Comparative Study of the Customer Satisfaction and Service Recovery in Hotel Industry

7/31/2019 Comparative Study of the Customer Satisfaction and Service Recovery in Hotel Industry

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A Project Report

On

Comparative study of the customer satisfaction

and service recovery in hotel industry.

Submitted By

Amandeep Singh Shergill

SMS ID- 2400588

PGCBM Batch 10

XLRI

XLRI Satellite Office

c/o XLRI Jamshedhpur

Above Jehangir Ghandi Library

CH Area East, Jamshedhpur- 831001

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INDEX

EXECUTIVE SUMMARY- .3

INDUSTRY PROFILE -.5

LITERATURE REVIEW-10

SERVICE RECOVERY-.28

MARKETING OF HOTELS - General Perspective-33

METHODOLOGY-..39

RESULTS AND ANALYSIS-.44

CONCLUSIONS AND RECOMMENDATIONS-53

BIBLIOGRAPHY-.58

APPENDIX 1-.60

APPENDIX 2-.63

GAPS MODEL OF SERVICE QUALITY-..65

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EXECUTIVE SUMMARY

This project in aimed towards accomplishing the objective of a comprehensive and

comparative study of the customer satisfaction and service recovery in hotel industry.

A hotel industry in a primarily a service sector emphasis in given on the role played by

relationship marketing. You are nothing without our customers understanding that your

organisation exists for no other reasons than to meet customer needs and expectations.

It imperative to develop proactive methods for understanding what you customer like

and dislike. If you believe other wise, just and glance behind you at the long queue off

competitors lined up and waiting to the opportunities to prove you wrong.

The purpose of this study is to debunk the conventional wisdom that hotel customers

don't really care about problems as long as they are effectively resolved. Other than rare

cases in which a problem occurs in the context of an existing stellar service experience,

problem incidence holds no arguable upside. There are far more effective ways to

generate loyalty than after-the-fact heroics in response to a problem occurrence. Wise

hoteliers will focus on proactive, rather than reactive service strategies as a means to

drive guest and meeting planner loyalty to their properties.

This project investigates through the primary research the service delivery expectations

within the budget hotels and if the overall satisfaction leads to the repeat purchase.

Budget hotels have shown a constant growth in the sector of hotels. Because of various

political and social events hotel sector has been running through a very sad phase,

despite the fact more and more budget hotels are coming out in the market with more

advanced facilities to please customers.

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A literature review of service quality which is an exciting and growing concept within

the hotel industry has been done. The purpose of this paper is to demonstrate the

evaluation of service quality in a Budget Hotels using the adapted SERVQUAL

instrument. The customers were asked to rate the five dimensions of service quality

based on questions asked in the attached questionnaire. Assurance was perceived to be

the one of the most important dimension and empathy one of the least important

dimension. Questionnaires were used as research tool to identify expectations of

customers. An evaluation of these gaps identified various areas of improvement. One of

the ideas was to benchmark the service quality.

The research uses questions based on the SERVQUAL format along with questions

aimed to find out purpose of stay their choice of budget hotel and their length of stay.

Survey was done outside and inside Harrods which is like a major tourist hub right now

in London..

Key findings included that Budget hotels are expected to be good value for money

package for customers who are mostly leisure customers and their length of stay in this

type of hotel is very short. Some of the areas which did not really affect customers

decisions while choosing budget hotels were responsiveness and empathy.

Recommendations have been provided in the study that covers future investments,

flexibility in pricing, better security systems and proving better.

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INDUSTRY PROFILE

An overall booming hotel industry and Q3 FY07-08 being the peak season, hotels

across the country witnessed strong growth in ARR and OR. During the quarter under

review average room rates in the seven major cities rose by 25% yoy to Rs6, 034 while

OR grew by 9% yoy at 72%. Aggregate revenues of the 5 leading players in the sector

have registered a 29% CAGR. Revenue growth has been driven by higher occupancies

and firm ARR.

Growth in ARR and OR in major cities during 9M FY07 compared to FY06

Strong revenue growth driven by higher room rates

A large part of the growth in Q3 for the universe under our coverage has come through

ARR increases. ARR for Indian Hotels Company grew by 35% yoy at Rs8150 while

occupancies were down a percentage point at 74% in Q3 FY06 due to companys focus

on improving RevPAR, Similarly, Hotel Leelaventure closed Q3 FY06 with a 27% yoy

growth in ARR at Rs11485 while OR was down 4% yoy at 74%. For 9M FY06 EIH

Ltd reported ARR of Rs7, 550 with 64% occupancy against 62% in the same period

previous year. Our universe of 5 companies posted a 29% yoy growth in revenue at

Rs7.6bn in Q3 FY06.

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Growth in revenue during Q3 FY07

Consolidated financials for Q3 FY07Net sales (Rs mn) APAT (Rs mn) OPM (%) EPS P/E

Q3FY07

Q3FY06

Growth(%)

Q3FY07

Q3FY06

Growth(%)

Q3FY07

Q3FY06

Inc/Dec

Q3FY07

IndianHotels 3175 2491 27.5 615 350 75.7 32.9 26.9 6.0 44.4 28.6

EIH* 2195 1760 24.7 1264 220 474.5 39.6 35.3 4.3 17.6 39.4

Hotel

Leela 892 691 29.1 323 161 100.6 54.5 47.7 6.8 17.5 18.0

Asian

Hotels 893 706 26.5 172 87 97.7 39.3 39 0.3 30.2 19.9

Taj GVK 520 308 68.8 140 69 102.9 47.2 44 3.2 8.9 25.2

*APAT includes extraordinary income of Rs1bn

EPS for EIH calculated on net profits before extraordinary income

Margins expand on the back of higher revenue growth

Operatingprofit of the companies under our coverage grew by 47% yoy at Rs2.9bn in

Q3 FY07. This growth is mainly attributed to the strong revenue growth led by higher

room rates. Our universe has reported a 490bps OPM expansion to 39%, as fixed costs

get spread over higher revenue base. Hotel Leelaventure remains the best performing

company at the operating levels with OPM of 54.5% for Q3 FY07 and 49.2% for 9M

FY07.

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Declining interest cost due to global fund raising

There has been a sharp fall in the interest cost burden for most of the companies, as

they have successfully raised low cost funds from international markets and restructure

or repayment of old debts. During the quarter under review combined interest cost of

our universe declined by 17% yoy at Rs367mn.

Robust profit growth

Operating profit of our universe grew by 47% yoy at Rs2.9bn in Q3 FY07. Other

income grew by 63% yoy, which helped PBT growth of 83% yoy at Rs2.3bn. However,

during the quarter under review, effective tax rate was higher (36% in Q3 FY07 vs 29%

in Q3 FY06), partly due to high tax outgo on extraordinary one time income of EIH.

EIHs net profit before extraordinary income displays a flat trend due to the higher tax

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outgo, however profit growth has been robust (PBT up 60.8%). Aggregate net profit

growth was higher by 63% yoy at Rs1.4bn.

