Guests Satisfaction and Loyalty of Perhentian Island Hotels in Malaysia

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1 Guests Satisfaction and Loyalty of Perhentian Island Hotels in Malaysia Mahadzirah Mohamad and Pham Thi Ho Ly Universiti Terengganu Malaysia, Mengabang Telipot Kuala Terengganu, Malaysia ABSTRACT Hoteliers are confronting with a great challenge of not only securing customer satisfaction but also to convert these satisfied customers into loyal customers. It may be argued that the difficulty faced by managers committed to customer satisfaction designing specific customer satisfaction strategies resulting from lack of studies done to address the content of customer satisfaction. Acknowledging the fact that not all satisfied customers become loyal customer, it is important for hoteliers to ascertain which aspects of customer satisfaction can predict customer loyalty. Subjecting the data to factor analysis, five underlying customer satisfaction s factors were identified with one factor named Hotel Room explains almost 43 percent variation in guests satisfaction. These identified factors are classified into core and supplementary aspects of guests satisfaction. The results from stepwise multiple regression analysis revealed that guests satisfaction components classified as core products ; Hotel Room, Housekeeping and Restaurant have positive and significant effects on customer loyalty. The findings of the study suggest that managers perhaps should give more focus on gaining customer satisfaction especially on these identified aspects, namely Hotel Room, Housekeeping and Restaurant since these aspects statistically have significant impact on guest loyalty. INTRODUCTION The contribution of the tourism industry to the country s economic growth is undeniably significant although the industry was a late entrant to the mainstream of the Malaysian economy. This industry is being increasingly recognized as an important player in contributing to the development of the economy. In 2000 the tourism receipts reached to a figure of USD4.92 billion. It was reported in the Eighth Malaysian Plan that this is due to the increase in the arrival of tourist mainly from countries such as Singapore, Thailand, China, Japan, Australia and United Kingdom. In addition, the increase in the total receipt from the tourism industry was partly due to the increase in the tourist average length of stay (4.8 nights in 1995 and 5.5 nights in 2000) and per diem expenditure (USD67.34 in 1995 to USD81.15 in 2000). The Malaysian Government also undertakes to enhance the potential of domestic tourism in the effort to reduce the outflow of Malaysian currency to foreign countries. The growth in tourism industry can also be seen from the number of foreign tourism trips that increased from million trips in 2002 to 17.6 million in The Malaysian government continues to attract foreign to visit Malaysia by declaring 2007 as Visit Malaysia Year. The main objective of the Visit Malaysia Year program is to increase the average length of stay of visitors and to increase per capita expenditure. Intensified promotion efforts were undertaken to convert short haul, augment inbound tourists to fast-growing medium-haul and longhaul travelers ( Year 2007 was chosen as Visit Malaysia Year because to commemorate the nation celebrating 50 th anniversary as an independent nation. Throughout the year will be filled with 240 exciting events featuring Malaysian culture and heritage, festivals, parades, fiesta, sports and the like. Usually the needs of tourists, regardless whether they are local or foreign, would be for safe place to visit, clean food and comfortable accommodation. This calls for the duty of the hospitality sector to fulfill most of the requirements by these tourists. The sector has an important role to play in ensuring that these tourists enjoy their stays in a particular country or place, which eventually encourage them to make repeat visits. In addition, the hospitality sector also plays a great role in delivering and meeting the domestic needs of people for food and beverage. Apparently, among the main

