The Role of Customer Satisfaction and Image in Gaining Customer Loyalty in the Hotel Industry

Transcription

1 The Role of Customer Satisfaction and Image in Gaining Customer Loyalty in the Hotel Industry Jay Kandampully Dwi Suhartanto ABSTRACT. Customer loyalty has become a topical issue in research and practice due to its proven dominance in a hotel organization s success. The present research adds to the body of knowledge in services marketing in the hospitality industry by improving understanding of the relationships among customer loyalty, customer satisfaction, and image. This research identifies the factors of image and customer satisfaction that are positively related to customer loyalty in hotels. Research findings from the data collected from chain hotels indicate that hotel image and customer satisfaction with the performance of housekeeping, reception, food and beverage, and price are positively correlated to customer loyalty. Performance of housekeeping, however, was found to be one of the most important considerations for customers of hotel chains. [Article copies available for a fee from The Haworth Document Delivery Service: HAWORTH. address: <getinfo@haworthpressinc.com> Website: < by The Haworth Press, Inc. All rights reserved.] KEYWORDS. Customer satisfaction, customer loyalty, image, service marketing, service quality Jay Kandampully is Professor, Hospitality Management Program, Campbell Hall, The Ohio State University, Columbus, OH Dwi Suhartanto is Director of The Indonesian Post Polytech, Administrasi Niaga, Politeknik Negeri Bandung, Jl. Gegerkalong Hilir, Ciwaruga, Bandung, Indonesia. Journal of Hospitality & Leisure Marketing, Vol. 10(1/2) by The Haworth Press, Inc. All rights reserved. 3

2 4 JOURNAL OF HOSPITALITY & LEISURE MARKETING INTRODUCTION Hospitality and tourism have evolved into truly global industries in which both consumers and producers are dispersed worldwide. Due to changes in lifestyle (including changes in work patterns, travel needs, eating habits, and the development of a cosmopolitan community), the services offered by hospitality businesses are now considered to be necessities, rather than luxuries. Consequently, during the past decade, there has been an exponential growth in hospitality businesses to meet the demands of the growing market. This has provided consumers with a great variety of choices while simultaneously augmenting competition in the marketplace. Consequently, hospitality organizations today are faced with intense competition, and the associated challenge of steady growth in a competitive environment. Moreover, it has become increasingly difficult for firms to assume that there exists an unlimited customer base prepared to maintain patronage. Hence, in the scheme of business, it has become apparent that the ultimate goal of any organization in a hyper-competitive market, is to maintain a loyal customer base. It is essential for any hospitality organization to seek opportunities to gain a competitive advantage by adopting various strategies. However, researchers and practitioners agree that developing customer loyalty has proved to be the most favored strategy, as price can have negative impact on the firm s medium-term and long-term profitability (Ernst &Young, 1996), consequently affecting the firm s image. It is thus imperative that hospitality firms develop proactive strategies to gain customer loyalty, as opposed to relying on pricing strategies to attract new customers. Although price continues to play a role in maintaining loyalty, competitive pricing alone does not create long-term customer loyalty (Schultz & Bailey, 2000; Scott, 2001). Moreover, from a customer s point of view, the costs involved in finding a new service provider have a significant positive influence on customer loyalty (Lee & Cunningham, 2001). Researchers have shown that it costs five times more to attract a new customer than to keep an existing one (Holmund & Kock, 1996:289). Research conducted by Reichheld and Sasser (1990) indicated that a 5 per cent increase in customer loyalty can produce a profit increase of per cent. They argued that the profitability of an individual customer grows permanently with the duration of the business-relationship. They also found that up to 60 per cent of increased sales to new customers could be attributed to customer recommendations an indicator of customer loyalty. Further, a study conducted by Heskett et al.

