Case of Parsian Esteghlal Hotel

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2007:039

M A S T E R ' S T H E S I S

Satisfaction Level of Hotel Customers in Iran

Case of Parsian Esteghlal Hotel

Neda Shishavi

Luleå University of Technology Master Thesis, Continuation Courses

Marketing and e-commerce

Department of Business Administration and Social Sciences

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MASTER'S THESIS

Satisfaction Level of Hotel Customers in Iran

(Case of Parsian Esteghlal Hotel)

Supervisors:

Dr. Amir Albadvi Professor Assa Wallstrom

Prepared by:

Neda Shishavi

Tarbiat Modares University Faculty of Engineering

Department Industrial Engineering Lulea University of Technology Department of Business Administration and Social Sciences

Division of Industrial Marketing and E-Commerce

MSc PROGRAM IN MARKETING AND ELECTRONIC COMMERCE Joint

2006

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Abstract

Nowadays, success of every company or organization lies beneath the satisfaction of their customers. This is especially obvious in hospitality sector. The success of a company active in hospitality environment has a direct relationship with their ability to satisfy their customers. Hotels, as one main important sector of hospitality environment, will use their customers if they walk out the door dissatisfied.

In this situation they will not go back to the hotel and they will not suggest the hotel to their friends. This means losing customers and failure of the company (hotel).

Increasingly customers are demanding added values for the money they are spending for their stay at a hotel. They do expect appropriate price and quality services from the staff of the hotel. They continuously compare the price and quality of different hotels with each other. In order for a hotel to gain market share and success, hotel corporations need to review the way they are currently offering their services. The Parsian Esteghlal Hotel is no exception to this rule. Dominated, as it is, by semi-state owned operated establishment, it seems that the hotel has been somewhat backward in its approach to both service quality and customer care over the years.

This thesis – presented here – measures the gap between customer expectation and perception of the services offered by staff of the hotel. SERVQUAL instrument has been used as a tool to measure this gap which shows the level of customer satisfaction from the services offered at the hotel.

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ACKNOWLEDGEMENT

This thesis was written during the period of June till October of 2006 at Tarbiat Modarres University. This thesis concludes my master degree in E-commerce and Marketing at Lulea University of Technology.

Initially, I would like to thank the employees of Parsian Esteghlal Hotel for giving me the opportunity to conduct my research at the hotel and helping me to conclude it. I would also like to thank my supervisor, Dr. Assa Wallstrom, Professor at Lulea university of Technology who guided me through this research and helped this research to happen.

Furthermore, I would like to thank my supervisor, Dr. Amir Albadvi, Associate Professor at Tarbiat Modares University for his practical advice and guidance which without his advice this research could have not been done. He has provided excellent advice along the way and also has been a great source of motivation and support.

My gratitude also goes to the respondents at the hotel who took their valuable time to feel out the questionnaires and the staff of the hotel for their cooperation in distributing and collecting the questionnaire. Without their cooperation, this thesis could have not been done.

Furthermore, I would like to offer my sincere thanks to one of my best friends who supported and helped me through this process.

Finally, I would like to thank my mother for all her support through this program.

Tehran, October 2006 Tarbiat Modares University

Neda Shishavi

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List of Tables

Table 1: Conceptual and Operational Definitions in Consumer Satisfaction Literature

...16

Table 2: Current Types of Micro-Models for Satisfaction...23

Table 3: Basic Sources of Comparison ...26

Table 4: Distribution of Guests in Two Towers of the Hotel ...55

Table 5: Gender Frequency...56

Table 6: Age Frequency ...56

Table 7: Guests ‘Level of Education...57

Table 8: Purpose of Trips...58

Table 9: First Time in Iran ...58

Table 10: Number of Trips to Iran ...59

Table 11: Frequency of the Guests Traveling with their Families...59

Table 12: Oneway Descriptive Test for Affect of Guests’ Nationality on Ratings ....60

Table 13: Oneway Anova Test for Affect of Guests’ Nationality on Ratings ...60

Table 14: T-Test Group Statistics of Gender Frequency ...61

Table 15: Independent Samples Test of Gender Frequency ...61

Table 16: Oneway Descriptive Statistics for Different Age groups of Guests ...62

Table 17: Oneway ANOVA Test for Age Groups...62

Table 18: Oneway Descriptive Statistics for Education Level Frequency of the Guests ...63

Table 19: Oneway ANOVA Test for Education Level Frequency of the Guests...63

Table 20: Oneway Descriptive Statistics for Purpose of Trips to Iran ...64

Table 21: Oneway ANOVA Test for Guests’ Purpose of Trip to Iran ...64

Table 22: Paired Sample Statistics...65

Table 23: Paired Samples Test...66

Table 24: Paired Samples Statistics ...67

Table 25: Paired Samples Test...67

Table 26: KMO and Bartlett’s Test for Data on Expectation ...68

Table 27: Principal Component Analysis before Rotation ...69

Table 28: Principal Component Analysis after Rotation ...69

Table 29: Total Variance...70

Table 30: KMO and Bartlett’s Test for Data on Satisfaction...71

Table 31: Principal Component Analysis before Rotation ...71

Table 32: Principal Component Analysis after Rotation ...72

Table 33: Total Variance...73

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List of Figures

Figure 1: Disposition of the Study ...13

Figure 2: Traditional Macro-Model of Customer Satisfaction ...21

Figure 3: Model of Linkage of Customer Value Chain to Customer Satisfaction...21

Figure 4: Model of Link between Satisfaction and Value ...21

Figure 5: Model of Two Levels of Satisfaction and Perceived Service Quality...22

Figure 6: Model of Sources of Customer Satisfaction ...22

Figure 7: SERVQUAL...31

Figure 8: Research Process ...41

Figure 9: A visualization of the methodology choices made for this study...50

Figure 10: An illustration of the differences between validity and reliability ( Zikmund, 2000)...52

Figure 11: Distribution of Guests in Two Towers of the Hotel ...55

Figure 12: Guests’ Level of Education ...57

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Chapter 1 General Problem Area

The purpose of the first chapter is to present the problem area. Initially, an introduction, and a background is provided in order to explain the importance of the subject. The presentation will thereafter be followed by problem discussion which will result in a formulation of the research questions and the purpose of this study.