Growth in APAT during Q3 FY07

*APAT for EIH includes extra ordinary income of Rs1bn

Consolidated financials for 9M FY07

Net sales (Rs mn) APAT (Rs mn) OPM (%) EPS P/E

9M

FY07

9M

FY06

Growth

(%)

9M

FY07

9M

FY06

Growth

(%)

9M

FY07

9M

FY06 Inc/Dec

9M

FY07 -

Indian

Hotels7,283 5,813 25.3 1049 637 64.7 25.5 19.1 6.4 25.2 50.3

EIH*5,293 4,165 27.1 1515 123 1131.7 31.1 24.7 6.4 13.6 51.0

Hotel Leela2,236 1,786 25.2 633 200 216.5 49.2 44.2 5 11.5 27.4

Asian Hotels2,244 1,825 23.0 338 171 97.7 35.9 34.1 1.8 19.8 30.4

Taj GVK1,277 802 59.2 308 150 105.3 44.5 38.2 6.3 6.6 33.9

*APAT for EIH includes extraordinary income of Rs1bn

EPS for EIH calculated on net profits before extraordinary income

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Outlook

Tourist arrivals remain healthy

The hotel industry in India is witnessing a new high in all respects. Tourist arrival,

occupancies and room rates have touched an all time high. Success of "Incredible India"

campaign, introduction of low cost airlines, growing infrastructure thrust by the

government and Indias emergence as an outsourcing hub has led to a 13.2% surge in

foreign tourist arrival in calendar year 2006 over the previous year.

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LITERATURE REVIEW

Customer satisfaction is defined as the individuals perception of the performance of

the product on service in relation to his on her expectations.

Hotel industry in a service industry. It sells its services and more and more quality

services provided, more going to be its revenue. This industry doesnt sell any tangible

assets to its customers and while making sales calls on presentation the property cannot

be taken to the potential customer, in reality creating customer satisfaction in not

something an organization does simply to satisfy, its something as organization does to

stay in business. Top management embrace this reality by acknowledging

communicating and acting upon three basic truths:-

Customer satisfy is the ultimate goal: There is no higher achievement than to satisfy

the customer whom an organization has committed itself to serving. This doesnt mean

that the organization become a not for profit industry. Profits and revenues are nothing

more than the outcomes of fulfilling customers needs and expectations.

Customer satisfaction to an investment: Customer satisfaction process dont often

produce results in the very short term. Rather the pay off are usually realised in the

medium on long term.

Everyone must be involved in customer satisfaction: All personnel have the

capability, at some level, to influence customer satisfaction. Top management must

communicate exactly how personnel will be expected too contribute because this is

possible the more those employees industrial their sales in creating customers

satisfaction, the better they will be able to participate.

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In hospitality each customer relationship has values and should manage effectively.

There in opposite for repurchase and recommendation from each past customer. the

administration of the information about this past guest of the effective integration of the

information into front line guest service program in the challenges of customer

relationship management implementation.

There are various contact points where the hotel comes in direct contact with the

customer which are known as "Touch points". These touch points are considered

important as there is direct interaction with the customer and they provide valuable

input to the hotel the input provided by the customer has to be captured in such a way

that it becomes information and can be used by various process within the hotel. This

can be done with the help of technology and the aim in that whenever there is a

customer interface with any of those process they are able to use that information in

servicing the guest in a most efficient manner.

While this research provides some perspectives to the field of service quality, it is

believed that there are a number of things that should be done to confirm the verified

methodologies as well as to develop the use of SERVQUAL in design and

improvement of quality services. There are number of problems with the instrument

that are mentioned in the literature. The evidence suggests that differential scores of

perception minus expectation tend to exhibit reduced reliability, poor discriminant

validity, spurious correlations, and restricted variance problems.

Also, inconsistent definitions and/ or interpretations of the expectation might lead to a

number of problems. In addition, since expectations and perceptions are based on

experience, its temporary nature might lead to question marks on the reliability of

SERQUAL difference scores.

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As for customer loyalty, one thing that Is felt important is that firms are good at

attracting customers for the first time but they cant actually retain them which is most

important as It costs between three and seven times as much as to win a new customer

as it does to hang on to an existing one. Also, there is a close link that exists among

learning, habit and loyalty. It is a result of consumers learning that one brand can satisfy

their needs and develop a favorable attitude towards it which results in consistent

purchase over time. Based on Coyne (1989), there are two critical thresholds affecting

the link between satisfaction and loyalty. On the high side, when satisfaction reaches a

certain level, loyalty increases dramatically; at the same time, when satisfaction

declined to a certain point, loyalty dropped equally dramatically (Oliva et al., 1992).

Managers should realize that having satisfied customers is not good enough; they must

extremely satisfied customers. Moreover, a small increase in customer satisfaction

boosts customer loyalty dramatically. In addition to benefiting from the extremely

satisfied customers' repeat patronage, the hotel can save their marketing expenses.

Customer loyalty is concerned with customer satisfaction because of the benefits of

retaining customers, and the activities involved in it are aimed at developing long-term,

cost-effective links between an organisation and its customers. Now a days hotel

companies have stepped up their promotions of frequent guest programs to compete in

the market. One of the examples of adopting loyalty system can be observed at Thistle

Hotels which is a five star hotel in India who awards guest miles in one of four airline

programme, including American Airlines and British Airways, but not point towards

stays at one of its 55 hotels. Its a different kind of strategy but yet appealing to many.

In our study we have chosen to identify the expectation levels of different customers

using the SERVQUAL model which has five attributes mentioned in the study. This

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model has been chosen because it perfectly fits the service industry and classifies each

and every dimension that allows management to understand customer behaviour and

interpret their expectations.

What are Services?

Services include all economic activities whose output is not a physical product or

construction, is generally consumed at the time it is produced, and provides added value

in forms (such as convenience, amusement, timeliness, comfort, or health) that are

essentially intangible concerns of its first purchaser.

Customer Loyalty

Customer loyalty describes the tendency of a customer to choose one business or

product over another for a particular need. Companies invest in retention rather than

attracting new customers. Its really hard for companies to make customers and then

retain them; the ones who do it pose major threat to rest of their competitors.

Customer retention has a direct impact on profitability and past research has claimed

that it can be five times more expensive to obtain a new customer than to retain one

Naturally then, considerable time and money is being spent in many organisations to

develop strategies to retain customers. Its commonly known to everyone that typically

about 80 percent of revenue comes from only 20 percent of customers therefore It

would make sense to concentrate most marketing resources on this 20 percent, but the

problem for managers is that the most financially rewarding 20 percent are not

necessarily the loyal customers.

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We may say that, Customer loyalty is a customers commitment to a brand or a store or

a service or a supplier based on a strong favourable attitude.

On the flip side of the coin, as said above not all consumers are loyal to any one product

or service, nor is any one customer loyal to everything he or she buys and uses. There

are some products, stores and services that command little or no loyalty from their

customers.

Service quality is a critical element of customers perceptions that compliments loyalty.

In the case of pure services, service quality will be the dominant element in customers

valuations. The quality of the services may be judged by the customers on the basis of

their perceptions of the technical outcomes provided, process by which the outcome

was delivered and the quality of the service surroundings where the actual service was

delivered. Customer loyalty includes both attitude and behaviour towards the service or

product. Ratings, commitments, satisfaction, trust are various forms of attitudes that

could be measured by survey presumed to guide behaviour. On the other hand

behaviour which includes retention and share-of-category loyalty could be measured

with panel data or survey which would indicate the possibility of purchase and

generally applies to service organizations like groceries, hotels, airlines, stores, etc.

A hotel might want to measure its loyalty on the basis of repeat patronage and repeat

behaviour. Repeat loyalty, Latent loyalty, spurious loyalty and no loyalty are the 4

constituents of same which are represented in a model known as Dick and Basus

typology.

When both behaviour and attitude are weak, no loyalty exists. Weak attitude

means customers dont have a liking or preference for the brand and weak

behaviour means that the same brand is not purchased consistently.

