The impact of service quality on cuctomer satisfaction in the hopitality industry

MINISTRY OF EDUCATION AND TRAINNING UNIVERSITY OF ECONOMICS HO CHI MINH CITY - Nguyen Nguyen Xuan Thao THE IMPACT OF SERVICE QUALITY ON CUSTOMER SATISFACTION IN THE HOSPITALITY INDUSTRY Differences between the viewpoint of foreign and Vietnamese customers THESIS OF MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – 2012 MINISTRY OF EDUCATION AND TRAINNING UNIVERSITY OF ECONOMICS HO CHI MINH CITY - Nguyen Nguyen Xuan Thao THE IMPACT OF SERVICE QUALITY ON CUSTOMER SATISFACTION IN THE HOSPITALITY INDUSTRY Differences between the viewpoint of foreign and Vietnamese customers Subject: Master of Business Administration Code : 60340102 THESIS OF MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Assoc Prof Dr NGUYEN DINH THO Ho Chi Minh City – 2012 I ACKNOWLEDGEMENTS This thesis was made during 06 months from March, 2012 It becomes a memory time in my life when having a lot of stress, difficulty and struggle between deadlines of job and study However, it has opened a vision for me about wildknowledge which comes from many authors who stay around in the world, having different languages and cultures but bring me an amazing experience which I am grateful for Knowledge should be accumulated gradually during the school I would like to say thank you to all professors in the University of Economics Ho Chi Minh City, who already taught and trained me in MBA course Knowledge also comes from the sharing of friends who were sitting the same class or incidentally appointed the same group with me I thank you for their sharing Especially, a great thank and special gratitude is addressed to Assoc Prof Dr Nguyen Dinh Tho, who directly instructs me throughout my thesis with his conscientiousness, patience and knowledge Finally, I wish to thank my boss of EFS Company Ltd., and my family members for all supporting me during my studying in University Nguyen Nguyen Xuan Thao st Ho Chi Minh City, October 31 2012 II COMMITMENT I would like to commit that this thesis, “The impact of service quality on customer satisfaction in the hospitality industry: Differences between the viewpoint of foreign and Vietnamese customers”, was accomplished based on my research seriously and independently The data was collected from hotels and restaurants industry in Vietnam by the author in reality It has clear source Thus, the data was trustful handled and conducted by the author Nguyen Nguyen Xuan Thao st Ho Chi Minh City, October 31 2012 III TABLE OF CONTENTS ACKNOWLEDGEMENT I COMMITMENT II TABLE OF CONTENTS III LIST OF TABLES V LIST OF FIGURES V ABSTRACT Chapter INTRODUCTION 1.1 Research Background 1.2 Research Motivation 1.3 Research Objectives 1.4 Research Scopes 1.5 Structure of Research Chapter LITERATURE REVIEW, THEORETICAL FRAMEWORK AND HYPOTHESES 2.1 Service Quality 2.1.1 The SERVQUAL Instrument 2.1.2 Applying SERVQUAL in the Hospitality Industry 10 2.1.3 Perceived Service Quality 11 2.2 Customer Satisfaction 14 2.3 Theoretical Framework and Hypotheses 16 2.3.1 Theoretical Framework 16 2.3.2 Research Hypotheses 16 Chapter RESEARCH METHODOLOGY 18 3.1 Research Methodology 18 3.2 Sampling Design 19 3.3 Data Collection Procedures 19 3.4 Data Analyze Procedure 22 IV 3.4.1Reliability Analysis 3.4.2Descriptive Statistics 3.4.3Factor Analysis (FA) 3.4.4Multiple Linear Regression Chapter ANALYSIS RESULT 4.1Respondents Demographics 4.2Reliability and Validity of SERQUAL Scales 4.3Dimensions of Service Quality in Hospitality Industry 4.4Overall Perceived Service Quality 4.4.1Correlation Testing 4.4.2Multi-Linear Regression An 4.5Hypothesis Testing and Discussions 4.6 Summary Chapter CONCLUSIONS AND RECOMMENDATIONS 5.1 Summary of Findings 5.2 Practical Implications 5.3 Contributions of the Study 5.4 Limitations and Future Research REFERENCES APPENDIX APPENDIX APPENDIX APPENDIX V LIST OF TABLES Table 2.1 Five Dimensions of Service Quality 10 Table 2.2: The Summary of Research Hypotheses 17 Table 3.1: The Sources of Measurement Scale 20 Table 3.2: Rules of Thumb about