Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 1

Customer Satisfaction in Hotel Industry of Karachi- A SERVPERF

Analysis

Musaidullah Muhammad
Student Iqra University

Dr. Masood Ahmed Sabzwari

Assistant Professor Iqra University

Abstract

For a service sector company, having a satisfied or even delighted

customer is key to the success of a supply chain. In highly service oriented
such as hospitality customer satisfaction is crucial as it leads to repeat
customer and word of mouth recommendations that bring new customers.
Measuring customer satisfaction has been a constant effort by service
providers. The model was first comprehensive effort measuring service
quality through what is known as SERVQUAL model. In this model
Parasuraman et.al (1985) initially explored service and quality with ten
different angles classifying them into five categories such as,
responsiveness, reliability, tangibility, empathy and assurance. Cronin
and Taylor (1994) argued that customer expectation varies a great deal
and the gap between expectation and service provided could be
misleading. The study proposed using the actual performance component
of the model and called that SERVPERF model. This model was the
subject of this thesis. A questionnaire developed for the survey using
SERVPERF model was used to assess the performance of hotel industry.
The thesis shows that SERVPERF model is simpler, avoids the unknown
or even absolute customer expectations and can be used to directly access
the service customer received.

Keywords: Tangibility, Reliability, Responsiveness, Assurance, Empathy, Customer

Satisfaction.

Chapter 1: Introduction
Overview
Customer satisfaction is considered as important for supply chains specifically in service.
Delivering quality services increases the satisfaction level and wins repeat customers as
well as new customers. Evaluation of service quality is essential for determining not only
customer satisfaction but also to identify areas for improvement.
The service supply chain provides a variety of services to satisfy customer expectation. In
order to assess the degree to which the SC is meeting customer expectation
questionnaires are used to invite customer opinion on the existing services and
suggestions for further improvements. Karimi, Sanayei and Moshrefjavadi (2011) also
conducted a research particularly on customer satisfaction about quality of service in
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 2

hospitality sector including hotel industry through SERVPERF model (Cronin & Taylor,
1994).
The key elements of supply chain had been studied under hospitality sector to look at
customers perception and their satisfaction. Generally, hotel or hospitality sector largely
depend on service and quality offered to win future clients. Routine customer surveys are
conducted as customer leave after staying in the hotels. In order to have a more
comprehensive assessment several models such as SERVQUAL, SERVPERF have been
developed to assess service quality. This research projects proposes to use SERVPERF
model for hotel industry.
In Pakistan, there is a lack of such type of research. The purpose of this thesis was
evaluating that how customers are satisfied in hotel industry by using SERVPERF model.
This thesis project particularly proposes to examine that how the service and quality
affect customers to make them satisfy using SERVPERF model to analyze the service
hotels in Karachi.

Problem Statement
Customer satisfaction is considered as an essential factor of supply chain. The hotel
industry has to depend of the quality of service offered to win future customers. Routine
customer surveys are conducted as customer leave after staying in the hotels. In order to
have a more comprehensive assessment several models such as SERVQUAL,
SERVPERF have been developed to assess service quality. This thesis project proposes
to use SERVPERF model for the local hotel industry in Karachi.

Background, Objectives and Significance of the study

This thesis aimed at examining correlation between services provided and the outcome
that services whether satisfied or dissatisfied customer in hotel sector of Karachi,
Pakistan. The replica created by Parasuraman, Zeithaml and Berry (1985) for observing
quality of services in four different service businesses to investigate the service quality
which was not covered before and is still undefined to some extent. This model can be
used to develop propositions for future to improve quality performance in service
management.
The SERVPERF range is really a far more convergent, in addition to be able to
discriminate well in the assistance construct; which offers larger capacity to explain
different versions. The objective of this thesis is analyzing an effects of service provided
in the hotel industry on satisfaction level of the consumers using SERVPERF analysis.

