Customer Satisfaction at The Plaza Crowne Hotel

Chapter I

Introduction

1.1 Introduction

Tourism is frequently and justifiably described as a major phenomenon of modern times. Since 1950 the number of international tourist arrivals worldwide has increased spectacularly, from just 25 million to over 924 million in 2008. Representing an average annual growth of 7 % a year (Sharpley, R., 2004; and WTO – World Tourism Organisation, 2009).

International tourism generated US$ 856 billion in 2007, representing 30% of the world’s exports of services for the related year. Under the influence of the recent global economic recession, tourism demand has significantly slowed down in the past few months. Notably in the second half of 2008 growth came to stagnation with the number of international arrivals declining slightly – a trend which is expected to continue in 2009 and probably beyond, if the economy does not show signal of reaction (WTO – World Tourism Organisation, 2009).

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Regardless of the current actual global recession, it is undeniable the importance of the tourism activity for the world economy, mutual understanding of nations, personal growth and development, just to mention a few benefits that tourism brings in.

The hospitality industry, as a segment of the tourism industry, plays a major role in this economic activity (King, 1995). Being accommodation the biggest percentage in tourism expenditure, in average of 34% of the total expenditure per trip (Sharpley, R., 2004).

The success of the hospitality industry, relies massively on the quality of the service delivered and customer satisfaction. The index of the measurement of both, quality service and customer satisfaction, will widely influence on occupancy rates, hence, on the profitability of the company (Holloway, JC, 1998; Solomon et al, 2006).

Therefore, justifying the need for a reliable model of assessment of customer satisfaction and service quality that would better adapt to the hospitality field, which at present still have a lack of agreement.

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1.2 Research Title

The measurement of service quality and customer satisfaction in the hospitality industry: a case study of the Plaza Crowne Hotel.

1.3 Research Background

For Cardozo (1965), cited by Williams and Uysal (2003), marketing researches in the consumer satisfaction field started in the early 60’s. The subject had a relevant increase in popularity by organisations and researchers only in the 80’s, when organisations, in an attempt to try to keep itselves in the marketplace, started paying substantial attention on customer’s expectations demands.

1.4 Research Aims

The aim of this project is to analyse customer satisfaction and service quality measurement, using the SERVQUAL model, within The Plaza Crowne Hotel – Kansas City (USA), based upon the hotel’s own data against the highlighted gaps within the model.

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1.5 Research Objectives

In order to achieve the specified aim it will be necessary to:

Conduct a review of service quality and customer satisfaction;

Illustrate The Plaza Crowne Hotel’s current customer satisfaction and service quality measurement model to identify its positive and negative aspects;

Conduct an initial diagnosis of the key issues presented in the Crown Plaza data, examining the hotel’s past assessments in order to identify areas of failure;

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Analyse the SERVQUAL model focusing on the hospitality industry;

Identify and critically recommend suitable quality measurement practices to apply within The Plaza Crowne Hotel, if necessary;

Chapter II

Literature Review

2.1 Introduction

To Kotler et al (1996), nowadays companies need to change their view and attitude in the marketplace and adopt a more customer centred philosophy, in order to keep competitive and profitable. Customers are changing their behaviour towards consumption, becoming more challenging to companies to attend their expectations, as they are increasingly aware of their rights, expect more than they used to, and know exactly what they want when purchasing a product or service. This increase in consumers expectation naturally leads to the need of a higher quality in costumer services delivery.

Customer satisfaction and quality service became priority for companies worldwide. They are believed to generate repeated business, therefore increased profit margin. The hospitality industry is paying close attention to it. Hampton’s Inn, a well know resort in Florida, has developed a 100% satisfaction guarantee program that promises its customers no charge unless they are completely satisfied. Other companies such as Sheraton Hotels has implemented a employees’ reward system for superior services to guests, the Sheraton Guests Satisfaction System (SGSS). Hilton International has adopted as a primary goal its customers satisfaction with global diversity. Moreover, organisations are increasingly becoming adept of rewarding its employees with bonuses, incentives and salary rise, just to mention a few actions to improve service. (Oh, 1997).

