Tourism Management 99 (2023) 104783
Contents lists available at ScienceDirect
Tourism Management
journal homepage: www.elsevier.com/locate/tourman
Employee turnover dynamics in the hospitality industry vs. the
overall economy
Tarik Dogru a, *, Sean McGinley a, Abhinav Sharma a, Cem Isık b, Lydia Hanks a
a
b
Florida State University, Dedman College of Hospitality, Tallahassee, FL, USA
Anadolu University, Faculty of Tourism, Tepebaşı, Eskişehir, Turkey
A R T I C L E I N F O
A B S T R A C T
Keywords:
Employee turnover
Market model
Voluntary turnover
Modern portfolio theory
COVID-19 pandemic
Hospitality
High employee turnover is a widely known reality for the hospitality industry. However, the extent to which
employee turnover in the hospitality industry depends on overall economic activities or idiosyncratic charac­
teristics of the hospitality industry is not clear. The purpose of this study is to examine the extent to which the
employee turnover rate in the hospitality industry is sensitive to the overall US economy. Also, the COVID-19pandemic has further exacerbated an already convoluted issue of employee turnover for hospitality busi­
nesses. Therefore, we further investigate the extent to which employee turnover rate in the hospitality industry
are sensitive to the overall US economy during the pandemic period. The results show that employee turnover in
the hospitality industry has the highest sensitivity to the economy. However, employee turnover in the hospi­
tality industry decreases the most in the overall US economy when economy-wide turnover increases. The
theoretical and practical implications are extensively discussed.
1. Introduction
High employee turnover is a reality for the hospitality industry, with
the industry leading private sector turnover rates prior to the pandemic
(US Bureau of Labor Statistics, 2018;2019). The high rate of turnover is a
major expense for hospitality companies due to lost productivity,
recruitment, selection, and training costs (Simons & Hinkin, 2001).
Turnover is so impactful on businesses that it is one of the most highly
studied phenomena in the management and organization literature (Jex
& Britt, 2018). Due to the high rate of turnover and its impact on firms’
profitability, the topic is also widely discussed in the hospitality cannon
(e.g., McGinley et al., 2020; McGinley & Shi, 2022) and was covered in
two recent meta-analyses focusing on the topic (Guzeller & Celiker,
2019; Park & Min, 2020). Fig. 1 shows the historical employee turnover
rates in major US sectors between 2001 and 2021.
While it is widely accepted that the hospitality industry has a high
turnover rate (Job Openings and Labor Turnover Survey, Bureau of
Labor Statistics, 2022) and this is a frequently studied topic (Guzeller &
Celiker, 2019; Park & Min, 2020), the debate on the reasons that turn­
over is so commonplace has yet to be settled. However, the fundamen­
tally high employee turnover rate in the hospitality industry and its
subsectors does not necessarily show the sensitivity of the hospitality
industry to overall economic conditions in the context of employee
turnover rates. Neo-Career theories like the Protean Career (Hall, 2004)
suggest that as more jobs are present in the general economy, turnover
will increase due to workers defining success subjectively, having an
interest in improving employability, skills, and professional networks,
and generally being self-directed in their career progression ambitions.
Neo-career theories suggest that people are looking to remain employ­
able in the labor market and therefore seek to acquire transferable skill
and broad professional networks (Baruch, 2014; Waters et al., 2014),
meaning that some industries might have idiosyncratic characteristics
and may encourage workers to behave independently of the overall
economy. Recent evidence supports the work of neo-career theorists, by
suggesting that trends such as economic expansions or contractions are
likely to affect trends in major sectors (Dogru & Sirakaya-Turk, 2017).
However, the extent to which changes in employee turnover rate in the
hospitality industry depend on overall economic activities has not yet
been examined, leaving a gap in both evidence and theory. Similarly, the
extent to which changes in employee turnover rate in the hospitality
industry depend on idiosyncratic characteristics of the hospitality in­
dustry is also not clear, given the extensive debate in the scholarly
conversation.
Therefore, the purpose of this study is to examine the extent to which
* Corresponding author.
E-mail address: tdogru@dedman.fsu.edu (T. Dogru).
https://doi.org/10.1016/j.tourman.2023.104783
Received 23 December 2022; Received in revised form 21 April 2023; Accepted 22 April 2023
Available online 26 April 2023
0261-5177/© 2023 Elsevier Ltd. All rights reserved.