3 Jay Kandampully and Dwi Suhartanto 5 (1994) showed that, in some companies, loyal customers not only provide the profits but also cover the losses incurred in dealing with less loyal customers. Gronroos (2000:131) indicated that, in most businesses, loyal customers are willing to pay a premium price; loyal customers make cost savings by using the service of a service provider they know well. The long-term benefits of the customer-supplier relationship are significant to any firm. According to Gummesson (1999:183) return on relationship reflects directly on the firm s long-term financial outcome. The above arguments clearly illustrate the importance of customer loyalty for an organization. Customer-supplier relationship, and the resulting loyalty of the customer, can be assumed to be necessary prerequisites for any firm to prosper in the competitive market. It is commonly believed that by satisfying customers, firms can improve their profits. Management thinker Peter Drucker (1973:79) wrote, to satisfy the customer is the mission and purpose of every business. Thus, for many years, business organizations have focused on customer satisfaction programs (Bhote, 1996). Although satisfying customers is essential for any organization, studies show that satisfying customers alone is not enough, since there is no guarantee that satisfied customers will return to purchase (Dube et al., 1994). Bowen and Shoemaker (1998) indicated that loyalty extends beyond simple satisfaction. Customer loyalty also addresses the issue of how likely a customer is to return and the customer s willingness to perform partner-like activities for the hotel that is, recommendations to friends. Thus, it is now becoming apparent that it is no longer customer satisfaction, but customer loyalty, that constitutes the dominant factor in the success of a business organization. Developing customer loyalty in the service industry constitutes a challenge due to the three defining characteristics of services: intangibility, heterogeneity, and inseparability (Parasuraman, Zeithhaml, & Berry, 1988). The intangible nature of the service product essentially forces customers to anchor their decision to become loyal on relatively more dependable cues such as the firm s image and reputation (Gremler & Brown, 1997; Ostrowsky, O Brien, & Gordon, 1993). Since services are performances that are commonly labor-intensive (Zeithaml & Bitner, 1996), the outcomes are thus heterogeneous. It is therefore difficult, if not impossible, to standardize a service. Moreover, standardization refers to how much flexibility the system is intended to display in serving the customer (Chase & Bowen, 1991). Inseparability denotes that the production and the consumption of a service occur simultaneously

4 6 JOURNAL OF HOSPITALITY & LEISURE MARKETING (Gronroos, 1978). This implies that customers are involved in the process of the production of the service and thus have the capacity to affect, positively or negatively, the outcome of the service (Parasuraman, Zeithaml, & Berry, 1985). Customer input in the production process of services causes difficulty in producing a consistent quality of service. This can lead to inconsistency of the firm s service order, negatively affecting customer satisfaction and loyalty. In addition, Parasuraman and Grewal (2000) showed that, in service organizations, the quality of service enhances the perceived value of the service, and contributes to customer loyalty. The increasing sophistication of customers demands also poses a challenge to the development of customer loyalty in the service industry (Kirwin, 1992). Modern consumers demand high-quality products and services and exhibit a low tolerance for products and services of mediocre quality. This has been an ever-increasing concern for hotel managers, who therefore seek ways to understand the factors that most influence customers to become loyal. In a practical context, this knowledge assists hotel managers to develop creative strategies to nurture and to maintain customer loyalty from both existing and prospective customers. LOYALTY IN SERVICES Although the academic literature contains many definitions of the term loyalty, there is no general consensus among researchers and practitioners as to what exactly constitutes loyalty and how it is demonstrated. Some authors define loyalty as an attitude exhibited by customers towards the service provider, whereas others define loyalty from the service provider s perspective. Gremler and Brown (1997:173) used the term service loyalty to refer to the attitude and behavior of the customer towards the service provider: Service loyalty is the degree to which a customer exhibits repeat purchasing behavior from a service provider, possesses a positive attitudinal disposition toward the provider, and considers using only this provider when a need for this service arises. This definition describes a loyal customer not only as a repeat buyer but also as one who maintains a positive attitude towards the service provider (for example, by recommending others to purchase from the firm).

