Importance of Customer Service in Hospitality

Published Date: 19 Sep 2017

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.

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

1	Introduction	4
A.	Overview	4
B.	Elaboration of Problem	6
C	Determination of Objective	8
2.	Literature Review	10
A.	Service Quality	10
B.	Routes to Achievement of Exceptional Service Quality	12
i.	Human Resource Policies	13
ii.	Essential Areas of Focus	14
iii.	Technological Advances and Service Quality	15
iv	The need for Enhanced Service Quality during Economic Downturn	18
v.	Framing of Research Hypotheses	20
3.	Research Methodology	22
4.	Data Collection	23
	Ritz Carlton	23
	Red Carnation	25
5.	Findings and Analysis	27
6.	Conclusion	30
	References	31

 

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]

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 than 400,000 networks worldwide today are communicating with each other (Napier, Judd, Rivers, and Wagner, 2001). As such, the Internet has been becoming a powerful channel for business marketing and communication (Palmer, 1999), and for new business opportunities - as it is often called as "e-business" or "e-commerce" today”^[35]

A major factor in the application of Internet Communication Technology (ICT) is the determination of services that can be delivered to customers via online routing. Whilst it is not feasible to deliver services such as beauty treatment or burger meals through the net, services like online booking of hotel accommodation, travel tickets, and automobile rentals can be searched, checked, ordered and delivered easily over the Internet.^[36]

Although the hospitality industry has by and large followed the trend of internet application in recent years, its implementation has tended to be un-uniform. A number of companies still feel that greater use of technology takes away the concept of personalised service from the hospitality business and makes the process mechanical and impersonal. Hotel executives have also traditionally resisted the use of information technology out of fear of alienating their guests.^[37] Despite such reservations recent years have seen the progressive adoption of the Internet by the hospitality industry. Guests are progressively using ICT for browsing through the web, weighing options, checking discounts and costs, settling upon airlines, hotels, or restaurants, making online reservations, paying though credit cards and bank transfers, and sorting out their needs at their convenience from places of their choice. E commerce has transformed the hospitality business by empowering customers to operate autonomously, augmented their elasticity in taking decisions, and lowered their reliance on travel mediators; options that were inconceivable even a few years ago.^[38]

Despite such developments the adoption of computer technology and the Internet by the hospitality industry continues to be slow and sluggish in comparison with other sectors.

“The luxury hotel segment continues to think of service as personal ministration and servitude. Personal interaction, pampering, and eager-to-please staff are the hallmarks of leading lodging companies like Ritz Carlton, Four Seasons, Regent, Preferred Hotels Worldwide and others. Traits such as these allow luxury-lodging providers to build world-class reputations and charge market premiums. Yet, it is these same traits that hinder creativity, increase uncertainty during the service encounter, and raise the costs of conducting business.” ^[39]

Whilst the Internet is helping hotels and restaurants to communicate with guests in previously unthinkable ways, hospitality establishments are now using modern technology to enhance customer service and improve guest satisfaction in many other ways. Conveniences like in-room tea and coffee dispensers and trouser presses, beautifully designed Jacuzzi bathrooms, sophisticated television viewing with access to numerous global channels, hand remote operated lighting, warming and air conditioning, Internet, and state of art global communication amenities. Safety of clients, always a worry in hotels with hundreds of rooms, is augmented through closed circuit television and chip controlled door cards. Top-of the-line luxury resorts provide electrically controlled vehicles for the guests to use inside their vast and beautifully landscaped properties. Gourmet chefs in five star kitchens use advanced kitchen technology and know-how to merge group production methods with tailored choices and put forward a variety of alternatives in hot and cold, as well as raw and cooked foods, thus providing guests with near infinite food choices.^[40]

The use of control tools and processes like HACCP (Hazard Analysis and Critical Control Point) is also being comprehended and utilised in larger hotel chains. HACCP, pioneered by the Pillsbury Company in association with NASA in the 1960s, is an especially useful quality assurance technique for actions concerning preparation of meals.^[41] With kitchen activity being vital to the service offering of hotels, restaurants, and fast food chains, culinary efficiency and quality is important for achieving and improving customer satisfaction. Sub-optimal handling of kitchen activity can be causal in deterioration of raw material, contamination of prepared and semi-processed food; unknowing usage of operations can lead to material spoilage, contamination of foodstuffs, use of infected and unsafe items and unhealthy cooking methods.^[42]

