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A labour shortage has been experienced in the hospitality industry and is predicted to
continue into the future with a greater impact on luxury resorts. Resort managers
typically look to human resource(HR) directors to develop strategies to solve this
problem. The co alignment model can give managers a competitive advantage in
the marketplace. This study presents the results of a case study of five luxury resorts
in North Carolina. HR directors identified forces driving change in the environment,
strategy choices, firm structure, and outcomes reflected in firm performance. There
was little evidence that co-alignment was being used as a basis for planning.
KEYWORDS
Strategic management, co-alignment, human resources, Resorts
INTRODUCTION
The labor shortage has been recognized nationally as a major force driving
change for decades and is predicted to continue into the future with the shortage
having greater impact on the hospitality industry (Terry, 2005). This shortage is
even more amplified for resorts that are typically located
in remote areas with a high cost of living, low unemployment rates, and a
seasonal need for employees (Angelo & Vladimir, 2004). These three factors
have led to increased turnover and higher overall costs for resorts. In the past 3
years, there have been many media reports on the seriousness of the labor
shortage in seasonal resorts due to changes in immigration laws (Berta, 2004;
Hedlund, 2004). Solving the labor shortage problem is the responsibility of the
human resources (HR) department. Traditionally, this department has served as
support for operations and was viewed as a funnel to provide workers.
Administrative functions of the department were viewed as the only contribution
of HR to the total organization. This view changed due to a movement in
business and industry that treated HR as human capital. Today, in some
companies, the HR department has been viewed as a source of competitive
advantage and has become a strategic partner at the executive level (Kearns,
2004). This has served to differentiate companies with a strategic HR emphasis
from those without. According to Cooper (2005), what differentiates great
companies from their peers is the ability to hire, develop, and retain the best
people. The effect of a strategic emphasis in hospitality HR departments has not
been documented in the United States, thus the need for research in this area.
This article reports the results of a case study of five luxury resorts in North
Carolina. The issues investigated in this article include:
(1) recognition by luxury resort HR managers of the forces driving change in the
environment;
(2) competitive methods being utilized to solve the labor shortage;
(3) resources allocated to these competitive methods;
(4) alignment of the three elements of the model with firm performance.
An evaporating pool of workers, coupled with other labor concerns, may be the
biggest challenge that the hospitality industry faces. The labor force is expected
to grow as little as 16% over the next 20 years, compared with the 50% growth
of the previous two decades (Gillette, 1996). The Employment
Policy Foundation forecasts a deficit of labor needed versus labor available of 10
million workers in 2015 growing to 35 million by 2030 (Holt, 2006). The National
Restaurant Association predicts that the industry will need to fill 1.4 million new
jobs by 2010—more jobs than people willing to take
them (Berta, 2002). The International Society of Hospitality Consultants has
identified a shortage of labor and skills as the number-one issue for 2007 (ISHC,
2006). Traditionally, seasonal resorts in the United States depended heavily on
workers from other countries for restaurants, housekeeping, and landscaping
positions (Taylor, Finley, & Calvert, 2005). Even when there were plenty of
potential employees available, turnover has been a problem in the industry,
hovering at 100% for line workers. The labor shortage in the hospitality industry
has been recognized as a major force driving change
for decades; however, the industry has failed to identify solutions to address this
issue. Solutions that could be implemented to ease the shortage of labor in the
industry include outsourcing, improving productivity, recruiting in target
markets, developing attractive employment policies, marketing as employer of
choice, and increasing skills of employees (Holt, 2006).
According to Ettedgui (2006), the best luxury hotels are known for providing
exceptional services and for the sincerity of the people who deliver those
services. This is true in luxury resorts where the delivery of quality service is
usually the number-one priority. In a model of impediments to improvements in
service quality in luxury hotels, Presbury, Fitzgerald, and Chapman (2005)
identified four broad categories of impediments: (1) budget constraints, (2) staff
attitude, (3) lack of mentoring, and (4) high customer expectations.
Two of these categories, staff attitude and lack of mentoring, are impacted by
HR policies and procedures. The authors indicate that a lack of leadership,
inexperienced managers, high turnover, recruitment procedures, and a lack of
service ethic in the organization are issues that contribute to the
lack of mentoring and staff attitude. All of these issues impact labor turnover and
should be addressed by hospitality HR directors.