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When both behaviour and attitude are strong, strong loyalty exists. In this case

the attitude towards the brand is favourable and the purchasing is done

consistently for same brand.

When behaviour is high but attitude is low, the customer has spurious loyalty

which means loyalty that is incidental and not well founded. In this case the

customer buys the same brand or shops at the same store regularly, but has no

preferential attitude or liking towards it. May be because this brand or store

happens to be the only one affordable or convenient but if he is given choice

they might shift towards another brand or store.

Finally, in the typology its the latent loyalty which evolves strong attitude and

weak behaviour. Perhaps the customer favours or likes the brand but is not able

to buy it because of certain barriers which could be high price or lack in access

to the brand or the store. Here, marketers can tap into the hidden potential

market by diminishing the barriers that prevent customers from buying their

desired brands.

Now, every company would want their customers to be converted into apartnerwhich

is on the top level of the loyalty ladder designed by Paine. It is the strongest form of

supplier-customer relationship which is sustained because both parties see it as

mutually beneficial. Customers on the other hand are typical purchasers who have no

feeling of loyalty towards your organization. There are other levels of loyalty which

includes Suspects, Prospects, Clients and Advocates which are discussed in appendix 2.

Any company would want to convert the suspects into advocates or partners.

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Value, Personality, attention, involvement and personal relationship are 5 major factors

that would help a company generate customer loyalty. All these factors are very

important factors as they focus on benefits offered, ability of customer to relate with the

brand, paying attention to the customer, involving the customer in creating the service

and having a personal relationship with the customer through all communicational

activities and touch-points.

Customer loyalty is also the basis of relationship marketing because retaining customers

for life contributes to enhanced profitability. The relationship between the customer and

the service provider should be maintained at all times and personal interest should be

shown towards each customer. Companies have to learn continuously about their

customers' needs and expectations which are ever changing and often unpredictable.

For example, hotels are beginning to customise service, and regular guests are given the

same room, their table is booked for dinner at their regular time and newspapers can be

ordered and delivered. This is just a simple example of building customer loyalty by

taking personal care of loyal customers and satisfying them.

Customer Satisfaction

Customer satisfaction is an important concept to consider when developing a customer

loyalty programme. It is the measure of how well the customers expectations are met.

Whereas if we compare customer loyalty with customer expectation, customer loyalty

is a measure of how likely a customer is to repurchase and engage in relationship

activities. Loyalty is vulnerable because even if customers are satisfied with the service

they will continue to defect if they believe they can get better value, convenience or

quality elsewhere.

Therefore, customer satisfaction may not be an accurate indicator of customer loyalty.

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Satisfaction is a necessary but not a sufficient condition for loyalty. A customer

travelling away from home may be very satisfied with a hotel in which they stay, but

they will not necessarily stay in the same hotel when they visit that area again. Other

variables impact on the customer's choice including price, location and convenience.

Loyalty is established when the customer makes a commitment to the brand and returns

to the same hotel whenever they are in the area. In other words, we can have

satisfaction without loyalty, but it is hard to have loyalty without satisfaction

(Shoemaker and Lewis, 1999).

While there is no guarantee that a satisfied customer will return it is almost certain that

a dissatisfied customer will not return.

There is a link between customer retention and satisfaction, loyalty and profitability and

this is illustrated by Orr (1995), who states that the best way to get the repeat business

that you need to be profitable is by: . . . loyal programs, frequent-buyer clubs, plain

ole'[sic] good service and fair prices.

What is customer satisfaction?

Customer satisfaction can be defined as satisfaction based on an outcome or a process.

customer satisfaction characterizes satisfaction as the end-state resulting from the

experience of consumption. This end state may be a cognitive state of reward, an

emotional response to an experience or a comparison of rewards and costs to the

anticipated consequences.

Social psychologists, marketing researchers, and students of consumer behaviour, have

extensively studied the concepts of customer satisfaction and dissatisfaction

The increasing importance of quality in both service and manufacturing industries has

also created a proliferation of research, the result of all this research has been the

development of nine distinct theories of customer satisfaction. The majority of these

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theories are based on cognitive psychology; some have received moderate attention,

while other theories have been introduced without any empirical research.

A minority of researchers perceive the satisfaction process to be subjective in

expectations but objective in the perceptions of the product attributes, or outcome.

Thus, Klaus defines satisfaction as ``the customer's subjective evaluation of a

consumption experience, based on some relationship between the customer's

perceptions and objective attributes of the product''. Others point out that both what is

perceived (outcome) and what is expected are subjective and therefore psychological

phenomena - not reality.

Since both expectations and perceptions are psychological phenomena, they are both

vulnerable to external influences and manipulation. As an illustration of how

expectations can be explicitly manipulated Sasser et al. note that: ``some restaurants

follow the practice of promising guests a waiting time in excess of the ``expected time''.

If people are willing to agree to wait this length of time, they are quite pleased to be

seated earlier, thus starting the meal with a more positive feeling''. An example of

creating low customer expectations is a restaurant in Orlando, Florida, which calls itself

Warm Beer & Lousy Food. Once a customer has experienced a reasonable meal at the

above restaurant he/she is pleasantly surprised and comes out very satisfied.

Service quality via Customer satisfaction

According to Vavra Customer satisfaction is the leading criterion for determining the

quality that is actually delivered to customers through the product/ service and by the

accompanying servicing. In simple terms customer satisfaction is essential for corporate

survival. As mentioned above several studies have found that it costs about five times

as much in time, money and resources to attract a new customer as it does to retain an

existing customer This creates the challenge of maintaining high levels of service,

awareness of customer expectations and improvement in services and product.

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Furthermore, customer satisfaction is recognized as of great importance to all

commercial firms because of its influence on repeat purchases and word-of mouth

It reinforces positive attitudes towards the brand, leading to a greater likelihood that the

same brand will be purchased again.

Satisfaction of customers also happens to be the cheapest means of promotion. Various

researchers have found this ratio to range from about 10 to 1 to 5 to 1

To assess the quality of services and customer satisfaction there are several ways i.e.

through subjective, or soft, measures of quality, which focus on perceptions and

attitudes of the customer rather than more concrete objective criteria.

These soft measures include customer satisfaction surveys and questionnaires to

determine customer attitudes and perceptions of the quality of the service they are

receiving (Hayes, 1997, p. 2). In our research we have also used soft measures in the

form of customer questionnaires.

Customers' perceptions of service is vital in identifying customer needs and satisfaction

because the extent to which goods or services meet the customer's needs and

requirements is the index by which quality is determined

Finding a strong relationship between satisfaction scores and performance does not

ensure economic success. In the long run the level of satisfaction may decline;

customers' attitudes and desires change, and new competition may emerge.

Components of customer satisfaction

Unlike material products or pure services, most hospitality experiences are an fusion of

products and services. Therefore it is possible to say that satisfaction with a hospitality

experience such as a hotel stay or a restaurant meal is a sum total of satisfactions with

the individual elements or attributes of all the products and services that make up the

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experience. There is no uniformity of opinion among marketing experts as to the

classification of the elements in service encounters. hospitality services consist of a

harmonious mixture of three elements: the material product in a narrow sense which in

the case of a restaurant is the food and beverages; the behaviour and attitude of the

employees who are responsible for hosting the guest, serving the meal and beverages

and who come in direct contact with the guests, and the environment, such as the

building, the layout, the furnishing, the lighting in the restaurant, etc. Czepiel et al.

