Importance of Customer Service in Hospitality

Exceptional Service Quality in the Hospitality Industry: It’s Role in Good and Bad Times

Abstract

Customer satisfaction is widely acknowledged to be causal in driving repeat and new business of hospitality enterprises and is considered to be integral to their success. With the delivery of service quality being vital to customer satisfaction, hospitality enterprises make great efforts to maintain, improve and distinguish their service quality through the adoption of corporate strategies and operational policies and procedures. Recent years have seen enormous expansion in the hospitality industry and the introduction of sophisticated technology, not just in areas of computerisation and Internet, but also through the use of various applications that aim to increase the comfort, convenience and safety of guests.

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With competition in the industry having become intense and advances in technology having become available across the spectrum of hospitality organisations, delivery of exceptional service quality is considered crucial for achievement of competitive advantage. Again whilst the last two decades have been a period of growth for the industry, current global developments, namely the astonishing increase in prices of oil, worldwide inflation in food and commodity prices, the banking crisis, the credit squeeze, and the impending recession in the United States indicate the onset of very difficult times for the hospitality business. The spectre of lower occupancy, lesser rates, and higher costs stares the industry in its face and the prospect of an industry shakeout, accompanied by the closure of inefficient units and the survival of the fittest is imminent.

Whilst such situations could possibly entail cost cutting exercises by industry members, along with reduction in services offered to guests, providing of exceptional service quality may well be vital to maintenance and improvement of competitive advantage and be the key to riding out difficult times. This dissertation investigates the phenomenon of customer service, its importance in the success of hospitality organisations, and its role during periods of economic downturn.

Table of Contents

Introduction

A. Overview

Achievement of customer satisfaction is widely accepted by business leaders and academics to be the most significant criterion for shaping the quality of products or services that are deliverable to customers, both through the actual product or service, and the corresponding service.^[1] With the intensely competitive nature of the modern customer-centric business environment ensuring the elimination of businesses that dissatisfy their clients with their products/services, customer satisfaction is vital not just for corporate growth, and profitability, but for the very survival of today’s corporations.^[2]

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Customer satisfaction, which is greatly dependent upon the quality of the customer service provided, is recognised to be critical to business success, primarily because of its role in driving future sales from both new and existing customers. Numerous studies have corroborated the theory that it costs five times the amount of time, money, and resources to attract new customers as it does to retain existing clients.^[3] Losing existing clients very clearly is among the worst things that can happen to business firms. Customer satisfaction is also accepted to be one of the cheapest and most effective ways of promoting goods and services; with no form of advertising being as effective as word-of-mouth publicity and actual customer endorsements. Satisfaction strengthens affirmative feelings toward the product or service and leads to a superior probability of repurchase; dissatisfaction on the other hand leads to downbeat perceptions and reduces the probability of repeat purchases.^[4]

“Or as others put it: …if consumers are satisfied with a product or brand, they will be more likely to continue to purchase and use it and to tell others of their favourable experience with it … if they are dissatisfied, they will be more likely to switch brands and complain to manufacturers, retailers, and other consumers about the product.”^[5]

Achieving high levels of customer satisfaction poses intense business challenges because of the ambiguity embedded in the concept as well as because of its abstract nature. With the actual manifestation of the level of satisfaction varying both between individuals, and between products and services, satisfaction levels depend upon a range psychological and physical variables that evidence positive correlation with behaviours indicative of satisfaction, like repeat purchase and recommendation rate.^[6] Such levels of satisfaction can also depend on other options available to customers and on the qualities of other products or services against which the organisation’s products or services can be compared.^[7] Despite the very broad range of parameters involved in its assessment and determination, customer satisfaction is overly dependent upon, related to, and driven by customer service.