2 movers and beneficiaries of the growth in tourism industry is the hospitality industry. Therefore, the growth in the tourism industry has a significant and direct effect to the growth of the hospitality industry. Hospitality is also known by another name, which is Hotel and Catering. It is identified by its output of products, which satisfy the demand for accommodation, food and beverage of those away from homes (Buttle, 1995). The hospitality industry includes various types of activities which cover everything from catering only to both catering and accommodation, sole trader catering to subsidized government-controlled operations; single hotel business to multi-site operators, and eating for pleasure, to eating for survival. This indicates that the industry is complex and heterogeneous. Hence, hospitality industry is a diverse industry in which small firms predominate, which includes hotels, guesthouses, bed and breakfast places, holiday camps, restaurants, self-service cafeterias, take-away, pubs, clubs, industrial and office canteen, function catering, school meals, hospitals and nursing homes (Statistical Review of Hotel and Catering Industry, 1984). However, the essential core products of the industry are accommodation, food and beverage. Perhentian Island Perhentian islands are located in the South China Sea 25 km from the coast of Kuala Besut. These islands are considered as the most beautiful island in the world ( and have attracted many foreign tourists visiting every year, especially from European countries. The major attractions that lure foreign tourists to visit the island are its white sandy beach and crystal-clear water. It consists of two islands, Pulau Perhentian Besar and Pulau Perhentian Kecil. Both islands are surrounded by beautiful palm-fringed sandy beaches and crystal-clear turquoise-blue sea. In addition, most foreign tourist who came to the island spend their activities by snorkelling and diving because the islands are the heaven for aquatic life such as turtles, coral and thousands of tropical fish. On the other hand, some chose to just lazing on their chosen spot on the white sandy beaches. It was reported that in 2005 on Perhentian islands, there are 43 hotels with 1,140 rooms ( There is no record of occupancy rate in Perhentian hotels but the average occupancy rate in Terengganu, the state in which Perhentian Islands are located is 58.3% in 2005, which is lower than the Malaysian hotel occupancy rate, which was 63.6% in 2005 ( It is essential for hotel managers on the island to take efforts to improve the present occupancy rate by perhaps understanding customer satisfaction and loyalty. LITERATURE REVIEW Although the major types of services provided in the hospitality industry can be classified into three main types: accommodation (rooms and beds), food and drink apart from miscellaneous services, it is important to note that the extent of these services being made available to customers tends to vary with the size of the establishments and types of organization. The most distinctive organization that provides accommodation and services related to the provision of accommodation to people who are away from home is hotels. The selling of food and drink is the second type of hospitality service, however the provision of such service requires more personnel compared to provision of accommodation. Hotels normally have a restaurant and bar to serve meals and refreshments to resident guests and sometimes to non-resident guests as well. Hence, the core offering of hotels are accommodation and food and beverages. Customer Satisfaction Customer satisfaction is recognised as an important factor that leads to repeat purchases and favorable word of mouth (Gundersen et al., 1996) which inturn increase profit of the firm (Bowen & Chen, 2001). Gundersen et al. (1996) defined customer satisfaction as a postconsumption judgement concerning a specific product or service which is measured from customer s evaluation of the organization performance. In addition, customer satisfaction serves as an exit barrier. The importance of customer satisfaction is undeniably. It was reported that for every 1 percent increase in customer satisfaction, there will be an increase in a firm s return of investment (ROI) by 2.37 percent (Anderson and Mittal, 2000).

3 The findings of a study conducted by Gundersen et al. (1996) in four major business hotels in a large city of Norway showed that the tangible aspects of the housekeeping department and the intangible aspects of the reception area are the most important aspects to customer overall satisfaction. The study also found that efforts to improve other aspects proved to be has no influence on customers overall satisfaction. Interestingly, the study by Skogland & Siguaw (2004) indicates that guests satisfactions do not appear to have a substantive effect on their loyalty. Although many studies have been done on customer satisfaction, but most of the studies focused on the process aspects of the construct, such as the antecedent and consequences, but less work has been done on the content of customer satisfaction (Gundersen et al.,1996). Hence, it is important to conduct a study that uncover the content of customer satisfaction so that further steps can be taken by the managers who are committed to customer satisfaction to make improvement. Customer Satisfaction and Loyalty Customer loyalty is defined as the willingness of re-purchasing the service and recommending the hotel to friends and relatives (Lovelock & Wirtz, 2004). Customer loyalty is known as having a positive relationship with profitability (Bowen & Chen, 2001). Reichheld et al. (2000) showed that a 5 percentage point shift in customer retention consistently resulted in % profit swings. Study by Bowen & Shoemaker (1998) found that loyal customer may return and purchase more in the hotel, they are more likely to have meal in the hotel restaurant than to use outside. The study also showed that the loyal customer encourage other people to use the hotel service. They are also less price sentitive. Customer loyalty is not the same as customer satisfaction. The hotel can attain customer satisfaction without their loyalty, but it is difficult to have customer loyalty without their satisfaction (Shoemaker & Lewis, 1999). Research by Choi & Chu (2001) showed that customer satisfaction has a strong and consistent causal relationship with repurchases intension. Highly satisfied customer are more likely to become loyal of a firm and spread positive word of mouth (Lovelock &Wirtz, 2004). As customer relies more on personal source of information as friends and relatives than multimedia and advertising from the hotel (Alexandris et al., 2002; Bowen & Chen, 2001), the hotel can have a good source of advertising without any cost. Study by Bowen and Chen (2001) found that a minor change of satisfaction could carry out a substantial change in loyalty benefit. The study demonstrated that when the level of satisfaction increases, the customer loyalty level increases. The study proved that when the satisfaction level declined, the intention to give a positive word of mouth dropped. However, Skogland and Siguaw (2004) express that the linkage between repeat-purchase behaviour and satisfaction is equivocal where a number of studies reported a significant links, while others noted that satisfaction explains little in regards to repeat purchase. In order to improve the understandings of the linking between satisfaction and loyalty perhaps it is important for hoteliers to understand which aspect or components of customer satisfaction has more influence on customer loyalty and apply appropriate strategies to gain customer loyalty. THE PURPOSE OF THE RESEARCH The study focuses on identifying guests responses to their recent experience of staying at a hotel on Perhentian Island with the aim of gaining some insights related to the different aspects of their satisfaction. In addition, this research attempts to uncover the effect of the identified aspects of guests satisfaction on loyalty. This research is very useful especially to hoteliers in establishing and implementing appropriate strategies for guests satisfaction and loyalty management. Hence, the two-folded objectives of the research are as follows: 1. To determine the different aspects of customer satisfaction. 2. To determine the effect of the different aspects of guests satisfaction on guests loyalty.

