An investigation of the relationships between compensation practices and firm performance in the US hotel industry

Drawing on a sample of 1223 US hotels, this paper examines the relationships between compensation (direct and indirect) practices in hotel organizations and their performance. The results show that in the case of management employees, direct compensation fully mediated the relationship between indirect compensation and hotel performance. In the case of non-management employees, however, such relationship was only partially mediated by direct compensation. It is therefore important for hotel industry HR executives to pay greater attention to the nature and level of benefits being offered to non-management employees. For management employees, on the other hand, it is more important to attend to the level of direct compensation in order to ensure higher levels of organizational performance.