Customer Satisfaction Case Study of Hotel

Customer Satisfaction Case Study of Hotel Customer satisfaction: A case study of the Travelodge Hotel. Docklands, London. Dissertation declaration â€Å"Is it possible for hoteliers to provide a quality of services that meets with customer satisfaction whilst at the same time reducing the quantity of services that are provided?† Abstract Budget hotels in the hospitality sector are continuing to make significant inroads into the market shares previously enjoyed by the standard hotel chains, even in select areas such as the City of London. However, the question is whether this new type of accommodation supply is being created at a cost to the consumer in terms of customer value and satisfaction. Using the Travelodge hotel Docklands as a case study, this research attempts to address this issue. From the result of a SERVQUAL measurement survey conducted with 48 of the hotels customers, the conclusion is reached that, whilst in theory there is no reason why the customer quality of service should be less, in practice the customers expectations that are attached to a lower price do not equate with the perceptions of the hotel management in some areas, particularly in relation to human resources. There is therefore a need for the management of such establishments to achieve a better level of balance between these two determinants. Table of Contents (Jump to) Chapter 1: Introduction 1.1 Rationale for research 1.2 Customer retention 1.3 Aims 1.4 Objectives 1.5 Overview Chapter 2: Background 2.1 Tourism in the UK 2.2 Tourism in Docklands Chapter 3: Literature Review 3.1 Customer satisfaction 3.2 Service quality 3.3 Methods used to measure customer satisfaction and service quality 3.4 Summary Chapter 4: Research Methodology 4.1 Research method choice 4.2 Data collection 4.3 Performance of the research Chapter 5: Data presentation and analysis Chapter 6: Implications of the research findings Chapter 7: Conclusion 6.1 Application 6.2 Recommendations Chapter 1:  Introduction The vast majority of commercial concerns, irrespective of whether their business is product or service orientated, are aware of the fact that continued business success is dependant upon determining that the quality of service they provide for the customer equates to or exceeds the perceived expectation of satisfaction that customers have when they decide to enter into transaction with the business. Furthermore, as Michael Porter (1985 and 2004) suggests in his researches into the subject of competition, quality of service can also be used as a strategy to gain competitive advantage, particularly in a crowded marketplace, which certainly exists within the tourism industry. In the context of delivering the quality of service that satisfies the customer, perhaps the hotel industry finds itself in a unique, although some would say unenviable position. Most other industries and sectors only engage with the consumer for a matter of moments during the course of their visit. However, with the hotel industry the interaction this business sector has with the consumer can last from several hours to many days. Similarly, with a number of customers in close proximity, it can be also be said that customer-to-customer interactions form part of the product (Kandampully et al (2001, p.28). In addition, the number of interrelated services within a hotel is invariable far more complex and diverse than other businesses will be offering. For example, in a retail environment, the connection with the customer is the quality of the product and service quality at the point of sale and after sales service. However. With a hotel, customer satisfaction can be influenced by a number of factors. From the product aspect, this will include the standard and quality of the main product, namely the hotel room, in this case relating to the dà ©cor, furnishings, facilities available, cleanliness and cost against performance. In terms of services provided, the hotel will also be judged by several diverse elements. These include the relation built between customers and front office staff, cleaners and employees in other facilities being offered, for example the service received from employees engaged within the waiting, bar-tending, local knowledge and health facility aspects of the busine ss. As a result of these service and quality issues, and in an effort to ensure that these meet with the expectation and satisfaction levels of their customers, one would therefore expect that the market players within the hotel industry would be constantly seeking ways to improve upon the services that their establishments offer. If this is the case, how is it then that, over the past two to three decades, the industry has seen a proliferation of budget and low cost hotel chains emerging, one of the most well known of which within the UK is the Travelodge brand? 1.1 Rationale for research It is the question regarding how budget hotel chains are managing to deliver customer satisfaction whilst at the same time reducing the levels of services being provided that forms the rationale for this paper. There has been a reasonable amount of research dedicated to the delivery of customer satisfaction by the method of adding to the levels and qualities of the services being offered, as would be the case in the tourism industry, for example with five star hotels. However, research into the ability of a commercial organisation to maintain the same standard of customer satisfaction levels, particularly within the UK tourism and leisure industry, when that organisation is operating a â€Å"low-cost† strategy, which by definition is primarily focused on driving down the business costs by reducing the levels of services being made available to the customer, is more limited. 