(1985) on the other hand, suggest that satisfaction with a service is a function of

satisfaction with two independent elements. The functional element, i.e. the food and

beverage in a restaurant, and the performance-delivery element, i.e. the service. To

prove the independence of the two elements from each other, the authors claim that

restaurant clients are quite capable of having responses to each element that differ one

from the other: ``The service was great, the food poor'' or conversely... Davis and Stone

(1985, p.29) divide the service encounter into two elements: direct and indirect services.

For example, direct services may be the actual check-in/checkout process in hotels,

while the indirect services include the provision of parking facilities, concierge, public

telephones for guests' use, etc. Lovelock (1985) divides the service attributes into two

groups: core and secondary. In a restaurant situation Lovelock's core will be composed

of the food and beverage, while his secondary will be composed of everything else,

including service, environment, etc. Lewis (1987), too, classifies the service encounter

attributes in two groups: essential and subsidiary. The essential attributes are identical

to Czepiel's functional, Davis and Stone's direct, Reuland and colleagues' product, and

Lovelock's core, i.e. the food and beverage in the meal experience. On the other hand

Lewis's subsidiary attributes are more comprehensive than Davis and Stone's indirect,

Czepiel's performance delivery, or Lovelock's secondary, and include such factors as:

accessibility, convenience of location, availability and timing and flexibility, as well as

interactions.

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What is service quality?

Service quality is considered a critical determinant of competitiveness. Attention to

service quality can help an organization to differentiate itself from other

organizations and through it gain a lasting competitive advantage. High quality of

service is considered an essential determinant of the long-term profitability not only of

service organizations, but also of manufacturing organizations.

Service quality has been discussed in only a handful of writings (Gronroos 1982:

Lehtinen and Lehtinen 1982: Lewis and Booms 1983: Sasser, Olsen, and Wyckoff

1978). Examincation of these writings and other literature on service suggest three

underlying themes:

Service quality is more difficult for the consumer to evaluate than goods quality.

Service quality perceptions result from a comparison of consumer expectations

with actual service performance.

Quality evaluations are not made solely on the outcome of a service: they also

involve evaluations of the process of service delivery.

When purchasing goods, the consumer employs many tangible cues to judge quality:

style, hardness, colour, label, feel, packaging etc. But while purchasing services fewer

tangible cues exist. In most cases tangible evidence is limited to the service providers

physical facilities, equipment, and personnel.

Kandampully (2000) revealed that service quality is crucial to the success of any

service organization. As the customers participate in the production and consumption of

services, they interact closely with various aspects of the organization. This inside

knowledge gives them the opportunity to assess critically the services provided, in

particular the quality of service. Customers will assess service quality by comparing the

service they get with the service they desire. Hence, service quality plays a critical role

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in adding value to the overall service experience. Since superior quality is one of the

crucial factors within the control of the hospitality service provider, Lee, Barker, &

Kandampully (2003) suggested that enhancing the quality of service at all levels of

service delivery has therefore become mandatory for organization survival.

Service quality affects the repurchase intentions of both existing and potential

customers. Market research has shown that customers dissatisfied with a service will

divulge their experiences to more than three other people. Thus, it is reasonable to

conclude that poor service will reduce the potential customer base. According to the

Technical Assistance Research Project (TARP), the research indicates that six times

more people hear about a negative customer service experience than hear about the

positive one.

Although Johns (1996) asserts that service quality is both ephemeral and personal, it

needs to be defined and characterised in order to be specified and delivered reliably in

hotels. Many authors have tried to identify the tangible and intangible components of

service quality, which may affect guest satisfaction either selectively or by their

absence, in the same way as Herzbergs (1959) hygiene factors or Maslows (1954)

hierarchy of needs operate at different levels. Balmer and Baum (1993) remark that

these ingredients change over time and are not likely to be the same in hotels of

different star ratings. Lee-Mortimer and Buxton (1991) contend that hotel star ratings

tend to measure tangible quality, and this is reflected in the current interest in quality

accreditation frameworks.

Service quality dimensions

In service organizations, the assessment of the quality of a service is made during the

actual delivery of the service usually an encounter between the customer and a service

contact person. The consumers used 10 potentially overlapping dimensions in assessing

service quality fit. These dimensions were tangibles, reliability, security, competence,

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courtesy, understanding/ knowing the customer, access, responsiveness,

communications and credibility. These dimensions were derived for SERQUAL scale

to serve as the basic structure of service quality domain and further reduced to just 5

generic dimensions of service quality (SERVQUAL) that must be present in the

service delivery in order for it to result in customer satisfaction: Reliability which

shows the ability to perform the promised service, Responsiveness which shows the

willingness to help customers and provide prompt services, Assurance which shows

employees knowledge and courtesy and their ability to inspire trust and confidence,

Empathy which shows caring and individualized attention given to customers and

finally tangibles which includes appearance of physical facilities, equipment, personnel,

and written materials.

The SERVQUAL

Much of the contemporary theory considers service quality from the viewpoints of both

provider and customer, and Parasuraman et al. (1985) propose a model which enables

perceptual gaps to be identified. In 1991, these authors developed this framework into

the SERVQUAL scale which enables actual service delivery to be measured. Zeithaml

et al. (1990) suggest that the criteria used by customers in moulding their expectations

and perceptions fit five dimensions of service quality which have been already

discussed above. SERVQUAL provides a technology for measuring and managing

service quality (SQ).

SERVQUAL is founded on the view that the customers assessment of SQ is

paramount. This assessment is conceptualized as a gap between what the customer

expects by way of SQ from a class of service providers (say, all opticians), and their

evaluations of the performance of a particular service provider. Parasuraman et al.

developed a 22-item instrument with which to measure customers expectations and

perceptions (E and P) of the five RATER dimensions. Four or five numbered items are

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used to measure each dimension. The instrument is administered twice in different

forms, first to measure expectations and second to measure perceptions.

GAPS model of service quality

SERVQUAL as an effective approach has been studied which analysis the difference

between customer expectations and perceptions. Outcomes of the study outline the fact

that although SERVQUAL could close one of the important service quality gaps

associated with external customer services; it could be extended to close other major

gaps and therefore, it could be developed in order to be applied for internal customers,

i.e. employees and service providers.

While there has been an effort to study service quality, but still there is no general

agreement on the measurement of the concept. The majority of the work to date has

attempted to use the SERVQUAL methodology in an effort to measure service quality.

One of the aims of this study involves the use of SERVQUAL instrument in order to

ascertain any actual or perceived gaps between customer expectations and perceptions

of the service offered.

Another aim of this study is to point out how management of service improvement can

become more logical and integrated with respect to the prioritized service quality

dimensions and their affections on increasing/decreasing service quality gaps.

According to Brown and Bond (1995), "the gap model is one of the best received and

most heuristically valuable contributions to the services literature". The SERVQUAL

approach is the most common method for measuring Service quality. There are seven

major gaps in the service quality concept, which are shown in appendix 3. The model is

an extension of Parasuraman et al. which discusses 7 major gaps below:

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Gap1: Customers expectations versus management perceptions: as a result of the

lack of a marketing research orientation, inadequate upward communication and too

many layers of management.

Gap2: Management perceptions versus service specifications: as a result of

inadequate commitment to service quality, a perception of unfeasibility, inadequate task

standardisation and an absence of goal setting.

Gap3: Service specifications versus service delivery: as a result of role ambiguity

and conflict, poor employee-job fit and poor technology-job fit, inappropriate

supervisory control systems, lack of perceived control and lack of teamwork.

Gap4: Service delivery versus external communication: as a result of inadequate

horizontal communications and propensity to over-promise.

