Perceptions on quality customer service in the hospitality industry in Papua New Guinea: an evaluation

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1 Asia Pacific Journal of Tourism Research, Vol. 9, No. 2, June 2004 Perceptions on quality customer service in the hospitality industry in Papua New Guinea: an evaluation Ramudu Bhanugopan Department of Business Studies, PNG University of Technology, LAE, Papua New Guinea The purpose of this study is to identify any quality customer service gaps in the hospitality industry in Papua New Guinea (PNG) and to test the significant values of each of the necessary variables that make up the component of quality customer service in the hospitality sector. A survey has been done among a group of 197 visitors in hospitality firms. Results revealed that the hospitality industry in PNG had a major service gap in the area of Personalized Service and Empathy. This gap includes areas such as serving customers best interests, never too busy to respond to questions, and understanding of specific needs. The study also identified that the major predictors for overall customer satisfaction were Tangibles and Financial Competence and Reliability, which had a significant negative effect on customers satisfaction. Key words: quality service, customer satisfaction, customer expectation, Papua New Guinea. Introduction The pervasive tourism awareness, promotion and development in developing countries has resulted in a massive upsurge in the influx of tourists and in the expansion of a more integrated hospitality and related services industry. The hospitality industry in developing countries has taken a long stride; however, at the same time it has been questioned in terms of quality services offered. Many hospitality businesses have developed in Papua New Guinea (PNG), starting from five-star hotels to village lodges, due to promising economic improvements and packages from preceding governments. Most of the hospitality businesses in PNG are operated in the main centrers and few of them are located in remote areas. There are many rbanugopan@dbs.unitech.ac.pg ISSN print/issn online/04/ # 2004 Asia Pacific Tourism Association DOI: /

2 178 Ramudu Bhanugopan businesses, ranging from international hotels to indigenous lodges and guesthouses, made in PNG s traditional styles. A variety of hospitality services have been offered. The need and importance for quality service and customer satisfaction are also realized. There will be about 1.6 billion people traveling all over the world, and with Papua New Guinea being part of the South East Asia region, in 2005 there will be 122 million tourists travelling through the region. It is estimated that in 2020 there would be 222 million tourists travelling through the region, and Papua New Guinea is no exception (Post Courier 1998). Therefore, for a successful tourism sector, the hospitality industry plays a significant role and services from this sector must be available sufficiently in terms of quality to match the demands of travellers. In general, hospitality service providers vary tremendously in their physical facility, quality, level of maintenance and courtesy provided. These services should meet the expectations, wants and needs of the travellers. Should such facilities and services drop, the tourists who are affected will likely become dissatisfied and the demand fall off, which could consequently be a serious blow to successful tourism. To address the issue of quality customer service, first, this research aims to identify the service gaps in the hospitality industry in PNG. Second, it intends to test the significant values of each of the necessary variables for quality customer service using SERVQUAL method analysis (Parasuraman et al. 1988). Review of literature Any person who is in business knows the importance of a satisfied customer. This is because satisfying a customer has both long-term and short-term benefits associated with it. The result of short-term dissatisfaction can be demonstrated by a walkout, while on the other hand, long-term dissatisfaction can lead to defection in customers (Gagliano & Hathcote 1994). The effects of these defections and walkouts can result in the company making a loss (Reichheld & Sasser 1990). With these effects and anxiety of loss, it forces organizations to look towards applying quality in the service that they provide. In the business world today, where service providers are looking at measuring the effectiveness of their service and creating a guide for their development strategies, they have all turned to a measurement called service quality (Murphy 2003). This has prompted the importance of service quality to be an area of increasing concern. In defining service quality, Parsuraman et al. (1988) see it as perceptions resulting from a comparison of consumer expectations with actual service performance. Others like Gronroos (1984) also define service quality along similar lines, by defining it as a perceived judgment resulting from customers evaluation processes, whereby they compare their expectations with the service they perceive to have received. With relevance to the tourism and hospitality industries, service quality too has been recognized as an important concept. Oppermann (1995), Augustyn and Ho (1998) also indicated that the concept of service quality has to be acknowledged for the success of tourism and hospitality industries. However, it has always been stated that there exists a gap in the quality of service provided. This is often referred to as the service quality gap. Murphy (2003) defines service quality gap as the discrepancies between what customers want and the quality of service they receive. Service quality has been monitored using gap analysis (Parsuraman, Zeithaml & Berry

