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Study on Compensation Incentive Mechanism of Hotel Salesperson: Based on Principal-Agent Model

Author: XuXinXin
Tutor: LinDeRong
School: Xiamen University
Course: Tourism Management
Keywords: Hotel Salesperson Compensation Incentive Mechanism
CLC: F719;F224
Type: Master's thesis
Year: 2009
Downloads: 349
Quote: 3
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Abstract

Nowadays the business environment of hotels is varying at all times and the customers’ demands are more individual than before. According to these marketing circumstances, salesperson becomes the core human resource of hotels, which will affect the hotel’s survival and development. Thus, the management of salesperson is thought to be the lifeblood of hotels. For hotels, how to encourage the sale-persons’ efforts at a. maximum is the key to enlarge the market shares and improve the competitive capability. Further, projecting an effective and reasonable compensation incentive mechanism in the hotels is a significant theme.In this thesis, the author reckoned the manager of hotels as the principal, the salesperson as the agent, and tried to analyze and discuss compensation incentive of hotel salesperson from mechanism projecting. Firstly, using the principle and the analytic approach of Principal-agent Theory, the author explained the problem on the compensation incentive mechanism of the hotel salesperson. Then, on that basis, established the economic model of compensation incentive and restraint mechanism and deduced a optimum incentive contract on the degree of the salespersons’ efforts at observable way and non-observable way in hotels, and then proved the scientific and feasibility of the.model by a empirical study, which researched the general relation between the improvement of the effort degree of salespersons and the frame of compensation incentive and restraint mechanism. Finally, combining the model and empirical conclusion, the author analyzed and considered to improve the compensation incentive and restraint mechanism of hotel salesperson, and also provide a theoretical basis for hotel decision-making to achieve the more effective management.The study has demonstrated that the regular wages provide the basic living of salesperson, but does not motivate the degree of the salesperson’s efforts; the royalties can motivate the salesperson’s incentives, but the ones should undertake more risks, that means the projecting of the compensation incentive and restraint mechanism for salesperson should ensure the balance in the basic benefits, incentive and restraint. The factors influencing the intensity of incentive include the personal elements of salesperson (working experience and ability, the degree of risk aversion). the particular cases of hotels (the star rates, levels and the management standards), and the uncertain situations faced by salespersons. The empirical study further concluded that the three ways of compensation incentive will generate the different effects; the sequence in effects digressively is royalty incentive, relatively fixed bonus incentive, penalty incentive. It also showed that bringing the incentive mechanism and the restraint mechanism into the incentive contract is the optimum plan to promote the efforts’ degree of salesperson; the empirical conclusion indicated that sales quota and royalty rate, as two indexes, are the core factors when people are projecting the effective compensation incentive and restraint mechanism to hotel salesperson.

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