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This chapter reflects the entire concept of this study through the major literatures that already being published. The major part of the following chapter points out the main variables including brand trust, service quality and customer satisfaction.

The outline of this project covers reviewing hotel industry in general and hotel industry in Dubai in particular. Afterwards it discusses to make clear the hotel purchase behavior and the importance of brand trust in hotel selection. Eventually it continues to explain what prior researchers have done upon the relevance of customer satisfaction with delivered service and service quality.

Hotel Industry

The hotel industry is one the most significant part of travel and tourism industry which in1995, generates over 247$US billion worldwide (Olsen, 1996). According to Olsen (1996), definition of a hotel as a brick in the wall of industry is, “any facility that regularly (or occasionally) provides overnight accommodations”.

Basically there are various independent and yet competing elements (hotels, resorts, motels, guest-houses etc.) inside the hotel industry which make it highly complex for this significant business (Go & Pine, 1995; Littlejohn, 2003). Besides every one of these elements has an intrinsic characteristic and quality (one star to five star or economy to luxury) and various types of customers (business, leisure & convention travellers) (Jones, 2002; Lewis et al., 1995).

On top of that to elucidate the diversity of the industry, an observation over the operating environment inside the industry can be beneficial. The operating environment has been expanded in three competing environments including international, national and local (Olsen 1996). The complexity of the hotel industry has been confirmed by many sub-sections inside of it which also have the competition at a boarder level within specific geographic areas (Lewis et al., 1995). For instance at the product level, the hotel industry is classified by quality of hotel and style. To be more specific, many of the customers are familiar with the star quality ratings and partly boarder classifications of luxury, first class, mid-range and economy. Yet there are various types of hotel such as business or leisure hotels, apartment or all-suite hotels inside of each category (Lewis et al., 1995; Littlejohn, 2003).

In an equal manner the geographic district of a hotel such as CBD, city outskirts, seaside, rural or roadside grants a plausible classification of hotels (Olsen, 1996). Generally speaking the rival of a first class hotel is another first class hotel within any given geographic domain. The competition may also extend to the luxury, mid-range or economy hotel conditional upon the range of the hotels available at the same location (Lewis et al., 1995). Moreover, the intricacy of hotel industry becomes more transparent when we observe the structure of the industry. The separation of ownership and management (franchisors, management firms and owners) makes the structure of the industry highly complex (Dube & Renaghan, 1999c; Jones, 2002; Littlejohn, 2003).

Hotel Industry in Dubai

The geographic location of Dubai is extremely strategic. It is located at the confluence of the Middle East, Asia, Western Africa and Central/Eastern Europe. It is placed on an origin point of ancient civilizations, stating point of three major religions and a perfect transit point for the travelers. In compare with other Gulf countries, “Dubai is the undisputed epicenter of an iconographic destination development” (Steiner, 2009). “It also considers as a “hyperreal” destination (as opposed to a cultural heritage destination) with the potential to establish progressive enterprises and create a novel concept to appeal to the westerners” (Stephenson et al., 2010).

Furthermore, one of the fastest growing economies in the world belongs to Dubai with a per capita income of US$31,000 (IMD, 2005). Globally, in 2006, the Middle East Travel and Tourism economy was ranked number nine in terms of absolute size (US$150 billion) and is anticipated to grow to US$280 billion by 2020 (WTTC, 2007a; Husain, 2007a)

Based on data have been released by Dubai Department of Tourism and Commerce Marketing (DTCM), the popularity of spending holidays time in Dubai rockets in the year of 2008. Hotel industry gains 4.3 billion Dirhams (£593.6) during a period of four months in 2008. This amount of revenue displays an escalation of more than a fifth on the 3.5 billion Dirhams recorded in the same period of time in 2007.

Statistic shows 7% enlargement of the guest’s number in Dubai’s hotels and apartments over the first quarter of 2008. Also the number of nights spend guests increased 10% at the same time. Furthermore, the number of hotel rooms and hotel apartments multiplied, 15.9 % on 2007. This rise in the number of rooms Helped to hotel revenues in Dubai to reach a record of Dh15.25 billion (US$4.15bn) in the year 2008.