Gap5: The discrepancy between customer expectations and their perceptions of

the service delivered: as a result of the influences exerted from the customer side and

the shortfalls (gaps) on the part of the service provider. In this case, customer

expectations are influenced by the extent of personal needs, word of mouth

recommendation and past service experiences.

Gap6: The discrepancy between customer expectations and employees

perceptions: as a result of the differences in the understanding of customer

expectations by front-line service providers.

Gap7: The discrepancy between employees perceptions and management

perceptions: as a result of the differences in the understanding of customer

expectations between managers and service providers.

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Measuring Service Quality Gaps

Lewis (1987) suggested that what can be measured are the differences between the

abstractions. So, it is the logic that if we can measure the difference between

expectations and perceptions, which is defined as perceived quality, we can therefore

determine the level of satisfaction. This concept is quite similar with Parasuramans

(1985) service quality model, which applied the expectancy-disconfirmation theory. As

discussed above Parasuraman (1985) defined service quality in ten major dimensions

that consumers use in forming expectations about and perceptions of services. In a later

research, Parasuraman (1988) revised and defined the service quality in five

dimensions, again- reliability, responsiveness, assurance, empathy, and tangibles. The

model suggested service quality as the gap between customers expectations (E) and

their perception of the service providers performance (P). Hence, the service quality

score (Q) can be measured by subtracting customers perception score from customers

expectations score: - Q = P - E

Zeithaml and Bitner (2003) stated that in order to manage service quality, it is important

to manage the gaps between expectations and perceptions on the part of management,

employers and customers. The most important gap (Gap 5) is that between customers

expectation of service and their perception of the service actually delivered. Hence by

referring to the gap model, it states that a service marketer must close the customer gap

(Gap 5).

In order to do so, the service provider must close the four other gaps (Gap 1, 2 3, and 4)

within the organization that inhibit delivery of quality service. Serious action must be

taken because how the customers, in these case hotel customers, perceive the level of

service performance that meets their expectations will reflect on the quality of service

provided by the organization.

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According to Lewis (1987), the gaps measurement may be a significant marketing tool.

It also has the advantage of being less abstract, even though not completely. It also

considerably eases the task of measuring service quality.

Without question, SERVQUAL has been widely applied and is highly valued.

Any critique of SERVQUAL, therefore, must be seen within this broader context of

strong endorsement.

Criticisms of SERVQUAL

Despite of its growing popularity and widespread application, SERVQUAL has been

subjected to a number of theoretical and operational criticisms.

Firstly, Parasuraman et al.s management technology takes no account of the costs of

improving service quality. Second, Parasuraman et al. collect SQ data using ordinal

scale methods (Likert scales) yet perform analyses with methods suited to interval-level

data (factor analysis). A further criticism is that SERVQUAL fails to capture the

dynamics of changing expectations. Also SERQUAL focuses on the process of service

delivery, not the outcomes of the service encounter

Despite the increasing importance of the service sector and of the significance of

quality as a competitive factor, service quality concepts are not well developed

SERVQUAL has undoubtedly had a major impact on the business and academic

communities. This review has identified a number of theoretical and operational issues

which should concern users of the instrument.

SERVICE RECOVERY

Service failures and deficiencies are common in hotel business. Many such failures

happen due to uncontrollable factors. But companies cannot escape responsibility.

When such things happen, they have to take recovery measures and communicate to all

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those who suffered a loss. Right recovery at the right time enhances the image of the

organisation. The recovery campaigns aim at reducing or eliminating customer anxiety

and turn consumer opinion in favour of the company.

Confronting the Myth of Service Recovery An Ounce of Prevention is Worth a Pound

of Cure

For the past several years, many hotel executives have ascribed to the widely circulated

notion that a strong problem-recovery process is the key to enhancing customer loyalty.

Some claim to possess statistics that show a higher intent to return among guests who

experienced a problem followed by excellent resolution, compared to guests who had a

problem-free stay.

The dangerous conclusion drawn from this belief is that guests don't expect perfection

as long as problems are professionally addressed and resolved to the guests'

satisfaction. As a result, hotel managers might relax their concerns regarding problem

incidence, believing that an effective resolution system will redeem guest loyalty.

Maritz has studied literally thousands of hotel satisfaction surveys, both on the guest

and meeting planner side of the business. The result of this extensive research: Maritz

has found only one circumstance discussed at a later point in this article in which

guests who experienced a problem showed greater affinity for the hotel than if no

problem had occurred in the first place.

In all but a few cases, guests who experience a problem are significantly less satisfied

with their experience, less likely to return, and less likely to recommend the property

even when service recovery exceeds their expectations, which it rarely does.

The Wrong Read

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How did this belief become widespread in the hotel industry? There is some evidence in

the business literature that effective service recovery in some industries can produce

greater customer loyalty. Initial customer expectations relative to the problems they

expect vary across industries and business sectors. For example, customers do not

usually expect outstanding service from their insurance agents, cable companies, or

government agencies. In such industries, a customer service representative who truly

cares about a problem provides a noteworthy positive counter to a negative expectancy.

However, when guests check into a hotel, especially an upscale hotel, they expect to

experience a hassle-free stay. Anything else represents a negative violation of a positive

expectancy.

Despite this no hassle expectancy, the data show that one-in-five guests experience

some type of problem during their stay, even in more upscale hotels. This percentage is

usually significantly higher in large city-center hotels and convention properties. On the

meeting-planner side, one-in-three planners generally experience some type of a

problem during the planning and execution of their event.

Since problems occur at a greater incidence than hotel managers would prefer, it is not

surprising that they would adopt a focus on fixing problems effectively. Unfortunately,

the data show that service recovery exceeds guest expectations in only one of 10 cases.

In the remaining problem situations, service recovery efforts are likely to fall short of

expectations.

In cases in which problem-resolution efforts meet, but do not exceed expectations, the

data show that guests are still likely to hold the initial problem against the hotel.

Satisfaction scores are significantly lower, as are scores for stated intent to return and

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recommend the property to others. Overall, hotels are four times more likely to fail to

meet expectations than they are to exceed expectations.

As mentioned above, some hotel executives who study customer satisfaction data report

that they see higher scores among guests who experienced excellent problem resolution

compared to guests who had a problem-free stay. A more typical result is that guests

who experience excellent problem resolution provide similar scores to guests who had a

hassle-free stay. In either case, the difficulty and cost in providing the type of resolution

that produces this result should be enough to convince a hotel executive that a focus on

problem resolution isn't the most effective strategy for driving guest loyalty.

Even with all of these issues aside, drawing this type of conclusion from the data

presents another problem: often, service recovery efforts are not examined in the

context of the larger service experience.

A Balanced Approach

Assess the degree to which the staff has made a positive connection with guests

regardless of whether a problem has occurred. Such items include:

The front desk staff really cared about the quality of my stay.

The staff treated me as a valued customer throughout my stay.

The staff anticipated my needs.

There are various combinations of strong/weak proactive service along with

strong/weak service-recovery efforts. Guest satisfaction and loyalty is strongest when

there is both strong proactive service and strong service recovery following a problem.

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As referenced previously, this is the one instance in which guests who experienced a

problem gave higher ratings of the hotels than guests who had a problem-free stay.

However, a combination of strong service on the front end and strong recovery efforts

on the back end rarely occurs. Approximately one of 20 guests who experience a

problem reports this type of service experience. (In the majority of problem situations,

there is neither good front end service nor strong recovery efforts.)

Meeting Planner Findings

The satisfaction scores and intent to return of meeting planners who experienced no

problem during their events.

