leave the company and look for
opportunities in other companies [Raub & Robert (2013)]. It is therefore essential for
hospitality managers to consider creating and increasing employee engagement and job
embeddedness to reduce the turnover rate and costs of hiring new people in the company and
finally, to increase employee retention.
CREATING AN EMPLOYEE-CENTRED WORK ENVIRONMENT:
Dissatisfied employees who are also emotionally exhausted due to poor work conditions are
not able to fulfill the requirements of the job. It is therefore crucial for the managers to
provide a supportive work environment. Fun activities may be incorporated to influence the
staff’s decision to remain or quit the job because the activities lead to bonding and forming
friendships in their establishments and such things are not easy to recreate if they choose to
quit. The employees need to know that they are important to the organization by establishing
an open and flexible workplace which adds to work-life balance. In today's day and age,
workers want time beyond their work to enjoy their life and organizations can allow them
flexible working hours which would be seen in a positive light. Incentive benefits that assist
employees' health and wellness would also be appreciated.

CAREER DEVELOPMENT:
The development of workers in the organization is not just the work of the employee but also
the employer. If the company invests in the training and development of employees it would
help in staff retention. For the efficient functioning of an organization, it must ensure that the
workers are well-trained and developed in the latest technologies. Organizations that enhance
existing workers' skills, experience minimum employee turnover levels [Martin (2003)].
However, when the workers are developed in many skill areas, it increases the risk of
turnover. This implies that this kind of development increases the chance of employees to
find work elsewhere and thus, threatens the parent company. Therefore, enhancing employee
skills and performance may motivate them to perform better and thereby increase and
improve organizational productivity.

LIMITATIONS
This research paper provides an insight on the employee retention rate in the hospitality
industry. However, some limitations remain. The literature review provides a detailed
overview of the retention rate and similar keywords. However, only those research papers
that were published in English and which were easily available were used.
The second limitation of this study is that is a literature review, which means it has derived
from the studies of other researchers.
Furthermore, the topic of retention rate is very broad and it is defined from a different
perspective in every other research article. Therefore, only a few of its aspects could be
studied and analyzed in this research.

FURTHER SCOPE OF RESEARCH

Due to limited time, only 15-20 studies could be collected and studied, but a literature review
produces good results if it is based on a larger number of studies.
 This research paper focused on only two objectives which were causes and strategies for
employee retention in the hospitality industry. However, more objectives could be taken for a
detailed study and better results.

CONCLUSION
Having conducted a systematic literature review, critically analyzing different academic
sources, and presenting our findings, we have seen with clear proof how significant the issue
of employee retention in the hospitality industry is. The industry faces high levels of turnover
every year, which causes employers to spend huge amounts on recruitment and selection of
new manpower to replace the employees who have left, which is concerning considering the
different uses those resources could have been used for. The workforce dwindling is a major
blow to the productivity of the industry, which could have soared to greater heights had there
not been repetitive costs in finding new personnel.
Through our review, we understood the reasons why hospitality employees leave their
organizations. It was found that limited career growth, unmanageable working hours,
physical exhaustion due to the demanding nature of the job, challenging subordinate-superior
relationship dynamics, better job opportunities elsewhere, etc. were some of the main causes
for the high rates of replacement in the hospitality sector.
Following this, we brainstormed strategies for retention of employees. We tried to answer the
question - what would make an employee stay, and choose the same organization for an
extended period? One approach will not fit all types of people in the hospitality industry, but
we thought of as many different ideas as we could. Some of these included flexible working
hours, a healthy work environment that makes the workers feel appreciated, compensation
that matches the efforts employees put in, freedom to make decisions, etc. could be some
factors that form the thin line between remaining in the organization and calling it quits.
Organizations need to be proactive - they cannot simply react to employees by replacing
them. Consistent efforts need to be put in by a company to make their employees find their
tenure in their organization worthwhile. After all, a company’s greatest strength lies not in its
physical resources. It is the people that keep the ship of business afloat, past tempestuous
waters and towards brighter shores.

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