3 Perceptions on quality customer service in the hospitality industry , Iacobucci, Grayson & Ostrom 1994). Not surprisingly, in the tourism and hospitality industry sector, this gap analysis has also been used to measure service quality. Service quality gap in the tourism and hospitality industries can be seen as a way in which the perceived service is less than the expected service (Murphy 2003) based on customer s experience. Parasuraman, Zeithaml & Berry (1985) identified five gaps in service quality. Of these gaps, Gap 5 is an external one and is mainly to do with the difference between the expected service and the perceived service. On the other hand, the other four gaps (Gaps 1 4) are internal ones and are concerned with factors which explain or contribute to a failure to deliver the expected service quality (Rosener 2003). These gaps also have to be seen prevalent in the tourism and hospitality industries. In regard to service quality gap in tourism and hospitality, quite a few studies have been done. These studies focused on areas such as ski resorts (Weiermair 1997), travel agencies (LeBlanc 1992), and a multisectoral approach has also been attempted (Fick & Ritchie 1991). Gagliano and Hathcote (1994), in their research on customer expectations of service quality in the tourism and hospitality industries, found that race, marital status and income created differences that were significant in terms of disparity in service quality. In addition to this, Murphy (2003) found that notable gaps in service quality were mainly determined by annual household income, occupation and education of the travellers. She points out that minimal differences or gaps between customers perceptions of quality and the abilities of service providers to meet these expectations lead to increased profits. Gagliano and Hutchcote (1994), in their study, found another variables influencing service quality gap: personal attention (sales service) holds the greatest gap scores, indicating disparity between what travel consumers expected and their perceived service quality. From an international perspective, the concept of quality service has been clearly defined and explained. Many studies have been done on customers perceptions on quality service in the hospitality industry. However, one main thing they have not highlighted is the variance in the degree of the quality of service from one ethnic or cultural group to another; also from the degree of developments in the particular nations, either developed or developing nations. Papua New Guinea is a developing country and the quality definitions and customer perceptions on quality service in the hospitality industry are different from that of the developed countries. Developed countries have better infrastructure and facilities and technology and this enables them to provide an excellent quality service. However, PNG is a developing nation and it is important that it should have its own perspective on what quality is in terms of quality customer service. In view of the above, this study aims to address that problem by evaluating customers perceptions of quality service offered by hospitality firms in PNG. Research hyphotheses The purpose of the study is to evaluate the customers perceptions on what is quality customer service in the hospitality industry in PNG. Many businesses have proclaimed to have quality services but their accuracy can only be gained from the customers point of view. With that, the following hypotheses are extended to address the research objective. H 1 There will be significant service quality gaps between customers service expectations on courtesy and responsiveness and the actual service offered.

4 180 Ramudu Bhanugopan H 2 There will be a significant service quality gap between customers personalised service expectations and the actual service provided by the staff. H 3 There will not be any significant service quality gap between customers facilities expectations and the actual service delivered to them. The method Survey instrument The data for this study were obtained through the use of Likert scaled English language questionnaires to customers of 42 leading hospitality organizations in PNG. The questionnaire contained 19 close-ended questions. These questions were focused on service quality, which were adapted in part from the SERV- QUAL measurement scale (Parasuraman et al. 1985). In order to suit the environment, 17 original questions were used, with minor changes in wording, and two new items were included. Furthermore, the scale development literature recommends the use of questionnaire items with mixed wording to reduce the chance of distortion in response from respondents (Churchill 1979). In light of this, positive questions were used so that customers would agree or disagree based on their experience from the service provider. Taking into consideration the service providers, positive questions were framed so that it would create a challenge, whether they were what they profess to be from the customers point of view. The respondents were asked to indicate their degree of approval on the sevenpoint rating scales in which the alternatives were very poor, poor, could be improved, neutral, good, very good and excellent. Sampling and data collection procedure The population studied were the six hotels, 14 motels and 22 restaurants situated in all major cities such as Lae, Goroka, Port Moresby, Rabaul and Mt. Hagen in PNG. Questionnaires were given to visitors through receptionists. They handed out the questionnaires to the customers randomly as they came through the reception. The customers were then able to give their views on what they perceived of the services received during their stay at the place of destination. The questionnaires were delivered back to the receptionist when they left the accommodation. A total of 300 questionnaires was divided and sent to these four centers. The usable questionnaires collected were from 197 visitors, which was about 66 percent response rate. It generally took almost nine weeks to collect the data from the respondents. This was because the respondents were scattered throughout the country. The questionnaires were flown in and out and thus resulted in late arrivals and feedback. Data analysis and results Demographic profile of respondents Of the 197 sample respondents, 87 percent were males and 13 percent were females. 11 percent indicated that they were business people, while 89 percent were salaried class. As much as 32 percent were aged above 25 and below 35 years, while 68 percent were above the age of 36 years. There was no one below the age of 25. All respondents on average had years of work experience. Of the 197 respondents 98 were Australians, 43 were New Zealanders, 29 were Europeans, 14 were Americans, and 13 were Asians.