Finally, disposition of the thesis and assigner presentation will conclude this chapter.

1.1 Introduction

The tourism industry worldwide generated more than US$2.5 trillion in sales per year in 1995, and was expected to create more than triple that figure to US$9.7 trillion by 2005 (Sorenson, 1997). The World Tourism Organization (WTO, 1995, cited in Mearh, 1997) has released data on the period 1980-1992. In that period, 8.5

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percent of total world spending on international tourism was by Americans, 8.25 percent by Europeans, and 16.6 percent by Asians. In 1950, total international arrivals were about 25 million (Bauman, 1996; Ayres, 2000), but by 2001 they had risen to 692.6 million (WTO, 2003). The WTO (2003) forecasts that international arrivals are expected to reach more than 1.56 billion by 2020. The travel and tourism sector now employs 195 million people worldwide – that is, one of every 13 jobs (Salomon, 2003).

These data explains that the tourism industry has become a major contributor to the GNP (gross national product) of many nations – and the marketing of tourist destinations have become a widely accepted practice in both public and private sectors (Riege and Perry, 2000). As clear in the numbers, many jobs depend on this industry and income of many families worldwide is strongly dependent on this industry.

The tourism industry is made up of a number of different sectors including travel, hospitality and visitor services sector. Within each of these sectors there are a number of individual enterprises that have attempted to measure customer satisfaction as part of their quality assurance programs. Measuring customer satisfaction level has become more common as the industry understands the importance of quality issues in an increasingly competitive environment. It has also been stimulated by the move towards an industry-driven accreditation system.

As one might know, the factor which is very important for the visitors of a country is the quality hotels in that country. The main factor in tourism and also hospitality industry is hotel. The quality of services offered during visitors stay at a hotel directly affects the GNP share of a country which is dedicated to tourism industry of related country.

As part of the WTO-assisted Tourism Development Master Plan, Iran has a motivate 20-year tourism program whereby its goal is to gain 1.5 per cent of the world's total tourist arrivals, receiving 20 million international tourists a year. In order to achieve this ambitious but also realistic target, the Government intends to increase its annual tourism budget by eight times starting from next year, and an anticipated amount of five billion US dollars will be invested by the Government in related

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restoration/preservation of historical monuments as well as in tourism infrastructure.

In this matter, many of the hotels owned by the state, has been renovated. Many of the hotels are under renovation. However, lack of training for staffs of the hotel and ignorance of the management team at different hotels has prevented the quality of the services offered to grow high. Many visitors staying in Iran return to their home countries unsatisfied with the service quality of hotels. Despite, the existence of weak services offered at hotels, no one has tried to conduct any research on satisfaction level of the customers in this industry.

Despite the large body of literature available on satisfaction research in general, only a few academic studies have focused directly on customer satisfaction amongst tourists and specially hotels. Of these, none have been undertaken in Iran.

1.2 Background

According to Fache´ (2000), one of the most important developments in the tourism industry is the growing attention to service quality from the customer’s perspective. If service quality is to be improved, it must be reliably assessed and measured.

The key to sustainable competitive advantage in today’s competitive environment lies in delivering high-quality service which results in satisfied customers (Shemwell et al., 1998). Indeed, because service quality is positively related to customer retention and customer loyalty, service quality has a direct effect on company profits (Baker and Crompton, 2000; Zeithmal and Bitner, 2000). It is therefore apparent that tourism enterprises need to focus on service quality continuously if they are willing t o g a i n competitive advantage and ensure sustainability – especially in developing countries such a s ours, service quality promotes customer satisfaction, stimulates intention to return, and encourages recommendations. Customer satisfaction increases profitability, market share, and return on investment (Hackl and Westlund, 2000; Barsky and Labagh, 1992; LeBlanc, 1992; Stevens et al., 1995; Legoherel, 1998; Fornell, 1992; Halstead and Page, 1992).

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Hotels with good service quality will therefore improve their market share and profitability (Oh and Parks, 1997).

In a highly competitive hotel industry, individual hoteliers must find ways to make their products and services stand out among the others. They have to find a way to make their services and products different from the others. To achieve this, hoteliers must understand their customers’ needs and wants – and then set their services in a way to meet these needs or goes beyond their needs.

As Sundaram and Richard (1993) stated, in order to improve service quality, the hotel industry needs to know which service attributes might affect choice intention of customers. Failure to give necessary attention to those attributes might result in a customer’s negative evaluation of the hotel services and may ruin the chance of that guest returning to the hotel. Since a customer’s satisfaction is influenced by the availability of customer services, the provision of quality customer service has become a major concern of all businesses (Berry and Parasuraman, 1991).

1.3 Problem Discussion

General perception in Iran is that a dearth of international visitors and a lack of global service awareness had resulted in a gearing of the local tourism product towards the domestic marketplace where, in the absence of any world service leaders and/or benchmark competition, the industry had leisurely ticked over with an

“anything goes” service attitude.

In fact the rhetoric, anecdotal evidence suggests that domestic tourists staying in different grades of hotels in Iran have experienced shortfalls in the quality of service offered. International tourists have also understandably expressed varied needs and expectations during their hotel stay but hotels in Iran have not responded adequately.

The traditionally insular and conservative nature of the Iranian population – who were disinclined to complain – led to unprofessional, inefficient service

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standards being accepted as the norm. What is unfortunate for the majority of tourism related organizations today, however, is that the modern day customer has tasted quality and is no longer prepared to settle for anything less. As seasoned tourism and leisure consumers, they make for an increasingly demanding and difficult to please clientele.

Hotels have also not responded satisfactorily to the demands of customers owing to lack of management and staff training in service quality. Therefore, the purpose of this study is to assess customers’ expectations and perceptions of service provided by hotels in Iran and to highlight how the service factors were related to customer satisfaction.

Specifically the study aimed to address the following objectives:

(1) To develop the underlying dimensions of hotel service quality or hotel service factors in Iranian context;

(2) To examine the relative impact of the derived hotel factors in influencing the overall level of service quality and customer satisfaction;

1.4 Disposition of this study

This thesis consists of seven chapters which is briefly shown in figure 1 below.