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Therefore, marketing researchers are constantly developing and improving models of measuring customers satisfaction and quality service. Among many measurement models and theories, this dissertation will focus on the analysis of the 5 Gaps Model developed by Parasuraman, Berry and Zeithaml also called The Servqual Model.

2.2 Defining Service

Service is any act or performance that one firm can offer to a costumer, its nature is essentially intangible and does not result in the ownership of anything. The service production may or may not be tied to a physical product (Kotler, P, 2003).

Addittionaly, Gronroos (1990) cited by Hsu et al (2001, p.18) defines service as “an activity or series of activities of more or less intangible nature that normally, but not necessarily, takes place in interactions between the costumer and services employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer’s problems”.

From the consumer’s optic, service is nothing else than the experience lived in the whole process of this transaction (Hsu et al, 2001).

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Moreover, it was noted that services have four major characteristics that greatly affect the way it is delivered and its marketing programme. Which are: intangibility, inseparability, variability, and perishability (Kotler, 2003).

Bellow the four charactecristics are briefly explained in the light of Kotler (2003) and Hsu et al (2001):

Intangibility relates to the extent that services cannot be tried in anyway before they are actually purchased and delivered. The only thing that can be done to reduce uncertainty is to look for evidences of service quality;

Inseparability is the relation that services are typically produced and consumed simultaneously. The person who provides the service, is actually part of the service purchased, therefore the importance of the interaction of providers and customers;

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Variability occurs because services depend on who provides, when and where, one experience is never exactly equal the other. As people are the means through service production, personal problems, mood, knowledge of the job and many other factors can interfer and widely vary the service;

Perishability means that services cannot be stored as we can do with manufactured products, because services are produced and consumed simultaneously. As an example, in a hotel, a room that was not occupied yesterday, cannot be sold anymore as time does not goes backwards.

For Cook (2002) the increased global competition has made many organisations realised that they cannot compete only in price. Therefore companies are developing their own strategy in providing superior customer care to differentiate their products and services.

“Surveys suggest that service-driven companies can charge up to 9 per cent more for the products and services they provide. They grow twice as fast as the average company and have the potential to gain up to 6 per cent market share” (Cook, 2002, p.1).

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2.3 Defining customer satisfaction and quality service

Peter Drucker cited by Cook (2002, p.1), once said: “There is only one valid definition of business purpose: to create a customer (…) an organisation’s ability to remain in business is a function of its competitiveness and its ability to win customers from the competition. The customer is the foundation of the business and keeps it in existence”.

Customer satisfaction relates to the personal opinion and result of customers’ assessment of a service based on a comparison of their expectations and actual perceptions of the service delivered (Clark, G.; and Johnston, R., 2005).

According to Lancaster et al (2002) from the customer’s point of view, service is judged by the mix of customers’ previous experiences and their perception of the outcome of the service. The service experience is the customer’s direct experience of the service process and concerns the way the customer is dealt with by the service provider. The result for the customer of the service delivered is described by the term service outcome. (Lancaster, G. et al, 2002).

“Service quality is more often used to mean different things. Some managers use the term to mean how the customer is treated. This is perhaps more accurately called quality of service, as opposed to service quality, which can mean the entirety of outcome and experience” (Clark, G.; and Johnston, R., 2005, p.108).

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Van Looy (et al, 2003) differentiates service quality and customer satisfaction stating that “service quality is a form of attitude representing a long-run, overall evaluation, whereas satisfaction represents a more short-term, transaction-specific judgement. The level of customer satisfaction is the result of a customer’s comparison of the service quality expected in a given service encounter with perceived service quality. This also means that satisfaction assessments require customer experience while quality does not “(p.124).

2.4 Benefits of service quality

Kotler (1996) has listed many benefits that an organisation enjoys as a prize for delivering service quality. As listed bellow:

Retaining customers – high quality builds loyal customers and creates positive word of mouth.

