Tapping Customer Satisfaction in Hospitality Industry - Research Proposal Example

TAPPING CUSTOMER SATISFACTION IN HOSPITALITY INDUSTRY: FACTORS TO IMPLEMENT TO STAY AHEAD OF THE PACK BACKGROUND Sometimes an attitude of negativity in the hotel and tourism industry develops and becomes a habit. This negativity dramatically affects productivity and profitability. The effects of work negativity are devastating and can lead to high turnover of staff, staff lateness, absenteeism, customer complaints over quality of service, intentional errors to trigger conflicts, intentional accidents to break items and faked illness to sabotage operations, all resulting into loss of business. Employees often whine, yell, speak sarcastically or bottle up their negativity attitudes and under-perform either in the presence of the customer to stimulate the customer to seek further details or amongst employees themselves. Employees and managers need to address this problem of negativity because the success of the hospitality industry depends on performance management of employees. AIMS AND OBJECTIVES To investigate how negativity attitude of employees towards work could affect customer loyalty and the degree it affects productivity, profitability in terms of sales lost. HYPOTHESIS Negativity attitude towards work by employees in hospitality industry affects customer service and impacts negatively on the customer loyalty. LITERATURE REVIEW Overview of the themes Economic value is the productivity gap between the price and the cost and is measured by sustained profitability. A business creates value when its returns exceed its cost of capital. The true measure of profitability is therefore is the net profit left after deducting cost of the capital utilized in the business, a measure commonly termed as economic shift. Hotels strategize to benefit from the economic profit, as the “best” in an effort to create their own market place. According to Cook (2003), profitability of a hotel is a function of efficient customer service, implying, the type of customer service that is advanced to a customer determines how far the hotel is likely to benefit from the customer. In the event of customer’s dissatisfaction, the customer is not likely to recommend a friend, team or fellow corporate citizens towards the services the hotel offers. This is a bad hotel publicity and leads into a loss of business from future possible sales and translates into ‘sales lost’. The mathematical representation of Total sales lost is the sum of sales lost from a customer who experienced disservice and complained plus the sales lost from a customer who experienced disservice and failed to complain plus the sales lost if the customer experienced no disservice. Satisfactory levels of a customer breeds loyalty. Customer’s loyalty has an estimated numerical value, depending on the domain that is used to denote it. Customer loyalty may therefore have a positive or negative value. Therefore, it’s possible to compute a relationship between the annual sales lost in terms of customer value. An annual sale lost is a ratio of total sales lost and a measured customer service. Since an annual sale lost is a ratio, it has no units. Analysis of the total sales lost and the annual sales lost, as measured through a determined number of years of customer loyalty helps to determine the relationship between the role of employees in effecting efficient customer service and overall profits. Hales (2005), points out that profitability can be a sum of segmented units of service that a hotel industry has like the bar, restaurants, recreational facilities that offer entertainment, boarding facilities and communication bureaus for the telephone and internet. Every segment has its own total profits and expenses. Therefore, gross operating profit is a cumulative sum and a gross operating expense is a cumulative sum of different segments expenses. This means cumulative gross profit is equal to the sum of total segments profit minus the sum of total segments expenses. Every segment makes profit that is determined by the level it makes contact with the customers. According to Getonga (1999), economic profit is more realistic in evaluating profitability because one charges the opportunity cost of capital to earnings of the enterprise. The cost of capital is determined by estimating cash flow and discount rate or the required rate of return (rrr). The discount rate is opportunity cost or the cost of supply of capital for discounting its cash flows. The cost of capital is the minimum acceptable rate of return on the committed funds. The minimum acceptable or the hurdle rate or the required rate of return or the threshold rate is a compensation for time and risk in the use of the capital and comprises the real risk return and the risk premium. Po = CF1/ (1+k) + CF2/ (1+k) 2 +…+ CFn / (1+k) n Where: Po is the capital supplied at period O and represents a net cash flow CF1, CF2…, CFn are returns expected and represent cash outflows k is the required rate of return or the cost of capital k that is cost of capital is the internal rate of return which equates the present values of inflows and outflows of a financial opportunity. The ability to have sustained profit lies in efficient performance management that is subject to productivity. Profitable productivity involves ability to organize inputs in order to create the service and required value of output. The main input that has the highest consideration in tourism and hospitality industry is the knowledge to deliver services that that the client needs. Hence the output is relative to input factors and the output, measured as profit index or profit margin, is the degree of customer service and corresponding satisfaction levels of customer for the services rendered. This sheds light on employees as the main input factors that determine the expected output (accel team) DATA AND METHODS Introduction The data used in the study of attaining sustainable profit is based on performance management. The degree of performance management impacts on profitability and is a function of how employees are motivated through relevant training requirements, salary increases as a ratio of man hours, incentives like medical and retirement schemes and presence of pensionable services. Productivity of employees is measured in term of input, meant to create a specified service that corresponds to a specified value of output (accel team). In the hospitality industry, these inputs comprise informed knowledge and capacity of employees to deliver the service that a client requires. On the other hand, the value of the expected output is the level of relevant customer service and its corresponding