1.2  Customer retention Another factor that makes the â€Å"low-cost† strategy and its removal of services within the hotel industry sometimes difficult to understand is that most literature concentrates upon the fact that providing a quality service that matches customer satisfaction is important in terms of customer retention (Parasuraman 1997, Schiffman and Kanuk 2000 and Porter 1998). On the surface therefore the rule of keeping customers returning by offering them less does seem to contain a dichotomy of views that are incompatible. However, many of the some of the recent observers, Including Zeithaml (1988), Agrawal (2000) and Porter (2004) in his later works, have begun to study this particular issue, finding that there can be a relationship between the less services and customer satisfaction. It is the intention for this paper to add value to these opinions. 1.3  Aims From the explanations given above therefore it can be seen that the aim of this research is to address the following question: â€Å"Is it possible for hoteliers to provide a quality of services that meets with customer satisfaction whilst at the same time reducing the quantity of services that are provided? In an effort to assist in the provision of a definitive response to the hypothesis set, it is intended to use as a case study research carried out at a specific location of the budget hotel chain Travelodge, namely their establishment in Docklands, London. 1.4  Objectives In the process of defining the theoretical and practical response to the hypothesis, as well as adding value to the existing research conducted with the subjects that are covered, these being customer satisfaction and service quality within a tourism and leisure environment, the following three objectives have been set: Customer perception and satisfaction Although there has been considerable literature relating to customer perception and satisfaction determinants, within this research the intention is to broaden this area to take account of how these issues can be best related to the â€Å"budget† service provider and by what methods such organisations can determine that a) the reduction of services reaches an optimal level and b) how other areas of service quality can be introduced in a manner that will continue to improve the business relationship with and retention of customers without adversely impacting upon the business â€Å"low-cost† strategy. Gaps within service quality measurement. Using the â€Å"SERQUAL† method of measurement, which is discussed in more detail in chapter three, we shall look particularly at the â€Å"gap† element of this methods in an attempt to define how these have can and have been applied effectively and successfully to the budget hotel business model despite the fact that these models concentrate upon the task of reducing the levels of services being made available to customers in return from price advantages. The future. From the results indicated above, it is intended to ascertain whether the process of understanding how the use of quality of service in a budget business environment can provide lessons that could be applied to other â€Å"premier† brand hotel businesses within the industry or if these results are strategy specific and therefore not transferable across different business models. The significant data which has been used to provide the foundation for this research paper has been collected through the use of then primary quantitative method of structured questionnaires and interviews, which will be discussed in more detail in chapter four. 1.5  Overview Following this introductory chapter, the second chapter in this study provides a brief background into UK tourism, including the levels and reasons for tourisms within the docklands area, as well as a history relating to the Travelodge hotel chain and its Docklands unit. In chapter three a critical literature reviews is conducted into the major areas of customer satisfaction, service quality and the various theories and models that have been developed to measure these aspects of the business operations. Chapter four is where the methodology for the main research carried out in support of this research is explained in greater depth. It will include an understanding of the strengths and limitations of the chosen research method, together with details of the manner of the performance of these methods. This will be followed in chapter five by the data findings and an analysis of these findings, the implications of which will be further discussed in chapter six. The paper will be drawn to a conclusion in chapter seven, at which point any relevant and appropriate recommendations will also be presented. Following the conclusion of this study, a reference list of all the resources used, together with appendices that contain additional information and data that is considered to add value to the understanding of this paper will also be attached. Chapter 2  Background As stated previously, tourism is one of the most important industries in the UK economy. Therefore, as the core theme of this research is related to an organisation within this industry, it is appropriate to provide some background relating to UK tourism and the Docklands area in particular, as wells as the organisation that is forming the case study, namely the Travelodge hotel group. 