A Review of Customer Loyalty Models in Hotel Services and Research Model in Vietnam

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1 A Review of Customer Loyalty Models in Hotel Services and Research Model in Vietnam Nguyen Thi Thanh Xuan Hong Duc University, Vietnam. Abstract Theoretically, meanwhile researches on the customers loyalty of hotel services in the world are abundant but in the field of hotel industry in Vietnam is very little. This paper will provide a review of the models that evaluate the customers loyalty in the hotel service in the world for proposing a model in Viet Nam. In general, through the approach and viewpoint of the researchers in different countries in this field, the author found that many factors have been shown to have a direct or indirect impact on loyalty, therefore, the determination of the factors are only relative and can vary based on space and time. The researcher has proposed a research model of factors including Perceived Quality (including both Tangible s Perception and Intangibles Perception), Perceived Value, Brand, Customer Relationship Management, and that may affect to the loyalty of customers using hotel services in Vietnam. Key Words: customer loyalty, models, hotel services, Vietnam 1

2 1. Introduction Proceedings of the International Academic Research Conference on Small & Medium Enterprises Hotel business is a link in the chain of tourism activities (Curta, 2012). It is one of the main and the most important components of the tourism industry. It can be said that for the development of tourism, it is necessary to develop hotel business activities to serve the restoration needs of tourists. Meanwhile, hotel business is currently contributing greatly to the overall economic development of Vietnam. However, the hotel business situation in Vietnam is facing difficulties and in-efficiency that the main reason is the hotel services have not met the needs of customers; consequently, customers (especially foreign customers) are less likely to return for using their services, meanwhile foreigners are guests who use and bring great revenue for luxury hotels in Vietnam (Figure 1) 1. It is necessary for hotel enterprises to impress and improve the quality of service, customer relationship, and brand value to satisfy the needs of customers for the better opportunity to develop and attract tourists back to use abundant tourism services in Vietnam. Figure 1: Customers using Hotel Service in Vietnam from 2014 to 2016 Domestic Year 2014, 17% Foreign customers Domestic Year 2015, 18.90% Domestic customers Domestic Year 2016, 20.40% Foreign Year 2014, 83% Foreign Year 2015, 81.10% Foreign Year 2016, 79.60% Source: Survey report of hotel service, Theoretically, meanwhile researches on the customers loyalty of hotel services in the world are abundant but in the field of hotel industry in Vietnam is very little. Therefore, the review of the models that evaluate the customers loyalty in the hotel service in the world for proposing a model in Viet Nam have important significance in improving the hotel services of Vietnam's service industry. Firstly, this study will analyze some definitions in the field of hospitality services and customer loyalty based on existing research. Following, this paper will analyze some customer loyalty patterns in the hotel sector from both direct and indirect aspects. Finally, this 1 Report by Grant Thornton (Vietnam) Ltd, Survey report of hotel service in Vietnam 2017, published by Grant Thornton 2

3 paper will propose a model of assessing the loyalty of customers using hotel services in Vietnam for future studies in this field. 2. Relevant Concepts 2.1 Concepts of Hotel Service The hotel is a major type of accommodation, occupying the largest share both in number and type in the tourist accommodation industry system. The two authors Chon and Sparrowe (1995), argued that hotel is a place where anyone can afford to rent a chamber. Each rental chamber inside must have at least two small rooms (bedroom and bathroom). Every bedroom must have a bed, a telephone and a television. In addition to the chamber service, there are other services such as luggage transport service, commercial center, restaurant, bar and entertainment services. The hotel can be built near or inside a commercial area, or airport (K.Chon and Sparrowe, 1995). In Belgium, it is assumed that the hotel must have at least 10 to 15 bedrooms with minimum facilities such as a bathroom and telephone. According to Vietnam Tourism Law, hotel is a tourist accommodation with a size of ten or more rooms, ensuring the quality of facilities, equipment and necessary services for guests staying and using services (Table 1). There are many different types of hotels by geographical location, service level, price, scale, or by ownership. In Vietnam, hotel types are often distinguished by rating that are mapped from location, architecture, comfort, luxury, security and a number of other factors into five levels from 1 to 5 stars. Table 1: Vietnam Hotel Ratings According to National Standard TCVN 4391: 2009 Criteria 1 star hotel 2 star hotel 3 star hotel 4 star hotel 5 star hotel 1. Location - Convenient transportation - Clean environment 2. Design - Standard architecture design or the template design 3. Size - At least Parking - Outside parking 5. Service rooms - Dining room - Bar in dining room - Convenient transportation - Clean environment - Standard architecture design, good building materials - At least 20 - Outside parking - Dining room - Bar in dining room - Convenient transportation - Clean environment and landscape - Standard architecture design, good building materials, reasonable interior design - At least 50 - Outside parking - Dining room - Bars - Convenient transportation - Clean environment and landscape - Beautiful architecture, high quality materials, beautiful interior and exterior design - At least 80 - Inside parking, enough for 30% of total - Asian and EU dining rooms - Banquet room - Bars (Source: Vietnam Standards and Quality Institution VSQI website) - Convenient transportation - Clean environment and landscape - Beautiful architecture, high quality materials, unified and beautiful interior and exterior design - At least Inside parking, enough for 50% of total - Asian and EU dining rooms - Banquet room - Bars 3