utility or satisfactory role to the client for the services rendered. Data used The data leading into conclusive role of performance management is qualitative primary data. Outcome from qualitative research helps to addresses the role of employees in effecting customer service that does not lead into sales lost. The data would be a guide towards implementation of successful employee performance management that is meant to increase customer loyalty. The limitation associated with the sampling technique that is employed in the study is due to presence of sampling errors. When the sample taken for study is too small, there is high probability of a large statistical standard deviation error. Methods and techniques The methods used to collect the qualitative data on the negativity of the employees and its effects on profitability involved the use of unstructured interview, where probing is often used to get deeper information. The questions used 1. When angry, do you take out your frustrations on others? 2. If you are in a senior position, would you be dictatorial, autocratic or tyrannical when angered at the work place? 3. If a change is communicated for implementation, do you become negative to the change? Do you express your resistance openly or do you do it silently? 4. As a competent employee, do you implement changes that have negative value? 5. Are you likely to sense a loss of control regarding work environment and rumor about it? For those who rumor, do you feel as if they regain a sense of control after the action? 6. Do you take responsibility of your own mistakes or do you shift the blame to others? 7. How sensitive are you to slightest things that affect your working environment, remuneration or employee benefits? 8. Do you focus on unimportant details when in the negative mood of work? Limitations of interviews They are very expensive. The researcher has to travel to meet respondents Interviewing requires a high level of skill that a novice researcher may not have. Interviewers need to be trained to avoid bias Interviews involve smaller samples because they are time consuming. Causes of negative attitude Low pay Lack of training programmes though they might have been promised Long working hours those don’t translate to high salaries Poor channels of communication Failure of agenda’s of meetings concerning remuneration and benefits to be implemented Poor working conditions and guidelines like failure of the hotel to arrange transport of employees to their homes after a day’s work that often ends very late Poor recruitment procedures that favour family relations as opposed to qualification levels Analysis of the results Negativity attitude could lead into poor service deli every by employees. This could be reflected on poor customer service. The client or customer could complain about the disservice and no assurance of something to be done to correct the problem. This could decrease customer loyalty and can be a starting point of negative publicity on the hotel. Failure to look into the problem by the management could lead into lost sales because the customer loyalty is lost. A specific method When employees’ negativity becomes pervasive, the boss should have no choice but to confront it and hold the negativist accountable for changing his or her behavior. It is best for the supervisor of such an employee to confront the individual and find a solution. Team members can also address it within their units. First, there is need to identify the negative behavior and its impacts on the business. If there is no impact, the person can be left to their own devices. Second, the person may have legitimate reasons for his or her actions. If his is the case, then the relevant departments should know and necessary action taken to solve it. Third, there is need to identify alternatives and more positive ways that the person can behave to help the employee and others affected by the negativity. This helps to improve hotel’s productivity. The performance management can be addressed by identifying the problem and working on the problem using the steps outlined by candy (2003) in the figure 1 below. Figure 1: the seven steps of performance management Step 1: the employee needs to have his or her job description stated clearly, and clearly understand the procedures t follow towards delivering the expected outcome. Step 2: diagnosis of the expected outcome is necessary to determine reasons behind the employee’s behavioral performance if it is not in line with tenets of step 1. Step 3: evaluation helps to determine if diagnosed and observed performance is within the required outcome Step 4 and 5: communication on the results of the evaluation process should be timely done to determine improvements that need to be made towards employee’s performance. Step 6-step 7: these ensure there is a functional relationship within the establishment that is in step with hotel’s objectives of financial stability, growth and development. This agrees with observations of Schwatz (1999) that effective performance management enables a firm to reap more profits. This is because a successful business is an ingredient of high quality employees and has management systems that motivate employees to be more productive and has ethics of building a culture within the organization that imparts on the customers loyalty. CONCLUSION Justification of the study Profitability of the hotel industry, as a people intensive entity, is determined by the level of customer service. Customer service rendered and satisfaction levels of a customer affects customer loyalty, a factor that determines long term profitability. The hotel and hospitality industry therefore need to address the negativity attitude in order to benefit from a sustained productivity. It’s also important that management performance of employees be carried out periodically. Limitations Many hotels set ups don’t understand or diagnose problems related to negativity because customer loyalty that eventually affects the hotel and hospitality industry profits take long to be estimated. In many hotel set ups, lost sales or annual lost sales are not attributed to customer loyalty. Reference 1. Andrew E. Shwartz (1999). Performance Management. Barron’s Education Series, Hauppage, New York 2. Cook, S., (2003). Customer Care Excellence, 4th Edn. London, Saxon Graphics Ltd 3. Gitonga, J.M. (199). Evaluation of Economic Profit, Target Publishers, Naironi, Kenya. 4. Hales, J (2005). Accounting and Financial Analysis in the Hospitality Industry. Elsevier Buterworth-Heinemann, Amsterdam 5. Candy, R.L., (2003). Performance Management: Concepts, Skills and Excericses. M.E. Sharpe, Inc. Armonk, New York Read More