5 Kandampully (1998:431) and Kandampully and Duddy (1999:51) also used the term service loyalty, but they used the expression to refer to the attitude demonstrated by the service provider in ensuring that customer loyalty is maintained. Thus, service loyalty represents: An organisation s commitment to its customers to think, anticipate and innovate products and services in accordance with customers evolving needs. Although these definitions vary in their perspective, they both refer to loyalty as a positive long-term relationship between service provider and customer. Thus, a loyal customer is a customer who mostly repurchases, when feasible, from the same provider and maintains a positive attitude towards the provider. For the purpose of this study, a loyal customer of a service organization is considered to be a customer who mostly repurchases, when feasible, from the same provider, and who recommends or personally maintains a positive attitude towards the provider. Research indicates that loyalty is a multidimensional construct, comprising two dimensions: behavioral and attitudinal (Julander et al., 1997). Behavioral Dimension Jay Kandampully and Dwi Suhartanto 7 The behavioral dimension of loyalty refers to those aspects of consumer behavior (for example, repeat purchase) directed towards a particular brand or service over time (Bowen & Shoemaker, 1998). Although repeat purchase is an important issue for most marketers, an interpretation of loyalty based on purchase behavior alone is not sufficient, since repurchase behavior does not necessarily indicate a customer s motivation for purchase (Jarvis & Mayo, 1986; Shoemaker & Lewis, 1999; Lee & Cunningham, 2001). A customer might repurchase from similar providers for reasons other than his or her positive personal feeling towards a firm. For instance, in the hotel industry a repeat customer might stay in a particular hotel chain due to: indifference to the hotel chain; the chain property being the only one acceptable to the traveller; familiarity; the chain being considered the best of a poor set of available alternatives at the destination; avoidance of the inconvenience of switching; convenience of location.

6 8 JOURNAL OF HOSPITALITY & LEISURE MARKETING Attitudinal Dimension According to Gremler and Brown (1997), the attitudinal dimension of loyalty included a customer s intentions and preferences. Some researchers measure loyalty according to the customer s intention to recommend or to repurchase (Getty & Thompson, 1994), whereas others measure loyalty in terms of customer preference (Ostrowsky, O Brien, & Gordon, 1993). The attitudinal dimension, such as the intention to repurchase and intention to recommend, is deemed a good indicator of customer loyalty (MacStravic, 1994) and is therefore very important for future business activities. Similarly, Zeithaml, Berry, and Parasuraman (1996) contended that customers behavioral intentions such as intention to recommend and repurchase are indicators that signal whether customers will remain with, or defect from the company. The behavioral and attitudinal dimensions of customer loyalty are consistent with the operationalisation of loyalty factors in the behavioral-intention battery of Zeithaml, Berry, and Parasuraman (1996). The five items they used for measuring loyalty included: saying positive things about the firm; recommending the firm to others; encouraging others to do business with the firm; considering the firm as the first choice in the future; and doing more business with the firm in the future. In addition, a study of loyalty conducted by Gremler and Brown (1997) provided evidence of the existence of behavioral and attitudinal dimensions. LOYALTY ANTECEDENTS The marketing literature to date has not clearly identified a theoretical framework particularly in terms of those factors leading to the development of customer loyalty (Gremler & Brown, 1997). However, a number of factors has been identified as antecedents of customer loyalty. Indeed, most researchers agree that customer satisfaction and service quality are antecedents of loyalty (Gremler & Brown, 1997; Cronin & Taylor, 1992). In addition, switching barriers related to technical, economic, and psychological factors are also considered antecedents of loyalty (Selnes, 1993; Gremler & Brown, 1997). These barriers influ-

7 Jay Kandampully and Dwi Suhartanto 9 ence customer loyalty by rendering it difficult or expensive for customers to change their suppliers. Moreover, recent studies indicate image to be another determinant of service loyalty. The effect of image on loyalty was explained by Fredericks and Salter (1995:2): Company image also can be an important element in the value equation. Company or brand image can support or undermine the value that customers feel they are getting, and therefore, image can affect loyalty. Similarly, Bhote (1996) contended that image is an attitude that leads to customer enthusiasm: value, delight, and loyalty. Research conducted by Ostrowsky, O Brien, and Gordon (1993) on the airline industry supported this contention. They reported that image is significantly related to passenger loyalty. Companies thus tend to perceive customer satisfaction and image (or reputation) to constitute the most viable long-term strategy (Selnes, 1993). RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY Customer satisfaction is one of the objectives of marketing activity, linking the processes of purchasing and consumption with post-purchase phenomena (Churchill & Suprenant, 1982). The basic argument for satisfying a customer is to improve profitability by expanding the business, gaining higher market share, and gaining repeat and referral business (Barsky, 1992). Cronin and Taylor (1992) investigated the conceptualization and measurement of service quality and the relationships among service quality, customer satisfaction, and purchase intentions. Using four service samples banking, pest-control, dry-cleaning, and fast food Cronin and Taylor showed that customer satisfaction has a significant effect on purchase intentions in all four industries. These findings were supported by a similar study conducted in a health-care setting by McAlexander, Kaldenberg, and Koenig (1994). They showed that patient satisfaction and service quality have significant effects on purchase intentions. Woodside, Frey, and Daly (1989), in their study on hospital patients, linked service quality, customer satisfaction, and behavior intention. Their research strongly supported the hypothesis that customer satisfac-