Table 2.1: Hotel room and bed occupancy, 2008 (source: DTCM/One Stop Information Centre)

5-Star

4-Star

3-Star

2-Star

1-Star

Listed

All Groups

Operating Hotels

49

53

45

42

133

19

341

Total Available Rooms

14,942

8,741

4,985

3,432

4,679

482

37,261

Average Rooms Occupied

12,723

7,176

3,979

2,665

3,527

316

30,386

Room Occupancy Rate

85.1%

82.1%

79.8%

77.7%

75.4%

65.6%

81.5%

Total Available Beds

21,553

12,904

8,357

5,681

8,821

1,040

58,356

Average Beds Occupied

18,483

10,957

6,374

4,295

6,195

632

46,936

Bed Occupancy Rate

85.8%

84.9%

76.3%

75.6%

70.2%

60.8%

80.4%

Table 2.2: Hotel revenues, 2008 (source: DTCM/One Stop Information Centre)

Dirhams

5-Star

4-Star

3-Star

2-Star

1-Star

Listed

All Groups

Lodging Revenue

5,493,290,433.00

67.8%

1,498,192,274.84

18.5%

495,033,308.03

6.1%

279,613,134.82

3.4%

315,027,884.83

3.9%

24,904,970.35

0.3%

8,106,062,005.87

100.0%

Other Revenue

3,545,564,616.56

69.0%

1,003,442,989.56

19.5%

351,071,827.71

6.8%

169,551,995.81

3.3%

65,373,029.72

1.3%

413,674.69

0.0%

5,135,418,134.05

100.0%

Total Revenue

9,038,855,049.56

68.3%

2,501,635,264.40

18.9%

846,105,135.74

6.4%

449,165,130.63

3.4%

380,400,914.55

2.9%

25,318645.04

0.2%

13,241,480,139.92

100.0%

Average Room Rate

1,182.91

527.00

340.85

287.45

244.71

215.93

730.88

Average Revenue Per Hotel

184,466,429.58

47,200,665.37

18,802,336.35

10,694,407.87

2,860,157.25

1,332,560.27

38,831,320.06

Figure 2.1: Dubai hotel visitors 1999-2008 (source: DTCM/One Stop Information Centre)

HOTEL PURCHASE BEHAVIOR

The parameters that affect the hotel selection and purchase behavior by consumers have been reviewed in this section. The hotel purchase within the context of the consumer purchase decision has been addressed in this section. Also a review of the literature on hotel selection and decision involvement decorated aforementioned subjects.

The hotel purchase process is related with customer purchase framework and consists of various stages including problem recognition, information search, product Assessment and choice (Mowen, 1987). Moreover, the purchase decision making is affected by number of individual and environmental items that influence the purchase process including decision involvement (Foxall & Goldsmith, 1994; Mowen, 1987). Furthermore, the consumer purchase decision occurs within a living area formed from individual and environmental variables that influence the purchase process. Purchase behavior comprises of motivations connected to both symbolic and actual product values and restrains mutuality among group influences, sub cultures, motivation, personality and psychographics (Foxall & Goldsmith, 1994).

The participation in the procedure of making decision reflects the importance to the consumer of the results of decision (Foxall & Goldsmith, 1994; Mowen, 1987). In a same way the scale of perceived risk in product procures will affect the level of investment in the decision process (Foxall & Goldsmith, 1994; Mowen, 1987).

Perceived risk possibly comes from several different origins including psychological, physical, functional and financial aspects of the purchase decision (Foxall & Goldsmith, 1994; Mowen, 1987). The process of hotel selection is a highly important and risky routine, especially for leisure travelers. This process includes the potential for psychological, physical, functional and financial risk. Brand loyalty is an issue which could accelerate the hotel selection process and increase the level of confidence on the customers (Campbell & Goodstein, 2001; Mitchell & Greatorex, 1993).

Briefly speaking the hotel selection decision is a highly significant issue especially for the travelers whom unfamiliar geographically with their destinations. Considering various aspects interfere with the hotel selection decision process, draw a bigger picture of the whole routine and make it easier to understand of its significance. There is several level of risk for a decision maker including physical risk arising from safety and security aspects of the decision, functional risk from selecting a poor quality hotel and financial risk from a poor decision.