Chapter 1 includes an introduction and a background, a presentation of the problem discussion which is followed by purpose of the study.

Chapter 2 the literature review for the research will be presented.

Chapter 3 includes the frame of reference, presenting the research questions and the theories selected for this study, as well as the demarcations made.

Furthermore, it includes a conceptualization and operationalization of important concepts included in the research problem and research questions.

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Chapter 4 includes a description of the methodological approaches chosen for this thesis and in Chapter 5 the result from the collection of empirical data is presented. Also, analysis of the data collected.

Chapter 6 includes the conclusion as well as further research and recommendations.

Disposition of the Study

Chapter 1 General Problem Area Chapter 2 Literature Review Chapter 3 Frame of Reference Chapter 4 Methodology

Chapter 5 Empirical Findings and Data Analysis Chapter 6 Conclusion and Recommendations

Figure 1: Disposition of the Study

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Chapter 2 Literature Review

In this chapter, theories that may be relevant when answering the research problem will be presented. These theories are mainly written for readers who are familiar with concept of service quality and customer satisfaction, but the intention is also that people without prior knowledge in this field should find it understandable.

2.1 Customer Satisfaction

To begin the discussion about customer satisfaction it would help to define customer satisfaction. A widely accepted definition would be the following which is presented by Oliver in 1997:

“Satisfaction is the consumer's fulfillment response. It is a judgment that a product or service feature, or the product of service itself, provided (or is providing) a

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pleasurable level of consumption-related fulfillment, including levels of under- or over-fulfillment.” (Oliver, 1997)

This is a remarkable definition. First, the focus is on a consumer rather than a customer. Traditionally speaking, the consumer uses a product or service, whereas a customer pays for the product/service but may not use the service or product offered to him. Usually the two definitions of consumer and customer get lost in vocabulary, but it is very important in researcher’s modeling of satisfaction to make distinction between these two. Satisfaction with a product/service is a construct that requires experience and use of a product or service (Oliver, 1997). Individuals who pay for a product/service but who do not use this product/service should not be expected to have the type of (dis)satisfaction that a product/service user (the consumer) will have.

So we need to be aware that the concept of customer satisfaction is about consumer satisfaction. That is, user satisfaction rather than about customer satisfaction which may include non-users.

In this study, where ever we are talking about customer satisfaction, it means consumer satisfaction. Someone who uses the product/service not someone who pays for product/service but do not use it.

Second, satisfaction is a feeling and thought. It is a short-term attitude that might change under certain circumstances or situations. Satisfaction stays in consumer’s mind and is different from observable behaviors such as product choice, complaining, and repurchase

Third, satisfaction commonly has positions at both a lower level and an upper level. This means that a consumer's satisfaction may drop if she/he gets too much of a good thing. Also, their satisfaction level may rise if they get a little of good things.

Many people focus upon the lower position and neglect the potential for an upper position. This conflict and ignorance might ruin the whole purpose of customer satisfaction and sets its level to a very low position in the mind of customers.

In general, researchers define customer satisfaction in different w a y s (presented in Table 1). Some of the definitions provided in the consumer satisfaction literature are fundamentally inconsistent with one another. In other cases, the

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definitions have overlapping components but are partially inconsistent. When examined as a whole, three general components can be identified in extant definitions:

1) consumer satisfaction is an emotional response; 2) the response pertains to a particular focus such as expectations, product, consumption experience, etc.; and 3) the response occurs at a certain time (after consumption, after choice, based on accumulated experience, etc). As can be seen by reviewing Table 1, these three general categories capture the essence of all the definitions presented. As expected, existing definitions are inconsistent in the specifics associated with the type, focus and timing of the satisfaction response.

Table 1: Conceptual and Operational Definitions in Consumer Satisfaction Literature

Source Conceptual Definition

The consumer's fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provided (or is providing) a pleasurable level of consumption-related fulfillment, including levels of under- or over fulfillment (p. 13)

Response Focus Time

Oliver 1997

Fulfillment response / judgment

Product or Service During Consumption

A transaction-specific affective response resulting from the customer’s comparison of product performance to some prepurchase standard (e.g., Hunt 1977; Oliver 1989) (p.

122).

Halstead, Hartman, and Schmidt 1994

Affective response P r o d u c t p e r f o r m a n c e compared to some prepurchase standard

During or after consumption

(Product satisfaction) is an attitude - like postconsumption evaluative judgment (Hunt 1977) varying along the hedonic continuum (Oliver 1989; Westbrook and Oliver 1991) (p. 454).

Mano and Oliver 1993

Attitude - e v a l u a t i v e judgment Varying along the hedonic continuum

Product Postconsumption

An overall postpurchase evaluation (p.11).

Fornell 1992

Overall evaluation

Postpurchase perceived product performance compared with prepurchase expectations

Postpurchase

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summary attribute phenomenon coexisting with other consumption emotions (p. 242).

Summary attribute phenomenon coexisting with other consumption emotions

Product attributes

During consumption

A postchoice evaluative judgment concerning a specific purchase selection (Day 1984) (p. 84).

Westbrook and Oliver 1991

Evaluative judgment Specific purchase selection Post choice No conceptual definition. (with the salesperson) a function of fairness, preference, and disconfirmation (pp. 28-29).

Oliver and Swan 1989

Salesperson During purchase

The consumer’s response to the evaluation of the perceived discrepancy between prior expectations (or some norm of performance) and the actual performance of the product as perceived after its consumption (p. 204).

Tse and Wilton 1988

Response to the evaluation

Perceived discrepancy between prior expectations (or some norm of performance) and the actual performance of the product

Post consumption

Conceptualized as a feeling developed from an evaluation of the use experience (p.

305).

Cadotte, Woodruff and Jenkins 1987

Feeling developed from an evaluation Use experience During consumption Global evaluative judgment about product usage/consumption (p. 260) Also cited Hunt (1977).

Westbrook 1987

Global evaluative judgment Product

usage/consumption

During consumption

the evaluative response to the current consumption event...the consumer’s response in a particular consumption experience to the evaluation of the perceived discrepancy between prior expectations (or some other norm of performance) and the actual performance of the product perceived after its acquisition (p.496).