“Substantial empirical and theoretical evidence in the literature suggests that there is a direct link between service quality and behavioural intentions (Bitner, 1990; Bolton and Drew, 1991a). Among the various behavioural intentions, considerable emphasis has been placed on the impact of service quality in determining repeat purchase and customer loyalty (Jones and Farquhar, 2003). As pointed out by Bolton (1998), service quality influences a customer’s subsequent behaviour, intentions and preferences. When a customer chooses a provider that provides service quality that meets or exceeds his or her expectations, he or she is more likely to choose the same provider again. Besides, Cronin and Taylor (1994)” also found that service quality has a significant effect on repurchase intentions. ^[8]

The delivery of quality service is expected to be a major challenge that is likely to confront hospitality managers in the immediate future and will be vital for achieving success in the intensely competitive modern day global markets.^[9] Hospitality service experiences are overly complex because they range from the exceedingly trivial to the extremely vital.^[10] They differ to a great extent in their character and may be straightforward or multifaceted, standard or bespoke, low or high technology, distant or responsive, little or highly skilled, or recurrent or infrequent.^[11] They can furthermore concern the execution of obligatory utilitarian actions or can involve grand and highly-strung hospitality events.Hospitality encounters, as distinct from material products or pure services, consist of a fusion of products and services, and satisfaction, (in such situations), represents the sum total of satisfactions with the individual traits of all the products and services that make up the experience.^[12]

B. Elaboration of Problem

The last few decades have witnessed enormous growth in the hospitality industry. Driven by a range of technological, social, economic, and political developments like the tremendous advances achieved in communication technology, the ever-increasing use of the internet, the breakdown of the Soviet Union, the formation of the European Union, the crumbling of travel barriers, economic liberalisation across countries, the proliferation of budget airlines, cheaper travel, and the opening of numerous new travel and tourism destinations, the hospitality industry has expanded like never before and that too across the world. New hotels, new restaurants, new resorts and new spas have mushroomed in near and distant locations to provide people with numerous hospitality options.

Whilst the industry has been buffeted by events like the September 11 bombings, the London Tube explosions, and the SARS and Bird Flu epidemics, the steadily increasing economic affluence in the western countries, as also in the countries in Southeast Asia and the Pacific Rim, in the last two decades, has ensured that such setbacks were overcome and the hospitality sector remained vibrant and prosperous. Such a period of inexhaustible growth now appears to be coming to an end.

With oil prices having neared USD 140 per barrel and currently hovering at around USD 125, the days of cheap air travel appear to be irrevocably over. Whilst local and international airlines had started ringing alarm bells when the price of oil crossed USD 70 per barrel last year, the events of the last few months have shaken up the whole airline and travel and tourism industry, cast doubts on the survival of several airlines, and led to the cancellation of thousands of airline bookings and hotel reservations. Apart from the price of oil, the disastrous denouement to the risky home mortgage policies adopted by major international banks, followed by thousands of home loan bankruptcies, billions of dollars in banking industry losses and a credit squeeze on business and personal lending have also contributed to the onset of a recession in the USA.

The deepening recession in the United States, the biggest global consumer of goods and services, accompanied by cut downs in jobs and mortgage bankruptcies, is bringing in a global economic downturn that is expected to bring extremely difficult times for the hospitality industry, not just in the United States but also in the UK and in other countries.

“More than one in three hospitality businesses in the UK are feeling less confident about economic prospects over the next 12 months than they do now, according to research launched by American Express. The survey also found that overall confidence has decreased in the last 12 months, with only 29% feeling more confident about the economic environment, down from 38% in 2007. Among hoteliers the number feeling confident has dropped to 34% from 41% a year ago. In comparison for restaurateurs the figure is only 24%, a fall of 10%. For pubs the picture is similar with only 20% stating that they feel more confident about the economic prospects facing their businesses over the next year than they do today.”^[13]

Whilst the probability of a shakeout in the industry seems to be imminent many veterans in the business appear confident of riding it out on the strength of enhanced customer service and total customer experience.

