Managers' leadership, compensation and benefits, and departments’ performance: Evidence from upscale hotels in Australia

As hotels strive to improve their management practices, managers' leadership style has been recognized for its influence on hotel departments' performance. Focusing on the practice of transformational and transactional leadership, this study investigates the role of compensation and benefits in the relationship between leadership style and hotel performance at the department level. Results of a self-administrated questionnaire survey of hotel department managers (food and beverage, and rooms) of four and five star hotels in Australia suggest that managers' perceived compensation and benefits mediated the effect of both transformational and transactional leadership on department financial, non-financial, and sustainable performance. This study's findings help clarify the mechanisms underlying how leadership works to improve performance and highlight the importance of well-designed compensation and benefits systems in hotels.