School Papers

INTRODUCTION Revenue per available room (REVPAR) and Labor

INTRODUCTION

The hospitality industry is a broad
category within the service industry. It includes lodging, theme parks, event
planning, transportation and other additional fields within the tourism
industry. The hospitality industry.

Hotel Industry is closely related with
the tours and tourism industry. According to the survey done by statista the
industry was forecasted to reach around 553.8 billion U.S. dollars in retail
value in 2018.

As stated in Srivastava and Maitra
(2016) the Key Performance Index for the hotel industry are Average Room
rate  (Average Daily Rate), Bedroom
Occupancy rate (Occupancy rate), Revenue per available room (REVPAR)  and Labor Cost Ratio.

                                                 

Occupancy rate is measured as the
percentage of available rooms occupied over a specific period of time.

Average Daily Rate is the average price
paid per room on a given day.

REVPAR or Revenue per available room is
the average daily room revenue generated by available room.

Customer Satisfaction can be a difficult
to measure but without satisfied customers it is difficult to compete. It is
possible to develop a process to measure customer satisfaction.

Advertising ROI is the revenue
advertising and promotions bring.

According to the survey by statista, as
of 2016, the highest occupancy rates are highest in Europe with 70.4%, followed
by Asia Pacific with an occupancy rates of 69 percent. The Middle East and
Africa had the lowest occupancy rates at 61.6%. According to the same survey,
the average daily rates are highest in Middle East and Africa.

The tourism and hospitality industry in
India is emerging as one of the key drivers of growth among the service sector.
According to IBEF, domestic tourist visits, or DTVs to states/union territories
grew by 15.5% year-on-year to 1.65 billion during 2016. The top 10 States/Union
Territories contributed about 84.2% to the total number of DTVs.oreign tourist
arrivals or FTAs in India have increased by 18% year-on-year to reach 723
thousands as of 2017 September.  FTAs on
w-tourist visa in India have increased by 71% year-on-year to 118 thousand in
September.

India is expected to move up five spots
to be ranked among the top five business travel market globally by 2030.

Due to all these reasons international
hotel chains will likely increase their investment and expansion plans and are
expected to account for 50 percent share in the Indian hospitality industry, a
rise from the current 44 percent.

Customer  relations is very important in the hospitality
industry. If hotels want guests to keep visiting the hotel premises and
increase the business the hotels need to have an exemplary customer
relationship that entices and attracts the customers to come back to the hotel.

Managing the guests’ experience does not
revolve around just the service. It is the summation of all privileges that are
achieved to cultivate a solid and compatible client relationship.

Customer relationship management has
become a very important strategy for personalizing and improving customer
satisfaction in hotels. It is a tool to attract, acquire, retain and maintain
hotel customer engagements as a long term goal. As said by Hyun and Perdue
(2016) the main change in the last 25 years in 
the marketing theory of hotels id that it has shifted from transactions
to relationships. Long term customer-hotel relationships are recognized as a
key determinant of marketing success.

 

 

 

 

 

 

LITERATURE
REVIEW

 

Influence of national culture and
balanced organizational culture on the hotel industry’s performance by Nazarian et al. (2017). They described
the impact of culture on organization performance. The relationship between
national culture and the organization management and the factors influencing
it, adopting mix culture in the organization results helpful in understanding
the behavioral and psychological instances. A balanced organizational culture
is positive key for overall performance of the hotel management. Cultural
behavior and organization management should be a perfect blend to yield the
efficiency and performance in any hotel management.

 

Guidelines for Developing Hotel
Management in Phitsanulok to Compete in Changing ASEAN are explained by Phisunt Tinakhat (2015). Tourism is a
high revenue indicator to economy and indicates peace and friendly relationship
between nations. Decline trend in the foreign visitors in Phitsanulok comprises
on many factors to govern for.  Hotels
management should implement the most practical and efficient methods to impress
their clients. Issues like pricing is a universal problem that people face but
by offering discounts is minimized, other factors such as facilities, location,
brand image and services these should be handy to incorporate to customers  to build strategic variable impacting
customer satisfaction and loyalty. New initiatives in marketing via segment
targeting and use of marketing tools in hotel industry can have an effect.

 

Langvinien
and Daunoravi (2015) discuss the factors behind choosing the
ideal business model to be adopted by hotel management and hospitality
professionals. It is discussed that the hotel industry is different from other
industries in terms of intangible deliverables, perishability and
heterogeneity. In order to deliver the needs of the most demanding customers,
the strategy needs to be customer centric. Thus, good customer relationship
management and internal marketing strategy needs to be well established.
Employee empowerment is also a crucial part of building the right business plan
as employees who are at full productivity will contribute more to customer
service, which in turn will improve the customer’s opinion of the hotel.
Innovation and efficient use of technology are also to be seen as factors which
not only improve service quality and customer satisfaction but also
profitability and reduce operating costs.