4 Hotel services exist in two forms: physical (food, drinks, utensils, souvenirs,...) and invisible (room service, meals and additional services). Although it exists in two forms, it is virtually see that all tangible products are in the form of services provided to customers. Therefore, it is possible to assert the products in the hotel business in the service business. In addition to the intangible features, service products in the hotel also are un-storable, high quality, and they are only made with the direct participation of customers. The process of creating and consuming hotel services takes place at the same time and is not uniform, and is performed only in certain technical facilities. Quality of hotel services is often difficult to measure and evaluate because it includes both tangible and intangible elements such as means of execution, goods sold, rendered services and hidden services (Nguyen Van Manh, 2013). Tangible elements are often easier to assess than invisible elements because they can be visible and measurable by quantitative criteria. In the provider s perspective, the quality of hotel services can be understood as the minimum service level that a hotel business has chosen to satisfy the high level of demand of the target market. At the same time, the level of service provision has been determined to remain consistent throughout the business cycle (Nguyen Van Manh, 2013). 2.2 Customer Loyalty According to Zeithaml, loyalty represents one dimension of behavioral intentions (Zeithaml et al., 1996). In contrast, attitudinal loyalty is often considered as comprising preferences, commitment, and purchase intentions of the emphasizing the psychological factor of brand loyalty (Mellens et al., 1996). The third approach combines the first two dimensions to measure loyalty by customers preferences, brand-switching propensity, frequency to buy and total amount of purchase (Hunter, 1998). So loyalty consists of not only two but three separate dimensions: behavioral, attitudinal, and composite. Based on the loyalty concepts, an approach composited to attitudinal and behavioral views is adopted for this research. 3. Overview of Customer Loyalty Models in Hotel Services With the aims of being the first choice and priority to the customers to use the service, a lot of the efforts from the hotels have been made to maintain customer loyalty in the period of competition these days. With this interesting fact, the research on the field of customer loyalty for hotel services nowadays is abundant; especially the identification of factors that affect customer loyalty when using hotel services is becoming very diverse between researchers based on their approach different perspectives, in different countries and regions. Both hotels and researchers are implicitly aware that understanding customer preferences in choosing hotel services determines customer loyalty (Permarrupan et al., 2013). Bodet (2008), through his empirical research, has verified the relationship between 4

5 customer satisfaction and loyalty based on four factors including specific satisfaction, overall satisfaction, attitudinal loyalty and repurchase behavior. Figure 2: Model for Hotels in the US by Danna Liang, 2008 Perceived Quality Perceived Value Behavioral/ Attitudinal Loyalty Trust Membership Liang (2008) in the research about customer loyalty for hotels in the US also confirmed that satisfaction was the most influence factor, followed by trust. The measurement of attitudinal loyalty regarded membership program is third most valued while perceived quality results for the fourth most valued factor. The least valued factors for attitudinal and behavioral loyalty were perceived value. This research results for the difference found between the customer loyalty components in terms of attitude and behavior and both differ from the customer loyalty s overall assessment. Through the use of the Servqual model, by empirical research, the customer loyalty study conducted by Kofi (2013) for some Ghana hotels services demonstrates that customer satisfaction depends not only on the rankings of hotels but also rely heavily on the quality of hotel services, which providing positive value perception to which in turn leads to customer loyalty. The results demonstrate the direct correlation between customer satisfaction and loyalty (Kofi, 2013). Orthodox (2016) in the research of relationship between Hotel Ratings, Service Quality, Customer and Loyalty at Ethiopian Hotels concluded that there are significant relationships between these concepts; but there was no basic to find out the direct relationship between hotel ratings and customer loyalty. Even though, the relationship between service quality and loyalty is not direct (Orthodox, 2016). These relationships are showed in Figure 3. 5