T. Dogru et al.
Tourism Management 99 (2023) 104783
changes in employee turnover rate in the hospitality industry are sen­
sitive to the changes in the overall US economy. Additionally, the
COVID-19 pandemic has further exacerbated an already convoluted
issue of employee turnover for the hospitality industry. During the
recent pandemic, the employee turnover rate spiked to about 65% in the
hospitality industry overall, 70% in the accommodations and food ser­
vices sector, and 43% in the arts, entertainment, and recreation sectors,
respectively (see Fig. 1). However, it is not clear whether the recent
pandemic has changed the sensitivity of the employee turnover rate in
the hospitality industry to the overall economic conditions. Therefore,
we further investigate the extent to which changes in employee turnover
rate in the hospitality industry are sensitive to the changes in the overall
US economy during the pandemic period. Accordingly, this study seeks
to answer the following questions.
2. Literature review
This investigation will shed light on competitiveness and strength (or
lack thereof) of the hospitality industry relative to the other sectors and
the overall economy in terms of employee retention. In the economy
before the pandemic-induced changes to the labor markets there was
stiff competition for talent (Das & Baruah, 2013). The hospitality in­
dustry was no exception, with Dawson and Abbott (2011) proposing
ways to gain a competitive advantage in the high turnover hospitality
industry by improving retention rates. Further evidence suggesting a
competitive labor market in hospitality can be seen in a review piece
published in 2022 discussing challenges and strategies for hospitality
firm retention (Ghani et al., 2022). During the post-pandemic recovery
period the competition for talent appears to be accelerating, with very
high turnover rates in the hospitality industry (Job Openings and Labor
Turnover Survey, Bureau of Labor Statistics, 2022), and the issue con­
tinues to be discussed in the extant literature (King et al., 2021). A
disproportionately high turnover in hospitality relative to other in­
dustries would corroborate the previously cited literature on drivers of
turnover in hospitality firms. These include issues relating to pay
(McGinley et al., 2014), work-life balance (Hom & Kinicki, 2001), the
impacts of emotional labor (McGinley et al., 2019), the underlying
culture of turnover, (Iverson & Deery, 1997), and employee back­
grounds (Han, 2020). On the other hand, if the findings were to uncover
certain phases of economic cycles when hospitality turnover is lower
than that of the economy overall, one could then seek to understand
whether the aforementioned factors which are typically identified as
drivers of turnover instead serve as drivers of retention in such periods.
Finally, the results will show whether employee turnover rates in the
hospitality industry change mainly due to macroeconomic conditions or
industry-specific factors, thereby refuting or supporting the work of neocareer theorists (Baruch, 2014; Hall, 2004; Waters et al., 2014), who
1) To what extent are employee turnover rates in the hospitality in­
dustry different from employee turnover rates in the overall U.S.
economy and other sectors of the economy?
2) To what extent do employee turnover rates in the hospitality in­
dustry change due to changes in employee turnover rates in the
overall U.S. economy (i.e., to what extent are employee turnover
rates in the hospitality industry economy-driven)?
3) If economy driven effects were to be detected, would the effects be
similar when economy-wide turnover is increasing, versus when
economy-wide turnover is decreasing?
4) To what extent do employee turnover rates in the hospitality in­
dustry change irrespectively of the changes in employee turnover
rates in the overall U.S. economy (i.e., to what extent are employee
turnover rates in the hospitality sector industry-driven)?
5) To what extent does the recent COVID-19 pandemic affect these
relationships?
Fig. 1. Historical employee turnover rate in major US sectors.
2
T. Dogru et al.
Tourism Management 99 (2023) 104783
posit that macroeconomic conditions should drive career progression
decisions, as they create the conditions that allow workers to be
self-directed, develop their own careers, and satisfy their subjective
ambitions. Understanding the relative effect of industry specific factors
to macro-economic conditions would not only provide scholars valuable
information to continue investigating the phenomenon but may also
help managers to respond to conditions in the field better.
that employee turnover rate in a given industry increase or decrease as
much as the employee turnover rate increase or decrease in the overall
U.S. economy. While a βi value lower than 1 suggest that a specific in­
dustry is less sensitive to changes in employee turnover rate in the
overall U.S. economy, a βi value higher than 1 indicates a higher
sensitivity to changes in employee turnover rate in the overall U.S.
economy for a particular industry. For example, a βi value of 1.2 in­
dicates that when employee turnover rate increases by 1% in the overall
U.S. economy, employee turnover rate increase by 1.2% in industry i
during the specified period. On the other hand, a βi value of 0.6 suggests
that when employee turnover rate increases by 1% in the overall U.S.
economy, employee turnover rate in industry i increase by 0.6% during
the specified period.