5 Perceptions on quality customer service in the hospitality industry 181 Factors of service quality gaps The correlation matrix of Likert scaled questionnaire items related to customers perceptions on quality customer service were examined. Nineteen items were analyzed to find out the service quality gaps. An orthogonal (uncorrelated) rotation was performed on the five factors of the study whose Eigen values were greater than one. Five orthogonal factors, their subjective interpretation, the factor loadings of variables on each of these five factors and their respective reliability coefficients of the study are presented in Table 1. As shown in the table, the five questions loaded in Factor 1 (Courtesy and Responsiveness) described the following areas: sincerity, willingness, promptness, timely service and the exactness of the service provided by the hospitality firms. Factor 2 (Credibility and Assurance), Factor 3 (Personalized Service and Empathy), Factor 4 (Financial Competence and Reliability), and Factor 5 (Tangibles) are correlated highly with their own identical and specific questions related to each group. The reliability coefficient (0.775) of Factor 1 was well above the range of 0.50 to 0.60 thought to be adequate for a satisfactory level of reliability in any basic research as according to Nunnally (1978). Factor 2 and Factor 3 have coefficients far below the level recommended, and respectively. Although the reliability coefficients are lower, the scale items for these factors reflected relatively high scores on an individual basis. These five factors were used as the determinants of the quality customer service in the hospitality industry in PNG to estimate gaps (shortage to expectations) between customers perceptions of quality customer service. With that, a composite mean gap was estimated as the difference between customers expectations and perceived service on these variables as loaded on each factor. All the mean factor gaps of all the selected hospitality firms operating in Papua New Guinea are shown in Table 2. The Z values were computed to test the hypotheses. The mean gaps computed in the study were significantly different from zero. According to Table 2, Factor 2 (Credibility and Assurance) seems to have the largest gap between customers expectations of what this service should offer and the actual service received. These are followed closely by Factor 4 (Finance, Competence and Reliability) and Factor 3 (Personalised Service and Empathy). It is evident from the table that Factor 5 (Tangibles) has the shortest gap. It appears that most of the variables in this factor were performed as expected. Confirmatory analysis of the five factors models For the purpose of confirming the actual findings of the study of the service quality concept, it was an ideal insight to adapt the confirmatory factory analysis using the LISREL VII, developed by Jöreskog and Sörbom (1989). The confirmatory use of structural equation modeling allows for a statistical test of the goodness-offit for the proposed five-factor solution, which is not possible with principal components of factor analysis. This strategy was furthermore adapted by this study. The other models used in this study are goodness-of-fit index (GFI), and adjusted goodness-of-fit index (AGFI), and root mean square residual (RMSR). The results of models applied are shown in Table 3. The results were obtained after carrying out multiple applications. The output was analysed to justify the findings and checked for any errors. The overall goodness-of-fit (i.e.,