Such issues can furthermore lead to (a) serving of foul-tasting and hazardous dishes, (b) severe and damaging culinary criticism and (c) possibly ruinous results on service quality, client contentment, organisational reputation, and repeat visits. The serving institution can also become vulnerable to legal action and potentially catastrophic damages by way of compensation.^[43] Food preparation challenges can happen because of various causes including wrong purchasing policies, inordinate transit time, poor material quality, storage temperature, vermin infested stores, and inappropriate culinary practices, such challenges multiplying with volume as happens during rush seasons, banquets, and special occasions.

Many hotels and restaurants still follow the age-old practice of periodically checking random samples of prepared food through physical and laboratory tests. Whilst end product testing is still widely followed in the hospitality industry, it has proven to be extremely ineffectual because of its inability to check systemic working and its over-dependence on periodically collected samples. HACCP is a production control system for use during food preparation. It is a risk minimising food management process that focuses and identifies nodes where potential contamination can occur and is proactive; it treats the production of food as a total, continuous system, and assures food safety from start to end. Activities covered include purchasing, receiving, storage, preparation, and service; each of these functions being evaluated by principles of failure analysis.

HACCP has seven components.

• Identify the Hazards
• Determine Control Points and Critical Control Points
• Set Critical Control Limits
• Monitor Critical Limits
• Take Corrective Action when monitoring indicates that Critical Limits have not been met
• Establish an effective Recording System
• Verify that the system is working as planned^[44]

HACCP needs to be rigorously introduced across institutions where food is prepared to ensure that customer safety becomes integral to service quality. Whilst London is increasingly becoming known as a global destination with an assortment of restaurants serving cuisines from across the world, numerous newspaper reports about the poor hygienic practices followed by establishments, even in fashionable and upmarket areas indicate that many improvements need to be brought out in the area of food preparation and safety.^[45]

iv. The need for Enhanced Service Quality during Economic Downturn

With service quality in the industry traditionally being related with bespoke attention, polite and considerate waiters, cheerful housekeepers, and bright and breezy reception staff, recent developments in technology, systems and management practices have been significant enough to add completely new aspects to such accepted diktats. The frenzied growth seen in the industry in recent years has also been causal in (a) sharply increased competition, locally and across the globe, (b) more demanding and clued-up clients, (c) the surfacing of several new establishments, (c) scarcity of skilled employees, (d) environmental restrictions, (e) reduction in rates, and (f) strain on expenses and profitability

Furthermore whilst factors like swift progress in the accessibility of several new goods and applications, technological progress in ICT, and the introduction of new and pioneering management methods, have enabled establishments to provide a range of products to customers, their emergence has also catapulted the industry into an age of insecurity, manifested by abruptness, unemployment, and even rapid redundancy.^[46] The rate of closure of restaurants in London and other hospitality centres continues to be extremely high, the hotel industry is going through a phase of merger, buyout and consolidation and iincompetently run businesses, regardless of their size and investment soon find themselves on the margin, waiting to be bought or taken over.

Hospitality industry executives, operating in severely competitive environments, routinely engage in trying out several options to sustain, improve, and set apart their service quality through various client-facing as well as internal operations. Some hotels take great pains in this area and have introduced extremely innovative practices to improve their service quality and guest offerings.^[47] These include choices like 24 hour checkout at no extra charge, the guests the option of shipping in advance and storing guest luggage to minimise airport delays, and home style food for in-room TV dinners. Some years back the Ritz Carlton Chicago, a Four Seasons property, introduced the concept of the compcierge, an attendant who can help guests to solve problems with their computers.^[48] With the compcierge taking seconds to set right a problem that would routinely take a guest 30 minutes or more, the concept has caught on and spread to other Four Season properties.

Hospitality executives operate under intense competitive pressure, need to accomplish diverse objectives and yet maintain, if not reduce, costs. This leads to new and complex challenges, forcing hospitality managers to continually scour management tools, processes and methods that can help them in driving their establishments towards improved levels of effectiveness and operational results.