Hotel Selection

Basically the most demand for hotel industry is upon the accommodation. That is the fundamental concept of industry. Apart from primary demand there is a secondary demand that originated from different type of purpose for instance a business meeting. It is quite vital to realize basis for action why individuals consume hotels, why they prefer one hotel to another and what benefits result for the individual consumer.

The prior researches based on selection criteria have inclined to concentrate upon a particular aspect, such as purpose of travel (Callan & Kyndt, 2001; Lockyer, 2002; McCleary, Weaver & Lan, 1994), age (Wei, Ruys & Muller, 1999), gender (McCleary et al., 1994), or hotel standard (Callan & Bowman, 2000).

Aspects of The fundamentals hotel product meddle with the ranking process and they are extremely significant, although the particular feature of cleanliness has been chosen as the most important factor (Callan & Bowman, 20008; Lockyer, 2002; Weaver & Oh, 1993). According to the statistic over ninety per cent of business travelers ranked cleanliness as the most important aspect (Weaver & McCleary 1991). Other aspects of the fundamental hotel product such as comfortable beds and rooms and high quality towels (Weaver & McCleary, 1991; Weaver & Oh, 1993) were ranked right after the cleanliness. In following there are several other features as important for hotel selection, including quality staff and service (Lockyer, 2002; Weaver & McCleary, 1991; Weaver & Oh, 1993), safety and security (Lockyer, 2002; Weaver & McCleary, 1991) and added value extras such as free newspapers and cable TV (Weaver & McCleary, 1991; Weaver & Oh, 1993).

Differential facets linked to the especial market segments based on age, gender or purpose of trip. McCleary, Weaver and Lan (1994) conducted a research that compare the travelers based on their gender. They found that female travelers are more focus on the security of hotel while male travelers voted a fax machine and suite rooms are the most important.

Also regarding the particular features they found that female applied some items more than the opposite sex. Hair dryers, ironing facilities, bathrooms and room service are some of them. On the hand male travelers intended to use telephone more. Considering leisure travelers in other study indicated that the price of service is more important for them rather than the business travelers (Knutson, 1988).

Aforementioned researches which all belong to the late 80s or 90s pointed at some features that maybe lost their importance at current days. To be exact, based on the research conducted by Dube and Renaghan (1999b) cleanliness, as the most important factor, has been replaced by another item which called “Brand”. It may be because of brand development that happened during 90 decade and elevated standards and aspects of the core hotel product. All the results emphasis on the fact that changing nature of expectations is unavoidable and different life style requires different products.

Brand and Hotel Selection

One of the main aspect of the hotel selection links to the consumer awareness of the hotel features and standards. Given the fact that potential customers are unfamiliar with the location, we can suggest they are unaware of the hotels presence in that location or their quality. Existence of the unfamiliarity and unawareness with the consumers makes them to rely on other cues to select their accommodation. In such satiation item of brand can be extremely sizable (Dube & Renaghan, 1999b; Krishnan & Hartline, 2001).

Brand recognition issue has been pointed as a highly significant factor for services (McDonald, de Chernatony & Harris, 2001; Selnes, 1993). Several characteristics have been mention for this reason such as high levels of intangibility rendering quality Assessment prior to consumption difficult (Lewis et al., 1995).

According to Krishnan and Hartline (2001), the products such as hotel and restaurants with simultaneous and inseparable production and consumption, which involves high levels of experience effects, can only be appraised during and after the consumption process. This demands external cues to Help a form a judgment on the likely levels of satisfaction to be anticipated in the consumption process.

The subject of perceived risk in a purchase is proceeding to anticipated value and willingness to buy (Sweeney, Soutar & Johnson, 1999). For this reason consumers often base their hotel choice on their beliefs about brand (Jiang et al., 2002; Kotler, Bowen & Makens, 1996; Morgan, 1991).

A degree of relationship was identified between affective quality and perceptions of functional quality by Dardan and Babin (1994). They conducted a retail study that suggested consumers use tangible aspects to conclude probably intangible qualities. Affective quality was caused from store design as well as internal and external tangible features. The function of the Internet is gaining credibility in this context as part of a selection process as it allows consumers to look at the tangible features of the hotel before visit.

