In this paper we explore how hotel managers may build a viable learning climate in their organizations. From a knowledge-based perspective on strategy, hotels may be viewed as knowledge-enabling communities where managers and employees share information and experiences to create new competencies and sustainable competitive advantage. Developing viable internal learning climates is regarded as a dynamic capability that is hard to imitate for competitors. A culture that values and stimulates learning will foster creativity, conversation, judgement, teaching and experience transfer. Based on a broad empirical study of hotel managers and their employees, the paper indicates a number of human resource measures that foster high-quality learning organizations. The effects of employment contracts, internal labor markets and types of knowledge have been investigated. The results indicate that the establishment of a firm internal labor market leads to a viable learning climate. Internal promotions, seniority-based wage increases, and wages above market level, are all measures of a firm internal labor market. The paper also indicates that hotels with a higher share of permanent full-time employees create superior learning organizations. This result questions the long-term effectiveness of extensive use of highly flexible, short-term employment contracts.