Outline of the Study

This study had comprised of five chapters where chapter number one contains
introduction of the study. An introduction chapter also contains overview of the study,
statement of the problem, background, significant and objective of the study. At the end
of the chapter number one, definitions of the study variables had also been given to make
easier for reader to understand.
The literature review of the thesis in discussed in chapter number two which was written
from more than fifteen research papers to make clear understanding of the topic under
study. As of the literature review chapter end, possible hypotheses of this thesis had been
discussed. The purpose of this chapter was to differentiate this study from previous work.
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 3

The research method had been discussed in chapter number three. This chapter contains
method of data collection, technique of sampling to collect data from population, total
sample size i.e. number of observations to be analyzed, data collection instrument such in
this study a comprehensive questionnaire had been developed and statistical technique
applied for the purpose of testing research hypotheses. This had been also divided into
validity and reliability test. The next issue was how research model to be developed.
The results, findings and interpretations of the study had been discussed in chapter
number four. At the end of the chapter number four, hypotheses assessment summary had
been shown to see which hypothesis had been accepted or rejected.
In final chapter of the study, discussions, conclusion, implication and future research had
been discussed.

Definitions
Customer satisfaction: It means the frequency of customer to attain the same service.
Service Quality: It means the food, rooms and the environment provided by the hotel to
the customers.

Chapter 2: Literature Review

In a global economy, service excellence is essential for endurance of the firm
(Wisniewski, 2001). Firms are focusing on customer-focused approach rather than
production-led philosophy. Wisniewski (2001) further illustrated that service excellence
is the approach that has animated noteworthy consideration and open deliberation in the
research literature.
Oliver (1980) demonstrates that service quality is gained through customer satisfaction.
Oliver (1980) further described that customer’s expectations may establish the service
quality. Hence foundation of the service quality serves as customer’s expectation.
Kodadah and Issa (2008) concluded that satisfaction of the client after obtaining the
service can be seen in the emotions of joy or disdain resulting from the difference
between the expected and actual execution of the client. According to Gitomer (1998),
customer contentment had effect on almost each industry. When clients, for instance,
recognize excellent services in the hotel, everyone may encourage almost ten individuals.
That has been estimated that “word-of-mouth” contribute about 50% in American
business. Griffin (1995) concluded that profits can raise 25 percent or more if
development in customer retention increases by few percentages. However, customer
dissatisfaction has a much bigger impact on the end result. Unsatisfied customers who get
inadequate service may tell their poor experience to more ten or twenty people due to
which average American organizations loses ten to twenty proportion of its clients every
year. The expense of picking up another client was almost 10 times more liability of
retaining fulfilled customer.
Anderson and Zemke (1998) argued that satisfied clients upgrade business and
disappointed clients debilitate business. Client’s contentment is an asset that ought to be
verified and treated at par with tangibility. As a result organizations which would like to
grow may understand significance of this factor (McColl-Kennedy & Schneider, 2000).
For the purpose of evaluating quality service Parasuraman, Zeithaml and Berry (1985)
initiated SERVQUAL model. SERVQUAL serves as a tool for examining the quality
gaps and determines the factors that may affect consumer satisfaction in hotel sector.
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 4