The coefficient alpha, ai , shows the extent to which employee
turnover rate in an industry changes independently of the changes in
employee turnover rate in overall U.S. economy. For instance, an ai
value of 0.3 suggests that employee turnover rate in industry i have
increased 0.3% independently of the changes in employee turnover rate
in the overall U.S. economy. Similarly, ai value of − 0.3 indicates that
employee turnover rate in industry i have decreased 0.3% irrespectively
of the changes in employee turnover rate in the overall U.S. economy.
Based on the postulations of the modern portfolio theory and the market
model, while the βi coefficient is referred to as the overall economy
driven effect on employee turnover rate industry i, the coefficient alpha,
ai , is referred to as the specific industry driven effect on employee
turnover rate in industry i.
3. Methodology
3.1. Sample and data
The study’s sample consists of all major industries with two-digit or
three-digit North American Industry Classification System (NAICS)
codes, as well as the arts, entertainment, recreation, accommodation,
and food services subsectors of the hospitality industry for the period
from December 2001 to August 2022. Accordingly, the total sample size
includes 260 observations. This period includes all the available
monthly and annual employee turnover data from the earliest date to the
most recent date. Changes in monthly employee turnover rates in major
industries with two-digit or three-digit NAICS codes, and employee
turnover rates in arts, entertainment, and recreation and accommoda­
tion and food services subsectors of the hospitality industry in the U.S.
serve as the study’s dependent variables. Changes in monthly employee
turnover rate in the overall U.S. economy serve as the study’s inde­
pendent variable.
Employee turnover data were obtained from the Bureau of Labor
Statistics, which is a branch of the United States Department of Labor.
We must note that a single hospitality industry is not classified by the
Bureau of Labor Statistics. Instead, the Bureau of Labor Statistics cate­
gorizes the hospitality industry along with the leisure industry, collec­
tively referred as the leisure and hospitality industry. Therefore,
although the main comparisons on the sensitivity of employee turnover
in the hospitality industry to overall US economy was made based on the
leisure and hospitality industry figures, we separately examined the
sensitivity of employee turnover in arts, entertainment, and recreation
and accommodation and food services subsectors to overall US
economy.
3.3. Summary statistics
Prior to conducting the main analysis of the study, we analyzed the
mean differences between employee turnover rates in major sectors and
Table 1
Summary statistics and mean differences.
3.2. Empirical approach
Ordinary least squares regression was used to estimate the market
model, which predicts the relationship between the changes in employee
turnover rate in a particular industry and in the overall US economy. To
estimate the market model, the changes in employee turnover rate was
calculated as follows.
Cit =
ETit
− 1
ETit− 1
(1)
where Cit is the changes in employee turnover rate of industry i on time t,
ETit is the employee turnover rate for industry i in time t, and ETit− 1 is the
employee turnover rate for industry i in time t-1. To estimate the changes
in employee turnover rate and sensitivity, the market model was
employed. The market model is specified as follows.
Cit = ai + βi Cmt + eit
(2)
where Cit is the changes in employee turnover rate for industry i in time
t, Cmt is the employee turnover rate in the overall U.S. economy in time t,
which is calculated using formula (2), eit is the random disturbance term,
and ai and βi are the parameters of the market model. All models include
month and year fixed effects to control for time-specific economic,
conditions, seasonality, and other conditions over time.
The beta coefficient, βi shows the extent to which employee turnover
rate in an industry change correspondingly with the employee turnover
rate in the overall U.S. economy. In this context, a βi value of 1 implies
Industry
Mean
Mean
Differences
Pvalues
Ranking
Accommodation and Food
Services
Hospitality
Retail Trade
Arts, Entertainment, and
Recreation
Professional and Business
Services
Trade, Transportation, and
Utilities
Construction
Other Services
Transportation and
Warehousing
Real Estate and Rental and
Leasing
Mining and Logging
Health Care and Social
Assistance
Education and Health Services
Non-Durable Goods
Manufacturing
Information
Financial Activities
Wholesale Trade
Manufacturing
Finance and Insurance
Educational Services
Durable Goods Manufacturing
49.70%
23.40%
0.000
1
47.20%
34.60%
32.50%
20.90%
8.30%
6.20%
0.000
0.000
0.009
2
3
4
31.20%
4.90%
0.218
5
27.60%
1.30%
1.000
6
24.10%
23.80%
22.00%
− 2.20%
− 2.50%
− 4.30%
1.000
1.000
1.000
7
8
9
21.90%
− 4.40%
0.745
10
20.70%
20.70%
− 5.60%
− 5.60%
0.044
0.051
11
12
19.70%
18.00%
− 6.60%
− 8.30%
0.003
0.000
13
14
18.00%
16.40%
16.10%
15.20%
14.50%
14.30%
13.50%
− 8.30%
− 9.90%
− 10.20%
− 11.10%
− 11.80%
− 12.00%
− 12.80%
0.000
0.000
0.000
0.000
0.000
0.000
0.000
15
16
17
18
19
20
21
Notes: Mean and mean difference numbers in thousands. Mean employee
voluntary turnover in the overall US is on average about 26.30% annually during
the study period. Ranking is based on mean values. P-values shows the statistical
significance levels of mean difference tests based on the US employee voluntary
turnover vs employee voluntary turnover in respective industry.