Day 1984

Evaluative response

Perceived discrepancy between prior expectations (or some other norm of performance) and the actual performance of the product

C u r r e n t c o n s u m p t i o n event, p articular consumption experience, after its acquisition No conceptual definition. A function of consumer expectations operationalized as product attribute beliefs (Olson and Dover 1979) and disconfirmation (p. 22).

Bearden and Teel 1983

During consumption

Postpurchase evaluation. Cited Oliver’s (1981) definition: An evaluation of the surprise inherent in a product acquisition and/or consumption experience (p. 394).

LaBarbera and Mazursky 1983

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Evaluation Surprise Postpurchase Product acquisition and/or consumption experience

An emotional response to the experiences provided by and associated with particular products or services purchased, retail outlets, or even molar patterns of behavior such as shopping and buyer behavior, as well as the overall marketplace (p. 256). An emotional response triggered by a cognitive evaluative process in which the perceptions of (or beliefs about) an object, action, or condition are compared to one’s values (or needs, wants, desires) (p. 258).

Westbrook and Reilly 1983

Emotional response

Experiences provided by and associated with particular products or services purchased, retail outlets, or even molar patterns of behavior such as shopping and buyer behavior Perceptions of (or beliefs about) an object, action, or condition are compared to one’s values

Postpurchase

Conceptually, an outcome of purchase and use resulting from the buyer’s comparison of the rewards and costs of the purchase relative to anticipated consequences.

Operationally, similar to attitude in that it can be assessed as a summation of satisfactions with various attributes (p. 493).

Churchill and Surprenant 1982

Outcome Comparison of the rewards and costs of the purchase relative to anticipated consequences

I m p l i e s a f t e r purchase and use An evaluation of the surprise inherent in a product acquisition and/or consumption experience. In essence, the summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumer’s prior feelings about the consumption experience (p. 27).

Oliver 1981

Evaluation Summary

psychological state Emotion

Surprise Disconfirmed expectations coupled with the consumer’s prior feelings

Pr o d u c t a c q u i s i t i o n and/or consumption experience

A conscious evaluation or cognitive judgment that the product has performed relatively well or poorly or that the product was suitable or unsuitable for its use/purpose. Another dimension of satisfaction involves affect of feelings toward the product (p. 17).

Swan, Trawick and Carroll 1980

Conscious evaluation or c o g n i t i v e j u d g m e n t A n o t h e r d i m e n s i o n involves affect of feelings

Product has performed relatively well or poorly or that the product was suitable or unsuitable for its use/purpose Toward the product

D u r i n g o r after consumption

Refers to the favorability of the individual’s subjective evaluation of the various outcomes and experiences associated with using or consuming it (product) (Hunt 1977) (p. 49).

Westbrook 1980

Favorability of the individual’s subjective evaluation

Outcomes and experiences During consumption

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A kind of stepping away from an experience and evaluating it. . . the evaluation rendered that the experience was at least as good as it was supposed to be (p. 459).

Hunt 1977

A kind of stepping away from an experience and evaluating it

Experience was at least as good as it was supposed to be

During consumption experience The buyer’s cognitive state of being adequately or inadequately rewarded for the sacrifices he has undergone (p. 145).

Howard and Sheth 1969

Cognitive state of being

Being adequately or inadequately rewarded for sacrifices

Cognitive state of being

Customer satisfaction has significant implications for the economic performance of firms (Bolton, Lemon, and Verhoef 2004). For example, customer satisfaction has been found to have a negative impact on customer complaints and a positive impact on customer loyalty and usage behavior (Bolton 1998; Fornell 1992).

Increased customer loyalty may increase usage levels (Bolton, Kannan, and Bramlett 2000), secure future revenues (Rust, Moorman, and Dickson 2002), and minimize the likelihood of customer defection (Anderson and Sullivan 1993; Mithas, Jones, and Mitchell 2002). Customer satisfaction may also reduce costs related to warranties, complaints, defective goods, and field service costs (Fornell 1992). Finally, in a recent study, Anderson, Fornell, and Mazvancheryl (2004) find a strong relationship between customer satisfaction and Tobin’s q (as a measure of shareholder value) after controlling for fixed, random, and unobservable factors.

2.2 Customer Satisfaction Models

Having explained the various definitions of customer satisfaction, in this section we describe different models of customer satisfaction. The first group are traditional macro models which are as follows:

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2.2.1 Macro-Models

The traditional macro- model is shown in Figure 2. This model depicts much of the research in customer satisfaction over the past few years. Note the following:

1. Perceived performance often differs from objective or technical performance, especially when a product/service is complex, intangible, and when the consumer is unfamiliar with the product/service.

2. Comparison standards can come from numerous sources that can vary widely by individual, by situation, and by product/service type.

3. Perceived disconfirmation is the evaluation of perceived performance according to one or more comparison standards. Disconfirmation can have a positive effect, generally resulting to satisfaction, a negative effect, generally resulting in dissatisfaction, or a zero effect.

4. Satisfaction feeling is an attitude. One can describe it as what goes on in customer’s mind. Sometime customers have mixed feelings towards a product or service which means they feel satisfied with a certain part of a service/product, and at the same time, they feel unsatisfied with other parts of the service/product.

5. Outcomes of satisfaction feelings may involve intent to repurchase, word- of- mouth and complaints. The consumer's communication with her/his network of friends and family and her/his approval or disapproval for a product/service might have very strong influence in attracting new customers. These outcomes also are affected by other variables. For example, when customers are extremely dissatisfied with service/product, it does not necessarily proceed with complaint behavior, especially if the consumer believes complaining will be useless and the complain will have no effect in the improvement of the service.

Perceived performance

Comparison standards

Perceived disconfirm.

Satisfaction feeling

outcomes

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Figure 2: Traditional Macro-Model of Customer Satisfaction

(Adopted from Woodruff & Gardial, 1996)

Later research has produced a new model shown in Figure 3. This model shows the importance of value in product/service choice and its relationship to satisfaction. As presented in the graph, values brought by product attributes directly affect the customer’s feeling for that certain attributes which might result in satisfaction or dissatisfaction. Again, it would have the same effect for consequences of use and desired and state. Figure 4 shows another version of this model which has been provided by Oliver in 1999.