8 10 JOURNAL OF HOSPITALITY & LEISURE MARKETING tion with hospital stays is associated positively with the intention to return to the same hospital, if hospital care is needed in the future. Similarly, a study conducted by File, Cermak, and Prince (1994), measuring the effect of word-of-mouth on buying behavior in professional services, showed that satisfaction with the professional service is positively correlated with positive verbal recommendation. In the hospitality industry, Getty and Thompson (1994) studied the relationships among quality of lodging, satisfaction, and the effect on customers intentions to recommend the lodging to perspective customers. Their results suggested that customers intentions to recommend are a function of their perception of service quality and their satisfaction with the lodging experience. Numerous additional studies have supported the conclusion that customer satisfaction has a positive relationship with behavioral intention (Barsky, 1992; Palmer & Maani, 1995; Fornell et al., 1996). It can therefore be concluded that there is a positive relationship between customer satisfaction and customer loyalty. RELATIONSHIP BETWEEN IMAGE AND LOYALTY Image is considered to be an important variable in influencing marketing activities. Image is important for any organization, due to its ability to influence customers perception of the goods and services offered (Zeithaml & Bitner, 1996). As a result, image impacts on customers buying behavior, and this highlights the importance of maintaining a desirable image. Researchers have identified a number of factors that determine image. Normann (1991), for example, argued that image is built up in the customer s mind through the combined effects of advertising, public relations, physical image, word-of-mouth, and the customer s actual experiences with the goods and services. From these determinants, Normann deemed the customer s experience with the products and services to be the most important factor in the development of image. Similarly, Gronroos (1983) contended that image is formed by the service quality (both technical and functional quality), by traditional marketing activities (such as advertising, public relations, and pricing), and by external influences (such as tradition and wordof-mouth). According to Gronroos (1983), it is service quality that represents the single most important determinant of image. Echtner and Ritchie (1991), based on studies conducted on store image, identified two dimensions of image holistic and attributes. The holistic dimension refers to a person s mental picturing of the phe-

9 Jay Kandampully and Dwi Suhartanto 11 nomena as a whole, as opposed to a mere collection of independent stimuli (Bitner, 1992). In other words, the holistic or imaginary element of image encompasses the total impression and feeling of the phenomena engendered from any or all of the senses. The attributes dimension refers to the facilities and physical environment that forms and influences the phenomena (Echtner & Ritchie, 1991). Ostrowsky, O Brien, and Gordon (1993) examined issues related to service quality and customer loyalty in the airline industry. Using data collected from two air carriers, they indicated that a significant relationship exists between carrier image and retained preference (a measure of customer loyalty). Among the carrier-image variables used in their research, airline reputation and quality of customer service were deemed the most important variables for both airlines. Heung, Mok, and Kwan (1996) examined the degree of hotel brand loyalty in the free independent travelers market. Their study revealed that hotel image maintains a relatively high score rating among loyal customers. Further, the findings indicated that hotel image is an important factor in hotel choice among loyal guests. Mazanec (1995) examined Self-Organizing Maps (SOM) for positioning analysis of luxury hotels. He reported that image is positively associated with customer satisfaction and customer preference (a dimension of customer loyalty). A desirable image leads to customer satisfaction and customer preference, whereas an undesirable image leads to dissatisfaction. RESEARCH JUSTIFICATION Customer satisfaction and image are two factors that have been identified as important antecedents of customer loyalty (Selnes, 1993; Ostrowsky, O Brien, & Gordon, 1993). In terms of the relationships among image, customer satisfaction, and customer loyalty, most of these studies measured the relationship among these three factors separately. Some researchers focused on the relationship between customer loyalty and image (Ostrowsky, O Brien, & Gordon, 1993), whereas others focused on the relationship between customer loyalty and customer satisfaction (Mazanec, 1995). The present research examines the relationship between customer loyalty and its two antecedents customer satisfaction and image in the hotel industry. More specifically, this research addresses the following research question:

10 12 JOURNAL OF HOSPITALITY & LEISURE MARKETING Which aspects of image and customer satisfaction are related to customer loyalty in the hotel industry? MODEL AND HYPOTHESES To address the gap identified in the literature review, we developed a conceptual model as shown in Figure 1. This model predicts that customer satisfaction and image directly influence customer loyalty. Customer s behavioral intentions such as intention to repurchase and to recommend are deemed to be good indicators of customer loyalty. Therefore, for the purpose of this research, customer loyalty is gauged as a customer s intention to recommend and to repurchase. Hotel image is measured based on holistic and attributes dimensions of the hotel. The holistic dimension of hotel image can be defined as a person s perception of the hotel as a whole, whereas the attributes dimension of hotel image refers to all the facilities and physical environment that form and influence a hotel. The hotel departments of reception, food and beverage, and housekeeping provide the operations necessary to satisfy the basic needs of hotel guests (Gundersen, Heide, & Olsson, 1996). Hence, for the pur- FIGURE 1. Model Suggesting the Relationship Between Customer Loyalty, Hotel Image and Customer Satisfaction Hotel Image Holistic Dimension Attributes Dimension + Customer Loyalty Intention to Repurchase Intention to Recommend Customer Satisfaction Reception Department Food and Beverage Department Housekeeping Department Price +

11 Jay Kandampully and Dwi Suhartanto 13 pose of this research, customer satisfaction with hotel performance is measured according to the performance of these three hotel departments. In addition, as price or value is considered as an important factor that influences and assists in the development of customer satisfaction (Getty & Thompson, 1994), price is also included as a measurement factor of customer satisfaction with hotel performance. HYPOTHESES The broad objective of the present study is to identify the relationships that exist between customer loyalty and its two antecedents, customer satisfaction and image, in the hotel industry. To this end, three hypotheses have been developed. H1: That the holistic and attributes dimension of hotel image is positively related to customer loyalty. H2: That customer satisfaction with reception, housekeeping, food and beverage, and price is positively related to customer loyalty. H3: That hotel image and customer satisfaction with hotel performance significantly explain the variance in customer loyalty. RESEARCH METHODOLOGY This research focuses on the chain hotel as customer loyalty is considered to be a more important issue for hotel chains than for other types of hotels, such as independent hotels (Heung, Mok, & Kwan, 1996). Considering the objective of this research, the unit of analysis in this research is at the individual level that is, the guests of chain hotels. To achieve this objective, cross-sectional data were collected from chain hotel customers. CONSTRUCT MEASUREMENT The constructs illustrated in Table 1 were operationalized by adapting existing items found within a wide range of research literature.

12 14 JOURNAL OF HOSPITALITY & LEISURE MARKETING TABLE 1. Construct Operationalization Variable Number Description items Customer loyalty 2 Two items are used to operationalize customer loyalty, intention to recommend, and intention to repurchase. Image attributes 6 This dimension is operationalized based on the basis of the guest s perception of the hotel location, physical facilities, interior design, price, the quality of the goods, and services provided, and staff performance. Image holistic 4 The operationalization of the holistic dimension of hotel image is based on the customer s perception of the hotel s atmosphere, reputation, external appearance, and layout. Satisfaction with reception Satisfaction with food and beverage Satisfaction with housekeeping Satisfaction with price 4 This variable is measured by the customer s perception of the receptionist s willingness and ability to provide service, the physical appearance of the reception area, and its ambience. 6 Satisfaction with the food and beverage is operationalized according to the guest s perception of the willingness and ability of the personnel to provide service, the opening hours of the restaurant or bar, the ambience of the food and beverage area, and the quality of the food and beverage. 4 Satisfaction with housekeeping is operationalized according to the guest s perception of the staff s willingness and ability to provide service, room amenities, and room comfort. 3 The value of the price paid for accommodation, food and beverage, and other services provided is considered to be the operationalization of customer satisfaction with the price variable. Customer loyalty, customer satisfaction, and hotel image were measured using Likert-type scales: 1 (strongly disagree); 3 (neutral); and 5 (strongly agree). To collect the data, questionnaires accompanied by a covering letter (and a chocolate-bar incentive) were distributed to 237 guests of five different chain hotels in Christchurch, New Zealand. The questionnaires were delivered through the reception desk to those guests check-

