Service Quality in Hotels

Introduction

Firms in the service industries play a vital role in the development of any economy. The growing competition among the service organizations as well as the increased knowledge of the customers about the quality and cost of service through Internet drive the firms provide an exceptional service to their customers. With the globalization, taking effect there has been an increase in the customer preferences and their demand in the service level from various service-oriented organizations. Quality in service is an intangible concept because of the nature of the service offered by the service organizations. Therefore, the definition of service is subject to variation from individual to individual and from one situation to the other. In the context of quality service, Parasuraman, Zeithaml and Berry (1986) defined service quality as “the direction and degree of difference between the customers’ perception of the service and their expectations about it.” The necessity on the firms to provide exceptional services makes the study of the service delivery by them interesting. Customers in the market place always prefer superior quality products and services.

Products and services with higher quality lead to tangible and measurable benefits to the business in terms of profits, reduction in overall cost and improved market share (Anderson, Fornell, & Lehman, 1994). Extensive past research on the topic revealed that service quality is gaining prominence as one of the critical factors in the success of any organization (Parasuraman, Zeithaml & Berry, 1988). Provision of quality service has serious financial implications for a service organization, as it is most likely to increase the revenue and earnings of the firm by repeat service requests by the satisfied customers.

Today, more than ever before, organizations operating in nearly every sector are re-evaluating their business approaches to meet the demands of the 21^st century. The capacities of some traditional business practices to solve organizational challenges of today are increasingly becoming irrelevant, while other approaches that had previously been relegated to the backseat are slowly realizing their importance, courtesy of the ever changing business environment and shifts in patterns of behaviour (Worthington & Britton, 2006). One such concept that has realized its rightful place in the modern world is service quality. Various seminal studies have focused on the interactions between service quality on one hand and tangible business results such as market share, value of the company, performance, and profitability on the other (Allen & Wilburn, 2002). The conventional wisdom, therefore, is that, since modern business analysts have been using service quality so extensively to gauge the overall performance and standing of an enterprise, it must be indicative of business accomplishment or the lack of it.

Background of the Study

Customer satisfaction is one of the important aspects in delivery of service, by service organizations. Satisfaction is the state of mind of a person reached over the performance of his expectations. Satisfaction therefore is dependent on the anticipation of the customers and their expected performance levels. The expectations are formed based on the experience of the customer with the same or similar situations (Kotler and Clarke 1987). In order to understand the customer expectations and to evaluate the level of customer satisfaction, superior quality customer service becomes critically important in service-oriented organizations. Only when the firm is able to meet the expected quality standards in service, it will be able to retain the customers, which is one of prerequisite for improved profitability of the organization.

The hotel and hospitality industry is largely a services-oriented industry, and employs millions of workers globally (Tian & Pu, 2008). The capacity to offer quality service is fundamentally important if hotels are to retain their competitive advantage in an already saturated market. Indeed, many analysts in the hospitality sector readily agree to the fact that service quality is the single most important factor in determining the destiny of a hotel enterprise (Hailin & Chao, 2007). By any standards, quality improvement in a hotel setup is largely a function of service quality rather than the management since it is the service quality, which makes the hotels flourish. According to Hailin & Chao (2007), a diversity of factors come into play to ensure the providence of quality services, but the most important ones are those relating to the interaction between the employees and the customers rather than the splendour, ambience or category of the hotel.

Service quality is one of the crucial elements in the success of any organization, especially one operating in the hospitality industry. Generally, customers have the tendency to compare the quality of service provided by any organization by comparing it with the quality level of service desired by them. Therefore, service quality plays a critical role in enabling service organizations sustain their competitive strength (Lau et al., 2005). During the past two decades, the contribution by the tourism industry to several economies in the world has grown tremendously. Tourism industry encompasses many infrastructure and service institutions, within its fold. Among these institutions, hotel industry represents a most important one, especially in a tourist destination like that of Singapore. The success of any hotel organization depends entirely on the quality level of service it provides to the customers and this makes maintaining and measuring customer satisfaction level an important element in the successful running of a hotel organization. In the hospitality industry, the ability of an organization to provide higher level of satisfaction continuously determines its success. For achieving success, the organization must be able to manage providing quality service to customers having different cultural backgrounds (Kandampully, 2000). Understanding the culture of customers becomes important in view of the fact that such culture determines the priorities and meanings the customer attaches to the service attributes. It is true that varied cultural bahviors of the customers are likely to impact the success of the hotel organizations. Understanding of the cultural background of customers helps hotels in achieving their service recovery strategies.