“Kathryn Pretzel-Shiels, Head of Hotels and Restaurants at American Express explains: ‘Like any other the hospitality sector is not immune to prevailing economic conditions, so it comes as no surprise that Britain’s hospitality industry feels more circumspect about business prospects than it did last year. The economy is forcing the agenda to a certain extent but the industry is fighting back. There are still opportunities to make money by providing a quality product and memorable service, as consumers are still willing to dine out and are doing it more than ever before.’”^[14]

A hotel chain like the Ritz Carlton, (the winner of two Baldridge quality awards and a byword in the area of service quality), which has weathered several economic downturns and has yet grown from strength to strength over the years, provides an outstanding example of the importance of exceptional service quality.

“The Ritz-Carlton is well-known for providing consistent service throughout all of its properties. The company began its commitment to quality in 1983 with such simple touches as fresh flowers throughout its hotels, white ties and aprons, and gourmet cuisine. It also established its Gold Standards for customer service—which include its credo, motto, employee promise, three steps of service, and the 12 service values—leading the company to repeatedly outperform its competition, increase customer loyalty (the average guest spends $250,000 at a Ritz over his lifetime), and win the Malcolm Baldridge National Quality Award twice”^[15]

Whilst the Ritz Carlton is of course the most well known example of a customer-centric and service quality oriented organisation in the hospitality industry, a number of other establishments like the Four Seasons, the Mandarin Oriental, The Marriott and the Red Carnation provide brilliant examples of how focus on exceptional customer service can increase the competitive advantage of organisations and ensure performance, business and profitability during the worst of times.

On the flip side, whilst most business managers are aware of the need to maintain if not improve quality during economic downturns, the actual picture on the ground becomes significantly different in many establishments; where quality programmes are cut down or even abandoned; very often at the cost of quality. “When economic troubles loom, we’ve found the usual knee-jerk reaction is to sacrifice programs associated with quality and the customer experience – training, quality assurance and mystery shopping programs, guest research, etc.”^[16]

C. Determination of Objective

With the price of oil showing no sign of rebating to previously unimaginable levels of 80-90 US dollars per barrel and the global economy caught in a cleft stick; of severe inflation in prices of food as well as commodities like steel and cement on one side and an impending and long-lasting recession in the United States on the other, all indications point to difficult economic times and squeezes on travelling, holidays, discretionary spending, hotel accommodation and restaurant visits.

One of the most important routes to achieving competitive advantage in such difficult and worrying situations is through enhancement of customer service quality to superior levels and improvement of hospitality experiences of customers, not only when compared to previous experiences in the same establishment, but also in comparison with that available elsewhere. Whilst the truth behind this theory is widely accepted and beyond doubt, embattled organisations, challenged by dropping revenue figures, higher costs and lesser margins, frequently adopt the opposite route, taking action to reduce and even abandon quality improvement programmes and actions in order to effect organisational economies and cost savings.

This study aims to examine the components of customer service with special emphasis on the hospitality industry and the ways and means in which it can be enhanced in times of economic downturn to increase the competitive advantage of organisations.

2. Literature Review

A. Service Quality

The key objective of organisational and marketing strategies of business firms in today’s intensely competitive and fast changing business environment is to make profits and further organisational growth. Customer satisfaction, quality and retention have become global management imperatives that are important for all organisations. With the maturing of different industry sectors high quality service has increasingly become an important tool in business success. The hospitality industry and its various components, mainly different types of hotels and restaurants, are certainly not exempt from the challenges of increased competition or rising consumer expectations of quality.

Researchers have defined service quality in different ways

“There are many researchers who have defined service quality in different ways. For instance, Bitner, Booms and Mohr define service quality as ‘the consumer’s overall impression of the relative inferiority / superiority of the organisation and its services’. While other researchers view service quality as a form of attitude representing a long-run overall evaluation, Parasuraman, Zeithaml and Berry defined service quality as ‘a function of the differences between expectation and performance along the quality dimensions’. This has appeared to be consistent with Roest and Pieters’ definition that service quality is a relativistic and cognitive discrepancy between experience-based norms and performances concerning service benefits.”^[17]

