High Employee Turnover in Budget Hotels in China

the current job fair, famous budget hotels such as the Seven-Days-Inn Hotel, Home-Inn Hotel, Jinjiang Inn Hotel, Hanting Hotel, and Green-Tree-Inn Hotel constitute 40% of the hiring companies. (Wang Hang, 2010, January 5) They all posted an extensive range of job vacancies since they have an urgent need for staff. However, this method could result in a high turnover rate amongst employees in the budget hotel sector.

Today, our campus is seeing a significant influx of recruitment events for budget hotels. With the industry's high employee turnover rate—around 30% as per statistical data—these affordable lodging establishments are in desperate need of competent staff. Therefore, attracting and retaining new talent would be a strategic approach. In 2010, Green-Tree-Inn Hotel aimed to employ thousands of fresh graduates, making it the leading employer in this sector. Similarly, Home-Inn Hotel had plans to recruit six hundred new workers (Wang Hang, January 5, 2010). The issue of high staff attrition is widespread within China's budget hotel industry. Ideally, an acceptable employee turnover rate should fall between 5% and 10%. However, according to a survey by the Chinese Tourism Association in 2003, this figure was moderately higher at approximately 13.95% in lower-cost hotels. Based on information from 2006, managers at these cost-effective accommodations earned an average yearly salary of RMB 86600—a figure about six times more than the average worker's annual pay—which coincided with an employee turnover rate that similarly stood six times higher than management’s at around15 .9%.

The attrition rate of workers spiked to 34.5% in 2009 (Jiang Wenhua, 2009). It's worth noting that there's an abundant number of recruitment events for budget hotels currently happening

on academic campuses due to their demand for highly competent and skilled individuals. However, this demographic has a higher turnover rate compared to other employees in the budget hotel industry, often switching jobs after receiving training from these establishments. Studies show that with the accelerated expansion of budget hotels in China, the need for management personnel grew exponentially; instead of needing three hundred managers as before, they now require three thousand.

There's a significant shortfall of skilled personnel, noted as the need to increase by 2,700 managers within three years. Accordingly, "manager poaching" has gained popularity within the budget hotel sector. Despite having ample rooms, the lack of quality management may cause a decline in service quality. (Jiang Hongming, 2006) To add, such moves can also enhance a manager’s mean salary, subsequently leading to the budget hotel industry incurring high labor costs for the same individual.

Furthermore, the swift expansion of budget hotels compelled us to trim down the managers’ training time from one or two years to just three or five months. Green-Tree-Inn Hotel's marketing director, Hu Jianwei, compared this trend to a wartime scenario where the soldiers become the leaders following the death of the general. He cautioned that this "Nurture the Young" approach could lead to future HR challenges. (Guo Shanshan, 2008) The Consequences of High Employee Turnover Rate The high staff turnover rate in the budget hotel sector could have numerous implications.

Although a moderate employee turnover rate can beneficially shape the structure of a budget hotel and infuse it with new energy, an excessive turnover rate could have adverse effects. These could include elevated training and operational

costs, potential threats to the hotel's financial stability, and hindrances to the management system. A Reasonable Employee Turnover Rate Enhances Budget Hotel Structure and Infuses New Energy The right balance of employee turnover can help shape the structure of budget hotels through the recruitment of employees that are best suited for specific positions (Jiang Wenhua, 2009). Simultaneously, incoming employees introduce fresh perspectives and innovative ideas to the hotel. Operational and Training Costs Rise with High Employee Turnover Rates The adage "it is cheaper to maintain an existing customer than to acquire a new one" holds true for employees as well, according to Donald. (Donald& Armates, 2008) A high staff turnover rate within budget hotels can escalate training and operational expenses. Viewing recruitment and training as an investment shows that when talented employees switch jobs, this investment benefits another company.