4 METHODOLOGY This research was conducted during the second weeks of April 2006 on Perhentian Island located in the East Coast of Peninsular Malaysia. The population of the research is the international tourist staying in hotels on the island. The respondents were selected using convenience-sampling method. In this case every tourist met on the beach was interviewed. The respondents were given a set of questionnaire, which they fill up themselves. The completed questionnaire was returned to the enumerator who waited until the process of responding to the questionnaire by the respondent was completed. The whole process lasted for about 15 to 20 minutes. The questionnaire used to collect data from respondents consists of three parts. The first part of the questionnaires contains items that measure customer satisfaction with respect to hotel services using a 7-point Likert scale ranging from 1 as very unsatisfied to 7 as very satisfied. The items on customer satisfactions were generated from the work of Gundersen et al. (1996). The second part of the questionnaire measures customer loyalty by asking questions related to their intentions to return and recommend the hotel to friends and relatives using a 7-point Likert scale ranging from 1 as not at all likely and 7 as extremely likely. Items measuring customer loyalty were adapted from Zeithaml et al. (1996). Finally, the last part of the questionnaire contains questions pertaining to the profile of respondents, which is deemed to be important to gain insights related to their background and characteristics. The collected data was subjected to several statistical analyses such as factor analysis and multi-regression, in addition to conducting reliability tests. A total of 247 questionnaires were distributed to the respondents and 217 questionnaires were completed and returned to be analyzed. Therefore, the response rate of the study is 87.8%. The reliability of the scale was assessed by subjecting the scale measuring customer satisfaction and loyalty to a reliability test. The results of the test indicated computed Cronbach s alpha values of 0.96 and 0.91 for customer satisfaction and customer loyalty respectively. According to Carmines and Zeller (1979) a Cronbach s alpha value of above 0.80 is considered to be reliably. Therefore we can comfortably proceed to further analysis of the data. Factor analysis was conducted to ascertain the underlying structure (contents) among the variables in the analysis (Hair et al., 2006). Stepwise multiple regression analysis was employed to determine the identified components of guests satisfaction (independent variables) whose values are known to predict the single dependent value selected, which in this case is guest s loyalty. RESEARCH FINDINGS Profile of Respondents The respondents are mainly from European countries (84.6%) mostly coming from United Kingdom, Sweden and Germany. Their ages range from 18 to 34 years old (71.8%) representing equal number of male and female group. Popular foreign tourist activities undertaken are snorkeling and diving perhaps would explain most of the respondents are in the age bracket because snorkeling and diving are suitable for that age group. Most of the respondents interviewed indicated that their purpose of visit to the island were to spent their holidays, traveling either with their spouse or friends. Majority of them spent 3 to 5 nights on the island. It should be noted that the most common activities are snorkeling and diving that attract many young tourist to visit. In addition, the majority of tourist visiting Malaysia is also at the age from 15 to 44 years old (77.2%) in which 54.3% are from 15 to 34 years old (Planning & Research Division, Tourism Malaysia, 2005). Components of Customer Satisfaction Factor analysis was applied to the data set using Principal Component Analysis to identify the underlying factors of guests satisfaction. An acceptable five-factor solution resulted, and these factors explain percent of the variation and all eigenvalues exceeded 1.0. Each of 13 out of 27 the statements, which attained a factor loading of 0.7 and above, was correlated with one of four underlying factors that were revealed by the analysis. As illustrated in Table 1, the Barlett s test of sphericity is significant and the value of KMO measure of sampling adequacy is 0.91, therefore we can comfortably proceed with the factor analysis. Table 2 provides the lists of these identified factors, namely Hotel Room,