2.1  Tourism in the UK The level of tourism in the UK has seen a diverse change depending upon the criteria that one uses. For example, with regards to domestic travel of UK residents, this saw a reported decline of –4.0% in the last 8 months of 2006 when compared with the previous year, although there were still nearly 102 million overnight trips (Visit Britain 2008 b, p,4). Conversely, the numbers of overseas visitors increased by 9%, rising to nearly 33 million trips (Visit Britain 2008 a, p.8), as can be seen from the following table (figure 1). In total therefore, tourism in the UK in 2006 saw a participating total of approaching 135 million customers, who visits were for both leisure and business purposes (see figure 2). With between 59% and 74% of the domestic journeys involving overnights stays of one to three days (see figure 3) and 42% of overseas journeys having the same duration, this provides a significant existing market opportunity for the UK hotel industry and room for continued growth, especially as at present it is estimated that only around 30% of the domestic visitors choose Hotels and guest houses for their accommodation needs (see figure 4). However, with hotel occupancy rates having fallen in recent years, especially in the capital, although this was partially due to terrorist attacks (Chetwynd and Knight 2005), it is important for hoteliers to ensure that they are providing the necessary level of quality service to capture this market. 2.2  Tourism in Docklands Visit Britain statistics (2008 a, p.11) indicates that of the total inbound tourism trade during 2006, nearly 16 million visitors chose London as their destination, with many more domestic tourists swelling that number. Similarly, compared with the rest of the UK, the hotel occupancy levels in London remain at a reasonably high level of around 72% (Visit London 2008, p.4), due mainly to the high mix of customers from the domestic and international leisure and business sectors. Having spent over  £12 billion on regeneration of the area, London Docklands is taking its fair share of visitors, with 24 hotels at present and a further five in development (LDVC 2008), of which the Travelodge budget hotel in Coriander Avenue, E14 is one. 2.3  Overview: Travelodge – London Docklands The Travelodge brand of hotels, which was originally formed in the US, has seen a number of owners since then, with the latest being a  £675 million acquisition for the group by Dubai International Capital in 2006. It is the UK’s second largest budget hotel chain with over 300 units in the UK offering around 22,000 rooms (Editorial 2007), although the company expects that to expand to 32,000 within the next three years, an plans to more than double this expansion by 2020. In 1985 the group was the first hoteliers to strip out what it considered to be non-essential services in an effort to reduce costs of hotel stays to the minimum, which in 2007 were around  £26 a night. Another example of the budget cost example can be seen from the group’s Docklands hotel, where normal rates of  £49  £59 per night can be reduced to as low as  £29 if they are booked around three weeks in advance. Travelodge’s mission statement is aptly summed up on their website as â€Å"Pay for things you don’t want? That’s crazy!† (Travelodge 2008). They further go on to explain this statement by outlining the fact that the quality of their services to the customer is the provision of nice beds, clean rooms and a value for money price which the inclusion of items such as room service, extra towels, toiletries and other items that are seen by other hoteliers as value added services, would prohibit the business from achieving. According to press releases (Travelodge 2008 b), the company has seen significant growth during the course of 2006, with revenues increased by 19% and room occupancy by 24%. These results are in line with the reports issued by the Mintel group (Kuhn 2007), which shows that in the four years to 2006 the budget hotel sector grew by 38% , out performing other sectors of the industry that could only manage 12%, to exceed the  £1 billion barrier of revenue for the first time. It can be seen from this background and the statistics that the budget hotel industry is obviously making inroads into traditional hotel markets. However, the question which this research will address is whether this is simply based upon the price advantage or if other service quality and customer satisfaction issues have also influenced the growing popularity of the budget hotel sector. Chapter 3  Literature Review During the course of the past six or seven decades there has been a considerable amount of literature and research produced that has endeavoured to address the issues of customer satisfaction and service quality, as well as a number of models of measurement that can be utilised in respect of the latter. This critical literature review will discuss a selection of these studies and in particular endeavour to identify whether there is a link between these and the model that has been deemed appropriate for the budget hotel sector, or indeed where gaps in current literature exists. 3.1  Customer satisfaction Customer satisfaction has been the subject of a reasonable amount of academic literature over the past few decades from a number of perspectives. For example, researchers such as Porter (1998), Parasuraman (1997) Agrawal (2000) and Harrison (2003) have all outlined the benefits of customer satisfaction as an integral aspect of competitive advantage. As Hennig-Thurau, and Hansen (2000, p.62) comment in their study on relationship marketing, it is the intention of all businesses â€Å"to try and engender a high level of customer satisfaction in order to positively influence our customers repurchasing and communicative behavior†. There is little doubt that the level of satisfaction experienced by customers will impact upon the way they react to a product or service, in other words it drives their behaviour (Schiffman and Kanuk 2000). However, the difficulty that all academics have wrestled with over the years is in defining exactly what â€Å"customer satisfaction is† and, perhaps more importantly, which determinates influence the achievement of customer satisfaction. Hennig-Thurau and Hansen (2000, p.8) define customer satisfaction as being the â€Å"emotional or empathic reaction† that occurs within the customer as they judge the experience of the product or service against the expectations they had prior to that experience. Richard Oliver (quoted in Holbrook 1999, p.56) rests with the definition that ideals and excellence is equal to satisfaction. Ziethaml (1998) adds further substance to these definition by explaining that satisfaction is all about the perception of value when adjudged again st price, quality, need and payment, In summarising this position, Zeithaml (1988, p.14) stated that â€Å"Perceived value is the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given †¦ value represents a trade-off of the salient give and get components,† in other words the cost of ownership against the value perceived. This is a definition that has been accepted by a number of other researchers, including Christopher (1996), although as Dr Brennen (2003, p.4) observes, there is some departure from this consensus in respect of the component parts that make up customer satisfaction, with some observers only including price as a denominator whilst others include the total cost of ownership. Nevertheless as Suzan Boztepe (2007, p.56), points out, to identify customer satisfaction, â€Å"The emphasis is on the point of exchange, and money is seen as a fundamental index of value.† It is as that moment, when the product of service has been purchased and used, in the respect that a contractual agreement has been entered into, that the customer makes a value judgement about what they have been given in exchange for what they have paid. In this situation it is therefore usually the case that the higher the level of quality of service promotes a higher level of satisfaction (Kandampully et al. 2001, p.8). In respect of the determinates that engender satisfaction within a customer, there do of course extend beyond the simple and direct use of the product or service. Parasuraman (1997, p.1) refers to this position when he talks above the â€Å"attributes and consequences arising from that use,† which indicates that satisfaction levels can be increased or decreased by other internal and external factors. Boztepe (2007, p.58) agrees with this comment, promoting the view that the context and environment within which the use is received will impact upon the customers enjoyment or satisfaction with the experience. In the context of the hospitality environment of hotel industry that is the basis of this study, this aspect is very important. For example, if the human service in a particular establishment is good but the physical environment, in terms of dà ©cor, equipment etc is not, this would reduce the customer’s enjoyment and therefore lower the satisfaction and value they g ain from the experience. Similarly, in the case of the hotel attention has to be paid to the external factors. For example, if the service from employees and the environment is good, but other guest create a situation that is disturbing or unpleasant to the customer, this nay also adversely affect their satisfaction with the experience and the value they gain from it. Therefore, it can be seen from the forgoing that when providing a service or product the supplier, or in this case hotelier, has to understand not only how the customer behaves or is likely to react to the value of the service provided, but also be aware of the factors that might adversely influence that behaviour. If that is not understood â€Å"the likelihood of consumer satisfaction diminishes, as does the potential for a profitable business† (Holbrook 1999, p.116). After all, as Porter (1998, p.411) succinctly explains the situation, in order to gain competitive advantage, the aim of the business should be to ensure that the whole format of the various elements of the business supply chain should be geared towards delivering a product or service to the end user that adds â€Å"to their convenience and satisfaction.† To achieve this position the marketer has to understand the whole of the customer behavioural process, which includes what drives them to make the origi nal choice, known as the pre-purchase period, how they will react to the actual use or consumption of the product and their reaction after that use, the post-purchase period (Holbrook, 1999, p.43). If the business bears these aspects in mind, and reacts positively to them, there is more opportunity to be able to provide the customer with a unique product of service that will be perceived by them to have a greater level of value and therefore being more satisfying (ibid p.121), which has the added benefit of potentially engaging the customers loyalty and therefore makes the retention of the customer more likely. In a practical sense this position cannot be achieved unless there is a quality of service. 3.2  Service quality Following on from an understanding of the factors that determine what values give satisfaction to a customer, it has been found that, in essence, this is uniquely linked with service and the quality of that service, which is another area where there has been a concentration of literature over the past few decades. In terms of definition of the words, because of the nature of this paper, the definition of service being relied upon is that promoted by Kolter (1999), who stated that: â€Å"A service is any benefit or activity that one party can offer to another, which is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.† Harrison (2003) and Holbrook (1999) regard quality as being the originator for meeting the expectation of value and satisfaction for the customer. In this respect, Holbrook (1999, p.13) states that â€Å"quality, generally, is an externally mediate perception that a product or service possesses excellent levels of the key quality dimensions which define quality for that product/service.