Loyalty Behaviour And Relationship Commitment Towards Hotel Services Carmen Tideswell, Southern Cross University Abstract With the proliferation of four and five star hotels internationally, a common strategy aimed at developing ongoing relationships and fostering customer loyalty with guests has been to introduce various frequent-stay points schemes. Within the relationship marketing literature, however, it is commonly recognised that this type of marketing strategy tends to generate customer attachment to the points program itself, rather than to the service provider. As the very term ‘relationship’ marketing suggests, service marketers should focus not just on encouraging repeat purchase (behavioural loyalty), but more so on developing a truly attached customer who demonstrates key attitudinal behaviours such as an insensitivity to price increases; active word of mouth promotion about the service and a desire not to switch to other service providers unless absolutely necessary. When this attitudinal type of loyalty is considered, it is often found that not many customers are truly loyal. This study explores the nature of hotel guest loyalty based on a survey of New Zealand residents. The results suggest that most repeat-user guests are not truly loyal and are only loyal provided a better price deal is not available elsewhere. The results imply that, unless the hotel industry provides more than ‘points’ to actively promote loyalty, they are unlikely to increase the proportion of guests who are emotionally committed to the service. Keywords: customer loyalty; hotel guests; New Zealand; relationship marketing Background Types of Customer Loyalty Loyalty is a complex construct (Javalgi & Moberg, 1997). Two of the fundamental attitudes a customer most hold towards an organisation in order to be considered loyal are those of trust and commitment (Morgan & Hunt, 1994; Lewin & Johnson, 1997). Trust is defined as ‘a willingness to rely on an exchange partner in whom one has confidence’ (Chow & Holden, 1997:p. 278). In a study designed to investigate the trust and commitment dimensions of loyalty among buyers and sellers within the restaurant industry, Crotts, Coppage and Andibo (2001: p.196) defined commitment as ‘the desire to continue the relationship and to work to ensure its continuance’. A variety of researchers have clearly stated that there is a distinct difference between repeat purchase behaviour and true brand loyalty (Dick & Basu, 1994; Bloemer & Kasper, 1995; Riley et al, 2001). While attempts to measure loyalty have focused on the behavioural aspects of repeat purchase, this approach has been somewhat problematic (Uncles, Dowling & Hammond, 2003; Garland & Gendall, 2004). It does not differentiate between customers who continue to purchase a given brand out of habit, or because they are unaware of alternative brands, from a customer who deliberately chooses to stay with one brand of good or service due to a variety of positive attitudes held about the service provided (Backman & Crompton, 1991; Dick & Basu, 1994; Odin et al, 2001; Baloglu, 2002). For a customer to be classified as a truly loyal customer, it is expected that they will demonstrate strong attitudes and attachment towards the service provider as well as demonstrating behavioural loyalty (Backman & Crompton, 1991; Dick & Basu, 1994). The most common attitudes associated with attitudinal loyalty include promoting the service provider to others ANZMAC 2005 Conference: Relationship Marketing (Consumer) 80 through positive word of mouth; resisting attempts by competitors to switch due to a cheaper price; and a clear intention to continue to reuse the service in the future (Knox, 1998; Bowen & Shoemaker, 1998). When Dick and Basu (1994) proposed that customer loyalty contains both a behavioural and an attitudinal measure, they suggested that consumers could be classified along a two by two matrix depending on the extent of their repeat patronage (high versus low) and their relative attitudinal attachment towards the service (high versus low). The position of a customer in the resultant matrix would ultimately describe the nature of their loyalty to the organisation, ranging from True Loyalty, Latent Loyalty, Spurious Loyalty to No Loyalty. True Loyalty describes those customers who have not only used the service on a frequent basis, but also possess a range of positive attitudes towards the organisation which results in them spreading many of the other benefits of customer loyalty, such as positive word of mouth (Dick & Basu, 1994). Customers who are classified as “Latent Loyals” still possess a wide range of positive attitudes towards the service provider, however their frequency of purchase is not so high due to limited use of the service in question. “Spurious Loyals”, on the other hand, regularly frequent the service provider, but often do so more out of habit than through any real sense of preference for the brand (Dick & Basu, 1994). Loyalty in the hotel context Several studies have previously focused on the issue of loyalty specifically in the hotel industry. Knutson (1988) investigated the hotel guest’s decision to return to a property, but they did not investigate other loyalty attitudes such as word of mouth or price sensitivity. Shoemaker and Lewis (1999) also reviewed a range of loyalty generating strategies used in the hotel industry and noted that for true loyalty to be achieved, tactics should involve recognition of customers as individuals through personalised services, emotional ‘rewards’ and tailor-made offers. Bowen & Chen (2001) explored the link between customer satisfaction and customer loyalty. While they concluded that an incremental