Parasuraman et.al (1985) originally explored service quality with ten dimensions
classifying them into five categories as below:
Tangibility: Appearance of workers, organization’s physical facilities and appearance
of their physical equipment
Reliability: Conveying and delivering the promised services
Responsiveness: The response speed, immediate service and help to clients
Assurance: To rouse confidence and trust in organization by information, reliability of
the representatives and politeness.
Empathy Eagerness and competence to give individual attention regarding a
customer
Parasuraman et.al (1985) subsequently surveyed these five dimensions and evaluated
them on the basis of input to two declarations that assess:
1) The common desires of clients involving a service
2) Observations of clients in regards to service level actually offered by company.
The score for gap is computed as the variation between Perception (P) and expectation
(E). Pursuing this estimation, higher the P-E score, better is the service superiority
Many research scholars illustrated some weakness of SERVQUAL.
Cronin and Taylor (1992) concluded that five dimensions don’t appear to be totally
generic and generally depend upon the nature of the business. Nevertheless, apart from
these weaknesses, the model remains a valuable and effective tool for service-quality
(Ladhari, 2009). According to Ladhari (2009), service managers can exploit SERVQUAL
to assess their own particular service attributes and correlate with their adversaries.
SERVQUAL might be used to fragment customers on the premise of their evaluation
scores. Ladhari (2009) further explained that is additionally practical to explore
perceptions and customer’s desires on the basis of geographical and demographic.
Additionally to examine the association's execution on the premise of service extents, a
qualitative study could be grasped through talks and meetings with their customers to
gain data about their desires.
A few specialists like Parasuraman et al. (2005) have additionally created specific e-
service quality scales, for example, improving E-S-Qual, for reviewing electronic
examination excellence. E-S-QUAL comprising of twenty two items isolated in four
dimensions:
1) "Proficiency" (which depicted as pace of monitoring and using the site)
2) "Contentment" (the intensity to which the site guarantees about request
conveyance and items accessibility is satisfied)
3) "System accessibility" (the right specialized working of the site)
4) "Protection" (the extent to which the site is sheltered and secures client data)
Zeithaml, Parasuraman and Berry (1996) created a SERVQUAL questionnaire contains
two sections. Customer’s expectations are measured in the first section and customer’s
perceptions are measured in the second section of the questionnaire. Cronin and Taylor
(1994) concluded that by utilizing the second section of SERVQUAL instruments, a
more reliable outcome can be acquired which is commonly named as performance based
measurement; SERVPERF.
SERVPERF Model
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 5

The SERVQUAL model provided by Parasuraman et al. (1985 & 1988) used actual
performance with customer expectation for comparison. Cronin and Taylor (1992) argued
that only performance component of the model provides superior representation for
quality service. The difference between SERVPERF and SERVQUAL is that
SERVPERF only considers the actual performance only and not a high undefined
perceived quality (based on expectations).
Another problem encountered with rating expectation often introduces different types of
expectation and respondent of SERVQUAL model are unsure on the expectation score
(Teas, 1993)
Customer Satisfaction
To satisfy the customer is a core objective of supply chain; whether service or
manufacturing. If the customer derives the required service or when services exceed
customers’ expectations, the customer may be delighted and consequently satisfied.
Customer satisfaction may come from five factors (Parasuraman et al. 1985),

If customer is satisfied with the physical facilities, equipment availability appearance of

facilities and employees then this factor is described as satisfaction from tangibles.
If the service is consistently of required specifications and as per customer order then the
customer is satisfied with the reliability of service.
If the customer receives prompt service and customer can feel the desire of the company
and employees to be responsive then customer is satisfied with the responsiveness of
service. Customer trust in the firm and vice versa is described as assurance while an
understanding of customer needs and treating them as important clients is described as
empathy.
Service Quality
The satisfaction and non satisfaction of customer hinges on quality of service received.
Service quality measurement is therefore critical to gauge customer satisfaction. A
satisfied customer may promote the firm through word of mouth communication and
repeat orders (Tripathi, 2013). Service quality is strongly associated with the satisfaction
of the consumers (Vanpariya & Ganguly, 2010).
Ostrom and Iacobucci, (1995) pointed out several studies in which quality services had
been correlated with the customer satisfaction. Service quality could be measured from
five different directions of the quality identified above; empathy, responsiveness,
reliability, assurance, and tangibility and their impact on customer satisfaction can then
be monitored on customer satisfaction (Ngan, 2013).
Figure 2.1 demonstrate link between different aspects of quality service offered and
consumer satisfaction.
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 6

Figure 2.1
Service Quality & Customer Satisfaction (Cronin & Taylor, 1992)

Quality Service and Consumer Satisfaction in Hotel Sector

Hotel industry is highly competitive and gaining new customers and retaining the
previous ones is crucial for the hotels. As hotels enhance their quality of serving
customers, the consumers are delighted and promoted that hotel through word of mouth
which boosts sales of hotels (Dominici & Guzzo, 2010). The hotel industry must
recognize customer needs and its impact on customer satisfaction. The hotels must
provide the environment and services that meets service quality requirements of the
customers.
The management must provide product and services that meet or exceed customers need,
creates a brand image in customer eyes and creates loyal customers (Dominici & Guzzo,
2010).
The customers are demanding increasingly high quality of services and the hotel industry
is creating the desired services to have a competitive advantage over the other players in
the field. Providing high quality and high level of services is what creates customer
satisfaction (Lam & Zhang, 1999).

