World Applied Sciences Journal 10 (Special Issue of Tourism & Hospitality): 01-13, 2010 ISSN 1818-4952 © IDOSI Publications, 2010 Corresponding Author: Mohamad Abdullah Hemdi, Faculty of Hotel and Tourism Management, Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia, E-mail: moham984@salam.uitm.edu.my. 1 Turnover of Hotel Managers: Addressing the Effect of Psychological Contract and Affective Commitment Mohamad Abdullah Hemdi and Nurzeti Abdul Rahman Faculty of Hotel and Tourism Management, Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia Abstract: High employee turnover within the hotel industry, especially amongst managers, has become one of the major concerns to researchers and practitioners. One of the major challenges for the hospitality industry is to retain these highly skilled employees. The purpose of this study is to investigate the psychological contract approach to the employment relationship with regard to the hospitality industry. The results demonstrate that psychological contract measures, in particular job content and promotion opportunities, can explain why there is a substantial amount of variance in intention among hotel managers with regard to leaving the organization, especially when the mediating role of affective commitment is taken into account. In this paper, managerial implications are discussed and recommendations for further research are made. Key words: Turnover Intentions Psychological Contract Affective Commitment Hotel Managers INTRODUCTION From an international perspective, Walsh and Taylor [10] The hotel industry is faced with the challenge of a primary challenge for the hospitality industry. In personnel shortage. Globally, the turnover rate in the addition, Hoque [11] emphasizes the importance of HRM hotel industry is estimated to range from 60 percent to 300 for the retention and the development of highly skilled percent annually, which is far higher than the 34.7 percent staff. annual turnover rate reported in the manufacturing Although management-level turnover is inevitable, a industry [1]. Nevertheless, this high turnover rate is not high turnover has a significant negative impact on the only confined to the operational employees alone. It has productivity and profits of an organization. Walker and been discovered that a high turnover rate also existed Miller [1] suggest that the costs of hiring and supervising among managerial employees within the hotel industry. a new replacement co-worker, rather than dealing with a For instance, Ghiselli [2] reported that the managerial coworker who is leaving, can amount to 70% of his annual turnover rate in the hotel industry in the United States salary. This figure is supported by Hinkin and Tracey [12]. ranges from 35 percent to 47 percent as compared to In addition, a high turnover rate may lead to the erosion about 8 to 15 percent in the non-service industries. of the company’s implicit knowledge base [13], which is Additionally, Ingram and Brown [3] in their study on one of the important key variables for competitive turnover discovered that the turnover rate among middle- advantage [14, 15]. In the resource-based view as an managers in the UK was significantly higher in the hotel influential research stream within strategy literature [16], industry as opposed to other service-oriented industries. the accumulation and deployment of valuable and rare Research studies have shown that management-level intangible and tangible resources, which are difficult to turnover is globally increasing rapidly [4, 5]. Past studies imitate, are a way of gaining competitive advantage [17]. regarding turnover rates of hotel managers in various Intangible resources occupy a central role in the countries have been reported. For instance, 29.5% in the resource-based perspective [18]. Intangible resources are USA [6], 86% in Hong Kong [7], 57.6% in Japan and hard to imitate because they are not visible at first sight Singapore [8] and 66% in Malaysia [9]. One of the major and even when they are spotted, competitors can hardly challenges for the hospitality industry is to retain decipher which resources are being used and how they managers who are termed as highly skilled employees. are used [19]. Also, the development cycle is hard to also suggest that retaining highly skilled staff is becoming