Those who rated service they received during the pre-event aspect of the meeting as

excellent. Those individuals later experienced a problem, and had a resolution to

their problem that exceeded their expectations.

Those who rated the pre-event service as excellent, but had problem resolution that

either only met or failed to meet their expectations.

The fourth line reflects the opposite scenario; these individuals rated the pre-event

service as less than excellent, but had problem resolution that exceeded

expectations.

The final line shows planners who experienced neither excellent pre-event service

nor excellent service recovery.

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* An additional three percent (3%) had a problem, but did not report it

The data clearly show that the service a planner receives before the event takes place is

far more important than service recovery following a problem. While having an

excellent problem-resolution process is beneficial, the table above demonstrates that an

ounce of prevention is worth a pound of cure.

The extremely low incidence of situations in which expectations are exceeded in

problem resolution does not warrant as strong a focus on service recovery as it does on

the front end to create positive impressions with customers before problems occur.

Of course, the data also show that some effort at problem resolution is highly preferable

to little or no effort at all. However, strong problem resolution alone does not buy back

much loyalty. Furthermore, the means required to exceed expectations in recovery

generally represent a real cost to the hotel, in terms of both time and money. Building

goodwill before a problem occurs is much less expensive than trying to rectify a

problem after the fact.

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MARKETING OF HOTELS - GENERAL PERSPECTIVE

The hotel industry's good time started after the introduction of economic reforms in

1991. Many foreign entrepreneurs were attracted to India to set up their hotels. The

industry grew by 35% in 97-98 and by 36% in 98-99. The demand during this period

was far above the supply. In Mumbai, the supply was 7489 rooms in 1996 and the

demand was 20,186 rooms per night. In Delhi too, the demand was 15,759 rooms

against a supply of 8018 rooms.

Federation of Hotels and Restaurants Association of India - Membership

Structure

Category Members Rooms

1 STAR 41 2280

2 STAR 180 6988

3 STAR 218 11178

4 STAR 70 5226

5 STAR 53 7712

5 STAR DELUXE 39 10063

HERITAGE (4 STAR) 28 853

UNDER APPROVAL 81 4641

UN-APPROVED 795 30558

TOTAL 1505 79499

The tourist arrival also showed increase during this period approx. 2.20 million tourists

visited India in the year 98-99 which is 15% more than 97. Forecasted growth of 18-

20% in 2000-2001. Hotel industry is the second largest forex earner for the government.

Typical customer profile - Case of hotel Vasant Continental

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The residents using accommodation facility of Room, Suites and Club Royale at Hotel

Vasant Continental can broadly be classified into the following:

1. Corporate Guest 2. Conference

3. Govt. Ministries 3. Embassies and World Bodies

5. Exhibitions 6. Airlines

7. GIT 8. FIT/DFIT

MAJOR PLAYERS

The hotel industry is classified into the public and private sectors. the public sector

hotels industry includes the Indian Tourism Development Corporation (ITDC), Hotel

Corporation of India (HCI) etc. The private sector includes organisations like the Indian

Hotels, East India Hotels, Asian Hotels, etc. 70 per cent of the market share of this

industry is with Indian Hotels (Taj) and East India Hotels (Oberoi).

Segmentation

The Department of Tourism (DOT) has assigned ratings to hotels from 1-star to 5-star

and 5-star deluxe depending on the faciliteis offered.

In addition to star categorization - a new category of heritage hotels has been

introduced. It covers palaces, castles, forts, havelis, hunting, lodges and residences.

These are further classified as heritage, Heritage classic and heritage grand.

The main characteristics of Hotel industry are:

a) It is a service oriented industry.

b) It is labour intensive requiring skilled labour

c) It is highly capital intensive and has long gestation periods

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d) It is a seasonable in nature, and at some places hotel occupancy rate touches 100%

in peak season and around 30% in off season.

e) Most of the prestigious hotels have foreign collaborations or franchise agreements

with International hotel chains to provide international standard services.

Hotel - Products and Services

Category of rooms

(a) Normal (b) Deluxe (c) Executive (d) Suite (e) Deluxe Suite (f) Presidential Suite.

Plans of hotels

European Plan Room only basis

Continental Plan Room plus Breakfast basis

Modified American Plan Room Plus Breakfast Plus one meal i.e., lunch or Dinner.

Also called Half Board.

American Plan Room plus three meals Breakfast, Lunch & Dinner. Full board.

THE HOTEL MARKETING MIX

The Hotel Product offering - there are a number of components of a hotel product.

The accommodation, food and beverage, recreation and health, shops, car rental

service, are some components of the offer.

The place

Direct Distribution : It is the customer who comes to the hotel unlike a manufactured

product. It has dependence on its allied services like Road Transport, cruises, travel

agents and tour operators, National and state organisations, etc.

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Distribution through intermediates : Tour operators, travel agents work as

intermediaries and sell hotel product.

Cooperative distribution : This system of distribution operates on the principle of

diverting traffic overflow hotel to another.

Franchising : The franchisee gets the benefit of being reservation and sales system

which ensures a certain level of business which may be available otherwise.

The pricing

The pricing of hotel rooms and airline seats are similar. Both are the commodities

which are perishable daily. The hotel profitability depends upon the occupancy of its

rooms.

The fixed costs in the hotel industry are very high and large components of component

in the cost is due to price rooms and meals. For this reason a hotel which is not situated

in high demand area must generate strong seasonal revenue to counter the low and off

season revenues.

The room rates of the hotel are related to following factors.

Firstly basic, normal rate considers the following:

Room space, Quality of furniture, Carpeting, Furnishing, Bath, toilet, shower, hair dryer

and trouser pressing equipment etc., Telephone, colour TV in house movie, radio,

Fridge, tea and coffee making equipment, Personal computer and office faciliteis and

others.

Secondly, the room rate is related to the market. The primary market will be located in

a posh and fashionable area with ample parking and garaging faciliteis and frequented

by high class people including business men and other groups.

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Thirdly, the room rate should reflect the availability of personal comfort faciliteis like

lounge, bar, restaurants, shopping arcade, banks, standard of cuisine, hairdressing,

swimming pool, health club etc.

Promotions

1. Pricing-off promotions Special terms for specific clients at specific times

e.g. off peak discounts (happy hours).

2. Couponing Free sightseeing and executioners discounts at

shopping arcades, free use of hotels recreational

facilities etc.

3. Consumer contests Prizes awarded to consumers winning special

contests i.e, free holidays/stays

4. Trade contests Same as consumer contests but meant exclusively

for the hotels channel member i.e. tour predators

travel agents etc.

5. Premium offers Special package deals i.e. three week stay for the

price of two weeks, children stay free of cost etc.

6. Welcome Cocktails A free welcome beverage is offered to the guest

7. Quantity discounts Tour operators are offered extra room free of cost

on booking a certain number of rooms.

Direct selling

Direct selling is done by sales staff of a hotel who sell to travel agents, tour operators,

business houses etc.

Direct mailing

Direct mailing is generally used by hotels and is sharply aimed at a well identified

segment.

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Advertising

Hotel advertising is a long term effort to inform customer about the hotel giving details

about the location and type of faciliteis offered. Persuasive advertising focus on more

competitive situation where the desired business from all departments of the hotel is not

achieved.

Public relations

To create a favourable image hotelier are using public relations as a communication

tool. They aim at maintaining Guest relations, Relations with government agencies,

media relations, community relations, employee relations, publicity.

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METHODOLOGY

Research approach

Not many researches were found on the budget hotel sector that would help or advice

this project.