Avoidance of price competition – “the PIMS data show that firms in the top third in quality could charge 5% to 6% higher than those in the bottom third. High quality can help to avoid price competition and help to maximise potential revenue” (p.363).

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Retention of good employees – employees appreciate working in operations that are well managed and produce quality services and products. When an organisation operates in high quality, it decreases turn over rates, hence, retaining good employees. Additionally, recruiting is easier and training costs are reduced.

Reduction of costs – which are divided in three categories of costs: Internal costs – are those associated with correcting problems discovered by the firm before the product reaches the costumers; External costs – are associated with errors that the costumers experience; Quality system costs – are costs viewed as investments in the future of the company to ensure that customers return. (Kotler, 1996)

2.5 Benefits of a customer-centred organisation

An excellent service provides many benefits to an organisation, Cook (2002) has listed what some of the best-practice organisations have gain on focusing on the customer. “Differentiate itself from the competition; improve its image in the eyes of the customer; minimise price sensitivity; improve profitability; increase customer satisfaction and retention; achieve a maximum number of advocates for the company; enhance its reputation; ensure products and services are delivered ‘right first time’; improve staff morale; increase employee satisfaction and retention; increase productivity; reduce costs; encourage employee participation; create a reputation for being a caring, customer-oriented company; foster internal customer/supplier relationships; bring about continuous improvements to the operation of the company” ( p.24).

2.6 Importance of customer relationship management (CRM)

Customers perceive service quality through everyday aspect of their contact with the company. In improving the quality of its service therefore an organisation needs to develop a strategy bearing in mind all aspects of the relationship with its clients. (Cook, 2002)

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Customers often do not perceive the service they receive from an organisation as a complete entity. Attention to detail is a key tool of the organisation’s relationship with the customer “such as an incorrectly addressed letter, a lengthy delay in receiving an e-mail response, a service which turns out to be different to how it was originally advertised, which forms customers’ impressions” (Cook, 2002, p.24).

CRM involves managing the customer relationship across all its interfaces with the company as one entire process. A CRM system can help identify sales prospects from existing or potential customer databases. It also can assist with all aspects of the sale and service being provided, eg offering online access to order status and a single view of the customer status when the sale is complete. It can collect information about the customer and the queries that he or she made. It can also monitor customer-usage patterns, so abnormal patterns or a reduction in use can be identified. Hotels systems can store any peculiarity or requests made by guests, such as preferences for smoking or non-smoking rooms, higher or lower floors etc. (Cook, 2002 and Lancaster et al, 2002).

Ernst and Young found elements that are essentially important for organisations to build a CRM framework. First basic step is to accumulate systematic knowledge of its markets and costumers. This could be made by complex IT systems, that are designed to store, manager and analyse informations about customer’s value. With this tool organisations can access business informations regard theier costumers, and also predict consumer’s behaviour. Enabling organisations to share informations across departments, and automatically update this informations by tracking loyalty cards costumers, any time they make a purchase or request the company’s service,for example (Cook, 2002).

CRM systems helps companies to target theier segments, and also to analyse the information flow throughout the company. Making easier to identify its costumers needs, and more importantly, shows the best way to approach its most profitable clients. The more information a company holds about its costumer’s the best is the knowledge built, as it helps refines consumer segmentation and individual needs. In this particular case, data about costumers life-style is very helpful (Cook, 2002).

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Selling involves taking a proactive approach towards costumers, rather than a reactive. For instance, hotels can treat their most profitable business guests with special offers on their holidays. To finish the CRM framework, is essential to hold a service, providing an after-sales which should be measured to individual needs (Cook, 2002).

2.7 Importance of performance measurement and a programme development

“You cannot manage what you can not measure” (Kelvin Anon, www.dti.gov.uk/quality/performance). According to Cook (2002) and Williams (2002) managers braves the way through customer satisfaction measurement. A measurement programme starts with a clear definition of objectives, budget and timeline. Moreover, for this task to be performed and achieve its highest level of success, it is necessary the full commitment and willingness of top management to act on the results founded.