Strategic Management in HR
METHODOLOGY
To answer the research questions, the case study method with multiple cases as
described by Yin (1993) was used. The case study method has been
demonstrated as appropriate in testing the co-alignment model because
researchers must enter into the domain of the firm and study it in depth in
order to understand the complexities of the situation (Taylor & Olsen, 2006). The
use of face-to-face interviews has proved effective in testing the coalignment
model because the subjects may not be familiar with the concepts included in
the co-alignment model, and interviewing allows researchers to
probe and use questions to get a valid response. Other researchers (mostly
unpublished dissertations) have used the case study method in investigating the
co-alignment model. In addition, Aung (2000) used the case study method to
identify the core competencies of the Accor hotel chain. The focus for this study
was 4-star resorts in North Carolina. Seven resorts were identified in the Official
2005 North Carolina Travel Guide (2005). After contacting the HR directors at
these resorts, five of the seven HR directors agreed to participate in the study.
Yin (1993) suggested the use of multiple cases be viewed as multiple
experiments and not multiple respondents to a survey. The consensus for
numbers of cases falls between two and four as the minimum and ten and fifteen
as the maximum (Perry, 1998). Therefore, the five cases were considered to be
adequate for this case study.
A structured questionnaire consisting of twenty-seven open-ended questions was
developed to serve as the basis of the face-to-face interviews with each director
on location at the resort. Six of the questions were descriptive of the resort. Five
questions sought to identify the forces in the environment identified by the HR
director as driving change in the hotel industry. These
forces also have the potential of affecting the resort in the future and are
contributing to problems in HR at the resort. Four questions addressed the
strategy choices or competitive methods utilized by the resorts. Specifically, the
HR directors were asked to identify the resort’s competitive methods and
what was included in each method. They were also asked how competitive
methods were chosen and which methods were perceived as adding the most
value to the resort. The next five questions sought to identify how capital and HR
were allocated to the competitive methods. Firm performance
in terms of financial performance was identified in the final eight questions. The
questionnaire was e-mailed to the HR director for preparation prior o the face-to-
face interview. The interviews ranged from 1.5 to 2.5 hours in length. In addition
to the interview, the researchers were able to observe
the implemented strategies at each property to confirm information received
during the interviews. Interviews were transcribed and content analysis was used
to evaluate the responses (Neuendorf, 2002).
Firm Structure
The third component of the co-alignment model is the firm structure required to
implement the strategy choices/competitive methods that have been selected.
Results in Table 1 indicate increased HR budgets, change of management
structure to compliment capital investment, involving HR as
a strategic partner, and establishing a culture committee as needed to address
the unemployment rate issue. Focused marketing was implemented to address
both of the guest issues. Structural changes that were identified by the HR
directors were not as comprehensive as the strategy choices. In addition, they
were not tied directly to a strategy choice as the co-alignment model would
indicate. The comprehensiveness of the responses received from the HR
directors ranged from all of the structural changes included in Table 1 to listing
only one— increased HR budgets.
Firm Performance
The final component of the co-alignment model is the firm performance
measures that are used to determine the impact of the changes. Traditional
measures of performance in the lodging industry (average daily rate [ADR],
revenue per available Room [RevPar], turnover, etc.) were identified by all
but two of the HR directors. These results are similar to those reported by
Mandelbaum (2006). It was interesting to note that almost all of the respondents
did not have access to the operating data on a regular basis and in no case could
alignment be determined. The annual ADR ranged from $185 to $300, annual
occupancy rates ranged from 59% to 96%, and annual RevPar ranged from $125
to $559. Only one HR director reported seasonal data. Employee data included
payroll percentages ranging from 32% to 38.5%, employees to rooms ranging
from 1.1 to 1.9, and turnover percentages ranging from 16.5% to 65%. The wide
range in RevPar, occupancy rates and turnover were due to
data from one seasonal resort. Turnover rates were also impacted by the use of
temporary guest workers. The HR directors reported that turnover rates were not
increasing. This trend is different from a study by the Society for Human
Resource Management where 38% of the members reported increasing turnover
rates (Feeney, 2007). While it is difficult to link these data as outcomes for a
strategy choice and change in firm structure, there was a trend for lower
turnover rates in the resorts with a more comprehensive “People Strategy.”