There are several ways to assess the quality of services and customer satisfaction

through subjective, or soft, measures of quality, which focus on perceptions and

attitudes of the customer rather than more concrete objective criteria. These soft

measures include customer satisfaction surveys and questionnaires to determine

customer attitudes and perceptions of the quality of the service they are receiving

(Hayes, 1997, p. 2) which have been undertaken as a primary research in this project.

Because the extent to which goods or services meet the customer's needs and

requirements is the index by which quality is determined, customers' perceptions of

service is vital in identifying customer needs and satisfaction.

It has been noticed that measuring customer satisfaction has become increasingly

difficult, and levels of quality offered within service industries, as all customers have

different perceptions about what contributes to good quality. It is true to say that all

guests within a hotel have different perceptions on the quality of their stay, but hotel

firms are continually determined to monitor customer feedback in the light of

improving service.

Research Instrument

The relevant literature and survey developed by past studies provided the basis for the

development of the close-ended and self-administered questionnaire for this study.

After review of the literature, 17 hotel dimensions, instead of the original 22-items

SERVQUAL questionnaire (Parasuraman, Zeithaml, and Berry, 1988), were developed

in this modified version of the SERVQUAL questionnaire to identify and analyze the

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expectations budget hotel customers. A seven-point Likert scale was used in this

questionnaire.

The questionnaire comprised of 3 sections. The first section was to measure the

respondents expectations regarding service quality in the budget hotel industry in India

by using the five SERVQUAL service quality dimensions. The second section was to

examine the respondents length of stay, type of stay and their choice of budget hotel,

just to understand what kind of customers do actually come and stay in budget hotels

and for how long. The third and the last section was to collect the gender and age group

of the respondents. Other personal information such as profession, location, income,

etc. was not considered appropriate as that would have made analysis complex and also

some respondents feel shy to share their personal information.

A review of the budget hotels was undertaken with the help of approaches that helped

us to analyse out of the dimensions that are mentioned in the questionnaire how

customers rate them against budget hotel. In other words based on the dimensions

mentioned in the questionnaire what are the expectation levels of customers. The survey

was in regard to budget hotels only and measured what customers really expect when

they hear about budget hotels based on their knowledge or experience. It also aimed at

measuring if customers were satisfied with all the attributes included in the

questionnaire. Candidates were required to respond to the questions circling one of the

numbers next to each statement which strongly represented their feelings on the scale of

1 to 7, one being strongly disagree and 7 being strongly agree.

SERQUAL was a perfect instrument here as the information provided on expectation

and satisfaction levels of budget hotels services is very minimal and there was no

information about the services and facilities of the hotels.

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Survey method

One method, which has now become a norm, is the guest Questionnaire. The overall

principle of measuring customer satisfaction is well established within the hotel sector,

with two theories from consumer behaviour research being used to investigate

consumer satisfaction. In review of the first disconfirmation theory consumers

develop feelings of satisfaction or dissatisfaction based on levels of expectations,

attitudes and intentions towards as yet untried products or services, matched against

their actual experience post-purchase. Therefore, disconfirmation occurs when there is a

discrepancy between expectations and performance. The second theory is expectancy

value theory, where emphasis is placed on the weighting difference between product

attributes and consumer satisfaction; that is to say the customer has different

perceptions, and his or her choice and the level of satisfaction derived there from is

dependent on which attribute is most valued. As a technique to collect customer

comments, the following criterion was included in the questionnaires:

The questionnaire included those variables that customers presume are important;

The variables were weighted on the basis of their relative importance;

The questionnaire was standardized across all samples;

The questionnaire was distributed randomly;

For the organization the benefit of guest-questionnaires is that they receive up-to-date

information concerning the product and service offered, and through a combination of

quantitative statistics (percentage of guests liking/disliking the service) and qualitative

comment boxes, managers are better informed of unit operation performance, as well as

the required and changing priorities and wishes of customers.

As mentioned before survey method has been chosen as the methodology for this

research. Reason being Surveys Methods is one of the important methods of

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quantitative research where a structured questionnaire is given to a sample of

population to extract specific information about the concerned topic. Also, it is an ideal

tool in cases where large numbers of respondents are involved and their opinions would

reflect their attitude. Surveys were conducted outside and inside Harrods store, which is

one of the most popular tourist destinations right now in London. Being an employee of

Harrods I was allowed to use facilities of the company which includes the cafeteria that

caters to more than 4000 employees everyday. Research was conducted in this cafeteria

on respondents who were first screened by asking just a simple question that weather

they have been on leisure holiday in the past 1 year. Every successfully screened

candidate was then asked if they would like to take part in the research that would not

take more than 5 min of their precious time and could earn them an opportunity to enter

a prize draw if they answer back their fully completed survey forms. Same surveys

were also carried down on the shop floor with due permission of our store manager.

Every one in 15 customers were asked to take part in the survey which was primarily

nothing to do with their shopping experience in Harrods. Candidates here were screened

again by asking just simple question whether they have been on any holiday in the past

1 year.

In excess of 200 questionnaires were given out over one and a half month period .

Population and Sampling

The overall target was to collect about 150 completely filled questionnaires with a

mixture of different age groups and gender. The target sample included all the potential

shoppers, tourists that came , store and all the 4000+ staff members that work in store.

Before actually starting the survey a screening question was asked to confirm that the

respondent has gone on holiday in the past 1 year. Therefore our sample size was of 150

respondents who as mentioned above were either shoppers in store, tourists outside

store or employees working.

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Samples were selected by using a rather simple random sampling technique which

means all members of the population have a known and equal chance of getting

included in the sample. One in every 15 customers inside the store and every 10th

person that I met in the cafeteria were surveyed.

We avoided using qualitative methods for our research as we already knew the

variables or factors that we need to include in our surveys and moreover we didnt had

to predict consumer behaviour for a particular situation. Based on questionnaires, mean

scores will be compared for each of the five SERQUAL dimension, and conclude

expectation of target group in each dimension.

Analysis

Once we got data from our respondents to reduce the number of items and club them

together in 5 attributes we use factor analysis using SPSS.

Factor analysis is a statistical technique identifying correlations among a list of issues

or items. This can be used to identify common issues or problems among different

groups of customers, grouping them to be dealt with together.

Response rate

Because the number of tourist, shoppers and staff was always high it was rather very

good response rate. But the problem that was faced was incomplete questionnaires

filled by most of the staff members as they used to quickly go through questions and fill

it. Also, most of the tourist did not understand English so it was very hard to explain the

objective of the survey to them. We managed to get about 175 responses out of which

only 150 were completely filled and made sense.

Full questionnaire is attached as Appendix 1

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RESULTS AND ANALYSIS

Base for analysis

The approach to analysis was to use classical inferential statistical techniques to:

Compare the means of each of the 5 SERQUAL dimensions.

Compare the mean scores of respondents based on gender and different age

groups.

Compare the differences in the mean scores of various dimensions

All this involved techniques using SPSS to compare mean scores in which analysis of

variance is somewhat considered an appropriate technique. A confidence interval of

95% was expected to provide sufficient robustness in this case.

The mean and standard deviation should be computed for the global/overall satisfaction

variables as well as for each of the product/service attributes. To understand better the

satisfaction/dissatisfactions of each market segment, it is recommended that separate

analyses be conducted on the basis of gender and age groups in order to find out the

difference in opinions and satisfaction levels among them.