Research Hypotheses
The hypotheses of the study are as under:
H1: Tangibility significantly affects consumer satisfaction in hotel industry.
H2: Reliability significantly affects consumer satisfaction in hotel industry.
H3: Responsiveness significantly affects consumer satisfaction in hotel industry.
H4: Assurance significantly affects consumer satisfaction in hotel industry.
H5: Empathy significantly affects consumer satisfaction in hotel industry.

Chapter 3: Research Methods

 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 7

The chapter covers the detailed information regarding sources of data collection, sampling, size
of the sample and theoretical and research model developed.

Method of Data Collection

Because of the qualitative nature of the study, the primary source for Data collection had
been used. To achieve this objective a comprehensive survey questionnaire had been
prepared to ask relevant respondents to provide rational answers to the questions in
accordance with the SERVPERF model.

Sampling Technique
Unrestricted non probability technique had been chosen to collect data from relevant
sample.

The Sample Size

As for as the size of sample is concern, this study comprised of 300 respondents. The
respondents included employees of the different organization, Supply Chain Managers,
students specializing in Supply Chain Management, and owners of the business.

Instrument of Data Collection

A well-furnished research questionnaire was prepared to receive possible responses from
the selected sample size for the purpose of collecting data. The questionnaire included 12
questions prepared at Likert Scale containing 5 options such as strongly agree, agree,
Neutral, Disagree, Strongly Disagree.

Validity and Reliability Test

The validity test is run to verify whether data collected through particular questionnaire is
truly reliable for the analysis or not. The criteria were that if reliability test value was
larger than 0.50, then it was be considered that the data is truly reliable. But on the other
hand, if the value was less than 0.50, then it was considered that the data is not reliable
for the analysis. When the test was applied through SPSS software, the following results
were generated.

Table 3.1 Case Processing Summary

N %
Cases Valid 299 99.7
Excludeda 1 .3
Total 300 100.0
a. List wise deletion based on all variables in the procedure.

The above table 3.1 shows the case processing summary about how many observations
had been used as sample for the analysis of the study and how many cases are valid and
excluded. The N in the above table shows the total number of observations included in
this study was 300 and one observation was excluded from the analysis due to particular
reason.
Working
Job
Remuneration
Employee
Satisfaction
Turnover
Decision to
Quit
Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 8

Table 3.2 Reliability Statistics

Cronbach's Alpha N of Items
.823 12

The Cronbach’s Alpha value was (0.823) which was greater than 0.5 that suggested that
categorical data used in the study was reliable for analysis. On the strength of Reliability
test, now Regression analysis may be applied to examine customer satisfaction in hotel
industry of Karachi by using SERVPERF model.

Research Model Developed

Following Research model was developed for the study

Figure 3.1
SERVPERF Model (Cronin and Taylor, 1992)

Independent variables Dependent variables

Tangibility

Assurance

Responsiveness Customer Satisfaction

Reliability

Empathy

Statistical Technique
Multiple Linear Regression test had been run for investigating customer satisfaction in
hotel in industry of Karachi by using SERVPERF model.

Chapter 4: Results
This chapter of results contains thesis findings and interpretation of the data analysis.