6 182 Ramudu Bhanugopan Table 1 Factor analysis of customers perceptions of quality customer service Factors Variables Factor loadings Reliability coefficient Factor 1 Courtesy and responsiveness Factor 2 Credibility and assurance Factor 3 Personalized service and empathy Factor 4 Financial competence and reliability Factor 5 Tangibles 1-1: When you have a problem, employees show a sincere interest in resolving it. 1-2: Employees are always willing to help you. 1-3: Employees give you prompt service : Employees tell you exactly when service would be offered. 1-5: Firm provides service at the time it promises to do so : The behavior of employees instils confidence in you. 2-2: You feel safe with your transactions with the firm. 2-3: Firm offers service right the first time : Firm has your best interest at heart : Employees are never too busy to respond to your request. 3-3: Employees understand your specific needs. 3-4: Employees approach you in your own accepted way of treating and greeting. 3-5: Quality is a main emphasis of the firm 4-1: Firm insists on error-free records : Firm has operating hours convenient to all its customers. 4-3: Employees have knowledge to answer your questions. 5-1: Firm has modern equipment and facilities. 5-2: Firm s physical looks are very nice and good. 5-3: Employees are neat-appearing and elegant.

7 Perceptions on quality customer service in the hospitality industry 183 Table 2 Expected and perceived service factor gaps Gap N Min Max Mean gap Standard deviation Z HO:Mean gap ¼ 0 Factor Factor Factor Factor Factor X 2 ¼ 44.5, df ¼ 66, GFI ¼ 0.391, AGFI ¼ 0.336, and RMSR ¼ 0.05) indicated similarity with studies of Tucker and Lewis (1973) and Bagozzi and Yi (1988). All of them have indicated some problems that may arise when sampling large populations as base of the study. However, the sample of this study was (n ¼ 197) moderate and the indicators of fit were given greater importance. The construct loadings of each of the fivefactor model along with their associated t values are shown in Table 4. As can be seen from the table, the largest significant modification index occurred for Item # (2 2) 2. Hence this parameter was set free. The t values gained for each of the loadings indicates that each of the variables have far outreached the critical value for the 0.01 significance level (critical value ¼ 22.35). Thus all variables are significant to their specified constructs, verifying the positive relationships among indicators and constructs. Overall satisfaction with service provider Angur (1994) found the relative importance of the factor gaps in influencing the customers satisfaction with the service providers through the estimated regression model as: OS ¼ b 0 þ b 1 CR þ b 2 CA þ b 3 PSE þ b 4 FCR þ b 5 TANG Where OS was for overall satisfaction with the service provider; CR, CA, PSE, FCR and Table 3 LISREL Goodness-of-fit measures for confirmatory factor analysis Goodness-of-fit measures Five factor model Null model Chi-square (X 2 ) Degrees of freedom (df) Goodness-of-fit index (GFI) Adjusted Goodness-of-fit index (AGFI) Root Mean Square Residual (RMSR) p, 0.000

8 184 Ramudu Bhanugopan Table 4 Confirmatory factor analysis of five-factor model Construct loadings (t values in parentheses) a Item b Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Item # (7.9) Item # (7.3) Item # (7.5) Item # (7.2) Item # (9.1) Item # (11.3).412 (7.2) Item # (7.1).235 c (3.7).432 (7.6) Item # (9.7).341 (4.3).542 (9.0) Item # (7.3).421 (7.4).324 (4.2) Item # (9.0).368 (4.7).765 (5.5).000 Item # (7.6).439 (7.1).762 (5.3).000 Item # (10.8).000 Item # (8.9).000 Item # (9.4).000 Item # (5.5) Item # (12.3) Item # (7.9) Item # (7.5) Item # (4.8) a All t values are significant at p, 0.01 b Correspondence to items listed to items listed in the order in Table 1. c The largest significant modification index occurred for item (2 2). Hence, this parameter was set free. Table 5 Multiple regression estimates of overall satisfactory relationship Independent variable Regression coefficient (b value) Standard of (b value) Significant level of (b value) Factor Gap I Factor Gap Factor Gap Factor Gap Factor Gap R 2 ¼ (p,.001)