Other researchers have conceptualised customer satisfaction as “an individual’s feeling of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.”^[18] Conceptualisations of satisfaction are of two main types, i.e. transaction-specific satisfaction and cumulative satisfaction, transaction specific satisfaction being the customer’s evaluation of his or her experience and reactions to a particular service encounter and cumulative satisfaction being the customer’s overall evaluation of the consumption experience to date ^[19]

The satisfaction level of a service encounter arises from differences between the expectations of customers and the actual experience from the provided services, the perceptions of service encounters being vital factors in creating long-term loyalty, customer satisfaction and quality awareness.^[20]

Whilst the Nordic conceptualisation of service quality was developed in the mid 1980s by Gronroos and emphasised the role of technical and functional quality on service encounters, Parasuraman, Zeithaml and Berry developed a new model of service quality, called the SERVQUAL model in 1988.^[21] The SERVQUAL model has five dimensions, reliability, responsiveness, empathy, assurances, and tangibles, which together form a basis to measure, quantify, and assess the service experience and to determine the ways in which the viewed and expected service would influence the perceived service quality.

• Reliability is the ability to perform the promised services dependably and accurately.
• Responsiveness is the willingness to help customers and provide prompt service.
• Assurance is the knowledge and courtesy of employees as well as their ability to convey trust and confidence.
• Empathy is the provision of caring, individualised attention to customers.
• Tangibles are the appearance of physical facilities, equipment, personnel and communication materials.^[22]

The SERVQUAL model views service quality to be the gap between the expectations of customers (E) and their perceptions of the performance (P) of the service providers.

“According to Parasuraman et al. (1985), service quality should be measured by subtracting customer’s perception scores from customer expectation scores (Q = P ± E). The greater the positive score represents the greater the positive amount of service quality or vice versa.”^[23]

Whilst the model has been the subject of criticism, mainly because of its inadequacy in quantifying and thus in measuring expectations of service from customers, it has nevertheless been used as the basis for investigation by other researchers who have developed modified versions of the model.

Despite the essentially theoretical nature of the models discussed above most quality conscious organisations take actions across a wide front of organisational activities to follow their underlying principles and take actions for minimisation of negative customer perceptions and strengthening of positive hospitality experiences.

“Companies that achieve high levels of customer satisfaction display a zeal for superior service from the very top of the organization chart. This dedication constitutes the foundation of customer-centricity. Without the values and culture that leaders inspire, none of the other principles can be effective for long. Customer-centric values and culture inform the hiring process and animate the systems of training and rewards. Instilling values of this sort may be the ultimate test of leadership. Leaders of customer-centric companies clearly articulate what kind of organisational culture they want and consistently sell employeeson its key principles, leaving no doubt about the significance that members of senior management attach to customer-centricity. More important than communications, however, is the leaders’ willingness to take action when the primacy of high-quality service is challenged.^[24]

B. Routes to Achievement of Exceptional Service Quality

The relationship between quality of service and successful hospitality establishments is frequently noticed but rarely recognised as a causal relationship. Reppa and Hersh (2007) report that interviews with 40 executives of truly successful companies operating in intensely competitive environments during a study by Booz Allen suggest that these organisations are distinguished by superb levels of service, which very often are viewed not just as being integral to the organisations but also as their important differentiators. Most such companies consciously route their organisations towards customer-centric behaviour and constant enhancement of service quality.

Companies known for high levels of customer satisfaction exhibit an enthusiasm for providing better service from the very summit of the organisation.^[25] This commitment makes up the basis of customer-centricity. Corporate strategies that are exclusive of the principles and mores of their leaders cannot really be effectual for long. Customer-centric values and traditions drive the recruitment processes of such companies, provide vitality to training, motivation and reward systems; experts state that building value systems of this type can well prove to be the definitive criterion of leadership. Leaders of such businesses are eloquent about their requirements of organisational culture and leave no doubt about the importance they attach to service quality.^[26]

Whilst most organisations by and large follow their own strategies for achieving of exceptional service quality, certain principles, policies, and strategies are important for the continued success of all hospitality organisations.

