How Much Does Labour Turnover Cost? A Study of Australian Four- and Five-Star Hotels Abstract
Purpose: Employee turnover is a significant challenge for Human Resource Management (HRM) strategies and organisational performance. This study presents findings drawn from an extensive survey of labour turnover in the Australian accommodation sector. A particular focus is placed on turnover rates and costs.
Design/methodology/approach: Based on labour turnover literature and an industry panel, an online survey was designed and distributed to four- and five-star hotels across Australia. Human Resource Managers from 64 hotels participated in the survey, providing a representative sample and a response rate of 29 percent.
Findings and implications: The research shows the major costs being attributed to labour turnover. These are costs that both the industry and individual operators should examine closely as they impact substantially on hotel operating costs and profitability. It also indicates that the levels of service, consumer experience and value may be impacted.
Research limitations: A limitation of this study is its main focus on tangible labour turnover costs. Additionally, findings based on four- and five-star hotels may not apply to other accommodation sectors.
Originality/value: The literature on hotel labour and turnover costs is limited and this paper provides the first major study in the Australian context, adding new knowledge to our understanding of labour turnover and cost impact on hotels. It also suggests areas where hotels may better address the turnover issue.
Keywords Labour Turnover Costs, Hotels, Australia Paper type Research paper
The Australian tourism industry is a leading industry contributing A$38,935 million or 3.7% of gross domestic product in 2006/2007, a 7.8% increase over the previous year and accounting for more than 10% of Australia’s export earnings (Australian Bureau of Statistics (ABS), 2008a). In 2006/07, Australia’s accommodation sector comprised 5,891 businesses, which collectively employed 96,000 people and generated a total income of A$9,876 million (ABS, 2008b). Accommodation is an essential element of tourism services and is vital to the quality of the tourist experience as it constitutes a major part of consumption.
High staff turnover in hotels is a major factor affecting workplace efficiency, productivity and hotel cost structure (Deery & Shaw, 1997; Lashley & Chaplain, 1999). The hotel labour market has a dual face; on the one hand, it is difficult to attract suitable labour; and on the other, it has relatively high levels of turnover representing a significant loss of investment in human capital, training and quality. Labour turnover represents a challenge for contemporary HRM strategies and practices. In Australia, turnover in the tourism industry has attracted the attention of public policy makers with the Australian House of Representatives establishing a Parliamentary Inquiry into the tourism workforce (Australian Parliament House of Representatives, Standing Committee on Employment, Workplace Relations and Workforce Participation, 2007).
Despite the adverse impact, there has been limited research effort concerned with quantifying the adverse impact of labour turnover in the Australian accommodation industry. In order to address this imbalance, the Australian Tourism and Transport 3
Forum (TTF) and the Sustainable Tourism Cooperative Research Centre (STCRC), commissioned this research into labour turnover. The research sought to: • • • • Assess the extent of labour turnover; Assess the direct cost of turnover; Examine the accountability structures associated with turnover; and Assess the impact of turnover on service quality and productivity.
These issues are critical in shaping hotel HRM practice and the management of labour retention. Being the first large scale study, the research findings may also contribute to the...
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