The role of the brand, as an external cue to quality, is highly significant to select a hotel, although there is a lack of research that has conducted the role of the brand in the initial or subsequent purchase of hotel accommodation. The role of trust in the brand (discussed in proceeding), probably has been seen as a significant external cue in the purchase process. It would be especially valuable tip for chain hotel managers and properties where customer satisfaction with one hotel possibly will be transferred to other hotels within the same brand.

CUSTOMER SATISFACTION

Customers form their satisfaction with a target product or service as a result of subjective (or direct) comparisons between their expectations and perceptions (Oh, 1999). Satisfaction is an “Assessment rendered that the (product) experience was at least as good as it was supposed to be” (Hun, 1977). Satisfaction may best be understood as an Assessment of the surprise inherent in a product acquisition and/or consumption experience (Oliver, 1981). Customer satisfaction, namely is the pre-purchase expectation level and the degree to which the product and service performance deviates from that level. This later concept is known as disconfirmation, and may be favorable (where performance exceeds expectations), unfavorable (where performance falls below expectations), or zero (where performance equals expectations) (Oliver, 1981).

As we can see most arguments about customer satisfaction define customer satisfaction as a result of comparison of customer expectation and what they really receive. But both expectations and perceptions also have been found to influence customer satisfaction and subjective disconfirmation under various circumstances (Churchill and Surprenant, 1982).

Customer satisfaction in hotel industry

For the hotel industry, guest satisfaction is the essential factor to provide revenues and profits. Therefore, all the researchers in hotel industry identify the customer satisfaction as the critical component of the hotel industry’s value position to guest. Oh (1999), worked on the interaction between service quality, customer satisfaction and customer value and their influence and relationship to repurchase intention, and word of mouth. In that study Oh used a sample from the luxury segment of the hotel industry.

Figure 2.2: Results of the path analysis of the proposed model (Oh, 1999)

Actual price

Perceived price

Perceived service quality

Perceived customer value

Customer satisfaction

perceptions

This model shows that the perceived service quality and perceived customer value have direct influence on customer satisfaction and actual price while perceived price and perceptions have indirect influence on customer satisfaction.

Zeithaml (1988), defined customer value as “the customer’s overall assessment of the utility of a product based on perceptions of what is received and what is given”. In the hotel industry value is delivered through a number of vehicles including quality of rooms, atmospherics of the hotel, meals and recreational/sporting facilities. Thus, value is a bundle of tangibles and intangibles and differs in configuration across individuals (Nasution, 2008). From the manager’s perspective customer value is the business product to be delivered to customers but from the customer’s perceptions this is a service to be experienced. The process of delivering customer value in a hotel setting involves three parties: employees, managers, and customers (Gowan et al., 2001; Hartline et al., 2003)

Work by Erto and Vanacore (2002), based on designing hotel service customers’ needs and expectations should be identified as and translated into hotel quality elements. As customers judge the hotel’s services as they receive the service, the hoteliers should consider each element of service quality as an essential factor on customer satisfaction.

Erto and Vanacore in their research classified the quality elements to three categories:

Must-be quality elements: these are fundamental features which are not mentioned unless undelivered. They meet up with basic expectations so their absence can be the root of dissatisfaction and their presence often goes without notice by customers.

One-dimensional quality elements: These are features which customers look at as desirable or determinant in their choice of a service. These are as satisfying as their level of presence within the service.

Attractive quality elements: These are features which are unexpected from the service provider. These may be offered, to the surprise of customers, resulting in the delighting of customers. However, their absence would not cause any harm or dissatisfaction.