3
T. Dogru et al.
Tourism Management 99 (2023) 104783
the employee turnover rates in the overall U.S. economy. Table 1 pre­
sents the average employee turnover rates in major sectors of the U.S.
economy along with the mean differences between these sectors and the
overall U.S. economy during the study period.
We further ranked the sectors based on the employee turnover rates,
where sectors with highest employee turnover rate ranked on top. The
results showed that employee turnover rate in the overall U.S. economy
is approximately 26%, on average during the study period. The sub­
sector of the hospitality industry, namely the accommodation and food
services sector is ranked number one with an average employee turnover
rate of almost 50% followed by the overall hospitality industry with an
average employee turnover rate of about 47%. The arts, entertainment,
and recreation subsector of the hospitality industry was also found to
have one of the highest employee turnover rates of about 32%, on
average, and ranked number four during the study period. The mean
differences of the hospitality industry and its subsectors are not only
statistically but they are also economically significant.
employee turnover rate in the hospitality sector has the highest sensi­
tivity to the changes in the overall U.S. economy. The economy-driven
effect or the beta coefficient of 1.828 (p < 0.01) suggests that
employee turnover rate in the hospitality industry is about 1.8 times
higher than employee turnover rate in the overall U.S. economy. While
employee turnover in the arts, entertainment, and recreation sector of
the hospitality industry changes almost in parallel with the changes in
employee turnover rate in the overall U.S. economy (β = 0.990, p <
0.01), employee turnover rate in the accommodation and food services
sector is nearly twice that of the overall U.S. economy (β = 1.975, p <
0.01). Although there are other sectors that are similar to the hospitality
industry, which are also more responsive to changes in employee turn­
over rates in the overall U.S. economy, such as the real estate and rental
and leasing (β = 1.530, p < 0.01) and the professional and business
services (β = 1.534, p < 0.01) sectors, employee turnover in the hospi­
tality industry appears to have the highest sensitivity to changes in
employee turnover rate in the overall U.S. economy.
The results also showed that employee turnover rates in the other
sectors of the economy are, in general, less responsive to the changes in
employee turnover rate in the overall U.S. economy. Specifically,
educational services (β = 0.345, p < 0.05), mining and logging (β =
0.469, p < 0.05), durable goods manufacturing (β = 0.492, p < 0.01),
and other services (β = 0.514, p < 0.05) industries appear to have the
lowest responsiveness to the changes in employee turnover rate in the
overall U.S. economy. For perspective, when the employee turnover rate
increases by 1% in the overall U.S. economy, the employee turnover rate
in other service sectors increases by 0.5% whereas the employee turn­
over rate in the hospitality industry increases by about 1.82% percent.
These results collectively suggest that the hospitality industry has the
highest sensitivity to the overall economic activities in terms of
employee turnover rate.
The findings from the analyses presented in Table 2 also show that
the hospitality industry and its subsectors do not have a statistically
significant industry-driven effect on employee turnover. The industrydriven effect or the alpha coefficient of − 0.001, which is statistically
insignificant, indicates that changes in the employee turnover rate in
hospitality are primarily economy-driven. That is, idiosyncratic char­
acteristics do not significantly affect employee turnover in the hospi­
tality industry and that the rate of employee turnover in the hospitality
industry changes solely due to changes in employee turnover dynamics
in the overall U.S. economy. Similar findings are also present in majority
of the industries with a few exceptions. Specifically, manufacturing,
financial activities, finance and insurance, real estate and rental and
leasing, and professional and business services industries present a
negative alpha coefficient ranging between − 0.004 and − 0.008, sug­
gesting that employee turnover rate decreases in these industries inde­
pendently of the overall economic conditions. We also observe structural
weakness in education and health services and health care and social
assistance sectors, as the industry-driven effects or the alpha coefficients
of 0.004 (p < 0.01) and 0.005 (p < 0.01) are observed, respectively.