9 Perceptions on quality customer service in the hospitality industry 185 TANG stood for the factor gaps Courtesy and Responsiveness, Credibility and Assurance, Personalised Service and Empathy, Financial Competence and Reliability and Tangibles respectively. The customers perception on quality customer service in the hospitality industry in PNG is evaluated using the above regression model and the results are presented in Table 5. The results showed that the most significant factor gap relating to customers satisfaction was Tangibles, followed by Financial Competence and Reliability. These two factor gaps were significant and negatively correlated to the overall customer satisfaction in the hospitality industry in PNG. Hypothese testing All the hypotheses were tested using both t test and confirmatory factor analysis methods. According to the results obtained, the first hypothesis (H 1 ) was proved to be correct. It has been found that there is a significant service quality gap between customers service expectations on courtesy and responsiveness and the actual service offered. The results revealed that most of the employees in the hospitality industry lack proper manners on how to reach and attend to the customers. The second hypothesis (H 2 ) has also been supported. The results have indicated that there is a significant service quality gap between customers personalized service expectations and the actual service provided by the staff. Grouped under the factor Personalized Service and Empathy, this factor had the largest factor gap. This is one of the major areas the hospitality industry in PNG has to look into to improve its services. The factor Courtesy and Responsiveness had the second-largest factor gap. It is an area that needs immediate allocation of resources and service providers need to redirect their employees and train them on how attend to this area. Finally, the results tend to support the third hypothesis (H 3 ). It has been found that there is no significant service quality gap between customers facilities expectations and the actual service delivered to them. It was found that the basic facilities provided by the hospitality firms were to that of expectations and resulted in a significant negative value. Discussion This study would not only have an impact in the hospitality industry in PNG but would contribute enormously to other industries that aim to provide service to customers both nationally and internationally. As initiated in the environment of a developing country, the general findings can be applicable to other developing countries in a similar setting. An important contribution of this study is in empirically assessing the existence of multiple service quality dimensions among customers perceptions in a developing country setting. The service quality gaps play an important role by providing important managerial and public policy implications in terms of concentrating efforts and allocating any needed resources to narrow the gaps and thereby improve the overall performance of the hospitality industry in PNG. Specifically, the major service gap is found in the area of Personalized service and Empathy. This includes areas such as serving the customer s best interest, never being too busy to respond to requests, understanding specific needs, personalizing ways of individual approaches and maximizing the general quality service level. The second-

10 186 Ramudu Bhanugopan largest gap was identified in the area of Courtesy and Responsiveness. This area deals with variables such as sincerity in solving problems, willingness to help, promptness in providing services, exactness of service provided and the timing of services when provided. Many studies undertaken in well-known US companies have consistently shown the importance of this dimension (Berry & Parasuraman 1992, Zeithaml, Berry & Parasuraman 1990). This is an important area that needs to be looked into by the hospitality industry in PNG, as concerted efforts are required to educate and train their employees to offer quality service to customers. It was found from the survey that many employees get involved with issues at the workplace and have poor responsiveness towards customers. Furthermore, the findings indicate a significant gap for the Personalized Service and Empathy dimension, underscoring the importance of appropriate employee training to ensure that success can in fact be measured one customer at a time (Angur 1994). Another important aspect involves confidence, safety of transactions and the rightfulness of the service provided, which are grouped under the Credibility and Assurance factor. Most of the regions of PNG are very different and have unique personalities. It takes a while to have confidence in people. Some Highlands areas in PNG are yet to be civilized. This gap can be explained by the general perception of people from where they come. From the results, it can be deduced that the best predicator of overall customer satisfaction appears to be the factor gap for Tangibles followed by Financial Competence and Reliability. These two factors seem to be significant and negatively correlated to the customer satisfaction. Thus the results indicate that the higher factor gaps (resulting from higher expectations and/or lower perceived service) result in lower overall customer satisfaction. However, the other three factors had greater gaps, which indicate higher dissatisfaction of the services provided. This gives a great call to service providers in PNG that they should not only base their development on external tangible features, but should also aim at improving the other aspects in terms of Courtesy and Responsiveness, Credibility and Assurance and Personalized Service and Empathy. Conclusions After the dawn of the twenty-first century, developing countries are now starting to move into growing businesses as those that are done and established in the developed countries. However, to compete well in a market environment, there is a need for more marketing intelligence. Hence, there is a greater need for research about customers in developing countries, to test the relevance and applicability of important concepts that are already well accepted in developed countries. This is because globalization is a major threat to new firms operating in the developing countries (Amnie and Cavusgil 1986). The study has identified major gaps in two areas, namely Personalized Service and Empathy and Courtesy and Responsiveness. For that reason, the management of the hospitality industry in PNG needs to allocate its resources to develop interpersonal relationships with customers. The major area that the PNG hospitality industry has to be improved is in the area of Tangibles, that is, the physical appearances of these facilities. Therefore, hospitality businesses in PNG should place more emphasis on developing staff and hospitality environments that may give good