A starting point should be to decide which part of customer satisfaction the company is most concerned to measure. Is also important to be aware that expectations and satisfaction levels can widely vary between the costumers of a company, therefore, the need to identify market segments. For example, the different needs of a businesses and tourists guest of a hotel. (Cook, 2002; Laws, 2004; Williams, 2002)

According to Clark and Johnston (2005) performance measurement is costly. Few organisations have calculated just how much time and energy they spend on measuring their performance and its value for money relation. Two useful tests of a performance measure are, first, what is its purpose and, second, what systems are in place to support or achieve that purpose. There are four main purposes or reasons to take measurement: communication, motivation, control and improvement within the company.

In the endless improvement process, measuring performance is an important task in order to identify and track progress in harmony with the organisations’ goals; identify areas and opportunities for improvement; and compare performance with internal and external standards (www.dti.gov.uk/quality/performance).

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According to the Department of Trade and Industry (DTI) the main reasons of measuring performance is:

• “To ensure customer requirements have been met

• To be able to set sensible objectives and comply with them

• To provide standards for establishing comparisons

• To provide visibility and a “scoreboard” for people to monitor their own performance level

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• To highlight quality problems and determine areas for priority attention

• To provide feedback for driving the improvement effort” (retrieved from ).

2.8 The SERVQUAL model

The Servqual model was developed by Parasuraman, Zeithaml and Berry, and has been one of the most popular service quality measurement instrument since then. The model was designed to measure those components of service that generate satisfaction within five dimensions (Ryan and Saleh,1991; Lee et al, 2004; Johns et al, 2004).

Originally the researchers conducted a focus group studies with service providers and costumers, and as a result they came up with a list of ten determinants or dimensions of service quality which are: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding/knowing the customer and tangibles, (Van Looy, B et al, 2003; Parasuraman et al, 1990; Ryan and Saleh,1991) which will be briefly explained bellow:

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Tangibles – the appearance of physical facilities, the personnel, the tools or equipment used to provide the service and communication material. Guests of a hotel look for details of the building, web sites and reservation systems for instance.

Reliability – consistency of performance and dependability. This means that the firm performs the service correctly the first time and that the firm honours its promises.

Responsiveness – the willingness to help the customers and to provide prompt service.

Competence – knowledge, ability and possession of the right skills to perform the job.

Access – degree of approachability of service providers.

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Courtesy – use of good manners, politeness, friendliness, smiling during the service.

Communication – ability to successfully communicate with costumers, keep them informed.

Understanding – degree of interest of employees to know the costumers needs and wants.

Assurance – knowledge and courtesy of employees and their ability to inspire trust and confidence.

Empathy – caring, individualized attention to customers. (Van Looy, B et al, 2003; Parasuraman et al, 1990; Ryan and Saleh,1991)

Later on, in another attempt of improving their models they found a high degree of correlation between communication, competence, courtesy, credibility and security. They therefore, merged them into one dimension, which they called assurance. Similarly they found a high correlation between access and understanding which they merged into empathy. Thus compacting the dimensions of service quality in five which are: tangibles, reliability, responsiveness, assurance and empathy (Van Looy, B et al, 2003; Dabholkar et al 2000).

The diagram bellow was originally made to suit the quality service measurement and customer satisfaction of a car repair garage. Which can be easily adapted to any other service organisation, surely including any hotels to be more precise.

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Source: http://www.emeraldinsight.com/fig/0240221006003.png

The SERVQUAL identified gaps between clients and organisations perceptions of attributes of service perceived, and also between customers expectations and perceptions of the service actually delivered (Ryan and Saleh,1991; Landrigan, 1999). This has led to the well known and widely used 5 gaps of service quality:

Gap 1: Consumer expectations versus management perception

CEO’s and managers often fail to realise what consumers expect of a service and which features needs to be pursued to deliver a high-quality service. When management does not understand what their customers want, a gap 1 exists.

Very often, organisations research to find out what are their markets needs and wants, but later can occur a divergence. When customer needs change but the product remains the same, gap 1 increases, as the service becomes less attractive (Parasuraman etal, 1991).