5 Staff, Housekeeping, Restaurant and Lobby. Interestingly, the findings indicate that there is one major factor termed as Hotel Room that explains almost 43 percent variation in guests satisfaction as illustrated in Table 3. Table 1. KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Approx. Chi-Square Df 351 Sig Items Table 2. Rotated Component Matrix Description Factor loading Total variance explained (%) Factor 1: Hotel room Cleanliness of the hotel room Functioning of facilities in the hotel room Amenities in the hotel room Comfort of the hotel room 0.84 Factor 2: Staff English speaking capacity of the hotel staff Ability of providing service of the hotel staff 0.74 Factor 3: Housekeeping Housekeeping personnel willingness to provide service Housekeeping personnel ability to provide service 0.77 Factor 4: Restaurant Variety of menu items at the hotel restaurant The taste of food at the hotel restaurant Price of the food and beverage at the hotel restaurant 0.72 Factor 5: Lobby Comfort of the reception area Physical appearance of the reception area 0.83 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. A Rotation converged in 7 iterations. Component Table 3. Total Variance Explained Initial Eigenvalues Total % of Variance Cumulative % Hotel Room Staff ability Housekeeping Restaurant Lobby Extraction Method: Principal Component Analysis. The attained mean score of guests satisfaction is 5.09 on a 7-point Likert scale ranging from 1 as very unsatisfied to 7 as very satisfied. The results as illustrated in Table 4 indicate that guests satisfaction can be further improved. In order to improve the present level of guests satisfaction hoteliers should pay great attention to improve hotel room

6 since not only this factor explains variance in customer satisfaction but also the mean score for this factor is the lowest amongst all other identified factors. Table 4. Descriptive Statistics: Customer Satisfaction Components N Range Minimum Maximum Mean Std. Dev Housekeeping Staff Restaurant Lobby Hotel room Mean Score 5.09 Components of Guests Satisfaction that Predict Guests Loyalty The data set were then subjected to a stepwise multiple regression to identify the different aspects of guests satisfaction simultaneously associated with guests loyalty and estimate the separate and distinct influence of each variable on guests loyalty. According to Norusis (1995) and Hair et.al. (2006), the tolerance value of less than 0.1 and VIF value not more than 10.0 indicate that there is high multicolinearity. Since the data in Table 5 illustrates that the tolerance value for all the dimensions are more than 0.1 and VIF values are less than 10.0, therefore there is no existence of high multicolinearity among these dimensions. Hence the independent assumption of multiple regression analysis is met. Dimension Table 5. Tolerance and VIF values of Customer Satisfaction Dimension Collinearity Statistics Tolerance VIF Room Staff Housekeeping Restaurant Lobby The results of stepwise multiple regression analysis as illustrated in Table 6 indicate that these variables, namely, Hotel Room, Housekeeping, and Restaurant explain almost 44 percent variation in guest satisfactions. Table 7 reveals that the ANOVA F is significant, signaling that the null hypothesis of no linear relationship is rejected. Table 6. Model Summary Std. Error of the Model R R Square Adjusted R Square Estimate 1.617(a) (b) (c) a Predictors: (Constant), Room b Predictors: (Constant), Room, Housekeeping c Predictors: (Constant), Room, Housekeeping, Restaurant

7 Table 7. ANOVA Model Sum of Squares df Mean Square F Sig. 1 Regression (a) Residual Total Regression (b) Residual Total Regression (c) Residual Total a Predictors: (Constant), Room b Predictors: (Constant), Room, Housekeeping c Predictors: (Constant), Room, Housekeeping, Restaurant d Dependent Variable: Customer loyalty The SPSS output in Table 8 indicates the levels of statistical significance. In this particular case it is apparent that Hotel Room (α = 0.000), Housekeeping (α = 0.000) and Restaurant (α = 0.017) are significant at the accepted significant level of Table 8 also illustrates the coefficient table which reported standardized coefficients, or betas for each variable. These betas allow us to compare the relative importance of each independent variable (Carver and Nash, 2005). In this case, Hotel Room (β = 0.443) have a greater impact on guests loyalty, followed by Housekeeping (β = 0.238), and Restaurant (β = 0.135) implying that Hotel Room has greater impact on guests satisfaction followed by Housekeeping and restaurant. Model Table 8. Coefficients Standardized Unstandardized Coefficients Coefficients t Sig. B Std. Error Beta 1 (Constant) Room (Constant) Room Housekeeping (Constant) Room Housekeeping Restaurant a Dependent Variable: Customer loyalty DISCUSSION Undoubtedly, gaining guest s satisfaction is important since securing loyal customer would fail without gaining their satisfaction. However, it is equally important to recognize that loyal customers; for many industries, is considered as the key to improve the profitability of a firm. In addition, it is also acknowledged that not all satisfied customers would become loyal customers. Hence, the most important issue confronting hoteliers would be to ascertain which aspects or components of customer satisfaction would have greater impact on customer loyalty or predict customer loyalty. Perhaps, it is useful for hoteliers to focus efforts on developing strategies to enhance only certain aspects of customer satisfaction, which significantly contribute to enhancing customer loyalty rather than on every aspects of