Figure 3: Model of Linkage of Customer Value Chain to Customer Satisfaction

(Adopted from Woodruff & Gardial, 1996)

Figure 4: Model of Link between Satisfaction and Value

(Adopted from Oliver, 1999)

Another important macro- model would be the linkage of overall service satisfaction, encounter satisfaction, and perceived service quality, as shown in Figure 5. Research for this model supports the conceptualization of perceived quality as a separate construct, distinct from satisfaction (Bitner & Hubbert, 1994). Furthermore,

Feeling for end-state Feeling for

consequences Feeling for

attributes

Desired

& state Consequences

of use Product

attributes Value

chain

Customer satisfaction

Quality

Performance outcomes

Cost-based value

Formation of satisfaction

Consumption value

Extended value Value-based

satisfaction

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it highlights the construct of overall service satisfaction in contrast to the construct of a component level of satisfaction (the encounter service satisfaction).

This model helps explain survey results that indicate different levels of satisfaction for a service that one individual may experience.

Figure 5: Model of Two Levels of Satisfaction and Perceived Service Quality

(based on a study by Bitner & Hubbert, 1994)

Some models differentiate between technical service quality and perceived service quality. Figure 6 shows one such model and how satisfaction results from a comparison between expected service and perceived service (Bateson, 1991). This model is explicit about the cyclical, feedback loop that affects satisfaction. A consumer's prior experience joins other data inputs to shape current satisfaction with a service.

Figure 6: Model of Sources of Customer Satisfaction

(adapted from Bateson, 1991)

*includes word-of- mouth, past experience and advertising

Overall service satisfaction

Service encounter satisfaction

Perceived service quality

Other data inputs*

Expected service

Perceived service

Contact personnel

Technical service quality satisfaction

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The above models are samples of the many models that give the analyst the context for the meaning and analysis of customer satisfaction. In the next section, we deal with narrower issues in customer satisfaction. Because these models provide explicit detail about the formation of satisfaction itself, this paper refers to them as micro- models.

2.2.2 Micro-models

Erevelles & Leavitt (1992) provide an excellent summary of micro- models.

Table 2 lists the seven types of models they review in their article, and we will briefly comment on each type.

1. Expectations Disconfirmation Model 2. Perceived Performance Model 3. Norms Models

4. Multiple Process Models 5. Attribution Models 6. Affective Models 7. Equity Models

Table 2: Current Types of Micro-Models for Satisfaction

(adapted from Erevelles & Leavitt, 1992)

1. The Expectation Disconfirmation Model is one the main models researchers use for measuring satisfaction. In this model, consumers/customers compare their pre-consumption experiences with post-consumption experiences of service/product. This model has been the principal model in satisfaction research. In order to form attitude towards satisfaction or dissatisfaction consumers compare their experiences of the product/service. In Expectation Disconfirmation m o d e l , expectations comes from believes of consumers about the level of performance that a

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product/service will provide. Expectation is what consumers expect to receive from product or service which is usual the ideal situation for the consumer.

However, satisfaction is defined as a customer’s perception of a single service experience, whereas quality is the accumulation of the satisfaction for many customers over many service experiences. Furthermore, service is equal to the perception of a single service as received and measured against the expected service received. The difference between the “perceptions” and “expectations” of a customer result in a level of satisfaction or dissatisfaction (Hill, 1992, pp. 44-47). This difference between “perceptions” and “expectations” essentially forms wha t i s commonly referred to as gap model.

The gap model contains a minimum of two or sometimes three key concepts.

Satisfaction and quality service are often treated together as functions of a customer’s perceptions and expectations. The gap model can be defined as a two component equation of Q = P –E. “Q” would be “satisfaction” and “quality”; “P” stands for

“perceptions” and finally “E” stands for “expectations”. Sometimes customers do not care about a service or do not have any expectations towards a service or product.

However, when perceptions (P) are equal to expectations (E), service quality (Q) is satisfactory. If perceptions are lower than expectations, a customer’s rating becomes negative and service quality becomes unsatisfactory (Cottle, 1990, pp. 22-23). In order to increase customer satisfaction you either raise customer perceptions, lower their expectations, or both. Since an expectation is nothing more than an anticipation of receiving something favorable or acceptable, it is essential for any service company to develop realistic expectations among their customers. But “expectations and perceptions are factors that are hard to control” (Davidow and Uttal, 1989, p. 19).

The two factors are difficult to control because perceptions are subjective responses. They are heavily influenced by the ongoing personal situations that individuals are exposed to, and by competing opportunities that are as much ignored or overlooked given the dynamics of human interaction.

2. In Perceived Performance Model expectations of consumers play less important role in formation of their satisfaction about service or product. This model

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outweighs the consumer’s expectations. In this condition, consumer forgets about his/her expectations and this perceived performance becomes his/her expectation for future service/product.

3. Norms Models are similar to the Expectations Disconfirmation Model except that in Norms Models consumers do not compare perceptions with expectations. However, they compare perceived performance with some standard for performance. In this case, the standard is not a predictive expectation. Rather than considering what will happen in the consumption experience, the consumer uses what should happen as the comparison standard.

4. In Multiple Process Models consumers use more than one standard for comparison with perceived performance. In this case, the satisfaction formation process becomes a multidimensional process.

5. Consumers use three factors in Attribution Models to determine attribution’s effect in satisfaction. These three are locus of causality, stability, and controllability. The locus of causality can be external can be both external and internal. In internal causality, the consumer will be responsible for the performance of product/service. In external causality, the service provider will be responsible for service/product performance. Stable causes would tend to have more impact in satisfaction because consumers tend to be more forgiving of product/service failures that appear to be rare events. Finally, controllability affects attribution in that a poor outcome in a consumption experience may mean that the consumer will be unsatisfied with the product/service provider if the consumer believes the provider had the capacity, that is, control, to perform in a better fashion.

6. Affective Models are different from previous models explained. This model goes beyond rational processes. In these models factors such as emotion, liking, and mood influence satisfaction/dissatisfaction feelings following the consumption experience.

7. Equity Models emphasize the consumer’s attitude about fair treatment in the consumption process. Fair treatment can use the concept of the equity ratio (that is, the amount of her/his return for her/his effort made) or the concept of social

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comparison (that is, the perceived, relative level of product/service performance that other consumers experience). Oliver (1997) breaks equity down further into three categories, procedural fairness; inter actional fairness; and distributional fairness.

