CHAPTER 1 INTRODUCTION

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1 CHAPTER 1 INTRODUCTION 1.1 Research Background Hospitality industry lately has become a very potential and promising business field in many countries; especially country that becomes a tourist destination such as Indonesia. This industry, which include hotels, restaurants, travel agents, and other service providers, continually expand and develop their service and quality in order to win the tough competition and grab as many potential market as possible. Hospitality industry itself offers a very dynamic and open competition that makes everyone can participate in this business field. Tougher competition in the hospitality industry that occurs lately, push each service provider to deliver the best service and emphasize the importance of meeting the guest expectation and needs. No firm that seeks long term relationship with its customer can afford to mistreat them or to provide poor value on an ongoing basis and of course, this condition also applied to many hotels spread in many location. Guest satisfaction is furthermore important in emphasizing the good image of each service provider, especially for the hotel management. One study conducted by The University of Michigan found that on average, every 1 percent increase in customer satisfaction is associated with a 2.37 percent increase in the firm s return on investment. (Eugene and Mittal, 2000) As hospitality industry continues to become more customer-oriented, guest perception of higher service and facilities also becoming more important. So it is absolutely critical for every company to understand and know exactly what should be done to make the service meets the customer demand or expectation; no matter whether it is a big and multinational hotel such as Ritz Carlton or Four Seasons, or a small private hotel like Saung Hotel Resto that placed in Lembang, West Java. They have to routinely evaluate, track, and manage the guest perception of their service quality. 1

2 The management of Saung Hotel Resto is fully aware with this issue, but until this research is conducted there is no systematic actions intended to improve its service quality and hence customer satisfaction. Saung Hotel Resto so far did not apply an integrated business process which able to cover each part of the business. In the past, they just stressed their strategy at one matter (for example: financial problem with low profit margin) and only focused on a short term problem solving. In addition, there was also lack of appropriate human resource condition and skill to support the hotel daily activities that makes the improvement of service quality faced some obstacles. Therefore, the aim of this research is to analyze and evaluate the current service strategy of Saung Hotel Resto and then examine potential strategies that could be implemented for further improvement in the hotel s service quality to create more customer satisfaction. 1.2 Research Approach In service industry field, there are three common models that generally used for measuring customer satisfaction. They are SERVQUAL, SERVPERV, and LODGSERV. This research will use the first method to conduct the research since SERVQUAL was the most common and holistic service measurement models used by many studies so far. SERVQUAL was able to provide an overall overview of the service provided by the provider from both the customer and management point s of view although the assessment method mostly depends on the customer perception and expectation of the service regarding to their knowledge and past experience with it. Until this time, there were many studies conducted to compare the most suitable method for service assessment from the three existed method, for example Schall (2003), Cronin and Taylor (1992) and Babakus and Boller (1992). However, many researchers such as Buttle (1996), Asubonteng et.al (1996), and Llosa et.al (1998) had proved that SERVQUAL was adequate enough to be used in a research for measuring service quality. Brown and Bond (1995) emphasized, the gap model is one of the best received and most heuristically valuable contributions to the service literature. In addition, Lovelock and Wirtz in Services Marketing book stated that SERVQUAL is an example of a sophisticated soft measurement system. (2004: 415) 2