13 Jay Kandampully and Dwi Suhartanto 15 ing-in during the data-collection period of three weeks. A total of 158 surveys were returned. Of these, 106 (45%) surveys proved useable. QUALITY OF MEASUREMENT To check the reliability of the measurement of customer loyalty, hotel image, and customer satisfaction, Cronbach s alpha reliability test was conducted for the three constructs. The final reliability of the measurement and the final number of items used to measure each construct are shown in Table 2. Using the 0.7 Cronbach s alpha value as the cut-off (Nunnally, 1978), the results of the reliability test show that all variables are reliable. Thus, all variables were included in subsequent hypothesis testing. Given that hotel image was newly tested in this research, it was necessary to assess the validity of the hotel image construct. To assess both convergent and discriminant validity, factor analysis was employed. The result indicates that one factor was extracted which explains 49.6% of the variance. The two variables, holistic and attributes dimensions, are therefore combined to make one variable: hotel image. Subsequently, the attributes and holistic dimension of hotel image in Hypothesis 3 were revised as hotel image. Considering the purpose of this research, regression analysis was considered to be the appropriate method for testing the hypotheses. TABLE 2. Reliability Test CONSTRUCT CRONBACH ALPHA Number of This research Previous research Items Hotel Image Attributes Dimension Holistic Dimension Customer Satisfaction Reception * 4 Food and Beverage * 6 Housekeeping * 4 Price ** 3 * Gundersen et al., 1996; ** Getty and Thompson, 1994

14 16 JOURNAL OF HOSPITALITY & LEISURE MARKETING ANALYSIS METHOD Regression analysis is a statistical technique used to examine the relationship between a single dependent variable and a single independent variable (simple regression), and a single dependent with a set of independent variables (multiple regression). This analysis method was chosen on the basis of its use as a tool capable of achieving the purpose of this research. First, regression can be used to predict which of the dimensions of hotel image and customer satisfaction (independent variables) is the more responsible in determining a customer s intention to recommend, in determining a customer s intention to repurchase, and in determining the exhibition of loyalty (dependent variables). Secondly, regression analysis enables the researcher to obtain an explanation for the relationship that exists between the independent and dependent variables. Respondent Profile RESULTS The characteristics of respondent groups can influence perceptions and expectations of a product or service (Stanton, Miller, & Layton, 1994; Kurtz & Clow, 1998). Therefore, to examine the impact of characteristics on the relationship between customer loyalty and image and customer satisfaction, respondents were asked to indicate their age, purpose of visit, gender, and whether they were repeat purchasers. The characteristics of the respondents are summarized in Tables 3, 4, and 5. Among the repeat guests, 49 had stayed fewer than 5 times, 10 had stayed between 5 and 10 times, and the rest (6 guests) had stayed more than 10 times in the chain hotel in either the same or a different location. TABLE 3. Gender Gender Frequency Percent Male Female Total

15 Jay Kandampully and Dwi Suhartanto 17 The simple regression between each independent variable and customer loyalty was conducted to test the hypotheses H1 (revised) and H2 (see Table 6). The results of the simple regression tests indicate that all the parameter estimates (β) of independent variables are positive significant (p < 0.01). There is thus strong evidence to support hypotheses H1 (revised) and H2. To test the relationship between customer satisfaction variables and customer loyalty, a multiple regression was conducted. The results are shown in Table 7. The results in Table 7 show that only the customer satisfaction with housekeeping variable is significant (p < 0.01) in all equations; the other customer satisfaction variables are not significant. TABLE 4. Type of Guest Type of Guest Frequency Percent Repeat Guest Non-Repeat Guest Undecided Total TABLE 5. Purpose of Visit Purpose of Visit Frequency Percent Business Pleasure Business and pleasure Other Total TABLE 6. Regression of Each Independent Variable Towards Customer Loyalty Variable R 2 F *** β T*** Hotel Image CS. Reception CS. Food and Beverage CS. Housekeeping CS. Price ***Significant at p < 0.01