8 customer satisfaction that are not proven to have positive impact on guests loyalty. The later effort would result in an increase in guests satisfaction but there is no guarantee that guests loyalty would increase. This study identified five underlying aspects of guests satisfaction, namely Hotel Room, Staff, Housekeeping, Restaurant and Lobby. Further analysis shows that only three factors out of five factors have statistically significant effect on guests loyalty and these factors are identified as Hotel Room, Housekeeping and Restaurant. The findings indicate that it is crucially important for hoteliers to satisfy guests on these aspects of their offerings, which is termed as core product. Hotel offerings are categorized into core product and supplementary services (Lovelock and Wirtz, 2004). The core products refer to the offerings that solve customers problem. For example, the existence of hotel is to provide accommodation and good and beverages to those who are away from home as suggested by Buttle (1995). Thus, these identified factors namely Hotel Room satisfies guests needs for accommodation. Housekeeping is closely related to providing Hotel Room and meeting guests requirements for services related to accommodation and finally Restaurant fulfills guests needs for food and beverages. On the other hand, Lobby and Staff are classified as supplementary services which facilitate the use of core products and enhancing its value and appeal. The findings of the study suggest that managers should concentrate on enhancing guests satisfaction on the core products which includes hotel room, housekeeping and restaurant which in turn would have an impact on guests loyalty. These aspects of guests satisfaction provide the central problem-solving benefits that guests seek. Importantly, the study also discovered that supplementary components of guest satisfaction have no significant influence on guest loyalty. The study did not undermine the important role of supplementary services in terms of enhancing guests satisfaction but the study suggests that the manager should aim at achieving high customer satisfaction on the core aspects of hotel offerings before embarking on improving guest satisfaction on the supplementary aspects. The findings of the study illustrates it is less likely that the efforts to improve supplementary aspects would influence guests loyalty. Thus, the study suggests that managers should aim at putting more efforts to improve the quality of hotel s offering especially on the core aspects of customer satisfaction in order to secure customers loyalty. Caution should be exercise when interpreting the findings of this study since all the data were gathered from a limited geographic area, which is on an island in the East Coast of Peninsular Malaysia. The findings of this study perhaps provide an insight to guests satisfaction and loyalty of hotels guests staying on island hotels. It would be interesting to replicate the study on national and international samples to ascertain whether the similar pattern exists. Additionally, future research should also empirically examine the linkages amongst service quality, guests satisfaction and loyalty. REFERENCES Alexandris, K., Dimitriadis, N. &Markata, D., Can perceptions of service quality predict behavioral intentions? An exploratory study in the hotel sector in Greece. Managing Service Quality 12, 4: Anderson, E.W. and Mittal, V., Strengthening the Satisfaction_Profit Chain, Journal of Service Research 3, November, pp Bowen, J. T. & Chen, S. L., The relationship between customer loyalty and customer satisfaction. International Journal of Contemporary Hospitality Management 13, 4/5: Bowen, J. T. & Shoemaker, S Loyalty: a strategic commitment. Cormell Hotel and Restaurant Administration Quarterly, February, 39, 1: Buttle, F., Hotel and Food Service Marketing, London: Cassell Educational Ltd. Carver, R. H. and Nash, J.G. (2005), Doing Data Analysis with SPSS Version 12, Thomson Learning, Canada. Carmines, E.G., and Zeller, R.A., 1979, Reliability and Validity Assessements, Beverely Hills, CA: Sage. Choi, T. Y. & Chu, R., Determinants of hotel guests satisfaction and repeat patronage in the Hong Kong hotel industry. Hospitality management 20: Eighth Malaysian Plan , Kuala Lumpur: Percetakan National Malaysia Berhad. Gundersen, M.G., Heide, M., Olsson, U.H., Hotel guest satisfaction among business travelers. The Cornell Hotel and Restaurant Administration Quarterly 36 (2),

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