These three levels of service quality cause different level of customer satisfaction, which is illustrated in the figure 2.3 by Erto and Vanacore (2002)

Figure 2.3: A logical framework to measure service quality (Erto and Vanacore, 2002)

0: prerequisites not fulfilled

1: prerequisites fulfilled

0: poor performance

1: low performance

2: common performance

0: ordinary service

1: excellent service

Must be quality elements

One dimensional quality elements

Attractive quality elements

Exciting quality:

The customer is delighted

Optimum quality:

The customer expectations are fully met or even exceeded

Common quality:

The customer’s expectations are just met

Low quality:

The customer’s expectations are particular met

Minimal quality:

The customer is neither dissatisfied nor satisfied

No quality:

The service is not adequate

3: optimum performance

SERVICE QUALITY

The issue of service quality has been vastly considered in the marketing literature by both practitioners and academic researchers in recent years (Caruana, 2002). Hoteliers and academic researchers believe service quality is a vital item to the success of any business organization. The reason of such belief based on the capability of service quality to construct largely impacts on customer satisfaction, repeat purchase behavior, and consequently, an organization’s long-term profitability (Zeithaml & Bitner, 2003). For instance, Bitner (1990) illustrates that effective service delivery influences customer satisfaction directly and immediately, therefore comprehending the meaning of service quality in the service sector Helps service sector management supervise and observe day-today service encounters.

Service quality as the consumer’s Assessment or judgment about the overall services provided has been defined by Zeithaml and Bitner (2003) . Various research studies on the service sector have investigated the service quality concept and verified its construction as being multi-dimensional (Brady & Cronin, 2001; Van Dyke, Kappelman, & Prybutok, 1997; Dabholkar et al., 1996).

To be clearer upon service quality Gronroos (1984) suggests that service quality is about how satisfying the service is conducted (functional quality) and the outcome of the service rendered (technical quality). Other researches about this issue pointed at the several factors that determine perceived service quality including skills, knowledge to perform a quality service, physical appearance of the facility, and the personnel involved in the service (Parasuraman et al.1985).

In summary, service quality is regarded as subjective in nature (Rust & Oliver, 1994), and also as an attitude (Cronin & Taylor, 1992). Several literatures reflect the fact that service quality is the subjective evaluative judgment of consumers according to the service performance they encounter (Dabholkar, Shepherd, & Thorpe, 2000; Cronin & Taylor, 1992).

Service Quality in Hotel Industry

The status of service quality in hotels is vastly acknowledged and is a prior condition to gain favorable purchase intentions (Min, Min, & Chung, 2002; Callan & Kyndt, 2001; Callan & Bowman, 2000).

Hotels with decent service quality will help the organization be beneficial (Tam 2000). A more clear comprehension of service quality is critical for enhancing customer satisfaction as service quality is a key performance driver for a hotel. On top of that, service quality is considered as an important and meaningful factor for hotel managers since the service quality ingredients translate into bottom-line operations of a hotel’s performance and activity (Wilkins, Merrilees, & Herington, 2006).

SERVQUAL MODEL

SERVQUAL is based on the gap model of service quality, which defines service quality as a function of the gap between customers’ expectations of a service and their perceptions of the actual service delivered.

Parasuraman et. al. (1985) have made use of qualitative and quantitative research following generally accepted psychometric procedures that resulted in the development of the original 22-item SERVQUAL instrument that represents one of the most widely used operationalisations of service quality. Original SERVQUAL instrument provides researchers with the possibility of measuring the performance-expectations gap in 5 scales, ostensibly composed of five determinants. Furthermore, the expectation side of SERVQUAL gap model is developed into two levels: the desired and the adequate, where between the two levels exists a zone of tolerance reflecting the degrees of heterogeneity individual customers are willing to accept.

SERVQUAL instrument presents service quality as a multidimensional construct. In their original formulation Parasuraman et al. (1985) identified ten components of service quality:

Reliability;

Responsiveness;

Competence;

Access;

Courtesy;

Communication;

Credibility;

Security;

Understanding/Knowing the Customer;

Tangibles.

These components were collapsed into five dimensions: reliability, assurance, tangibles, empathy, and responsiveness. However, the application of SERVQUAL has lead to several concerns:

The conceptualization and usefulness of the expectations side of the instrument has been questioned

Variance restriction problem of expectation scores

Problem associated with different scores

The stability of extracted factors

These concerns draw various critics on SERVQUAL instrument and forced Parasuraman et al. to improve the instrument to reduce problems in the implementation.

