Chapter 7 HRM Practices and Employee Retention: The Moderating Effect of Work Environment

Hospitality is considered one of the fastest growing industries globally, because of its significant contribution to the economy, in Malaysia specifically and across the world generally (ILO, 2010, cited in Bharwani & Butt, 2012). Similarly, the influence of tourism industry in Malaysia to GDP is at MYR 167.5 Billion, 13.7% in 2016. In 2017, it is expected to increase to 4.2%, and to rise by 5.4% per annum, from 2017 to 2027, to MYR 295.6 Billion (15.9% of total GDP) in 2027, directly impacting the increase in employment opportunities (World Travel and Tourism council, 2017). This year, the Malaysian tourism industry accounts for 4.5% of national employment. In addition, it is expected to increase by 1.9% in 2017, and increase by 3.9% per annum to create 956,000 jobs in 2027. This growth in the tourism industry directly affects the demands in lodging (hotels, hostels, guesthouses), subsequently increasing the supply of rooms by 81%. As a human-based industry, hospitality depends on humans as a part of the product, in which, the humans cannot be separated from the service process (Ghazali, 2010). Primarily, the hospitality industry strongly depends on the human factor and direct contact with customers. According to Bharwani and Butt (2012), employees have become very precious assets to hotel industry, playing a decisive role in enhancing the organizational image. In the competitive market environment of hospitality, retention of high performers is known as a key to delivery of service quality. Nevertheless, employee retention is still a major issue for the hospitality industry. Aksu (2004), Kuean, Kaur, and Wong (2010), and Proudfoot Consulting (2008) found that turnover rates have considerable passive effects on hospitality performance. It is costly for hotels’ management to spend money and time on employees who leave a short time later after they go through the employment process.