Gap 2: Management perception versus service quality specifications

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A gap 2 situation occurs when managers know their customers needs, but do not deliver it, either for unwillingness or incapability. Reasons for gap 2 to happen could be inadequate commitment to service quality, absence of goal setting, lack of perception of feasibility, and lack of standardization. The pursuit to achieve short-term profits refrain companies to invest in equipments and people, causing service quality issues (Parasuraman etal, 1991).

Gap3: Service quality specifications versus service delivery

Gap 3 occurs when employees are unwilling or unable to deliver the appropriate service that was specified by management. In this case managers understand their customers needs, develop strategies and tasks to fulfil these needs, but in the moment of employee and costumer interaction it does not occur (Parasuraman etal, 1991).

Gap 3 could be minimised through training and development, rewarding and internal marketing campaigns. Human resources department plays a major role in this task.

Gap 4: Service delivery versus external communications

A company creates gap 4 when it promises more than it can deliver, creating disappointments to its customers. Good sense and ethic when advertising should be primordial in any circumstances (Parasuraman etal, 1991). The image of a company that cheats or lies to its costumers leads to an extremely bad reputation and negative word of mouth.

Gap 5: Expected service versus perceived service

Last but not least, gap 5 is a function of the other gaps. It pictures the difference among expected quality and perceived quality. If any of the other 4 gaps increases or decreases, gap 5 will follow it (Parasuraman etal, 1991).

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The diagram below represents the 5 gaps model of quality service.

Source: http://www.kmfadvance.com/mind_the_gap_files/image004.jpg

2.9 Criticisms and limitations of the SERVQUAL

According to Oh (1997) the use of the difference of the scores contributes to discrepancies and errors, affecting the reliability and valididyt of the model. Such finding suggests that caution has to be taken when using the scores, and that additional work is essential to the development of measures of assessing the quality of services.

In addition it is also noticeable that the SERVQUAL lacks in ties with statistics, economics and even psychology theories, therefore many arguments has formed a doubtful opinion regards its relaibility.

2.10 Other service quality and costumer satisfaction measurement models

Obviously, the SERVQUAL is not the only model available to measure service quality and costumer satisfaction. Indeed, there is a range of variety of models out there. Some of them will be quickly explained in this study.

2.10.1 The expectancy-disconfirmation model (EDM)

The principle of expectancy theory was early stated by Lewin (1938) who hypothesized that individuals make decisions on the most appropriate action to take based on their expectations of the outcomes of that action. After being reviewed by many researchers, the model developed to two processes: the formation of expectations and the disconfirmation/ confirmation of the expectations through performance evaluations (Oh, 1997; available at http://proquest.umi.com.newdc.oum.edu.my/pqdweb).

Chapter III

Research Methodology

3.1 Research Process

This research will include several components of different character, promoting the approach to new problems, providing bibliographic survey, offering a selection of methodologies, as well as providing a critical analysis of results (Saunders, et al, 2003).

In order for the aims of this research to be met it is necessary to gain an understanding of the practices of the service quality and customer satisfaction assessments applied within The Crowne Plaza Hotel (please see appendix II). This data will be given by one manager of the company, and will be adapted for a experimental application of the SERVQUAL model.

The research and development will comprise creative work undertaken on a systematic basis in order to build knowledge accumulation, including not only the practices of the service quality and customer satisfaction assessments model researched but how would be applied within The Crowne Plaza Hotel in order to achieve competitive advantage and business success.

The purpose of the literature review is theoretically discussing ideas that exist about the given topic. Data sources, such as library catalogues and indexes will be scanned for secondary data. This will produce a list of journals and newspaper articles, published books and internet sources (Saunders, et al, 2003).

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The secondary research will be complemented by primary research, through questionnaires and interviews with stakeholders of the organization in question.

In case of interviews and questionnaires, the manager cooperating with this research will be fully informed about the, methods and intended possible uses of the research, what their participation in the project entails, the strict confidentiality, and academic purpose only (Bell, 1999).