 

Customer relationship with different
dimensions is related to the various marketing research actions as discussed in
Hyun and Perdue (2017). They
discussed the key forces that have impacted the marketing strategy of the hotel
industry, as how the marketing theory shifted from transactions to the
relationships. Marketing success is viewed as the long term customer-firm
relationship. Short term transaction volume and revenue are the
transaction-oriented marketing. The various customer relationship dimensions
discussed in the paper are: customer acquisition, retention, expansion and
defection. The emphasis is also given on understanding the return on investment
from hospitality marketing. The paper develops a customer relationship scale
which is multidimensional and validated with both marketing effectiveness
measures and financial performance measures. They identified six dimensions for
the customer relationship scales: engagement, motivation, cross buying,
commitment, customer defection and commitment. 
They concluded that there is a positive correlation between customer
relationship scale and marketing effectiveness and also positive correlation between
customer relationship scale and customer lifetime financial value.

 

Customer satisfaction which should be
the most important output is often ignored in many hotel efficiency studies. Assaf and Magnini (2012) have discussed
how customer satisfaction is directly related to the hotel efficiency scores.
Many studies have measured the hotel efficiency using methodologies like DEA
(data envelopment analysis), BDEA (bootstrapped data envelopment analysis), SF
(stochastic frontier) and MI (Malmquist Index). Their study gives the empirical
evidence of how there is a significant difference in the ranking of hotel
efficiency scores when customer satisfaction was excluded. They have derived
the hotel efficiency scores using the stochastic frontier method based on a
sample of leading hotel chains (Hyatt, Hilton, Mariott, Starwood, etc.) in the
US. They divided their study into two models: one where the customer
satisfaction was excluded and other where it was included. They used the public
data from American Customer Satisfaction Index and founded that a hotel’s
efficiency ranking among competitors changes when customer satisfaction is not
included as an output variable.

 

Dominici
and Guzzo (2010) have studied the overall customer satisfaction
level for the hotel and for each service supplied.  Customer satisfaction, decides if the customers
will return to a hotel or advise it to other tourists. It is pivotal to the
success of the hospitality business. Neglecting to pay attention to those hotel
attributes considered most important by guests, may lead to negative evaluation
of the hotel. Dominici performed a qualitative analysis of a large hotel in
Sicily (IT), the Sporting Club Hotel in the town Cefalù, using the Critical
Incident Approach (Hayes, 2008).

Customer satisfaction is the starting
point to build customer loyalty, therefore a long-term relationship. This
creates a loyalty’s stock in the enterprise which improves corporate image.

Through the analysis, he evaluated the
overall customer satisfaction level for the hotel and for each service
supplied.

 

Customer satisfaction is casually
related to service quality, consumption emotions, customer loyalty and
perceived value as described in Deng et
al (2013). They concluded that service quality directly or indirectly
positively impacts customer satisfaction. They also concluded that customer
satisfaction is positively and directly impacted by consumption emotions.
Consumer complaint is negatively related to consumer satisfaction.

 

Influence of strategies and key
management decisions on customers experience are explained in detail by Voorhees et al. (2016).The perception
of customers on quality and the overall customer satisfaction across service
sector is described. They suggest that service delivery alone cannot be the
criteria to measure customer satisfaction but the overall pre, post and core
delivery should be metric for service industry. They also explain how awareness
of service builds expectations of service delivery for the customers. They
provide insights into how social media can be used as platform to build
customer awareness on the services provided. They stress on the need to expand
beyond the core business strategies to gain service targets and retain customer
satisfaction.

 

Neirotti
et al. (2014) discuss that technology actually improves
visibility and revenues, but does not increase profitability. They illustrate
that that social media as a tool for value generation amongst hotels. For the
past few years, social media as a tool has to enhance visibility among
masses.   The observation was that a
strong online presence has a positive effect as far as the revenue is
concerned. This is due to quality of ratings rather than the volume of the
ratings given. However, we can see that even though their revenues go up, their
overall gross profit margin is not affected or is negatively affected. This is
due to the immense cost of fee provided to the info mediating agencies. This is
observed as being less in hotels with higher star ratings, located in places
lacking competition. However, small and medium range hotels should plan their
social media budget and strategy according to the target customers’
demographics and its intended positioning, due to the strong visibility
obtained and to keep costs under control.

Gender Differences among Hotel Guest
towards Dissatisfaction with Hotel Services are explained by Salleh et al. (2016). Dissatisfaction
is cause due to failure in providing expected services to a client in quality,
service, promises and failures in brand benchmark levels. As increase in the
competitors count and providing service to large volume of clients of highly
diverse cultures is it not easy to hotel management to make renovations. High
dissatisfaction level are usually seen in females compared to males because of
attribute comparisons ,such as 
advertising , poor experience , word of mouth etc. women are likely to  focus more on interpersonal component i.e.
they guide by personal experiences or evaluations. They try to interact more
with skilled person. Males are more dissatisfied when compared to females and
this result out because females are not expressive their feelings towards
negative experiences. Study was to understand the behavior of customers and
what factors were influencing there dissonance level among gender based
comparisons.