This listing is extensive but not all- inclusive. Oliver (1997) also has summarized the comparison standards from his perspective, and these appear in Table 3. Table 3 introduces the comparison standards of needs, regret, and nothing.

Comparison Operator Resulting Cognition

Expectations Disconfirmation

Needs Need fulfillment

Excellence Quality

Fairness Equity/inequity

Events that might have happened Regret

Nothing Unapprised cognition

Table 3: Basic Sources of Comparison

(Adapted from Oliver, 1997)

In the needs standard, consumers evaluate whether a consumption experience gave them what they need. Maslow’s hierarchy of needs is one typology for needs.

Of course, “need” can be defined in many different ways. The standard of excellence refers to technical perfection, that is, some objective, widely recognized criteria which the resulting cognition would be quality. The standard of regret refers basically to what might have been the scenario for a consumer. This commonly occurs when a consumer realizes that what she/he got in one encounter could well have been improved if she/he had chosen a different provider. Finally, the nothing standard specifies the situation where consumers form a satisfaction/dissatisfaction feeling without cognition. In this case, the resulting cognition will be unapprised cognition.

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2.3 Multi Dimensionality of Satisfaction

Another relevant modeling issue at the micro- model level is the multidimensionality of the satisfaction construct. Research, such as that by Mackoy &

Spreng (1995), has found that satisfaction can have two coexisting dimensions, satisfaction and dissatisfaction for the same individual and the same consumption experience. A two-dimensional model of satisfaction helps explain the seemingly paradoxical occurrence of both high and low satisfaction scores on a satisfaction survey. This model can affect survey measurement methodology. Traditionally, researchers have measured satisfaction with a Likert-type scale with endpoint anchors of satisfaction and dissatisfaction because it was thought that satisfaction and dissatisfaction were the ceiling and floor of the continuum of a one-dimensional satisfaction construct. A two dimensional model puts the validity of this attitude scale into doubt.

2.4 Benefits of Measuring Customer Satisfaction

Numerous studies and publications have almost unanimously concluded that measuring customer satisfaction can lead to several benefits for the organization applying it:

• Results of customer satisfaction measures (CSM) can be used to explore important strengths and weaknesses in product/service offerings and more effectively focus on improvement of these issues (Lin & Jones, 1997; Emerson &

Grimm, 1999; Sharma et al. 1999; Yang, 2003a; Lam et al., 2004).

• CSM results may also be useful in estimating the degree of customer loyalty which is very critical for long-term revenues of the organizations (Gronholdt et. al, 2000; Lam et al., 2004).

• CSM gives the supplying organization the opportunity to compare the performance of its different business units in different time periods and locations and more focus on improvement of their activities (Jones & Sasser, 1995).

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• CSM is useful for assessing the effectiveness of efforts to redesign elements of the service delivery system (Chase & Bowen, 1991; Juran & Gryna, 1988).

• Customer satisfaction can be used as a basis for customer segmentation (Athanassopoulos, 2000).

• According to McColl-Kennedy and Schneider (2000), measuring customer satisfaction is not a neutral act, but an intervention. The opinions of the customer whose satisfaction is measured can be affected by the measurement process

• CSM can be used by the supplier as a symbolic activity for demonstrating customer-oriented behaviour (Kujala & Ahola, 2004).

2.5 The Customer Satisfaction and Service Quality

Customer satisfaction is determined by defining customer perceptions of quality, expectations, and preferences (Barsky, 1995, Ch. 2). Said another way,

“satisfaction, or lack of it, is the difference between how a customer expects to be treated and how he or she perceives being treated” (Davidow and Uttal., 1989, p. 19).

Customer satisfaction is created by being higher than expectations, delivering quality, and targeting customer preferences (Barsky, 1995, p. 66). Conceptualizing this process in quantitative terms, expectations are hypothetically measured from zero to exceed.

Customer satisfaction is also defined as either an overall judgment of satisfaction or given an attribute-specific definition. According to Cronin and Taylor in 1992, the latter is based on the assumption that satisfaction is the outcome of service quality. In general, service quality promotes customer satisfaction, stimulates intention to return, and encourages recommendations. Customer satisfaction increases profitability, market share, and return on investment (Hackl and Westlund, 2000;

Barsky and Labagh, 1992; LeBlanc, 1992; Stevens et al., 1995; Legoherel, 1998;

Fornell, 1992; Halstead and Page, 1992).

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Hotels with good service quality will therefore improve their market share and profitability (Oh and Parks, 1997). In a highly competitive hotel industry, individual hoteliers must find ways to make their products and services stand out among the others. To achieve this, hoteliers must understand their customers’ needs – and then set out to meet (or exceed) these needs. As Fache´ (2000) has observed, one of the most important developments in the tourism industry is the growing attention to service quality from the customer’s perspective.

2.6 Service Quality

Service quality has emerged as an issue of paramount importance for the hospitality industry. It has been identified as one of the most effective means of building a competitive position and improving organizational performance (Lewis,1993). Service quality can be a differentiating factor among hospitality establishments that provide otherwise identical services within a small area.

Establishing high service quality enhances customer satisfaction – thus generating increased market share and profitability of providers (Hoffman and Bateson, 1997).

However, despite the importance of service quality in the hospitality industry, many managers apparently do not know how to measure it. Moreover, existing measurements of service quality are controversial in terms of generating reliable information for managers (Hoffman and Bateson, 1997).

The use of comparisons is central to measuring service quality. Researchers have defined quality in different ways. This quality construct has been variously defined as value (Feigenbaum, 1951), conformance to requirements (Crosby, 1979), fitness for use ( Juran et al., 1974) and meeting customers’ expectations (Parasuraman et al., 1985). However, because of increased importance from the service sector, researchers are defining quality from a customer’s perspective. Among services marketing literature, the widely used definition of service quality is to meet customers’ expectations defined by Parasuraman et al. ( 1985). In their review of service quality, Parasuraman et al. ( 1985, 1988, 1991), found that service quality could neither be conceptualized nor evaluated by traditional methods of goods quality

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because services possess three characteristics: intangibility, heterogeneity and inseparability. For this reason, they have defined and conceptualized service quality as a form of attitude, which results from a comparison of customers’ expectations with perceptions of performance. They have also developed an instrument called SERVQUAL to measure service quality.