16 18 JOURNAL OF HOSPITALITY & LEISURE MARKETING To identify the relationship between customer loyalty and image and customer satisfaction, all hotel image and customer satisfaction variables were simultaneously tested with each dependent variable in one model to test hypothesis H3. As can be seen in Table 8, hotel image and customer satisfaction with reception, food and beverage, housekeeping, and price, together significantly explained 34% of the variance in customer loyalty (R 2 = 0.343; F = ; p = 0.001). The beta values of both image and customer satisfaction with housekeeping are significant. Thus, the hypothesis that hotel image and customer satisfaction with hotel performance would significantly explain the variance in customer loyalty (H3) is substantiated. DISCUSSION OF THE FINDINGS The findings suggest that hotel image and customer satisfaction with reception, housekeeping, food and beverage, and price are important factors in determining customer loyalty. TABLE 7. Regression of Customer Satisfaction Towards Customer Loyalty Variable β T Sig. CS. Reception CS. Food and Beverage CS. Housekeeping *** CS. Price R 2 = F = *** ***Significant at p < 0.01 TABLE 8. Regression of Hotel Image and Customer Satisfaction Towards Customer Loyalty Variable β T Sig. Hotel Image *** CS. Reception CS. Food and Beverage CS. Housekeeping * CS. Price R 2 = F = *** ***Significant at p < 0.01; *significant at p < 0.1

17 Jay Kandampully and Dwi Suhartanto 19 Hotel Image The positive relationship between hotel image and a customer s intention to recommend, to repurchase, and to exhibit loyalty, is consistent with the results of previous studies. Previous studies show that the image of the location, employee attitudes, facilities, and the services of a hotel constitute important factors in determining customer loyalty (Ostrowsky, O Brien, & Gordon, 1993). Moreover, research by Heung, Mok, and Kwan (1996) revealed that loyal customers consider the image of a hotel in terms of convenience and accessibility an important factor in the decision to return. The positive correlation between hotel image and a customer s intention to repurchase, to recommend, and to demonstrate loyalty can be attributed to the role of image as a representative of reality (Normann, 1991). Therefore, customers tend to repurchase and recommend a business with a favorable image in the belief that it provides an assurance of high-quality goods and services. Customer Satisfaction with Hotel Performance The hypothesis tests show that customer satisfaction with the performance of reception, food and beverage, housekeeping, and price is an important factor in determining whether a customer will repurchase and recommend. The importance of this factor is most likely due to these departments and price being perceived as the essence of a hotel offering. Therefore satisfaction with the performance of these factors influences customer loyalty. Among customer-satisfaction factors, customer satisfaction with housekeeping is the only significant factor in determining customer loyalty when tested in the model (which included all customer-satisfaction variables). This finding indicates that, when compared to other customer-satisfaction factors, customer satisfaction with housekeeping is considered the single most important in determining whether a hotel guest will return and recommend. A possible explanation for this finding is that housekeeping might be perceived as a facilitating factor for a hotel, whereas reception, food and beverage, and price might be regarded as supporting factors (Powers, 1997). As a facilitating factor, housekeeping delivers the core benefit of a hotel (temporary accommodation). Reception, food and beverage, and price, although essential for the marketing operation of a hotel (Powers, 1997), are seen as factors that assist the delivery of the hotel s core benefit. As a consequence, hotel guests perceive satisfaction with house-

18 20 JOURNAL OF HOSPITALITY & LEISURE MARKETING keeping to be more important than satisfaction with reception, food and beverage, and price in determining whether they will return to, recommend, and demonstrate loyalty to the hotel. Hotel Image and Customer Satisfaction with Hotel Performance When hotel image and customer satisfaction with reception, housekeeping, food and beverage, and price are tested in a complete model (Table 5), hotel image and customer satisfaction with housekeeping are the only significant factors. This finding indicates that, among the factors tested (hotel image and customer satisfaction with housekeeping, reception, food and beverage, and price), hotel image and customer satisfaction with housekeeping are considered the most important factors in determining a customer s intention to recommend and to repurchase. Thus, this research suggests that in developing customer loyalty, hotel management should focus on establishing a favorable hotel image and customer satisfaction with housekeeping. In conclusion, the results of the tests of the hypotheses indicate that hotel image and customer satisfaction with food and beverage, reception, housekeeping, and price are important factors in determining a customer s intention to repurchase, to recommend, and to exhibit loyalty. Among those determinant factors, hotel image and customer satisfaction with housekeeping are the major considerations for customers to repurchase, to recommend, and to exhibit loyalty. Limitations The focus of this study was on image and customer satisfaction as antecedents of loyalty. These variables were chosen on the rationale that they would seem to constitute a viable means of developing customer loyalty in the long term (Selnes, 1993). However, we recognise that there are many other antecedents of loyalty which this study has not taken into consideration. Methodological limitation concerns the measurement of the intention to recommend and repurchase with one item. Although those two factors are good indicators of loyalty (MacStravic, 1994), reliability is difficult to test using a single item. However, this study is consistent with previous research that also used a single item in measuring a customer s intention to recommend and repurchase (Hartline & Jones, 1996; Getty & Thompson, 1994; Richard & Sundaram, 1993; Selnes, 1993).