i. Human Resource Policies

Whilst strong HR policies are accepted to be utmost importance for achievement of high levels of service quality, especially so in the hospitality industry where interaction between organisational employees and guests occur at various points, actual HR practices leave much to be desired in many establishments, and much of the hospitality industry, especially in the middle level and economy level hotels and restaurant segments, is characterised by low wages, part-time workers and high turnover.^[27] This is especially true of the London budget hotel and restaurant segment, which is peopled by workers from East Europe and Asia, many of whom are paid low wages, have essentially temporary jobs, and are weak in communicating in English. Staff turnover in many hospitality establishments is often as high as 100 %.^[28]

Hotels Chains like the Marriott, the Four Seasons, and the Ritz Carlton, on the other hand, are obsessed with issues concerning employee selection, training, remuneration, and retention, believing and very rightly so, that the quality of service is predominantly dependent upon employee calibre. ^[29]Such organisations populate their establishments with superior staff who are specifically chosen for their natural predispositions for caring for people. The Marriott recruitment philosophy of “get (ting) it right, first time” conceals a complex and well thought out strategy of recruiting people with great care in order to provide for near perfect fits. Again most such establishments pay as much attention to training, motivating and developing employees as they do to selecting and recruiting them.^[30]

“Ritz-Carlton uses a process that may set the standard for methodical rigor. It evaluates each applicant using scientific, behaviour-based assessment tools developed by the human resources consulting firm Talent+, tools derived from statistical analysis of top performers’ behavioural characteristics in each job category. Potential hires are tested both for cultural fit and for traits associated with customer service excellence, including what Ritz calls an innate ‘passion to serve.’ Says John Timmerman, vice president for quality and program management: ‘The smile has to come naturally.’” ^[31]

The interview process furthermore requires candidates to spend time with hotel staff whilst they operate on their regular functions, giving prospective employees a practical picture of the rigours and responsibilities involved in the job and the opportunity to withdraw in case of any apprehensions or misgivings. With in-house company research indicating that wrongly recruited employees could cost the organisation many times their annual salary, the Ritz tries out initiatives like these to minimise attrition. The company’s staff turnover, which is less than 15 % of the industry average, adds, both to stability and to profitability. ^[32]

ii. Essential Areas of Focus

Whilst service quality is integral to customer satisfaction, its delivery, in the hospitality industry and elsewhere, is essentially multifaceted and subjective, and thus far more challenging than product quality. The issue has become more complex because of the fact that whilst hospitality clients have until now been satisfied with basic and fundamentally simple products and services, the technological advances of recent years have introduced new dimensions of comfort and convenience that have come to be regarded as part of high quality service.^[33]

Despite a plethora of innovative products, services and technologies now available in hotels, people still share a basic set of requirements critical to their experience. The top five factors that drive loyalty across all industry segments are (a) value for price, (b) room cleanliness, (c) employees “can do” attitude, (d) friendliness of the front desk staff, and (e) comfortable bed and furniture. ^[34]

These factors play key roles in the provisioning of service quality and all successful hotels are fanatical about issues like guest comfort, cleanliness, and housekeeping. At the Mandarin Oriental, which won the highest ranking for Housekeeping in the Market Metrix Hospitality Index ranking for 2006, Barsky and Nash state that customers expressed their appreciation on various facets of housekeeping services like twice a day turndown of sheets and carefully chosen flowers.

iii. Technological Advances and Service Quality

Recent times have seen incredible progress in technical knowledge, expertise, and know-how, and their use in across almost all areas of human action. Hardware technology, software development and the expansion of the World Wide Web have provided new facets to the hospitality sector. Technological development has led to improvement in efficiencies, reduction of expenses, heightening of customer satisfaction, expansion of revenues, and increase in competitive advantage of members of the hospitality industry. The emergence and the progressive adoption of the Internet by millions of individuals across the world has opened up new dimensions in human connectivity and influenced the actions of all business sectors.

“The Internet, as a collection of interconnected computer networks, provides free exchanging of information. Over 400 millions of computers on more