However, in order to maintain smooth operations at the hotel, it's necessary to recruit new personnel. This process will incur extra costs related to assessing and interviewing prospective staff members, as well as their induction and training. The concept of a budget hotel can bring substantial risk due to potential loss of critical business details and client data through outgoing employees. Such situations could place the current hotel at a tremendous competitive disadvantage. Therefore, it's crucial for the budget hotel to keep its workforce intact wherever possible. Moreover, high rates of employee attrition can negatively impact the reputation of the hotel.

Despite the fact that it's not considered a direct financial cost, high employee turnover, a prevalent issue in budget hotels, often leads to people quitting their jobs at the hotel. This creates significant

obstacles in the management system, manifesting as low employee morale, ineffective teamwork and subpar productivity. Furthermore, this situation may lead to a decline in service quality, as pointed out by Liu Jun in 2007. The lack of experienced staff makes it challenging for new hires to perform exceptionally, hence negatively affecting service quality.

Understanding the Factors Driving High Employee Turnover in the Budget Hotel Sector. It's crucial to pinpoint the main contributors that result in a high employee turnover rate in the budget hotel industry. Ignoring these elements and failing to take corrective actions can potentially harm the entire industry due to persistent high turnover. Hence, we can categorize the reasons for employees leaving into two groups: reasons linked with departures from within the hospitality sector, and reasons connected with job resignations outside of this particular industry.

From the viewpoint of workers in the hospitality industry, dissatisfaction and eventual departure from their jobs are often linked to unmet expectations concerning ideal working conditions. When compared with industries such as banking, healthcare, and education, wages in the hotel sector tend to be noticeably lower. This significant wage discrepancy is a key driver behind high turnover rates among hotel staff. Moreover, perceived deficiencies regarding work conditions - particularly in budget hotels - can dampen employee morale and frequently prompt them to contemplate quitting their jobs.

Frankly, a reduction in high turnover rates could be achieved if HR departments in budget hotels provided detailed job descriptions and analysis to applicants. The current reward and appraisal system tends to hinder employee development due to being illogical. Salaries often correspond with an employee's position within the company, so

a promotion is usually required for salary increases. However, certain factors such as employees' skills or their work ethic are frequently overlooked when promotions are given in budget hotels, which consequently may lower overall productivity. (Ai Jing, 2009)

If high-achieving employees feel undervalued, they might lose motivation and stop giving their best, eventually leading to their departure from the hotel. An ancient Chinese parable compares a reward and recognition system to an engine in a motor - can one imagine a motor operating without its engine? This situation is largely due to ineffective management systems. Primarily, a management approach that only takes into account the employee headcount, as seen in many budget hotels, impedes the development of prospective talents (Liu Jun, 2007). The substantial workforce in such organizations typically leads to lower compensation for most employees.

In the budget hotel industry, the Human Resources department's tendency to prioritize quantity over quality significantly influences the labor cost, leading to a high employee turnover rate due to inadequate quantity management. Furthermore, considering the prevailing conditions in the industry, budget hotels fail to offer commendable promotion opportunities to skilled or academically qualified personnel. Over time, these individuals, unable to receive further promotions, may perceive their professional growth as stagnant and decide to seek different employment. This issue fundamentally pertains to career development.

The hotel industry has experienced expeditious growth with numerous renowned international brands making inroads into the Chinese market. This expansion is viewed positively by many budget hotel employees who perceive that opportunities for higher remuneration, better benefits, and promotions are prevalent within these international establishments. (Lv ming; Wang Xiancheng, 2009) Notable examples of

such brands include Shangrila, InterContinental, Marriot, and Four Seasons, all of which have recently launched in Tianjin. This has resulted in a trend of staff from budget accommodations, seeking to advance their careers by moving to these internationally recognized hotels.

Staff recruitment from competitors, also known as employee poaching. In the event your hotel has an abundance of skilled employees, it's likely that rival businesses would lure them with enticing offers including higher pay, improved work conditions, and positions of authority. (Jiang Hongming, 2006) There exist certain misconceptions about human resource development within the budget hotel industry. Some budget hotel operators assume that top talent is typically found employed by others, such as international or renowned brand hotels. Consequently, they exhaust every means to entice capable managers and high-performing employees to transfer to their budget hotels without considering the expenses.