 

Gender based differentiation strategy is
also an important part of establishing customer satisfaction. Omar et al. (2015) states that gender
has a significant effect of service quality and customer experience. Females,
being more social oriented are most likely to have better satisfaction of
service quality and experience than males, who are seen as more goal oriented.
This makes it important to differentiate approaches towards male and female
customers albeit in a subtle manner.

But, how do we measure the intangible? Zeithaml and Berry (1998) have
developed an instrument called SERVQUAL which consists of five dimensions:
reliability, responsiveness, empathy, assurance and tangibles of service
quality. Thus, we can develop a correlation analysis of service quality with
the above factors. This will help us quantify intangible aspects like service
quality and help us improve customer service and experience.

 

The relation between customer sentiments
and online ratings of hotels are explained by Geetha et al. (2016). They try to answer whether customer sentiment
explains customer ratings and whether customer review sentiments and hotel
ratings are consistent across hotel categories. From their research they
conclude that the customers have better sentiments associated with premium
hotels. They also conclude that the variation in hotel ratings ae explained
better by customer satisfaction in the budget hotel range than the premium
hotel and it is possible that multiple factors are affecting customer ratings
for premium hotels.

 

The need to know the influencers for
customer experience in budget hotels are researched by many scientists. In
their research paper Subramanian et al. (2016)
after their research on budget hotels in China confirmed that drivers like
physical product and services are an essential port in budget hotel industry
and that services provided and cause a difference in customer satisfaction. Similarly,
Ren et al. (2014) had done similar
experiments on hotels in China have come to conclusion that the customers of budget
hotels check from basic attributes of the hotel room to professionalism of
service staff including location and all these parameters positively impact the
customer experience.

 

Imran
et al. (2017) have studied effect of customers experience on
consumer’s satisfaction, brand loyalty and word of mouth. They found out few
factors that positively affect the consumer’s satisfaction, brand loyalty and
word of mouth are peace of mind, moment of truth, outcome focus and product
experience.

 

Kandampully
and Suhartanto (2000) studied relationship between customer
satisfaction and customer loyalty. Due to increasing competition in this
industry, hotels have to focus on uniqueness; there is very little distinction
between products and services of one hotel with another.

There are only 2 strategies followed by
hotels to gain competitive edge: Low Cost and Unique Services. A satisfied
customer will not only become a loyal customer but will make other customers
come to your hotel. They came to conclusion that hotels need to be consistent
with their services as customers highly values consistency as well as
personalised services. Customer loyalty can be nurtured by providing consistent
superior room facilities, complemented by the personalised services by housekeeping
staff.

 

The effect of service performance on the
hotel customers and their retention in culturally diverse Iran is explained by Hosseni et al. (2015).They describe
need to efficient use of manpower to build brand visibility and enhance
customer loyalty. They studied the need of improving functional quality of
service offering and the need of enhancing the use of experienced staff for
better service and improving loyalty towards brand. They analysed how quality
of service is influenced by workforce experience, performance and how it
impacted brand association and experience of the customer. They describe how
direct and indirect experiences of customer build the perception that customers
develop on the hotel chain and how it influences customer choices.

Ali
et al. (2014) have studied various dimensions of customer’s
experiences along with the guests’ memories to check customer loyalty in
Malaysian Resort Hotels. This study has concluded that the customer’s
experience can be classified in four dimensions viz., entertainment, education,
esthetic and escapism. The study further concluded that these four dimensions
develop customers’ memories which ultimately affects the loyalty. Gee (2000) has stated that resorts are
built on the concept of creating such an environment that will give customers a
feeling of well-being, enjoyment and satisfaction. Ali et al (2013) concluded that guests get the motivation to travel
to Resort hotels in order to escape from their daily routine life or normal
life.

Stefano
et al. (2015) describe the use of qualitative methods to evaluate
the value of service offered to customer in the hotel industry. They describe
how the use of customization, communication, developing credibility and
reliability on the service through responsiveness can help retain customer
loyalty by using SERVQUAL scale. They used customer perception on service,
actual service level, membership function describing the frequency of the
visits to build a fuzzy decision making model to determine service quality.
They determined how service quality helps in positioning the hotel chain within
its customer segment and build loyalty. They emphasis on need to understand the
customer culture, improve process of managing human resources within the hotel
chain to retain customer loyalty.

Hussain
et al. (2015) describe how team building, knowledge sharing of
best practices and customer service be measured to improve customer
satisfaction in hotel industry. They explain how socio-economic positioning of
the hotel sector helped scale industry. The need to enhance quality as well as
innovative practices to improve services is also discussed. They used
structural modelling and Partial Least Squares method to identify the relation
between knowledge sharing behaviour between employees, team culture and how
they influence service innovation. They stress on the need of employ service
innovation and new service techniques development to achieve high customer
loyalty and enhance market share.