Despite most participants of the hospitality industry knowing of the criticality of service quality and customer satisfaction for sales growth and customer retention, such knowledge is quickly forgotten during periods of economic downturn, often with disastrous results. A common reaction during business slowdowns is to first reduce prices in order to retain business (by becoming cheaper than the competition), and second, to reduce expenditures in areas seen to be superfluous, but are possibly essential for maintaining quality. In such situations establishments frequently cut down on quality assurance programmes, number of staff, room service hours, and free bathroom toiletries and shoeshines.

Very often such measures backfire viciously and the losses suffered, because of dissatisfied customers, exceed the savings made.

“The adage that satisfied customers will tell an average of five people about their positive experience and conversely, dissatisfied customers will tell an average of ten people about their bad experience holds even truer during a recession. As customers have less disposable income, their vacation, dining and general purchasing decisions become more contemplative. When they do spend money, customers have less tolerance for a flawed experience and will broadcast their discontent to their peers. At the same time, companies have less margin for error - if the overall pool of disposable income is shrinking, you better invest more to hold on to your share to weather the rough times. Utilizing data collected from a quality assurance program can help businesses ensure that a positive customer experience is retaining customers, and perhaps even gaining a few from competitors who have invested less prudently during the downturn.”^[49]

v. Framing of Research Hypothesis

The literature studied in the course of the review indicates (a) the importance of top quality and superior customer service for attracting and retaining customers and for differentiating the service offering, and (b) the adverse effects of reducing quality during times of economic downturn. In light of the adverse economic conditions anticipated in the near future and their expected impact upon the hospitality industry, the research hypotheses are framed as follows

H 1: Successful hospitality establishments pay great attention to maintenance and improvement of Service Quality

H 2: Achieving exceptional service quality can help the survival and growth of such establishments during times of economic recession and shrinking markets.

3. Research Methodology

Whilst choosing an appropriate research methodology is very obviously a topic and resource dependent exercise, other factors like the range of available methodologies and their suitability for the dissertation also need to be considered.

With research data generally being available for assignments in social sciences and business from both primary and secondary sources, the initial steps in determining methodology consist of deciding upon a quantitative or qualitative approach followed by laying down secondary and primary sources of data. The dissertation essentially being an industry specific investigation of global nature with multidisciplinary ramifications, quantitative techniques involving large populations will be quite inappropriate. With the questions to be pursued essentially being of a “how, why and what kind” the research needs to essentially follow a qualitative approach.

Secondary sources of information on the subject comprise of books, journal articles, research studies, and web articles prepared by people not directly part of the industry. Available in physical and electronic form, all of the secondary information sources are listed in the bibliography at the end of the assignment. Primary information sources consist of material collected directly from respondents by way of interviews, focus group discussions or from the public domain by way of interviews of hospitality executives given to media, company websites, and transcripts of public speeches.

A substantial amount of information has been accessed in the course of the literature review. Apart from such details, information pertaining to two organisations, the two time Baldrige award winner Ritz Carlton chain of hotels and the Red Carnation group have been specially accessed for the purpose of the dissertation. Both hotels, whilst of different age and size, are well known for their emphasis on service quality. A study of the practices followed by them should go a long way in validating the information obtained from the literature review and ascertaining the validity of the hypothesis.

4. Data Collection

Ritz Carlton

Information available on the Ritz Carlton indicates that the company is driven by the need to provide exceptional service quality. It furthermore believes the most appropriate route to providing service quality is through the excellence of employees, who are carefully selected, rigorously trained, and constantly motivated to give off their best.

The Ritz Carlton is an international hotel chain, possibly the most prestigious in the world. The winner of two Baldrige National Quality Awards, (the only company to do so), the organisation believes its exceptional service quality to be its key distinguishing feature. Winners of Baldridge Awards are chosen carefully and outperform their competitors by 2.5 times in the stock market.

“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”^[50]

The company pays the greatest attention to recruiting, training, and motivating its staff. The following information is gleaned from the website of the company, articles by Reppa and Hersh, (2007) and Mila D’Antonio (2007) and an interview given the company’s Area Marketing Director, Bruce Seigel.