To determine the relative importance (weights) of each product/service attribute, an

establishment can either conduct a periodic study to determine how customers

themselves rate these, or alternatively determine the weights by running a multiple

regression with the global satisfaction variable as the dependent variable and each of

the product/service attributes as the independent variables. The beta weights for reach

independent variable in the regression will be equivalent to the importance rates oft he

attributes. Since the relative importance of product/service attributes changes from time

to time, it is recommended that these weights be computed at least once a year and if

possible more than that.

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Looking at the result in table above it suggests that there are 8 factors that explain two

third of the variance as their Eigen value is above 1. But to find out these 8 factors we

need to run a rotation test using same factors analysis. Because the size of the

respondents is 150 we need to rotate data and suppress absolute values which are less

than 0.3.

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ROTATED COMPONENT MATRIX(A)

Component

1 2 3 4 5 6 7 8Excellent Decor .775

Modern Equipment .697

High standard .681

Smart and neat .707

Employees help

customers.599

Employees make

customers feel

comfortable

.757

knowledge toanswere customers

queries

.443 .335 -.506

understanding

specific needs and

fulfil it

.354 .720

employees are

courteous at all

times

.784

Customers feel safe-

transactions

.816

Customers feel safe-

belongings.660 .515

Personal attention -.530 .514

Service standards .849

right service at right

time in right manner.512 .309 .580

good facilities .762

Service process .801

good value for

money .748

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with

Kaiser Normalization.

A Rotation converged in 15 iterations.

This result shows that such as help from employees to the consumers, employees

making customers feel comfortable, and their knowledge to answer customer queries

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have the highest mean values so they represent responsiveness attribute of it. Among

these three, customers really appreciate when employees of budget hotel make them

feel comfortable at all times. Surprisingly, Personal attention is negatively correlated

which means it really doesnt affect responsiveness attribute in a budget hotel.

Moving on to the next component which includes promised service standards, right

service at right time and personal attention represent the reliability attribute of the

budget hotel that customers feel glad about. Out of which sticking to promised serviced

standards are considered very important to all customers and understanding specific

needs and fulfilling it doesnt really contribute to the reliability aspect of service.

Next component represents Assurance- customers expect budget hotels to understand

their specific needs and make all efforts to fulfil it. Also, they value when they are

assured that their transactions with the budget hotels are safe.

The fourth component highlights the empathy aspect. Customers feel in order to make

their stay a satisfied and happy stay management of budget hotels should always be

courteous to them and they should make sure that their belongings are safe within the

hotel premises. In hospitality industry these factors are kind of pre requisites, if any

organization ignores them or doesnt respond to these factors customers are bound to be

unsatisfied and never repeat their stay again.

Tangibility facet which in our analysis is fifth and sixth component is always

considered important and factors such as modern equipment, high standard of

cleanliness, excellent decor and appearance of their employees are most significant

aspects of tangibility that customers rate. They have mean scores of 0.697, 0.681 and

0.775, 0.707 which is quite significant. Customers have also rated safety of their

belongings important as they feel if hotels have necessary infrastructure that makes sure

their belongings are always safe it contributes to their pleasant and peaceful stay.

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Factors such as right service at right time in right manner and not too complex service

process represent the empathy attribute along with courteous employees and customers

feeling safe about their belongings which have already been mentioned and included in

component 4.

The last component which again represents assurance tells us customers need assurance

about the overall facilities that a good and successful hotel should have and they being

good value for money.

Reconfirming the Reliability

We reconfirm the reliability of each dimension for each component. For e.g. Help from

employees to customers, employees making customers comfortable and knowledge to

answer customer queries are clubbed together in one component under responsiveness.

To reconfirm reliability that these three dimensions are related to each other and come

under one component we conduct reliability tests using Cochrans ANOVA test using

alpha model.

The significance should be greater than 0.7. By running those tests we came to know

that SPSS did not really interpret any reliability between these factors of each

component except just two which had significance close to and above 0.7, these

dimensions fall into responsiveness and empathy components with a significance of

0.636 and 0.731.

Comparison of mean scores based on gender

Moving on to our next set of tests which explains the differences in opinions for each

component. We will run independent sample T test for same to find out the differences

among two genders for each component.

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Group Statistics

Gender N MeanStd.

Deviation

Std.

ErrorMean

knowledge to

answere

customers

queries

Female 56 3.8750 1.37593 .18387

Male

94 4.0745 1.59461 .16447

employees are

courteous at

all times

Female 56 4.0000 1.38826 .18551

Male

94 4.5213 1.45712 .15029

Customers

feel safe-

belongings

Female 56 4.5179 1.32103 .17653

Male

94 4.1383 1.24953 .12888

right service

at right time

in right

manner

Female 56 3.4821 1.53731 .20543

Male

94 3.9787 1.37551 .14187

The results depict that the mean scores for responsiveness dont show much differences

between them for the attribute responsiveness. The numbers of male respondents almost

double the number of female respondents in the survey. In case of other attributes like

reliability, assurance and tangibility also there is not much difference between the

responses on the basis of gender. There was very little difference between the responses

for empathy in which males have more expectations than women.

In reliability attribute also there was very little difference found in the opinions of

males and females. Males here as well give prime importance to right services at right

time and in right manner.

Areas where females give more importance than males are appearance of employees,

budget hotels being good value for money and safety about their belongings.

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Budget hotels being good value for money.

There are few dimensions where there are different in opinions among groups. We do

not focus on what are the expectations of different age groups, what we are looking for

is weather or not there are differences in opinions. Dimensions like understanding

specific needs and fulfilling it, knowledge to answer customers queries, and good

facilities have major difference in opinions within groups and between groups.

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CONCLUSIONS AND RECOMMENDATIONS

From our study the most noteworthy conclusions that can be depicted are that no matter

what gender or age group is customers put greater importance on the assurance aspect

of the budget hotels than the hotel services. Overall, the dimensions that have scored

higher mean score are Assurance, Reliability and tangibility. Empathy and

responsiveness are important but do not majorly affect customers decisions to choose a

hotel or be loyal to a hotel.

Responses of different age groups and genders in the study conclude that their duration

of the stay in any budget hotel would primarily be a short stay and the purpose could be

break from long drives at motorways, accommodation for special occasions like sports

events, weddings etc.

If we look at each dimension customers have following expectations that budget hotels

should meet:

Budget hotels in all senses are good value for money.

Making customers feel safe while doing transactions.

Making customers feel safe about their belongings.

Staff interaction and appearance

Sticking to promised service standards

Dimensions such as dcor, modern equipment and employee knowledge to answer

customers queries are rated least important in the study.

Based on the gender the research didnt show any major differences in the response of

the respondents for all attributes. But women did give more importance to appearance

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of the employees and safety of their belongings. Males on the other hand consider

service aspect to be more important and right service at the right time is something that

pampers them.

There are few dimensions where there are different in opinions among groups. But

overall there were some common issues that all age groups definitely considered

important for any budget hotel.

Where as customer loyalty is concerned, based on opinions of different writers and

authors it came to light that a discount card does not appear to increase customer loyalty

and that many customers buy the card because they perceive it to be good value for

money and once the card expires they discontinue using the services of same hotel.

Also, satisfaction does allow hotels to build customer loyalty but it really depends on

the satisfaction levels. An overall satisfaction in all attributes need to be taken care of

and not just one or two attributes. For e.g. If the satisfaction is based just in tangibility

aspect of a hotel then a customer might choose another hotel for his next stay where he

will find same satisfaction level for tangibility along with other attributes. So, its very

important that all attributes are taken care of and they are equally balanced at all times.

Management inference based on study

The fi

Documents

Comparative Study of the Customer Satisfaction and Service Recovery in Hotel Industry