These findings suggest that employee turnover rates in education and
health services and health care and social assistance sectors increase
independently of overall economic conditions.
These findings collectively suggest that a few industries put forth an
effort to reduce employee turnover, which shows the structural strength
of these industries. Also, a number of industries, such as manufacturing,
financial activities, and professional and business services industries
have structural weaknesses in employee retention. However, the
employee turnover rate in most other industries changes, although with
varying rates, based on overall economic activities, including the hos­
pitality industry.
The recent pandemic might have had a significant impact on overall
economic dynamics, including employee turnover rates. Therefore, we
further examined the extent to which changes in employee turnover rate
in the hospitality industry are sensitive to the changes in the overall US
economy during the pandemic period (i.e., January 2020–August 2022).
4. Results
This section presents the findings from the examination of the
changes in employee turnover rate in the hospitality industry and its two
main subsectors (i.e., arts, entertainment, and recreation and accom­
modation and food services) together with other major sectors of the U.
S. economy relative to employee turnover rate in the entire U.S. econ­
omy. In particular, changes in employee turnover rate in a specific sector
was compared to employee turnover rate in the overall U.S. economy
utilizing the market model. Table 2 presents these results.
The results show that the hospitality industry is highly responsive to
changes in employee turnover rate in the overall U.S. economy. That is,
Table 2
Employees’ voluntary turnover dynamics: Pre-pandemic period.
Sectors
Industry Driven
Effect (α)
Economy Driven
Effect (β)
RSquared
Mining and Logging
Construction
Manufacturing
Durable Goods
Manufacturing
Non-Durable Goods
Manufacturing
Trade, Transportation, and
Utilities
Wholesale Trade
Retail Trade
Transportation and
Warehousing
Information
Financial Activities
Finance and Insurance
Real Estate and Rental and
Leasing
Professional and Business
Services
Education and Health
Services
Educational Services
Health Care and Social
Assistance
Hospitality
Arts, Entertainment, and
Recreation
Accommodation and Food
Services
Other Services
0.006 (1.99)
0.002 (0.46)
− 0.004b (2.32)
− 0.001 (− 1.01)
0.469b (2.05)
0.874a (4.72)
0.645a (7.83)
0.492a (7.31)
0.70
0.83
0.94
0.92
− 0.008a (− 2.82)
0.914a (6.57)
0.88
a
0.95
− 0.001 (− 0.27)
0.012a (3.88)
− 0.004 (− 1.15)
a
0.680 (5.95)
0.905a (6.96)
1.012a (7.14)
0.78
0.93
0.78
0.002 (0.55)
− 0.009a (− 3.17)
− 0.007a (− 2.64)
− 0.015b (− 2.32)
0.842a (5.86)
1.083a (8.45)
0.929a (8.31)
1.530a (5.29)
0.71
0.80
0.80
0.59
− 0.007b (− 2.49)
1.534a (13.35)
0.90
0.004a (3.62)
0.596a (12.86)
0.93
a
0.006 (3.38)
0.847 (11.43)
b
0.003 (0.80)
0.005a (3.21)
0.345 (2.61)
0.640a (11.41)
0.84
0.91
¡0.001 (-0.08)
0.001 (0.03)
1.828a (12.58)
0.990a (2.65)
0.95
0.80
¡0.001 (-0.14)
1.975a (10.36)
0.95
0.007 (1.27)
b
0.514 (2.11)
0.67
Notes: The dependent variable is the employee turnover rate for respective in­
dustry. All models control for month and year effects. Robust t-statistics are in
parentheses. a, b, and c denote 1%, 5%, and 10% statistical significance levels,
respectively.
4
T. Dogru et al.
Tourism Management 99 (2023) 104783
rates during the pandemic and hence gained a structural strengthened.
Table 3
Employees’ voluntary turnover dynamics: During the pandemic period.