† From the commercial aspect therefore, it is apparent that businesses have a need to use service quality in order to attract customers and to retain their loyalty in a manner that will lead to them continuing to purchase the service in the future, in other words quality is one of the core competing elements (Berry and Parasuraman 1991). An essential element of this will be to aim to provide the customer with an experience of service quality that they perceive to be of a higher value than they can expect to receive elsewhere, at least for the same price and conditions (Hennig-Thurau and Hansen (2000, p.169). Service quality has to permeate through all aspects of the business which, as has been identified earlier, will include the way that employees react to clients, the dà ©cor and content of the environment where the service quality takes place and the control of external determinates. These latter â€Å"situational / environment characteristics† (Holbrook 1999, p.30) are extremely important in a hotel environment as they will directly impact upon the customers perception of value and satisfaction. For example, if when arriving at the hotel the customer is required to wait for some time to become registered and given their room keys, this could adversely affect their satisfaction levels. Furthermore, this experience may reflect in their post–purchase behaviour, for example with the memory of the experience being marred by this one incidence, thus reducing the value they have gained and the likelihood of re-booking. However, what has to be remembered is that each business is unique and will therefore have to find its own way of using service quality in an effort to gain competitive advantage. What works for one sector of an industry or even an individual business may not work for another. In fact trying to change a business service quality strategy to emulate that of another business may do more harm than good (Porter 1998, p.531). For instance, the service quality format and strategy developed by budget hotels such as Travelodge may not work for the five-star hotel sector of the industry. Nevertheless, as can be seen from this discussion, it is important for the commercial organisation to research the are of service quality as it impacts upon their particular business model as this will provide them with â€Å"valuable insights† into how to promote their goods or services in a way that is deemed to provide the customer with the level of service quality that they are expecting (Hennig-Thurau and Hensen 2000, p.13) 3.3  Methods used to measure customer satisfaction and service quality There are a number of methods for measuring the relationship between customer satisfaction and service quality that have been discussed in literature over the years, both from the academic and practical viewpoint. For the purpose of this research it has been decided to use the SERQUAL method originally developed and later revised by Parasuraman et al (1991). However, prior to reviewing this particular method and the reasons for its choice, it would be of benefit to briefly discuss some of the other measurements that are available. Other methods One method of measurement that is particularly popular in the hospitality sector, especially with guesthouses, is the use of comments and feedback from the customer. As Porter (1998, p.147) acknowledges this system of testimonials does have value in the respect that it provides the supplier with a direct indication of the levels of value and satisfaction experienced by the customer. However, the difficulty with this process is twofold. Firstly, the construction of the process may be misleading for the customer and the business (Kandampully et al 2001). For example, a simple complaints format does not show areas where the business is succeeding. The second aspect of this process is that it is not sufficiently defined. The business managers need to know in which specific service quality areas they are performing well or not. Without such definition it is difficult for them to be able to address areas that are perceived by the customer as a concern. Two other methods that prove quite popular are the general satisfaction and the continuous monitoring surveys and polls. Both of these have their drawbacks. In terms of the former, whilst it is in many ways similar to the SERVQUAL method chosen, its concentration upon the customers perceptions leaves it weak in terms of providing practical results that can be directly implemented by the business. Continuous surveys on the other hand have the inherent problem of adding to administrative costs within the business and, in addition, there may be issues with sampling (Visit Britain 2008 b). These can result from the fact that, being random in nature, continual update of relevant data is required, which may not always be easy for an individual business to acquire or manage. SERVQUAL Measurement The SERVQUAL method of measurement is one that has been â€Å"extensively applied† (Shahin 2005, p.4) and has been found by many to be particularly useful in providing a â€Å"true measure of customer service† (Kandampully et al 2001, p.68). It is seen to be relevant to the hospitality sector and has been used extensively in this area of commerce. Although in some cases this model has been extended by researchers to a dozen elements, essentially the foundation of the SERVQUAL process is founded on five key factors (Sahney et al 2004), which are: Tangibles. Physical facilities, equipment and appearance of personnel. Reliability. Ability to perform the promised service dependably and accurately. Responsiveness. Willingness to help customers and provide prompt service. Assurance (including competence, courtesy, credibility and