3 The SERVQUAL model was developed by Parasuraman et.al in 1985 to measure satisfaction in services industry. So far this model has been developed more and revised, either by the creator themselves or other researchers. It has been successfully applied in various research, including numerous studies in the hospitality and tourism industries such as Fick and Ritchie (1991), Saleh and Ryan (1991), Lee and Hing (1995), Gabbie and O Neill (1996), and also Ryan and Cliff (1997). The SERVQUAL itself consists of five dimensions which are described in 22 items. (Parasuraman et.al, 1985). These dimensions represented all important aspect needed in the service industry to make sure the fulfillment of customer s need. SERVQUAL Dimension Tangible Reliability Responsiveness Assurance Empathy Table 1.1 SERVQUAL Dimensions Description Description Appearance of physical facilities, equipment, personnel and communication material Ability to perform the promised service dependably and accurately Willingness to help customers and provide prompt service Knowledge and courtesy of employees and their ability to convey trust and confidence The firm provides care and individualized attention to its customers 1.3 Research Objectives By conducting this research, it is expected that the following objectives can be realized: 1.Describing Saung Hotel Resto strategies that related with maintaining and improving its service quality and customer satisfaction. 2.Measuring the service quality of Saung Hotel Resto. 3.Measuring the level of Saung Hotel Resto customer satisfaction. 4.Give some suggestions for improvement in Saung Hotel Resto s service quality. 1.4 Research Questions As a guidance of the investigation, the following questions are formulated: 1. What are the expectations of Saung Hotel Resto s customers about service items concerning hotel business? 2. What are the perceptions of Saung Hotel Resto s customers and management toward their daily service performance? 3

4 3. How satisfy were Saung Hotel Resto s customers concerning the service performance received during their stay at the hotel? 4. How effective is Saung Hotel Resto s current strategy to maintain and improve customer s satisfaction? 1.5 Research Methodology In order to help the researcher collect proper data during the research and investigation, some method that will be used are: Literature study Use in order to: (1) define the big picture of hospitality industry and its customer satisfaction; (2) discover the meaning of each dimension in SERVQUAL and to specify the important items in each dimension. Survey and depth interview It was conducted using both questionnaire and direct interview. Questionnaire used to assess guest evaluation regarding to Saung Hotel Resto programs and service performances during their stay at the hotel and also review Saung Hotel Resto s employee concerning the service they provided. Interview used to cross checking the data provided from the questionnaire. For management importance, interview with the Saung Hotel Resto s management about their recently service will determine the customer perception according to the management view which will be evaluated using the second part of SERVQUAL analysis in the end. Observation To support the given data by both management and the hotel customer, direct observation on the spot also carried out to get clearer condition of Saung service performance. Overall, this research consisted of three main parts. In the beginning, data sampling was conducted to make sure that the questionnaire and data taken will be valid and reliable in purpose to get the best research result. This sampling step included a minimal of thirty (30) respondents as the pre-test sample. Secondly, it was questionnaires distribution, interview and analysis steps.. The data collection was conducted every weekend meanwhile the interview will be conducted in any possible time. 4

5 The survey involved about one hundred (100) correspondents to ensure the validity and reliability of the data. This survey conducted on direct interaction between the researcher and the correspondent at Saung Hotel. The last step was project writing and presentation. In order to prevent the error during the research and to keep the completeness, legibility, comprehensibility, consistency and uniformity level of the survey, quality control of the questionnaire will be applied by cross checking the data directly to the respondent on the site. Moreover, researcher s attendance while conducting the survey would be very beneficial in order to provide solid answer for respondent s question that might be arise during the investigation. Figure 1.1 Research Methodology 5

6 1.6 Report Structure This research report would be divided into 5 chapters, based on the research methodologies (Figure 1.1). Chapter 1 Introduction This chapter describes the background of the research. Research approach, objectives and questions were briefly discussed in this chapter. The methodology used for the conducted research also stated here. Chapter 2 Theoretical Foundation A review of some theoretical foundations from various literatures utilized during the research was presented in this chapter. It includes the overview of general service and hospitality industry, introduction of service quality and customer satisfaction concept and also detailed explanation about SERVQUAL model. Chapter 3 Methodology This chapter discussed the context of this research that explained the company profile of Saung Hotel Resto and detailed methodology to assess and analyze the problem that divided into research and sampling design, data collection and also data analysis. Chapter 4 Data Analysis This chapter provided the results of the conducted research that consist of reliability and validity test result, respondent s demographic profile and analysis of SERVQUAL gaps and customer satisfaction level. Tables and graphs mainly used to describe the investigation output and explained in detail. Chapter 5 Suggestion and Conclusion As the last chapter, some suggestions regarding to the occurred problem would be presented. A conclusion of the research would act as a closing for the report. 6