• The company has intensive selection and recruitment processes where the candidates’ attitudes towards pleasing people and overall pleasantness are considered to be very important. Candidates are required to spend time with employees working on their jobs to assess their suitability for a Ritz job. "The Ritz-Carlton doesn't hire; it selects its staff," Siegel says. “A candidate must look you directly in the eye, be warm and friendly during the first interview. We are looking for ability to show empathy. If they can't do that in the first interview, how are they going to react with our guests?”

• The Ritz-Carlton looks for potential employees who can detect unexpressed needs. Part of its Credo states that it “fulfils even the unexpressed wishes and needs of our guests.” Siegel gives an example: A room service waiter places a breakfast tray on the ottoman as requested by the guest, and on the way out of the door, he tilts the TV toward the guests' viewing direction. This is taking service to the next level, addressing unexpressed wishes
• Employees are told not to ever lose a guest and to think about the money spent on marketing to acquire a new guest. An average guest spends $100,000 at the Ritz-Carlton over a lifetime
• The motto of the company, “ladies and gentlemen serving ladies and gentlemen”, denotes the importance the company attaches to its staff to deliver quality service.
• From greeting guests to bidding them goodbye, employees are told to always use their names. The bellman sees the name on luggage as the guest checks in; the server sees the name on the credit card slip.
• The average Ritz-Carlton employee receives 232 hours of training per year, almost four times the average of their counterparts at peer hospitality companies.
• By setting salaries at the top of industry norms and using visible, non-financial recognition of employee contributions, it keeps enthusiasm high and staff turnover low.
• Employee turnover is less than 25 % in an industry where 100 % turnover is fairly common.

Some other policies and diktats that reveal the company’s customer-centric obsession with service quality are detailed hereunder.

• If an employee can’t support the company, they should find a job elsewhere
• Do not say, “It’s not my job.” It is everyone's job. Whoever receives a complaint from a guest is responsible to resolve it
• Do not reply to a request by saying, “Our policy says we can't do that.” Solve the problem
• Make sure your environment is surgically clean. It's the responsibility of every employee to pick up discarded cigarette butts
• Be aware of your language when communicating with guests. As an expression, "no problem" is perceived as insincere. Train your employees to use correct language
• Escort guests to another area of the hotel instead of pointing or giving them complicated verbal directions. “When you take your customers somewhere, that demonstrates care and concern,”
• When working the phone, answer on three rings. "The customer isn't calling to ask about the weather or to wonder if you are there," Never screen calls. And use the guest's name when you speak to them.

Red Carnation

The case of Red Carnation is especially interesting in light of the economic downturn currently threatening global business, including the hospitality industry. The Red Carnation Hotel Collection is an international group of thirteen luxury hotels with four of its properties situated in London. The company pays great stress on employee training and has more than 50 training modules designed for the development of their staff members.

The hotel group was in a difficult situation in the early 2000s. With the hospitality industry buffeted by the September 11 attacks and the SARS epidemic most hotels were facing shrinking volumes and the prospect of much lower revenues. Apart from bookings being down by more than 20 %, the Red Carnation was also facing the problem of extremely high labour turnover, which at more than 80 % was hurting the efficiency, and the profitability of the organisation.^[51]

Despite gloomy business conditions and the anticipated adverse impact of terrorism on tourism and hospitality, the management went ahead with an expensive management makeover and human resource exercise involving training and empowerment of staff and managers, with special attention being paid to improvement of service quality to much higher levels.

The programme met with excellent results with RevPar increasing by 11 % and staff turnover reducing by more than 50 % after the completion of the project. The company also won numerous awards including the Five Star Diamond Award for Service Excellence and Hospitality.

5. Findings and Analysis

Hypothesis 1

Recent years have seen enormous developments in the area of hospitality. Developments like the collapse of the Soviet Union, the emergence of the Economic Union, economic liberalisation, the demolition of travel barriers, and cheap air travel have led to an enormous expansion of the hospitality industry with new hotels, resorts, spas, restaurants, and fast food chains springing up across the world bringing with it intensely increased competition and a spate of mergers, consolidations, and increased entry and exit of players.

The industry has also been significantly impacted by developments like the proliferation of Internet communication technology, the introduction of technological applications in rooms and kitchens, and the need to abide by new environmental regulations. Whilst the hospitality industry has traditionally paid most of its attention to basic issues like cleanliness, comfortable rooms, and looking after the comfort and well being of guests, new methods, technologies are being absorbed, albeit unevenly across the industry.