6 Figure 3: Model for Ethiopian Hotels by Orthodox, 2016 Rating by hotels Expectation Perception Service Quality Customer loyalty Rating by customers A survey of 163 customers from hotels in Sweden resulted in two main conclusions. Firstly, factors belong to organizations such as: size, strategy, and information system s maturity affect CRM activities, of which customer loyalty strategy affects mostly to CRM activities. Secondly, factors such as bonus cards, customization, free-gifts and the convenience of check in/check outs affect customer loyalty, of which customization affects mostly to customer loyalty (Figure 4). So, different preferences of firms and CRM activities are preferable because hotels are trying to create loyalty from their target customers (Bertilsson, 2011). Figure 4: Model of Customer Loyalty in Sweden by Bertilsson, 2011 Organizational factors Size Strategy Maturity of information system CRM activities Free gifts Bonus Cards Service customization Convenient check in/out Loyalty A thematic analysis to indentify customers service quality perceptions and loyalty in Harare, four factors results as the most important components for evaluating service experiences. They are customer service, service personnel s attitude, physical environment and staffs cleanliness, price and food quality (Mangwiro, 2015). Hou Xingqi (2008) has seen customer satisfaction as intervening variable in a study about customer loyalty of high star-level hotel, of which customer satisfaction was measured by 5 variables of Parasuraman (1988): Tangible, Reliability, Responsiveness, Empathy and Assurance. This model is shown as Figure 5 following: 6

7 Figure 5: Model of High Star-Level Hotels by Hou Xingqi, 2008 Tangible Reliability Responsiveness Empathy Loyalty Assurance Research by Akaba, 2013 evaluated the influence level of socio-demographic factors on customer perception and on their loyalty in hotel industry. The results showed that the relationship between service quality and customer loyalty is strongly influenced by customers socio-demographic characteristics. Of which, factors such as age, gender, marital status, occupation, education, income, length of stay, frequency and purpose of visit were moderators that importantly affect service quality and customer loyalty (Akaba, 2013). The model is shown in Figure 6 belowing: Figure 6: Model of Customer Loyalty by Akaba, 2013 Perceived Service Social - Demographic Loyalty Gender Age Marital status Nationality Income Education Occupation Length of stay Purpose of visit Repeat visitation The research authors on customer loyalty in the field of 4 star hotel services in Iran shows that the factors of personalization, communication, trust and satisfaction may influence customer loyalty when using hotel services. The findings confirmed the significant correlations among all these factors and the most significant one is customer satisfaction (Ranjbarian et al., 2011) 7

8 Figure 7: Model of Customer Loyalty in Iran by Ranjbarian, 2011 Personalization Loyalty Trust Communication Using a cross-sectional design, a study in Malaysia examined how Branding, Services, and Strategy influence customers loyalty from a data collection of 187 tourists. Findings of this study revealed that branding and services of hotels has a significant positive effect on consumer loyalty. Therefore, administrative should emphasize on service and branding in order to build long term relationship to maintain customer s loyalty, which is crucial for the survival in today s competitive business environment (Permarupan et al., 2013). Figure 8: Model of Customer Loyalty in Ho Chi Minh city by Khuong, 2015 Empathy & Assurance Price Tangible Loyalty Image The research about affecting factors of guests satisfaction and their loyalty of hotels in Ho Chi Minh City of Vietnam by Mai Ngoc Khuong and his partners in 2015 conducted a quantitative approach method with 255 questionnaire directly delivered to international tourists staying at 3-5 star hotels. The results showed that proposed factors as empathy and assurance, tangibility and hotel image directly and indirectly affected customers loyalty. Also according to the results of this study, satisfaction directly affected customers loyalty, meanwhile price indirectly and negatively affected the loyalty (Figure 8). There is no significant affect of reliability and responsiveness to customers loyalty (Khuong et al., 2015). In general, through the above studies, with each approach and viewpoint of the researchers in different countries, many factors have been shown to have a direct or indirect impact on customer satisfaction and loyalty using hotel services. This difference is due to the 8

9 models that include the proposed factors affecting customer loyalty are quite widely used and are applied in different aspects, different customers and in different cultures, therefore, the determination of the factors affecting customer loyalty of hotel industry are only relative and can vary based on space and time. Based on the overview of literature and studies of service quality, customer satisfaction, loyalty, along with the analysis and assessment of the actual performance of hotel businesses in Vietnam and consult from major hotel businesses owners and managers, experts in the field of hospitality industry, the researcher has found that factors such as Perceived Quality (including both Tangible s Perception and Intangibles Perception), Perceived Value, Brand, Customer Relationship Management (CRM), and may affect to the loyalty of customers using hotel services in Vietnam. Based on the above arguments, the author formed the research framework in this field for the research in Vietnam as Figure 9 following: Figure 9: Research Framework Perceived Quality Tangible_Perception Intangibles_Perception Customer Loyalty Perceived Value Brand image CRM The relationship between main factors as perceived quality, perceived value, brand image, customer relationship management with customer satisfaction and customer loyalty is very complex. The independent factors proposed in this study may be dependent factor on the approach of other studies. However, this research model has considered 2 relationships: (1) the relationship between four independent factors: perceived quality, perceived value, brand image, customer relationship management (CRM) and customer satisfaction factor (dependent factor); (2) the relationship and level of the impact of the above 5 factors (both considered as independent factors) on the dependent factor, which is the loyalty of domestic customers using hotel services in Vietnam. Thus, the satisfaction variable in the first relation is considered as a dependent factor but in the second relationship, it is considered as an independent factor, affecting to hotels' customers loyalty. 9