Sectors
Industry Driven
Effect (α)
Economy Driven
Effect (β)
RSquared
Mining and Logging
Construction
Manufacturing
Durable Goods
Manufacturing
Non-Durable Goods
Manufacturing
Trade, Transportation, and
Utilities
Wholesale Trade
Retail Trade
Transportation and
Warehousing
Information
Financial Activities
Finance and Insurance
Real Estate and Rental and
Leasing
Professional and Business
Services
Education and Health
Services
Educational Services
Health Care and Social
Assistance
Hospitality
Arts, Entertainment, and
Recreation
Accommodation and Food
Services
Other Services
0.002 (0.85)
− 0.003c (1.94)
− 0.003b (2.19)
− 0.003b (2.27)
0.568a (6.12)
0.942a (13.53)
0.887a (16.12)
0.795a (14.09)
0.44
0.78
0.81
0.80
− 0.003 (− 1.59)
1.044a (13.18)
0.76
a
0.92
− 0.001 (− 0.50)
0.001 (0.61)
0.007a (2.97)
a
0.679 (6.64)
1.282a (12.73)
0.710a (7.41)
0.73
0.86
0.61
0.001 (0.81)
0.001 (0.81)
0.001 (0.88)
0.001 (0.08)
0.530a (8.05)
0.482a (7.42)
0.424a (5.96)
0.654a (5.29)
0.68
0.57
0.45
0.47
0.006a (3.26)
0.878a (11.99)
0.82
0.003b (2.33)
0.685a (14.72)
0.86
0.002 (1.29)
1.013 (16.77)
b
− 0.007 (− 2.52)
0.005a (3.21)
0.777 (7.12)
0.669a (13.86)
0.57
0.85
− 0.005 (− 1.18)
− 0.018a (− 2.79)
1.955a (12.88)
1.732a (6.94)
0.90
0.69
− 0.003 (− 0.82)
2.024a (12.21)
0.90
b
− 0.005 (− 2.07)
a
a
0.972 (10.05)
5. Discussion and conclusion
The analysis clearly shows turnover in the hospitality industry to be
highly sensitive to the overall economy. Although the industry’s turn­
over numbers ran k higher than all other economic sectors (Job Open­
ings and Labor Turnover Survey, Bureau of Labor Statistics, 2022), this
study’s findings uncover the presence of a noticeable linear relationship
between turnover in the hospitality sector with that of the overall
economy. Specifically, the results show that when the rate of turnover
increases economy-wide, the corresponding rate of turnover hospitality
increases even more. This might be, for instance, during times of eco­
nomic growth when employees voluntarily quit their jobs to pursue
alternative job opportunities that they presumably believe to be more
attractive, a key factor that enables individuals to move between com­
panies supporting neo-career theories like the Protean Career (Baruch,
2014; Hall, 2004; Waters et al., 2014).
Nonetheless, the linear relations between turnover in the hospitality
industry and turnover in the economy overall also suggests when turn­
over declines in general, the corresponding decrease in turnover in the
hospitality industry is even more pronounced. Stated differently, when
the economy undergoes a fall in voluntary job exits, the associated slide
in voluntary departures in hospitality is comparatively even greater,
implying better retention in such macroeconomic conditions. This result
indicates that despite the challenges the hospitality sector faces when
economy-wide turnover increases, it appears that certain characteristics
within the hospitality industry provide a certain buffer from excess
turnover relative to the rest of the economy during economic cycles
when turnover is declining in the general economy.
We note, however, that despite these differences between hospitality
and other industries in terms of the sensitivity of turnover, from a
structural point of view turnover in hospitality is not dissimilar to the
rest of the economy in that hospitality tends to follow the same general
directional trend as the entire economy. Within the hospitality industry,
the high rates of turnover are largely driven by the accommodation and
food services subindustries, rather than the recreation and art related
subindustries. In this regard, one is inclined to agree with previous
studies that contend that the nature and characteristics of the hospitality
industry largely explain the movement of the labor market from hospi­
tality to other industries. Among these are attributes such as low wages
(McGinley et al., 2014), the failure of hospitality firms to provide em­
ployees with a satisfactory balance between work and life (Hom &
Kinicki, 2001), the widespread culture of turnover (Iverson & Deery,
1997) toward which hospitality firms have seemingly adopted an atti­
tude of resignation, and the backgrounds and skill levels of employees
who largely make up the hospitality sector (Han, 2020). In addition, our
findings also show that during major economic shocks like the
COVID-19 pandemic, turnover in the hospitality industry has been
particularly sensitive to turnover in the overall economy. In fact, we
found that during the pandemic, turnover in the hospitality sector was
double the turnover economy wide.
0.76
Notes: The dependent variable is the employee turnover rate for respective in­
dustry. All models control for month and year effects. Robust z-statistics are in
parentheses. a, b, and c denote 1%, 5%, and 10% statistical significance levels,
respectively.
Table 3 presents these results.