The project proposes to use analytical and theoretical framework, which extends descriptive research, making suggestions of why and how practices of the service quality and customer satisfaction assessments plays an important role in the competitive advantage, profitability and success of the firm (Yin, 2003).

A method of both, quantitative and qualitative approach will be applied in order to examine values, attitudes and perceptions aspects of the research subject. (Flick, 2003)

The departure point will be deductive, with the observation of the SERVQUAL model, fed by the organisation information’s collected where conclusions will be critically evaluated against facts.

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Moreover, a phenomenological philosophy will be implemented, applying a case study approach, since this kind of research methodology is ideally suited to investigate the insights into the service quality and customer satisfaction in theory and practice (Yin, 2003).

The data collected for this research was taken between the months of January, February and March 2009, it consists of 380 customer satisfaction surveys, applied by the hotel. This surveys were answered by guests, either on the check-out or on the hotel web site, after their stay in the hotel. At the time of the data collection, was common practice of the hotel’s front desk manager to put the weekly result together and send to all hotel departments, so they could have a picture of the guest’s feedback.

3.2 Research Theories

In order to achieve this reaserch objectives it will be necessary to apply many reaserch theories that reinforces the reliability of it. The theories used in this research will be briefly explained one by one.

3.2.1 Case study

According to Robson (2002:178) cited by Saunders et al, 2003, p.93), a case study is “a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evedence”. A case study approach is recommended to those reasearchs that essentially aims to explain ‘why’, ‘how’ such phenomenon occurs, as well as in research that includes surveys (Saunders, 2003; Yin,2003).

A case study is also a scientific way of explore an existing theory, which is one of the main objectives of this research, as is analysing the use of SERVQUAL (Saunders, 2003).

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3.2.2 Descriptive studies

In order to have a clear picture of the scenario studied is essentially important to describe with accuration every data collected. As cited by Saunders et al (2003, p.97), Robson, 2002:59 describes the objective of descriptive research as ‘ to portray an accurate profile of persons, events or situations’.

3.2.3 Deductive method

Complementing the case study approach, a deductive method could be simply described as way of what we would think of a scientific research or theory, moving from theory to practice (Bailey, 2006; Cottrell, 2005; Saunders, 2003).

“It involves the development of a theory that is subjected to a rigorous test” (Saunders, 2003, p. 86). The deductive method has many characteristics. “First, there is the search to explain casual relationships between variables” (Saunders, 2003, p. 86). Then, hypothesis development, followed by hypothesis testing, normally using quantitative data, but could also being backed up by qualitative data.

3.2.4 Quantitative data

On the other hand quantitative research apply measurements and normally considered as better than qualitative research. Ghauri and Gronhaug (2005; p. 109) explains that “the difference between quantitative and qualitative methods and approach is not just a question of quantification, but also a reflection of different perspectives on knowledge and research objectives”.

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A method of qualitative approach will be applied in order to examine values, attitudes, and perceptions aspects of the research subject.

3.2.5 Qualitative data

A narrative analysis process was implemented to interpret the data that were collected from the research portion of this project. Thomas (2003; p.1) argues that “Qualitative methods involves a researcher describing kinds of characteristics of people and events without comparing events in terms of measurements or amounts”

3.3 Research Design

The survey consists of a questionnaire of 44 questions (picked by the hotel’s own customer satisfaction survey) related to the quality of the service provided by the hotel. The guests (sample = 380) will answer the questions according to their perception of the service received, whilst the managers (sample = 4) will answer the questions according to what they expect the overall of the guests to answer.

The answers will range between score 1 to score 5. Being 1 the best degree of satisfaction and 5 the worst degree of dissatisfaction, (Saleh and Ryan, 1991) having some variations as follows:

Score 1: very satisfied / definitely would / much more than you paid / much better / excellent / yes

Score 2: somewhat satisfied / probably would / somewhat more than you paid / somewhat better / very good

Score 3: neither / might or might not / about what you paid / about the same / good

Score 4: somewhat dissatisfied / probably would not / somewhat lees than you

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