10 4. Conclusion Proceedings of the International Academic Research Conference on Small & Medium Enterprises Based on the theoretical research, the author provides an overview of the customer loyalty models on hotel services from which the author has developed a common research model of the main influencing factors (independent variables) and indirect factor (intermediate variables) on customer loyalty in Vietnam; they are the six main factors: perceived quality, perceived value, brand image, customer relationship management and customer satisfaction factor. Because of the limitation in the length of paper, the author could not summarize all the models in this field. The author proposes that the future literature could contain some other models that have different intervening variables in order to better illustrate the relationship between influence factors. References Akaba, 2013, Relationship of service quality and customer loyalty through the moderating effect of socio demographic characteristics, International journal of Hospitality & tourism systems, Vol 6, Issue 2, pp Bertilsson, 2011, How to create loyal visitors in hotel business, Hogscoland Karistianstad Universtiy Bodet, 2008, Customer satisfaction and loyalty in service: Two concepts, four constructs, several relationships, Journal of Retailing and Consumer Services, 15, pp Chon and Sparrowe, 1995, Welcome to hospitality: an introduction, Cincinnati, OH: South-Western Publishing Company Curta, 2012, Customize the value chain for tourism companies, Quaestus Multidisciplinary Research Journal, 2012, pp Hou Xingqi, 2008, The Study on Service Quality Customer and Loyalty, Shandong University Hunter, 1998, The validity and utility of selection methods in personnel psychology: practical and theoretical implications of 85 years of research findings, Psychological Bullentin, Vol 124, No 2, pp Kofi, 2013, Impact of Service Quality on Customer Loyalty in the Hotel Industry: An Empirical Study from Ghana, International review of management and business research, Vol 2, No 2, pp Liang, 2008, The determining factors of customer loyalty for Luxury hotels in US, The Journal of International Management Studies, Volume 3, Number 2, August, 2008 Mai Ngoc Khuong, Pham Le Hoang Ngan and Nguyen Thi Minh Phuong, Factors of affecting guests satisfaction and their loyalty A study of Luxury hotels in Ho Chi Minh City, Vietnam, International Journal of Innovation, Management and Technology, Vol 6, No 3, pp Mangwiro, 2015, A study into guests perceptions of service quality and loyalty in hotel restaurant in Harare, Research journali s Journal of Hospitality Tourism,Vol 2, No 4, pp 1-12 Mellens, M., M. G. Dekimpe, and J. B. E. M. Steenkampe, 1996, A review of brand-loyalty measures in marketing, Tijdschrift voor Economie en Management, Vol 41 (4), pp Nguyen Van Manh and Hoang Thi Lan Huong, 2013, Hotel business admistration, by National Economics University publisher, Vietnam Orthodox, 2014, Hotel ratings, service quality, customer satisfaction and loyalty: The perception of guests at Ethiopian Hotels, African journal of hospitality, tourism and leisure, special edition, Vol 5 (3), 2016, pp 1-18 Parasuraman, Zeithaml & Berry, 1988, SERVQUAL: a multiple-item scale for measuring consumer perception of service quality, Journal of Retailing, Vol 64(1), pp

11 Permarupan, Abdullah, Roselina, Noor Raihani, 2013, Critically Evaluating the Role of branding, service and strategy on customer loyalty, International business and management journal, vol 7, no 1, 2013, pp Ranjbarian, R Dabestani, E Khajeh, I Noktehdan, 2011, An Investigation of Influencing Factors Customers' Loyalty in a Four Star Hotel in Iran, International Journal of Business and Social Science 2 (21), pp Zeithaml, V. A., Berry, L. L., & Parasuraman, A., 1996, The Behavioral Consequences of Service Quality, Journal of Marketing Management, Vol 60, pp

A Review of Customer Loyalty Models in Hotel Services and Research Model in Vietnam

A Review of Customer Loyalty Models in Hotel Services and Research Model in Vietnam A Review of Customer Models in Hotel Services and Research Model in Vietnam Nguyen Thi Thanh Xuan, Lecturer at Hong Duc University, Vietnam. E-mail: xuanhongduc2002@yahoo.com Abstract Theoretically, meanwhile