The results show that the hospitality industry and its subsectors have
become even more sensitive to changes to employee turnover rate in the
overall U.S. economy during the pandemic period. Specifically, the
economy-driven effect or the beta coefficient of 1.955 (p < 0.01) sug­
gests that the rate of employee turnover in the hospitality industry
increased about twice as much as employee turnover rate in the overall
U.S. economy. Similarly, the employee turnover rate in the accommo­
dation and food services sector changed almost twofold more than the
overall U.S. economy (β = 2.024, p < 0.01). While employee turnover in
the arts, entertainment, and recreation sector of the hospitality industry
changed almost in parallel with the changes in employee turnover rate
in the overall U.S. economy (β = 0.990, p < 0.01) during the prepandemic period, employee turnover in the arts, entertainment, and
recreation sector of the hospitality industry has become more sensitive
to the employee turnover rate in the overall U.S. economy with a beta
coefficient of 1.732 (p < 0.01) during the pandemic period. Although the
sensitivity of employee turnover rate to the overall U.S. economy has
also changed for some other industries, the sensitivities remained un­
changed for most sectors.
Furthermore, the examinations from the pandemic period showed
results that are similar to the pre-pandemic period in terms of the
industry-driven effect on employee turnover rates. However, the arts,
entertainment, and recreation subsector of the hospitality industry
showed a structural strength during the pandemic with an alpha coef­
ficient of − 0.018 (p < 0.01). That is, employee turnover rate decreases in
the arts, entertainment, and recreation subsector of the hospitality in­
dustry independently of the overall economic conditions during the
pandemic period. This finding suggests that arts, entertainment, and
recreation subsector has put forth an effort to reduce employee turnover
5.1. Theoretical and practical implications
During periods of abundant job postings, it may be particularly
important for the hospitality sector to learn from other industries that
are more successful in retaining employees. Sectors like education,
mining and logging, and certain types of manufacturing seem particu­
larly resilient against economy-wide fluctuations in turnover. Not sur­
prisingly, these industries are also among those that are characterized by
comparatively higher wage levels than hospitality (Dogru et al., 2019).
Moreover, one assumes that more extensive training and additional skill
levels are better rewarded in these other occupational sectors. As such,
hospitality firms must explore measures that would make them more
competitive in labor markets and attract employees with higher skill
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Tourism Management 99 (2023) 104783
levels.
Certainly, there is a need for better wages in hospitality. Nonetheless,
an increase in wages alone would likely be insufficient for the hospitality
industry to achieve desirable levels of employee retention. Prospect
theory (Kahneman & Tversky, 1979) predicts that d iminishing sensi­
tivity is a fundamental characteristic of human preferences. This would
mean that wages do matter and that every additional dollar does in­
crease employee satisfaction, but that the marginal satisfaction induced
by every additional dollar increase in wages is lower than that of the
previous dollar. This in turn underlines the need for improvements in
other dimensions of the job, including fringe benefits (Dale-Olsen,
2006). Furthermore, the results also corroborate Hom and Kinicki’s
(2001) theoretical arguments regarding the importance of providing a
satisfactory work life balance to employees.
Also, while high employee turnover is a widely discussed reality for
the hospitality industry, the extent to which employee turnover in the
hospitality industry depends on overall economic activities or idiosyn­
cratic characteristics of the hospitality industry was not previously
examined. The findings from this study provide empirical evidence
showing that employee turnover in the hospitality industry mainly
driven by the overall economic activities. From an empirical perspec­
tive, in this study, we utilized the market model, which is developed
based on the modern portfolio theory and it has been extensively used
with stock market data in much of the event study literature in fields like
finance, marketing, management. Although its applications can go
beyond these contexts, the market model has not been widely utilized in
the context of employment and turnover. Utilizing the market model,
this study provides support for the postulations of the modern portfolio
theory in the employment and turnover context.
There also is a perception that hospitality firms offer low-quality
employment opportunities, and that hospitality jobs are for mainly for
those who have no other employment options (McIntosh & Harris,
2012). This image is unlikely to change overnight, and potentially
contributes to the transitory nature of hospitality employment. In trying
to keep costs at a minimum, hospitality firms themselves might have
contributed to this perception by hiring hourly minimum wage workers
rather than salaried employees whenever possible. This recruiting
strategy, however, results in ineffective orientation, socialization, and
training, which then restricts growth opportunities, all of which lead to
higher turnover (Mooney et al., 2016). A shift towards more full-time
employees and more emphasis on professional skill development is
likely to help in this regard. Opportunities for career growth may also be
provided through better succession planning and internal promotions.