SERVQUAL Implementation

Quality has been an elusive concept; however the impressive body of SERVQUAL evidence suggests how consumers judge quality. Knowing how consumers make quality judgements can aid the practitioner in two vital ways (Asubonteng, et aI., 1996):

On a qualitative basis, knowing what constitutes quality can guide the business person by suggesting how quality might be enhanced.

On a quantitative basis, the measurement of quality can provide specific data that can be used in quality management.

Qualitative use of SERVQUAL is conducted through the following steps:

See if the industry (focal industry) has been included in the studies reviewed in recent SERVQUAL work that identified dimensions of service quality for the corresponding industry

Judge the expectations of customers on each dimension and how well the firm performs on the dimensions

Compare performance with expectations to identify weakness, dimensions in which performance is short of expectations, where improvement is needed.

The quantitative use of SERVQUAL can employ the same generic steps as outlined above:

Determine the dimensions for the focal industry based on the literature or perform a study in which the dimensions are identified;

Measure for the firm customer expectations and performance on the dimensions;

Compare expectations with performance to identify strengths and weaknesses in service quality;

Take action to correct weaknesses and capitalize on strengths; and

Add a framework for judging quality data over time and in comparison with other firms.

A quantitative measure is needed to provide the baseline for the measurement of service improvements but the initial qualitative measure means that service improvements can begin in parallel with the quantitative research

Critics on SERVQUAL

SERVQUAL has been subjected to a number of theoretical and operational criticisms which are detailed below (Buttle, 1996):

Theoretical:

Paradigmatic objections: SERVQUAL is based on a disconfirmation paradigm rather than an attitudinal paradigm; and SERVQUAL fails to draw on established economic, statistical and psychological theory.

Gaps model: there is little evidence that customers assess service quality in terms of P – E gaps.

Process orientation: SERVQUAL focuses on the process of service delivery, not the outcomes of the service encounter.

Dimensionality: SERVQUAL’s five dimensions are not universals; the number of dimensions comprising SQ is contextualized; items do not always load on to the factors which one would a priori expect; and there is a high degree of inter correlation between the five RATER dimensions.

Operational:

Expectations: the term expectation is polysemia; consumers use standards other than expectations to evaluate SQ; and SERVQUAL fails to measure absolute SQ expectations.

Item composition: four or five items cannot capture the variability within each SQ dimension.

Moments of truth (MOT): customers’ assessments of SQ may vary from MOT to MOT.

Polarity: the reversed polarity of items in the scale causes respondent error.

Scale points: the seven-point Likert scale is flawed.

Two administrations: two administrations of the instrument cause boredom and confusion.

Variance extracted: the over SERVQUAL score accounts for a disappointing proportion of item variances.

Cronin and Taylor (1994) comment that: “Recent conceptual advances suggest that the disconfinuation-based SERVQUAL scale is measuring neither service quality nor consumer satisfaction. Rather, the SERVQUAL scale appears at best operationalisations of only one of the many forms of expectancy disconfirmation.”

Andersson (1992) claims that Parasuraman et al. “abandon the principle of scientific continuity and deduction”. Among specific criticisms are the following:

Parasuraman et al.’ s management technology takes no account of the costs of improving service quality. It is nai’ve in assuming that the marginal revenue of SQ improvement always exceeds the marginal cost.

Parasuraman et al. collect SQ data using ordinal scale methods (Likert scales) yet perform analyses with methods suited to interval-level data (factor analysis).

Parasuraman et al. are at the “absolute end of the street regarding possibilities to use statistical methods”. Ordinal scales do not allow for investigations of common product-moment correlations. Interdependencies among the dimensions of quality are difficult to describe. SERVQUAL studies cannot answer questions such as: Are there elasticity among the quality dimensions? Is the customer value of improvements a linear or non-linear function?

Parasuraman et al. fail to draw on the large literature on the psychology of perception.

As a response to the empirical findings in the application of SERVQUAL, Parasuraman et al. (1994) have undertaken significant changes in the instrument:

Reconceptualization and extension of the expectations side distinguishing between desired and minimum expectations.

Suggest the use of three column format SERVQUAL that eliminates the need to re-administer items.

Suggest the reduction in number of items to 21, the use of nine-point scales, and the possibility of the exist

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