11 Perceptions on quality customer service in the hospitality industry 187 impressions to customers, both locally and internationally. It is imperative that hospitality business promoters train their personnel in areas that need attention so that service quality can be improved in PNG. This study on the perceptions of customers on quality customer service in the hospitality industry has a few limitations that could pave avenues for future research. For instance, this study has addressed many issues from the customers point of view that were of importance to the hospitality industry operating in Papua New Guinea. The findings of the study may be viewed as a base to have insights on other service sectors and also to develop a framework for service quality in hospitality industry in developing countries. References Amnie, L. S. & Cavusgil, T. S. (1986). Demand estimation in a developing country environment: Difficulties, techniques and examples. Journal of the Marketing Research, 28(1), Angur, G. Madhukar (1994). Determinants of financial quality in Africa: The case of banking service in Ghana. International Journal of Business Research,1(1), Augustyn, M. & Ho, S. (1998). Service quality and tourism. Journal of Travel Research, 37(1), Bagozzi, R. & Youjae, Yi (1988). On the evaluation of structural equations models. Journal of the Academy of Marketing Sciences, 16 (Spring), Berry, L. & Parasuraman, A. (1992). Prescriptions for a service quality revolution in America. Organizational Dynamics, 20(4), Churchill, G. A., Jr. (1979). A paradigm for developing better measures of marketing constructs. Journal of Marketing Research, 16, Fick, G. & Ritchie, B. (1991). Measuring service quality in the travel and tourism industry. Journal of Travel Research, 30(2), 2 9. Gagliano, B. K. & Hathcote, J. (1994). Customers expectations and perceptions of service quality in retail apparel speciality stores. Journal of Services Marketing, 8(1), Gronroos, C. (1984). A service quality model and its marketing implications for future. European Journal of Marketing, 18(4), LeBlanc, G. (1992). Factors affecting customer evaluation of service quality in travel agencies: An investigation of customer perceptions. Journal of Travel Research, 30(4), Iacobucci, D., Grayson, K. & Ostrom, A. (1994). Customer satisfaction fables. Sloan Management Review, 35(4), Nunnally, J. C. (1978). Psychometric Theory. McGraw Hill, New York. Jöreskog, K. G. & Sörbom, D. (1989). LISREL 7: A Guide to the Program and Applications. SPSS Publications, Chicago. Murphy, A. (2003). Illustrating the utility gap analysis as a regional tourism-planning tool: Case study of potential Japanese and German travellers to the Cowichan region. Journal of Travel Research, 41(4), Oppermann, M. (1995). Holidays on the farm: A case study of German hosts and guests. Journal of Travel Research, 34(1), Parasuraman, A., Zeithaml, V. and Berry, L. (1985). A conceptual model of service quality and its implications for future research. Journal of Marketing, 49(fall), Parasuraman, A., Zeithaml, V. A. & Berry, L. L. (1988). Servqual: A multiple-item scale for measuring consumer perceptions. Journal of Retailing, 64(1), Post Courier (1998). EHP puts polish on its tourist service (6 March), p. A3. Reichheld, F. F. & Sasser, W. E. Jr. (1990). Zero defections: Quality comes to services. Harvard Business Review, 68 (September October), Rosener, F. (2003). Complacency and service quality: An overlooked condition in the gap model. Journal of Retailing and Consumer Services, 10(4), Tucker, L. R. and Lewis C. (1973). The reliability coefficient for maximum likelihood factor analysis. Psychometrika, 38, Weiermair, K. (1997). Service quality and its management in tourism enterprises. In Papers de Turisme fundacion de Cavanilles de altos Estudios turisticos. University of Alicante, 20, Zeithaml, V. A., Parasuraman, A. & Berry, L. (1990). Delivering Quality Service: Balancing Customer Expectations and Perceptions. Collier Macmillan Publishers, London,