change in satisfaction levels would result in a substantial change in loyalty levels, only two aspects of loyalty were assessed, being intention to return and willingness to recommend the hotel. Price sensitivity and switching/complaint behaviour, were not addressed. Kim, Han & Lee (2001), in a Korean hotel context, demonstrated that a stronger customer-hotel relationship did in fact lead to greater levels of repeat purchase and positive word of mouth, but again they did not consider the price sensitivity and switching aspects of loyalty. This study adds to existing research on loyalty in the hospitality context by attempting to segment hotel users based on their loyalty behaviours towards hotels using the matrix proposed by Dick & Basu (1994). It focuses on all four attitudinal aspects of loyalty as previously described. It aims to determine how loyal hotel guests are and the nature of their loyalty towards properties, based on a sample of New Zealand hotel users. Methodology Survey development A survey was developed containing a range of measures included perceived service quality dimensions based on Parasuraman, Berry, and Zeithaml (1991); behavioural intentions as ANZMAC 2005 Conference: Relationship Marketing (Consumer) 81 measured by Zeithaml, Berry & Parasuraman (1996); a self-developed scale of variety seeking behaviour; perceived service innovation and risk perceptions based on Dholakia’s (2001) scale. Key demographic data was also included. The current study focuses on the loyalty behaviours of hotel guests based on the 13-item behavioural intentions scale developed initially by Zeithaml, Berry and Parasuraman (1996) and later tested by various researchers such as Bloemer, de Ruyter & Wetzels (1999). Four key dimensions of service loyalty were included– word of mouth promotion; future repurchase intentions; price sensitivity; and complaint behaviour. The survey commenced by asking respondents to indicate the extent to which they had used four or five star hotels over the past five years, followed by nomination of the properties which they had stayed in. They were then asked to indicate which of these hotels they considered they would stay at again in the future and which (if any) they considered themselves to have some form of ‘loyalty’ towards. Respondents were also asked, through an open ended question, to define what they believed the term ‘loyalty’ meant in this context and then to select one particular hotel property which they considered themselves to be ‘loyal’ to which they were asked to consider for the remainder of the survey. Data collection A pilot study was initially conducted to ensure that the wording of questions was clear and logical, resulting in the removal of some questions where unnecessary duplication was evident. For the main study, surveys were distributed to 1,500 New Zealand residents via a commercial mailing list. The households selected for this study were from a list known as “Ambitious Achievers” who were known to use luxury hotels. Households within this sample were selected at random and each received a copy of the survey, a personalized cover letter stating the purposes of the study, and a reply paid envelope. Two hundred and 18 completed and useable surveys were returned, equating to a 15 percent response rate. Results To explore the different types of loyalty that existed among respondents, a hierarchical cluster analysis using the within-groups linkage method was performed based on the 13 loyalty attitudes and behaviours. A range of solutions were initially considered, with the final four cluster solution reported in Table 1 selected as it was the most logical and interpretable, while still being parsimonious. Table 1 reports the range of loyalty attitudes adopted by members of each cluster using the average response across a five point likert-type scale where 1 = strongly disagree and 5 = strongly agree. Three key measures of behavioural loyalty (number of times visited hotel in last five years; year of first stay (length of association); and number of hotels intending to reuse in the future) are also reported. Key demographic characteristics of each cluster are also presented for profiling purposes, along with significance levels associated with the differences between clusters (see final column). The four cluster solution is similar, but not identical, to the nature of segments suggested by Dick & Basu (1994). The first cluster termed ‘Uncommitted Repeat Users’ (28 percent) have no real attitudinal loyalty to the hotel they selected and the evidence of behavioural loyalty is low as they stayed there less than once a year on average. They do not demonstrate any real attitudinal loyalty despite having used the hotels on several occasions. They are highly sensitive to better prices offered by competitors; and do not spread positive word of mouth in ANZMAC 2005 Conference: Relationship Marketing (Consumer) 82 general. They would definitely switch to competitors if they had trouble with the hotel in question and they hold no firm intentions to do more business with the hotel. Table 1: Cluster Analysis of Guest Loyalty Attitudes and Behaviours Uncommitted Repeat users n = 49 (28%) Spurious Loyals n = 94 (52%) True Loyals n = 18 (10%) Conditional Loyals n = 17 (10%) Significance Level Behavioural Loyalty Times Visited Hotel in last 5 years 4.8 6.9 11.1 8.0 0.068 Year of first stay in hotel 1998 1996 1993 1995 0.155 Number of hotels intending to return to 2.7 2.8 2.7 2.1 0.446 Attitudinal Loyalty PRICE SENSITIVITY Average Score (where 5 = strongly agree) I am willing to pay a higher price than other hotels charge for the benefits I receive from this hotel 2.2 2.8 4.2 3.5 0.000 I