In an industry where players in the same segment, be they luxury hotels or medium budget restaurants, have access to similar infrastructural facilities, competitive advantage has traditionally been driven by service quality; customer perceptions about service quality being positively correlated with repeat purchases and new business. Members of the industry have also constantly tried to bring about innovations to improve the quality of their service to exceptional levels in order to bring about customer satisfaction.

It needs to be noted that much of such service comprises of personal pampering and ministering to guests beyond normal levels by hotel staff; far more in fact than such guests would be used to in their normal places of residence.

The traditional emphasis on such service continues to exist despite the emergence of numerous technological advances that could effectively reduce the interface between guests and staff. The Ritz Carlton, for example, pays great emphasis on the interface between staff and guests, selecting, training and motivating their staff rigorously to provide personalised pampering to their guests. Considering that much of the phenomenal success achieved by the Ritz Carlton and other chains like the Marriott is associated with their exceptional service quality rather than with introduction of technology, it is logical to assume that the hospitality industry continues to depend upon service quality for maintenance of competitive advantage. The hypothesis generated after the literature review is more than validated by detailed investigation of the Ritz Carlton and the Red Carnation Group.

Hypothesis 2

With the global economy expected to go into a downturn on the back of rocketing oil prices, the mortgage crisis, scarcity of credit and the onset of recession in the United States, alarm bells have begun ringing in the hospitality industry worldwide. The current economic downturn is expected to be sharper and more prolonged than the slump occasioned by the September 11 bombings and the SARS epidemic, which at that time had sharply impacted the hospitality business.

Businesses normally respond in times of downturn through policies that mix reduction of sales with slashing of costs in order to hold on to their clientele and maintain their profitability. Both these strategies have been found to be counterproductive because it is difficult to increase prices later and cost slashing if not done with great care leads to reduction of quality, customer dissatisfaction and loss of business.

The Ritz Carlton provides an example of an organisation, operating in the luxury segment that has undergone several economic downturns and survived. Whilst the organisation was always associated with richness and luxury, its reputation soared after the mid 1980s when it implemented an extensive programme for improvement of service quality through up-gradation of managerial and staff skills. The winner of two Baldrige Awards the institution is now an international paradigm of service quality. With a staff turnover of 25 %, (which is much lesser than the industry norm of 100 %), the company is also eminently profitable and outperforms its competitors year after year.

The Red Carnation Group, a much smaller group of hotels in comparison with the Ritz Carlton, saw a significant improvement in RevPar and in employee attrition after it implemented a staff and management programme aimed at improving service quality. Even more important is the fact that this was achieved in a period of economic downturn when the global hospitality industry was facing a crisis in the wake of the September 11 and SARS episodes.

The study of internationally renowned hotel chains appears to validate hypothesis 2 and indicates that hospitality establishments can beat economic slumps by raising their service quality to exceptional levels. Whilst this may be easier said than done with many establishments trying in various ways to achieve the same objective, the study reveals that the most successful strategy to achieve superior service quality is more through training and motivation of staff than through up-gradation of facilities. Whilst progress in technology and know-how will continually surface in the hospitality business, (and be used for adding to customer satisfaction), meeting and exceeding customer hopes and expectations will largely depend upon the actual providers, namely the staff of hospitality establishments.

6. Conclusion

Excellent service quality has been traditionally associated with hospitality sector establishments like hotels, restaurants, and cafes, and the need to be pampered and looked after forms much of the appeal of visiting such places.

With the industry having become intensely competitive in recent years, most hospitality establishments understand the need to provide top level service quality to differentiate their organisations from their competitors, build reputation and increase repeat customer visits, such policies being even more important during economic downturns when customers are fewer and have far greater choices.

Whilst the nature of the topic is essentially subjective, the information unearthed in the course of research, both by way of general industry details and by way of study of specific organisations point to the need for hospitality organisations to constantly try for exceptional service quality, more so during lean business periods. The findings of this research could possibly be further augmented if an organisation like the Red Carnation, where efforts to increase service quality during periods of economic downturn have met with significant success, could be studied in greater detail. A focus on the measures taken to improve service quality in such an establishment and a detailed assessment of their o