A case may also be made for local governments and convention and
visitors bureaus (CVBs) to provide more resources and support to the
hospitality industry. A high performing hospitality industry attracts outof-town visitors, which in turn creates employment and economic op­
portunities for residents. Indeed, there is an extensive literature on the
spillover economic benefits that result from a thriving hospitality and
tourism industry (Brida et al., 2020; Dogru et al., 2020; Holzner, 2011;
Nissan et al., 2011). Turnover hinders hospitality firms from performing
efficiently, and the repercussions of high turnover rates extend into the
local economy. Subsidies and tax breaks from the government could
help provide better wages and benefits. Moreover, such incentives could
help local hospitality employers in retaining workers during off-seasons
and shoulder seasons, when the demand for hospitality services might be
lower, and the temptation to lay-off some employees may be higher.
The results of this study also rekindle the debate on whether cus­
tomers rewarding hospitality workers with money in the form of tips
ultimately helps or hurts (see Even & Macpherson, 2014; Shy, 2015).
Tipping is an especially common practice in some countries, including
the United States (Dogru et al., 2019; Lynn et al., 1993), where tipping of
restaurant servers in full-service restaurants is, for the most part, ex­
pected. Nonetheless, tipping potentially shifts a share of the burden of
compensation away from employers. Although this custom might pro­
vide adequate earnings to employees during busy periods, it also may
have resulted in a situation where restaurant employee earnings are
inadequate in off-seasons. One must certainly consider the possibility
that this situation then leads to workers resigning to pursue more stable
compensation opportunities. If so, a rethinking of this longstanding
cultural practice may be warranted.
5.2. Limitations and recommendations for future research
Although this research shed light on a range of issues relating to
employee turnover in the hospitality industry, important issues that
warrant further investigation still remain. In this analysis, U.S. data were
used. As a future avenue for research, we recommend that similar
studies be conducted using data from other countries that have labor
markets that are structurally different from the U.S. Specifically, it
would be interesting to compare our findings with results from countries
where wage discrepancies between industries are lower. Additionally, it
would be useful to conduct similar analysis using data from countries
where tipping of hospitality employees is not a standard practice.
Also, while there is widespread agreement that hospitality firms
must lower turnover, it has also been recognized in the academic
scholarship that a certain amount of turnover may be beneficial for or­
ganizations (Hancock et al., 2013; Hausknecht & Trevor, 2011). One can
reasonably assume that current turnover levels in hospitality far exceed
this optimal level. At the same time, more research is needed to un­
derstand what the optimal rate of turnover in hospitality firms might be.
Impact statement
A high turnover rate in the hospitality industry is widely accepted
and is a frequently studied topic; however, the debate on the reasons
why turnover is so commonplace has yet to be settled. This study in­
vestigates the extent to which changes in employee turnover rate in the
hospitality industry are sensitive to the changes in the overall US
economy before and during the COVID-19 pandemic periods. The results
shows that the hospitality industry is highly sensitive to national trends
and less competitive than other industries when turnover is increasing
economy wide. The sensitivity further increases during the pandemic
period. These findings show that employee turnover rates in the hospi­
tality industry are mainly driven due to macroeconomic conditions and
not due to industry-specific factors. These results would not only provide
scholars valuable information to continue investigating the phenome­
non but may also help managers to respond to conditions in the field
better.
Declaration of competing interest
None.
Acknowledgements
None.
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Dr. Abhinav Sharma is an assistant professor of hospitality
management in the Dedman College of Hospitality at Florida
State University.
Dr. Cem Işık is an associate professor in the Faculty of Tourism
at the Anadolu University. He received his bachelor’s degree in
economics from 9 Eylul and master’s degree in MIS from UST/
Houston/Texas. He earned a doctorate degree in economics
from Ataturk University. Prior to joining Anadolu University,
Dr. Işık worked at Ataturk University as an assistant professor
for seven years. He teaches Tourism Economics and Innovation
in Tourism. His research interests include the tourism eco­
nomics, energy economics, innovation, and applied
econometrics.
Dr. Lydia Hanks is an associate professor of hospitality man­
agement in the Dedman College of Hospitality at Florida State
University. Her research interests include consumer behavior,
services marketing, and corporate social responsibility. Hanks
is on the editorial board of the Journal of Hospitality and
Tourism Insights and Tourism Analysis. She serves as a
reviewer for numerous academic journals and conferences.
Dr. Tarik Dogru (Dr. True) is an associate professor of hos­
pitality management in the Dedman College of Hospitality at
Florida State University. Prior to joining Florida State Univer­
sity, Dr. True worked at Boston University as an assistant
professor for two years. Dr. True’s research interests span
topics in sharing economy (e.g., Airbnb), hospitality finance,
corporate finance, tourism economics, employment and wages,
climate change, and blockchain technology.
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