Cronbach‟s Alpha Coefficient Size 23 Table 4.1: Demographic Characteristics of the Study 26 Table 4.2: Cronbach‟s Alpha Measures of Variables in the Study 27 Table 4.3 KMO and Bartlett's Test of Five Independent Variables 28 a Table 4.4: Rotated Component Matrix of Independent Variables 29 Table 4.5 KMO and Bartlett's Test and Component Matrix 30 Table 4.6 Correlation of Variables 31 b Table 4.7 ANOVA for Construct 32 b Table 4.8 Model Summary of the Construct 33 a Table 4.9 Coefficients of the Construct 34 Table 4.10 Overall Perceived Service Quality 34 b Table 4.11 ANOVA for Satisfaction 38 b Table 4.12 Model Summary of Satisfaction 38 a Table 4.13 Coefficients of Satisfaction 39 a Table 4.14 Coefficients of the Construct for Vietnamese Customers‟ Group 41 a Table 4.15 Coefficients of Satisfaction for Vietnamese Customers‟ Group 41 a Table 4.16 Coefficients of the Construct for Foreign Customers‟ Group 43 a Table 4.17 Coefficients of the Satisfaction for Foreign Customers‟ Group 43 Table 4.18 Comparison Customers‟ Viewpoints 45 LIST OF FIGURES Figure 2.1 Theoretical Framework 16 Figure 4.1 Research Framework for Vietnamese Customers Group 40 Figure 4.2 Research Framework for Foreign Customers Group 42 ABSTRACT Vietnam is more and more attractive a lot of tourists from other countries in the world Since the life-style is developed rapidly, the customers have more demands on the services, especially in their enjoyable and leisure time The importance of service quality for business performance has been recognized not only in the literature but also in reality because it effects directly on customer satisfaction which leads to the profitability for an organization This study examined the relationship between the components of service quality, overall perceived service quality and customer satisfaction The respondents were Vietnamese and foreign customers who stayed in hotels or spent their dining in restaurants in Ho Chi Minh City, Vietnam The study used Statistic Package for Social Science (SPSS) to analyze data through Exploratory Factor Analysis (EFA) and regression analysis tools Firstly, the research proposed a model to analyze the effect of service quality factors in the hospitality industry on overall perceived service quality The five service quality variables identified in this study were named as “tangibles”, “reliability”, “responsiveness”, “assurance” and “empathy” The results indicated that “reliability” and “empathy” have strong positive effect on overall perceived service quality Secondly, the research investigated the impact of overall perceived service quality on customer satisfaction Results showed that overall perceived service quality has a significantly effect on customer satisfaction Finally, the research finding confirmed that there are differences between the viewpoints of Vietnamese and foreign customers on service quality and its impact on their satisfaction differently Keywords: SERQUAL, Perceived Service Quality, Customer Satisfaction, Hospitality Industry, Vietnam CHAPTER INTRODUCTION 1.1 Research Background: The trend of world markets has changed significantly from agricultural to service markets In Vietnam, the service markets, especially the hospitality industry is more and more increasing the market share caused by the growth of tourism industry According to the report of Vietnam National Administration of Tourism (www.vietnamtourism.com, accessed on 20/05/2012) the revenue of tourism 2011 gains 130 trillion VND, increasing 30% over the previous year Vietnam tourism market has been received over million oversea tourists and served for 30 million domestic customers in 2011 Till April 2012, the number of foreign tourists has already reached 2.5 million, increasing 22.9% over the same period last year Vietnam government also proposes a planning of tourism in 2012 is that receiving 6.5 million of foreign tourists (increasing 8.3% over 2011) and serving for 32 million of domestic customers (increasing 6.67% over 2011) In order to gain this target, many strategies for developing tourism