2.7 SERVQUAL

According to Parasuraman in 1988, in order to improve service quality, it must be reliably assessed and measured. According to the SERVQUAL model (Parasuraman et al., 1988) service quality can be measured by identifying the gaps between customers’ expectations of the service to be rendered and their perceptions of the actual performance of the service. The SERVQUAL model is based on five dimensions of service (Parasuraman et al., 1988):

Alexandris et al. (2002) have reported that SERVQUAL is a good approach for assessing practical issues of service quality in the hotel sector.

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Figure 7: SERVQUAL

(The SERVQUAL scale is based on a gap model by Parasuraman et al., 1985)

According to Brown and Bond[10], “the gap model is one of the best received and most heuristically valuable contributions to the services literature”. The model identifies four key internal discrepancies or gaps relating to managerial perceptions of service quality, and tasks associated with service delivery to customers. The first four gaps (Gap 1, Gap 2, Gap 3 and Gap 4) are identified as functions of the way in which service is delivered, whereas Gap 5 suggests the gap between customers’ expectations and their perceptions of actual performance and drives the perception of service

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quality. Both the original version of SERVQUAL (Parasuraman et al., 1988) and its revised version (Parasuraman et al., 1991, 1994) contain five dimensions of service quality namely tangibles, reliability, responsiveness, assurance and empathy.

Tangibles represent the physical facilities, equipment, and appearance of personnel and presence of users. Tangibles can create an atmosphere. The tangible aspect of a service is one of the few dimensions that a potential service patron can know and evaluate in advance of participation.

Reliability refers to the ability to perform the promised service dependably and accurately. Promises made to an organization's promotional efforts can contribute to participant expectations. Consistency of performance at the highest standard is crucial to reliability.

Responsiveness is the willingness to help participants and provide prompt attention. Hotel patrons expect their requests to be handled quickly and accurately.

Assurance indicates courteous and knowledgeable employees who convey trust and confidence. Assurance contains elements of the organization's credibility, competence and security.

The empathy dimension includes caring and individual attention to users.

Empathy expresses an understanding of the participants’ needs.

These five dimensions were derived from ten overlapping dimensions, which were regarded as essential to service quality by Parasuraman et al.’s, (1985) exploratory study. Although the SERVQUAL instrument has been criticised by some researchers (e.g. Carman, 1990; Cronin and Taylor, 1992; Teas, 1993), it is still regarded as a Leading measure of service quality (Lam and Woo, 1997; Mittal and Lassar, 1996). The SERVQUAL statements are shown in Apendix I.

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2.8 Service Quality in Hotel Industry

Research into hotel selection criteria has focused on the relationship between customer satisfaction and service quality or services and facilities. Because of the intangibility, inseparability, variability and perishability of services, consumers’

perceptions of satisfaction criteria may include contextual clues that they use to evaluate the service quality and to make decisions about future patronage, whether or not they have experienced the hotel’s products and services before (Bitner, 1990;

Parasuraman et al., 1985).

Alpert (1971) and Kivela (1996) viewed consumer products and services as a bundle of attributes, or features, and benefits: and stated that those attributes that directly influence consumer choice are termed “determinant” attributes. These attributes which could be different from those of competitors’ offerings, may be vital factors in determining consumers’ intentions regarding future purchases. Wuest et al.

(1996) defined perceptions of hotel attributes as the degree to which travellers find various services and facilities important in promoting their satisfaction with hotel stays.

There have been many studies reviewing the needs and characteristics of travellers. Reviews of the literature suggest that most travellers would consider the following hotel attributes when making a hotel choice decision:

Cleanliness, location, room rate. Security, service quality and the reputation of the hotel or chain (Ananth et al., 1992; Atkinson, 1988; Clow et al., 1994; Le Blanc and Nguhen, 1996; Mc Cleary et al., 1993; Rivers et al., 1991;Weaver and Heung, 1993; Wilensky and Buttle, 1998).

Atkinson found that cleanliness of accommodation, followed by safety and security, courtesy and helpfulness of staff were the top attributes for travellers in hotel choice selection.

Rivers et al. ( 1991) examined the hotel selection decision of members and nonmembers of frequent guest programmes. Their results show that convenience of location and overall service received the highest ratings.

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Le Blanc and Nguhen (1996) in particular examined the five hotel factors that may signal a hotel’s image to travellers: physical environment, corporate identity, service personnel, quality of services and accessibility. They suggested that marketing efforts should be directed to highlight the environmental cues to attract new customers.

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Chapter 3 Research Questions and Frame of Reference

In this chapter, we formulate our research questions according to our research problem. And our chosen theories is assessed in our frame of reference, furthermore, we state the Demarcations for this study.

3.1 Research Questions

The aim of this research in chapter one was mentioned as follows,

(1) To develop the underlying dimensions of hotel service quality or hotel service factors in Iranian context;

(2) To examine the relative impact of the derived hotel factors in influencing the overall level of service quality and customer satisfaction;

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Therefore, we hereby formulate the research problem as “The Satisfaction level of Hotel Customers in Iran”.

And in order to answer the research problem we have designed two research questions which are discussed as follows:

As Fache´ (2000) has observed, one of the most important developments in the tourism industry is the growing attention to service quality from the customer’s perspective. The key to sustainable competitive advantage in today’s competitive environment lies in delivering high-quality service which results in satisfied customers (Shemwell et al., 1998). Indeed, because service quality is positively related to customer retention and customer loyalty, service quality has a direct effect on company profits (Baker and Crompton, 2000; Zeithmal and Bitner, 2000). It is therefore apparent that tourism enterprises need to focus on service quality continuously if they are to gain a competitive advantage and ensure sustainability – especially in developing countries such as ours, service quality promotes customer satisfaction, stimulates intention to return, and encourages recommendations.

Customer satisfaction increases profitability, market share, and return on investment (Hackl and Westlund, 2000; Barsky and Labagh, 1992; LeBlanc, 1992; Stevens et al., 1995; Legoherel, 1998; Fornell, 1992; Halstead and Page, 1992). Hotels with good service quality will therefore improve their market share and profitability (Oh and Parks, 1997). So the first question is: What are the general customer’s ratings and perceptions of hotel service quality in Iran?