19 Jay Kandampully and Dwi Suhartanto 21 MANAGEMENT IMPLICATIONS AND CONCLUSION Although customer satisfaction is a widely accepted and proven antecedent of customer loyalty, there have been relatively few studies on image as the antecedent of customer loyalty. The present research shows that the inclusion of image and customer satisfaction in one model not only serves to highlight the importance of image, but also provides a better explanation for customer loyalty. This suggests that both image and customer satisfaction should be included when measuring customer loyalty. This research suggests that developing customer loyalty depends not only on the hotel manager s capacity to increase customer satisfaction in terms of performance, but also on his or her ability to establish a favorable hotel image. Various aspects of the hotel operation, including the seven marketing variables (product, place, price, promotion, people, process, and physical evidence) might directly affect the hotel s image. For example, reduction in price might tarnish the image of a hotel. Attracting customers who do not represent the image of the customer base might negatively affect the loyalty of existing customers. Research findings from this study indicate that the various aspects of a hotel s operations are not of equal importance in the judgment of hotel guests. The hotel room, and the ability and willingness of housekeeping staff to serve, were clearly shown to be the most important factors in determining customer loyalty. Thus, this research suggests that efforts towards quality improvement should focus, primarily, on ensuring customer satisfaction with housekeeping. While acknowledging the importance of all aspects of the hotel operation, managers should recognize the significance of housekeeping to overall customer satisfaction and, therefore, concentrate their resources on improving the comfort of hotel rooms and the professionalism of housekeeping staff. This study has demonstrated the importance of image and customer satisfaction in improving and developing customer loyalty. Hotel chains face intense competition, and the performance of one hotel is influenced by the performance of other hotels in the same chain. Achieving and sustaining customer satisfaction with housekeeping and a favorable hotel image provide hotels with the means to develop customer loyalty and meet the challenges successfully. The findings of this study contribute to the growing body of knowledge in services management and, in particular that pertaining to customer loyalty in the hotel industry. A number of issues has emerged from this study. These factors have important contributions to make to

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23 Jay Kandampully and Dwi Suhartanto 25 Stanton, William, Miller Kenneth, & Layton, Roger (1994). Fundamentals of Marketing, third Australian edition, Sydney: McGraw-Hill. Woodside, Arch G., Frey, Lisa L., & Daly, Robert T. (1989). Linking Service Quality, Customer Satisfaction, and Behavioural Intention. Journal of Health Care Marketing, 9, Zeithaml, Valerie A. & Bitner, Mary Jo (1996). Services Marketing. McGraw-Hill International Editions. NY. Zeithaml, Valerie, Berry, Leonard L., & Parasuraman, A. (1996). The Behavioural Consequences of Service Quality. Journal of Marketing, 60, For FACULTY/PROFESSIONALS with journal subscription recommendation authority for their institutional library... If you have read a reprint or photocopy of this article, would you like to make sure that your library also subscribes to this journal? If you have the authority to recommend subscriptions to your library, we will send you a free complete (print edition) sample copy for review with your librarian. 1. Fill out the form below and make sure that you type or write out clearly both the name of the journal and your own name and address. Or send your request via to getinfo@haworthpressinc.com including in the subject line Sample Copy Request and the title of this journal. 2. Make sure to include your name and complete postal mailing address as well as your institutional/agency library name in the text of your . [Please note: we cannot mail specific journal samples, such as the issue in which a specific article appears. Sample issues are provided with the hope that you might review a possible subscription/e-subscription with your institution's librarian. There is no charge for an institution/campus-wide electronic subscription concurrent with the archival print edition subscription.] Please send me a complimentary sample of this journal: (please write complete journal title here do not leave blank) I will show this journal to our institutional or agency library for a possible subscription. Institution/Agency Library: Name: Institution: Address: City: State: Zip: Return to: Sample Copy Department, The Haworth Press, Inc., 10 Alice Street, Binghamton, NY