Findings and Interpretation of the results

In this study five independent variables such as, Responsiveness, Tangibility, Assurance,
Empathy and Reliability, and one dependent variable such as customer satisfaction were
proposed for analyzing customer satisfaction. The independent variables are taken from
Cronin and Taylor (1992) model of SERVPERF model. The results that was generated
through SPSS software is illustrated below.
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 9

Table 4.1 Model Summary

Adjusted R Std. Error of the
Model R R Square
Square Estimate
1 .653a .426 .417 .5009
a. Predictors: (Constant), Empathy, Tangibility, Responsiveness, Assurance, Reliability
b. Dependent Variable: Customer Satisfaction

Table 4.1 indicate model summary of study. R in the above table was coefficient of
correlation between the variables which was 65.3% which was greater than 50% that
means the correlation was statistically significant among study variables. The R Square in
above table is coefficient of determination. The R square value (0.426) specifies that
42.6% of variation in dependent variable such as customer satisfaction was elucidated by
above mentioned five predictors. As value of R Square (0.426) was approaching to 0.50;
therefore, it indicated that study model was fit for the analysis as per data provided.

Table 4.2 ANOVA

Model Sum of Squares df Mean Square F Sig.
Regression 54.100 5 10.820 43.127 .000a
1 Residual 72.757 290 .251
Total 126.857 295
a. Predictors: (Constant), Empathy, Tangibility, Responsiveness, Assurance, Reliability
b. Dependent Variable: Customer Satisfaction

Table 4.2 demonstrates matrix for Analysis of Variances (ANOVA). The sig value
(0.000) in above table 4.2 was less than 0.05 (α=0.05), thus, the study rejected the null
hypothesis and accepted the alternate hypothesis that customers are highly satisfied if the
hotel industry of Karachi use SERVPERF model.
Also, the value of F statistics is greater than 3.8 (i.e. 43.127>3.8), therefore, F value also
proved that customer are satisfied if the hotels followed SERVPERF model factors

Table 4.3 Coefficients

Un-standardized Standardized Co-linearity
Coefficients Coefficients Statistics
Std. Toleranc
Model B Error Beta t Sig. e VIF
(Constant) .944 .204 4.637 .000
Tangibility .188 .042 .226 4.425 .000 .758 1.319
Reliability .025 .051 .027 .501 .617 .672 1.488
1
Responsiveness .133 .047 .152 2.857 .005 .699 1.430
Assurance .145 .046 .166 3.119 .002 .698 1.432
Empathy .286 .047 .327 6.048 .000 .676 1.480
a. Dependent Variable: Customer Satisfaction
H1: Tangibility significantly affects consumer satisfaction in hotel industry.
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 10

The sig value for Tangibility in the above table 4.3 was 0.000, which was less than level
of significant (α=0.05), therefore, study rejected null hypothesis and accepted alternate
hypothesis that tangibility significantly affect consumer satisfaction in hotel industry.
Thus this thesis found that if management of the hotel sector in Karachi takes care of
decoration and physical appearance of the hotels, then the customers may be highly
satisfied and can visit the hotel again and again and finally can become loyal.

H2: Reliability of customer service significantly affects consumer satisfaction

The table 4.3 also shows the sig value (0.617) for 2nd independent variable (i.e.
Reliability) which was greater than level of significant (α=0.05), (0617>0.05), therefore,
study rejected the alternate hypothesis that reliability has significant impact on customer
satisfaction in hotel industry and failed to reject suggested null hypothesis.

H3: Responsiveness significantly affects consumer satisfaction in hotel industry.

In table 4.3, the sig value for 3rd independent variable (i.e. Responsiveness) was 0.005
which was less than level of significant (α=0.05), (0.005<0.05) therefore, the suggested
that null hypothesis of the study was rejected and the alternate hypothesis was accepted
that responsiveness has significant impact on customer satisfaction in hotel industry.
Finally, the study found that employees in hotels were responsive in providing quality
services.

H4: Assurance significantly affects consumer satisfaction

The sig value for 4th independent variable in above table 4.3 (i.e. Tangibility) was 0.002,
that was less than 0.05. Therefore, study rejected the suggested null hypothesis and
accepted alternate hypothesis that Assurance had significant impact on customer
satisfaction in hotel industry. Thus the study found that employees were well versed with
the special knowledge to serve at the best which instilled confidence in customers that
whatever told by employees is right and perfect to serve.