industry have been given out such as to appeal the investment on infrastructure; to open more the tourism trading promotion representative offices in China, Japan, Korea, Thailand, Australia, Malaysia, France and Russia; especially Ha Long Bay just becomes the New World‟s Natural Wonders; last but not least all other industries, e.g hospitality industry related to tourism should be reinforced and enhanced so that to bring the most satisfaction to the tourists As all above factors, there are a lot of restaurants and hotels to be opened to serve for this demand Besides the services of accommodation and food are provided by local suppliers, there are many famous international hotel and restaurant groups to join this market in Vietnam such as Starwood, Park Hyatt, Hilton Worldwide, Movenpick and so on The customers have more choices about the services and all the service businesses are trying their best to improve their service quality in order to make customers more satisfied, and that can improve profitable to the firms Therefore, the viewpoint of customers (local and foreign ones) about service quality should be considered and defined how to match with the different levels of customer satisfaction To help the companies get more success and survival in today‟s competitive environment, there are many researches to define about “quality”, “service quality” “customer satisfaction” Research shows that quality is defined as “fitness for use” and “those product features which meet customer needs and thereby provide customer satisfaction” (Juran and Godfrey, 1999) Service quality leads to customer loyalty and attraction of new customers, positive word-of-mouth, employee‟s satisfaction and commitment, enhanced corporate image, reduced cost and increased business performance (Berry et al., 1989) Higher levels of service quality produce higher levels of customer satisfaction, which in turn lead to higher levels of customer patronage Customer service quality is a crucial source of distinctive competence and often considered a key success factor in sustaining competitive advantage in service industries (Palmer, 2001) In the hospitality industry, to exist in the intense competition, hospitality organizations look for ways that they can profitably differentiate themselves One of strategy is the delivery of high service quality (Stevens, Knutson & Patton, 1995) Research has supported that the basic principle that high quality goods and services are favored in the marketplace and has suggested that high service quality performance increases customer satisfaction (Anderson & Fornell, 1994) However, the concepts of service quality are difficult to define, measure and maintain (Parasuraman, Zeithaml & Berry, 1985) In 1985, Parasuraman et al., defines service quality as a function of the differences between expectation and performance along ten major dimensions such as reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding/knowing the customer, tangibles In later research, Parasuraman et al (1988) revises and defines the service quality in terms of five dimensions: tangibles, reliability, responsiveness, assurance (combining communication, 61 APPENDIX CRONBACH ALPHA ANALYSIS Appendix 2.1: Cronbach Alpha analysis of Tangibles Factor Reliability Statistics Item-Total Statistics Tangible01 Tangible02 Tangible03 Tangible04 Tangible05 Appendix 2.2: Cronbach Alpha analysis of Responsiveness Factor Reliability Statistics Responsiveness1 Responsiveness2 Responsiveness3 62 Appendix 2.3: Cronbach Alpha analysis of Reliability Factor Reliability Statistics Reliability1 Reliability2 Reliability3 Appendix 2.4: Cronbach Alpha analysis of Assurance Factor Assurance1 Assurance2 Assurance3 Assurance4 63 Appendix 2.5: Cronbach Alpha analysis of Empathy Factor Empathy1 Empathy2 Empathy3 Appendix 2.6: Cronbach Alpha analysis of Satisfaction Factor Satisfaction1 Satisfaction2 Satisfaction3 64 APPENDIX EXPLORATORY FACTOR ANALYSIS (EFA) Appendix 3.1: EFA for exploring the service quality dimensions KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Total