Simultaneously, their own employees' personal growth and training plans are often overlooked. Similarly, a number of employees feel disregarded with respect to their skills and job positions. (Jiang Hongming, 2006) As a result, they opt to resign and join better-paying hotels with superior amenities that have recruited them. Presently, this trend is growing popular within budget hotels with an increasing number of skilled professionals moving on, causing significant damage to the budget hotel sector. The primary reason for the frequent job changes among managers in the budget hotel industry is shareholder incentive.

Primary Financial Daily's news revealed that three key skilled managers from Home-Inn Hotel have been poached by Green-Tree-Inn Hotel. Despite the lack of significantly higher wage and benefits at Green-Tree-Inn, their yet-to-be-public status makes it a tantalizing offer for these

individuals. Upon going public, they could potentially earn stock equity and more benefits compared to what they received at Home-Inn. Considering Home-Inn is already a publicly listed entity, its room for growth is seemingly less than that of emerging hotels like Green-Tree-Inn.

The HR manager of Green-Tree-Inn Hotel acknowledged the immense potential within the budget hotel sector as a significant factor in attracting skilled individuals (Jiang Wenhua, 2009). The industry's characteristic pattern was visible when, after the launch of Home-Inn hotel, other budget entities including Seven-Days-Inn Hotel, twenty-four K, and Green-Tree-Inn Hotel, all announced their imminent launches. These emerging opportunities prompted numerous managers to quit their positions to pursue their dreams of becoming shareholders in these enterprises.

Considerations on why Employees leave Industries other than Hospitality, and Perceptions about the Hotel Sector. In the Chinese traditional viewpoint, the hospitality industry falls under the service sector, often wrongfully seen as "a job of lesser importance" or "a demeaning job serving others", which can evoke biased opinions. (Jiang Wenhua, 2009) In the context of families with a single child, such prejudiced views regarding these occupations persist and impact several young individuals.

University students, in particular, are leaving their hotel employment due to a lack of commitment, as per the previously mentioned survey. Presently, there is a proliferation of budget hotels recruiting on campuses, nurturing and grooming these students as potential talents. However, influenced by traditional views, these talents might not maintain long-term positions within the budgetary hotel sector or even the hospitality industry. Once imparted with training, or upon receiving opportunities in other industries outside hospitality, they readily abandon their jobs.

A poll

among university students revealed that factors related to social and concept issues largely affect their choice of employment, particularly in the hospitality sector. Work characteristics in low-budget hotels can lead to intense job stress due to non-standard rest times. It's not just front-line staff who are affected, but managers as well, who must distribute their hours over three shifts, depriving them of typical rest periods like ordinary people. (Lv ming& Wang Xiancheng, 2009) They are constantly required to prioritize the wellbeing of their customers, leading many capable individuals to leave the sector due to unbearable conditions.

Another hallmark trait of the hospitality field is the practice of beginners starting off in foundational roles such as frontline staff. (Li Yan, 2008) This concept can be hard to swallow for many young individuals, particularly those with higher education, who may find it difficult to imagine themselves in a role such as a server or housekeeper for an extended period. From their perspective, they deserve positions of leadership, at the very least supervisor roles in budget hotels. But unlike deluxe establishments, budget hotels need versatile individuals capable of multitasking - from cleaning rooms to navigating booking systems. Consequently, newcomers should receive comprehensive training in these areas.

Nevertheless, numerous individuals grow impatient and eventually opt to quit their roles in the hospitality sector. There are also other appealing factors involved. Generally, individuals who excel in the hospitality industry are capable of performing well in various other sectors. Increasingly, people don't wish to remain in the hospitality sphere, with many preferring jobs that are associated with a moderate workload, substantial pay and benefits, and a positive reputation

instead of continuing their career in the hotel industry.