will stay with a competitor hotel property if it offers more attractive prices 4.3 4.1 1.8 2.5 0.000 I would book my stay at a competitor hotel if it offered more attractive rates 4.0 4.0 1.9 2.8 0.000 WORD OF MOUTH I say positive things about this hotel to other people 3.7 4.2 4.7 4.4 0.000 I encourage friends and relatives to do business with this hotel 3.0 3.7 4.8 4.2 0.000 I recommend this hotel to people who are looking for advice on hotels 3.2 4.0 4.4 4.2 0.000 COMPLAINT BEHAVIOUR I will complain to other consumers if I experience a problem with this hotel 3.8 3.9 3.4 4.2 0.047 I will complain to an external agency if I experience a problem with this hotel 2.4 2.6 1.7 2.7 0.000 I will switch to a competitor hotel if I experience a problem with this 4.0 3.7 2.8 3.7 0.000 I will complain to the hotel’s staff if I experience a problem with its services 4.1 4.1 4.4 4.4 0.134 INTENTIONS TO RETURN I consider this hotel my first choice of property to stay at when I travel 2.3 3.6 4.5 4.1 0.000 I will do more business with this hotel in the next few years 3.6 3.8 4.8 4.1 0.000 I will do less business with this hotel in the next few years 2.9 2.8 1.7 2.3 0.000 Personal Characteristics of Guest % male respondents 53 47 61 47 0.707 % in 36-45 age group 20 21 28 31 % in 46-55 age group 41 42 22 25 0.561 % with household income over $150,000 24 34 50 63 % who stayed in hotel for business 25 22 28 24 0.996 ANZMAC 2005 Conference: Relationship Marketing (Consumer) 83 The ‘Spurious Loyal’ segment (52 percent) had a higher rate of past use and had held a longer association with the hotel in general (since 1996 on average), but also demonstrated low levels of attitudinal loyalty. While they indicated they spread positive word of mouth about the hotel to others, they would still switch properties if problems occurred and were easily attracted by competitor prices. Only 10 percent of respondents in this study could be classified as ‘True Loyals’, exhibiting both high behavioural loyalty (more than 2 stays per year on average) and high attitudinal loyalty. They were not attracted to stay with competitors due to better prices; they were very strong word of mouth promoters for the property which they were loyal to and had a strong intention to return. While they will complain internally if problems occur with their preferred hotel, they would not do so externally and were unlikely to switch to competitors. The final group ‘Conditional Loyals’ (10 percent) are somewhat different to the final group suggested by Dick & Basu (1994). Rather than being ‘latent loyals’ who have low repeat patronage but high attitudinal loyalty, Conditional Loyals do have relatively higher behavioural loyalty than the first two clusters (8 stays in five years on average), but their attitudinal loyalty is only high providing that no service failures occur. While they shown some signs of strong loyalty such as promoting the hotel through word of mouth and being resistant to better prices offered by competitors, they are not so loyal that they will stay with the hotel if any problems occur. In fact they will clearly switch hotels if something goes wrong and complain to other consumers as a result. Discussion According to the results of this study, only a small proportion of hotel users who demonstrate repeat visitation fit the description of ‘truly loyal’ guests as defined by Dick & Basu (1994). By far the majority of respondents in this study were shown to be ‘spuriously loyal’, demonstrating relatively high repeat patronage, but relatively low attitudinal commitment to the property. There appears to be no significantly different personal characteristics that distinguish one group of hotel users from another in this study. There was no particular gender bias in any cluster, any unique age characteristics, or particularly different reasons for staying in their chosen hotels. Perhaps the only characteristic which distinguishes True Loyals and Conditionally Loyal guests from other groups is that they tended to have higher incomes which may explain their relatively higher frequency of use of these hotels. While this study is based on a relatively small sample and is focussed specifically on the New Zealand environment, it does present some challenging implications for the hotel industry. One conclusion that can be made is that few guests who have used a particular hotel on multiple occasions actually have any real attitudinal loyalty towards the service. As such, hotels need to be aware that marketing strategies, such as frequent-stay programs, that are aimed primarily at encouraging repeat use do not necessarily create the emotional, attitudinal types of loyalty the industry may desire. Most guests, according to this study, are still highly sensitive to better price offerings by competing properties; do not spread a lot of positive word of mouth for the hotels they use on a regular basis and will certainly switch properties if anything goes wrong with their current choice. 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ANZMAC 2005 Conference: Relationship Marketing (Consumer) 86 . to No Loyalty. True Loyalty describes those customers who have not only used the service on a frequent basis, but also possess a range of positive attitudes towards the organisation which results. results in them spreading many of the other benefits of customer loyalty, such as positive word of mouth (Dick & Basu, 1994). Customers who are classified as “Latent Loyals” still possess a wide. mailing list. The households selected for this study were from a list known as “Ambitious Achievers” who were known to use luxury hotels. Households within this sample were selected at random and each