Variance Explained Component Total 10 11 12 13 14 15 16 17 18 Extraction Method: Principal Component Analysis 65 Rotated Component Matrix a Tangible05 Tangible04 Tangible02 Tangible01 Tangible03 Assurance2 Assurance4 Assurance1 Assurance3 Empathy1 Empathy3 Empathy2 Reliability2 Reliability3 Reliability1 Responsiveness1 Responsiveness3 Responsiveness2 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations Appendix 3.2: The EFA implementation of dependent variable (Customer Satisfaction) KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity 66 Total Variance Explained Component Extraction Method: Principal Component Analysis a Component Matrix Component Satisfaction2 971 Satisfaction1 950 Satisfaction3 939 Extraction Method: Principal Component Analysis a components extracted 67 APPENDIX MULTIPLE LINEAR REGRESSION ANALYSIS (MLR) Appendix 4.1: The effect of the independent variables (service quality dimensions) on the dependent variable (overall perceived service quality) Correlations OPSQ Pearson Correlation Sig (2-tailed) N TAN Pearson Correlation Sig (2-tailed) N RES Pearson Correlation Sig (2-tailed) N REL Pearson Correlation Sig (2-tailed) N ASR Pearson Correlation Sig (2-tailed) N EMP Pearson Correlation Sig (2-tailed) N ** Correlation is significant at the 0.001 level (2-tailed) Variables Entered/Removed b Model a All requested variables entered b Dependent Variable: Overall Perceived Service Quality 68 Model a Predictors: (Co RELIABILITY, R b Dependent Var Model Regression Residual Total a Predictors: (Constant), EMPATHY, TANGIBLE, RELIABILITY, RESPONSIVENESS, ASSURANCE b Dependent Variable: Overall Perceived Service Quality Coefficients Model (Constant) TAN RES REL ASR EMP a Dependent Variable: Overall Perceived Service Quality a 69 70 71 Appendix 4.2: The effect of the independent variable (overall service quality dimensions) on the dependent variable (customer satisfaction) Model a Predictors: (Constant), Overa b Dependent Variable: SATISF Model Regress Residua Total a Predictors: (Constant), Overall Perceived Service Quality b Dependent Variable: SATISFACTION Model (Constant) OPSQ a Dependent Variable: SATISFACTION 72 73 74 Appendix 4.3: The effect of the independent variables (service quality dimension) on the dependent variable (overall perceived service quality) of Vietnamese Customers Group a Coefficients of the Construct for Vietnamese customers Model (Constant) TAN RES REL ASR EMP a Dependent Variable: Overall Perceived Service Quality Appendix 4.4: The effect of the independent variable (overall service quality dimensions) on the dependent variable (customer satisfaction) of Vietnamese Customers Group a Coefficients of Satisfaction Variable for Vietnamese Customers’ Group Model (Constant) Overall Perceived Service Quality a Dependent Variable: SATISFACTION 75 Appendix 4.5: The effect of the independent variables (service quality dimensions) on the dependent variable (overall perceived service quality) of Foreign Customers Group a Coefficients of the Construct for Foreign Customers’ Group Model (Constant) TAN RES REL ASR EMP a Dependent Variable: Overall Perceived Service Quality Appendix 4.6: The effect of the independent variable (overall service quality dimensions) on the dependent variable (customer satisfaction) of Foreign Customers Group a Coefficients of the Satisfaction for Foreign Customers’ Group Model (Constant) Overall Perceived Service Quality a Dependent Variable: SATISFACTION ...MINISTRY OF EDUCATION AND TRAINNING UNIVERSITY OF ECONOMICS HO CHI MINH CITY - Nguyen Nguyen Xuan Thao THE IMPACT OF SERVICE QUALITY ON CUSTOMER SATISFACTION IN THE HOSPITALITY INDUSTRY. .. SERVQUAL instrument in measuring and comparing service quality within the fine dining sector of restaurant industry is accessed by Lee & Hing (1995) Customer‟s expectations of service quality, on all... fulfill their customer satisfaction In order to identify the impact of service quality factors on customer satisfaction in hospitality industry in Vietnam, I want to conduct a survey to examine the