H5: Empathy has significant impact on customer satisfaction in hotel industry.

The table 4.3 also shows the sig value (0.000) for 5th independent variable (i.e. Empathy)
which was less than 0.05, therefore, study rejected null hypothesis and accepted alternate
hypothesis that empathy has significant impact on customer satisfaction in hotel industry.
Thus, the study found that staffs of the hotels provide customers with exclusive attention
and understand specific needs to solve problem. The overall results of the study
suggested that customers were delight with the services of the hotels in the Karachi when
hotels were able to deliver quality service to the customers. SERVPERF helps hotels in
assessing customer satisfaction.

Following was the hypotheses assessment summary for acceptance and rejection of the
study hypotheses.
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 11

Table 4.4 Hypotheses Assessment Summary

Test Specification
Empirical
S. No Hypothesis Beta Sig Conclusion
Coefficient Value
H1: Tangibility significantly affects
1 consumer satisfaction in hotel .188 .000 Accepted
industry.
H2: Reliability significantly affects
2 consumer satisfaction in hotel .025 .617 Rejected
industry.
H3: Responsiveness significantly
3 affects consumer satisfaction in hotel .133 .005 Accepted
industry.
H4: Assurance significantly affects
4 consumer satisfaction in hotel .145 .002 Accepted
industry.
H5: Empathy significantly affects
5 consumer satisfaction in hotel .286 .000 Accepted
industry.

CHAPTER 5: CONCLUSION, DISCUSSIONS, IMPLICATIONS AND FUTURE

RESEARCH

This chapter covers discussion, conclusions, implication and future research etc.

Discussion
For a service sector company, having a satisfied or even delighted customer is key to the
success of a supply chain. In highly service oriented such as hospitality customer
satisfaction is crucial as it leads to repeat customer and word of mouth recommendations
that bring new customers. Measuring customer satisfaction has been a constant effort on
made by service providers in hotel sector. Parasuraman et al, (1985) model was first
comprehensive effort measuring service quality through what is known as SERVQUAL
model. In this model Parasuraman et.al (1985) initially explored service quality with ten
dimensions classifying them into five categories such as tangibility, responsiveness,
reliability, empathy and assurance. The model considered consumer expectations and
actual performance information was collected in the above five categories and the gap
between the two provided the information on areas of improvement. Cronin & Taylor
(1994) argued that customer expectation varies a great deal and the gap between
expectation and service provided could be misleading. The study proposed using the
actual performance component of the model and called the SERVPERF model. This
model was the subject of this thesis. A questionnaire developed for the survey using
SERVPERF model was used to assess the performance of hotel industry. The thesis
shows that SERVPERF model is simpler, avoids the unknown or even absolute customer
expectations and can be used to directly assess the service customer received.
 Customer Satisfaction in Hotel Industry- A SERVPERF Analysis 12

The thesis shows that this model is simpler, requires less customer time for the survey
and is probably an improvement on SERVQUAL model.

Conclusion
The analysis of collected data shows that SERVPERF model provides a good tool for
checking service performance. The hypotheses selected were accepted with the exception
of hypothesis on service reliability. This is unexpected as reliability of service is also
important, additional data may be required to recheck this hypothesis.
SERVPERF model is easier to implement, which reduces the data requirement and is
likely to be a more effective tool in performance measurement

Policy Implications
This study focused on different aspects of service quality in hotel sector of Karachi by
using SERVPERF model prototyped by Cronin & Taylor (1992) to provide customers
with quality services to make customers satisfied. The study shows that SERVPERF
would be an easier tool to implement; the information is more useful as which gives a
direct assessment of service provided and is not affected by some exalted expectation.

Future Research
This study was confined to hotels serving only in Karachi, future studies can be extended
to Pakistan. SERVPERF application on other service sector can also be researched.

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