Service quality has emerged as an issue of paramount importance for the hospitality industry. It has been identified as one of the most effective (albeit difficult) means of building a competitive position and improving organizational performance (Lewis,1993). Service quality can be a differentiating factor among hospitality establishments that provide the identical services within a small area. Establishing high service quality enhances customer satisfaction – thus generating increased market share and profitability of providers (Hoffman and Bateson, 1997). However, despite the importance of service quality in the hospitality industry, many managers apparently do not know how to measure it. Moreover, existing measurements of service quality are controversial in terms of generating reliable information for

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The use of comparisons is central to measuring service quality. Researchers have defined quality in different ways. This quality construct has been variously defined as value (Feigenbaum, 1951), conformance to requirements (Crosby, 1979), fitness for use ( Juran et al., 1974) and meeting customers’ expectations (Parasuraman et al., 1985). However because of increased importance from the service sector, researchers are defining quality from a customer’s perspective. Among services marketing literature, the widely used definition of service quality is to meet customers’ expectations defined by Parasuraman et al. ( 1985). In their review of service quality, Parasuraman et al. ( 1985, 1988, 1991), found that service quality could neither be conceptualized nor evaluated by traditional methods of goods quality because services possess three characteristics: intangibility, heterogeneity and inseparability. For this reason, they have defined and conceptualized service quality as a form of attitude, which results from a comparison of customers’ expectations with perceptions of performance. They have also developed an instrument called SERVQUAL to measure service quality. For the second question we will find out:

As Sundaram and Richard (1993) stated, to improve service quality, the lodging industry needs to know which service attributes might influence choice intention. Failure to give due attention to the likely attributes can result in a customer’s negative evaluation of the hotel service and may refrain the chance of that guest returning to the hotel. Thus it is necessary to investigate the second question:

How can we recognize any attributes which have their most effect in enhancing the satisfaction level? And which attributes should be more emphasized for developing customer-oriented strategies?

3.2 Frame of Reference

Clear research questions based on the relevant literature will act as a focus for the research that follows. Research is theory dependent (Saunders et al, 2000).

Therefore we have designed our research questions based on the literature reviewed in previous chapters.

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Question 1: What are the general customer’s ratings and perceptions of hotel service quality in Iran?

The assumption of this research is that the customers are not satisfied with hotel services. Therefore, with a look as the literature we found that customer satisfaction is determined by defining customer perceptions of quality, expectations, and preferences (Barsky, 1995, Ch. 2). Said another way, “satisfaction, or lack of it, is the difference between how a customer expects to be treated and how he or she perceives being treated” (Davidow and Uttal., 1989, p. 19).

Customer satisfaction is created by exceeding expectations, delivering quality, and targeting customer preferences (Barsky, 1995, p. 66). Conceptualizing this process in quantitative terms, expectations are hypothetically measured from zero to exceed.

Customer satisfaction is also defined as either an overall judgment of satisfaction or given an attribute-specific definition. The latter is based on the assumption that satisfaction is the outcome of service quality (Cronin and Taylor, 1992). T here fore while we consider the service quality as the antecedent of the customer satisfaction we try to measure and assess it by applying SERVQUAL model (Parasuraman et al., 1988)

According to literature the SERVQUAL scale is based on a gap model (Parasuraman et al., 1985), The model identifies four key internal discrepancies or gaps relating to managerial perceptions of service quality, and tasks associated with service delivery to customers. The first four gaps (Gap 1, Gap 2, Gap 3 and Gap 4) are identified as functions of the way in which service is delivered, whereas Gap 5 suggests the gap between customers’ expectations and their perceptions of actual performance and drives the perception of service quality. Both the original version of SERVQUAL (Parasuraman et al., 1988) and its revised version (Parasuraman et al., 1991, 1994) contain five dimensions of service quality namely tangibles, reliability, responsiveness, assurance and empathy.

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Question 2: How can we recognize any attributes which have their most effect in enhancing the satisfaction level? And which attributes should be more emphasized for developing customer-oriented strategies?

According to the SERVQUAL model (Parasuraman et al., 1988) service quality can be measured by identifying the gaps between customers’ expectations of the service to be rendered and their perceptions of the actual performance of the service. Alexandris et al. (2002) have reported that SERVQUAL is a good approach for assessing practical issues of service quality in the hotel sector.

As we conduct our research by applying SERVQUAL statements (Appendix One) we are empowered be to recognize those attributes that have most effect in enhancing satisfaction level and should be more emphasized for developing customer oriented strategies.

3.3 Demarcations

This study due to time and resources constraints is not considering the seasonal customer perceptions like for example seasonal tourist or business persons participating in Iranian exhibitions.

This research problem will confine itself to investigate with hotel customer satisfaction levels precisely speaking the customers of Parsian Esteghlal hotel. This study will incorporate the SERVQUAL model to measure the Gap 5 which is satisfaction level and service quality from the customer point of view.

Case of Parsian Esteghlal Hotel

M A S T E R ' S T H E S I S

Satisfaction Level of Hotel Customers in Iran

Case of Parsian Esteghlal Hotel

Neda Shishavi

MASTER'S THESIS

Satisfaction Level of Hotel Customers in Iran

(Case of Parsian Esteghlal Hotel)

Supervisors:

Dr. Amir Albadvi Professor Assa Wallstrom

Prepared by:

Neda Shishavi

Abstract

Table of Contents

List of Tables

List of Figures

Chapter 1

General Problem Area

1.1 Introduction

1.2 Background

1.3 Problem Discussion

1.4 Disposition of this study

Chapter 2

Literature Review

2.1 Customer Satisfaction

2.2 Customer Satisfaction Models

2.3 Multi Dimensionality of Satisfaction

2.4 Benefits of Measuring Customer Satisfaction

2.5 The Customer Satisfaction and Service Quality

2.6 Service Quality

2.7 SERVQUAL

2.8 Service Quality in Hotel Industry

Chapter 3

Research Questions and Frame of Reference

3.1 Research Questions

3.2 Frame of Reference

3.3 Demarcations