An examination of human capital investment, employee productivity and return on investment: The case for the New Zealand hotel industry : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

This study investigated the relationships between Human Capital Investment (HCI) in the New Zealand hotel industry, its impact on Employee Productivity (EP), and the Return on Investment (ROI). Previous research into HCI, EP and ROI has not considered these factors as being interdependent especially in the area of tourism. Pre-Covid-19, tourism (including the hotel sector) in New Zealand was a primary driver of the economy. The industry has strong growth prospects despite the current pressures facing the global tourism industry. HCI plays a significant role in the growth of this industry. Hotels believe that their human capital is their most valuable asset and highest operational cost, and agree that HCI is fundamental to sustain business growth. Such investment can take many forms, from initial engagement to ongoing training and education, to ensure employees are as productive as possible. However, literature in the tourism industry reports that productivity research and analysis has not received the attention needed despite being a high priority on the United Nation World Travel Organisation (UNWTO) agenda. In effect, this is a call for more research into tourism productivity related to EP, HCI and HCROI. When businesses, including hotels, invest in their Human Capital (HC) they expect to generate a return that needs to be quantified. ROI measures the cost-efficiency of investment by analysing the financial gain or loss made by the investment relative to the amount of money spent. Therefore, it was particularly important to understand how HCI impacted on productivity and how this was then measured against a ROI. This research used a mixed-methods approach. In-depth semi-structured interviews were conducted with 25 general and operational hotel managers to gain their understanding of HCI, EP, and ROI and how these were measured and tracked. An online questionnaire gathered data from 102 hotel employees on their understanding of the term EP and factors that increased or decreased their productivity. The study participants were from 18 international and domestic brands of hotels within three- to five-star hotels in three locations in New Zealand: Auckland, Christchurch, and Queenstown. This research found that investment in the pursuit of productivity is viewed differently by employees, operational and general managers. Each group also has a different view on how to measure productivity. The most striking finding of this research is that hotels do not measure HCROI. ROI measures the cost-efficiency of investment; therefore, the lack of understanding of ROI by hotel managers and senior hotel head office human resource directors is a new understanding and of particular importance and concern. These interconnected findings have not previously been considered or reported in the literature. Overall, a key message for industry practitioners and hospitality researchers is that they should work together to co-produce research that will help managers better understand ROI and its calculation. While HCI to EP might be considered a logical and linear process, for hotels in this research, it does not then move to consider ROI. This disconnect and consequently the missing loop from ROI back to discussions about future HCI add to the body of knowledge of how hotels consider their human capital. This thesis contributes to the hotel industry and literature.