Aveneu Park, Starling, Australia

SCMHRD per available room (REVPAR) and Labor


Understanding the dimensions of customer relationship in hotel industry and how it impacts customer satisfaction

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Marketing research paper


A.Ashwin, Ajita Kathuria, Diksha Aswani, Debdatta  Chaudhary, Jaspinder Singh, Ganesh Kamath, Lohit Kumar



Customer satisfaction is a very important variable in the efficiency of the hotel industry worldwide. For many nations tourism is a major contributor to the economy and revenue. So it is very important to study how hotel industry contributes to the economy of a nation.  For efficient hotel industry in any nation, it is utmost priority to give importance to the culture of the nation and being open to different cultures. Understanding different behaviours and gender diversification to have better customer relationship is required. Our study is to analyse various variables like gender diversification, service quality, brand awareness, word of mouth, pricing (premium hotels, budget hotels) that lead to customer satisfaction. Also, we have tried to research how customer satisfaction leads to customer loyalty and hence, efficient hotel rankings in the industry. 



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.









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 whether or not 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.







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