For attaining improvements in the service quality, it becomes essential that the hotel organizations focus on service quality initiatives, such as Total Quality Management (TQM) and training and development of their staff in meeting the quality requirements of the customers. Investment in the development of the quality of human resources requires the close attention of hospitality organization desirous of raising service quality (Narangajavana, 2007). While attempting to increase the competitive strength by enhancing the service quality, the hotel organization has to remember that different customers will perceive quality from different perspectives. Although the definition of quality may vary from person to person, it typically involves whether the actual service delivery meets, exceeds or fails to meet the perceived quality levels of the customers (Cronin and Taylor, 1994; Oliver, 1993; Zeithaml, Berry and Parasuraman, 1993). In this context, evaluating customer satisfaction level of service quality and designing appropriate service recovery strategies becomes important. The current research evaluates the customer satisfaction level of service quality in the context of service recovery.

Service recovery is an important means to satisfy customers after a failure has occurred. Most of the customers’ reactions are strong, when they experience a service failure. Therefore, it becomes critical for the management to implement service recovery strategies that are of equal strength and effectiveness (Smith et al., 1999). The customers in general prefer to receive resources for recovering the service in the amounts, which adequately cover the magnitude of the service failure experienced by them.. Hence, it might be helpful to consider some important factors of recovery efforts in this study.

It is now wildly believed that retaining current customers may be more profitable than obtaining new customers (Reichheld, 1990). Recent research works on managing customer retention are conducted from different aspects such as relation management and customer equity management (Hogen et al., 2002), relationship marketing (Lemon et al., 2002), and managing service failure and recovery (Tax and Brown, 1998). Increasing customer loyalty is a critical driver of a firm’s financial growth over the period (Jones and Sasser, 1995). Customer dissatisfaction could reduce loyalty and erode a firm’s reputation. A major cause of dissatisfaction is resulted from unsatisfactory problem resolutions (Hart et al., 1990). “Keaveney (1995) finds that service failures and failed recoveries are a leading cause of customer switching behavior in service organizations,” (Smith et al., 1999). Up to 50% of customers who experience problems are not satisfied with the recovery strategy (Zeithmal et al., 1990). Berry et al. (1992) suggested that organizations should see failure not necessarily as a challenge but as a chance to have more customers, who feel satisfied.

Motivation

In general, service recovery strategies consists of three distinct actions, either alone or combination: (a) apology (acknowledging the problem); (b) assistance (fixing the problem); and (c) compensation (paying for the “trouble” costs of the problem) (Levesque and McDougall, 2000). Each possible recovery strategy has its effects on customer satisfaction. For firms, it is important to know what an effective service recovery strategy is for different types of customers. Bitner et al. (1990) indicate that it is not necessary the failure itself that leads to customer dissatisfaction. It is more likely to be an organization’s response to a failure that causes dissatisfaction.

International tourism hotels usually provide the excellent service quality to customer. (Tourism Bureau, Ministry of Transportation and Communications, ROC. Hotel categories). There are 59 international tourism hotels which have been confirmed by Tourism Bureau in Taiwan. The competition in the segment of international tourism hotels in Taiwan is very keen. Providers must have the good hospitality for their guests. Besides the facilities, the emphasis is the service quality because the consumer perception is rising. Excellent service quality is viewed as one of the international tourism hotel characteristics. Customers desire to enjoy the excellent service quality which is worth the money they pay. Hence, an international tourism hotel provider in Taiwan should concern the issue of service recovery in order to gain the long-term operation and maintain the excellent service quality.

It is suitable to investigate the relative effectiveness of recovery strategies in different situations. The hotel industry is typically characterized by variability in the quality of service providers (Zeithmal et al., 1993). We are concerned with the issue of the effects of service recovery efforts on customer satisfaction and customer behavior intention in international tourism hotels. This is a comparative study of failure types, recovery strategies, and situation variables in hotels.

Aims and Objectives

The central aim of the current research is to study the effects of service recovery efforts on customer satisfaction and customer behavior intention in international tourism hotels by undertaking a comparative study of failure types, recovery strategies, and situation variables in hotels. In this study, we propose to an overall conceptual model of the relationships among service recovery strategies, customer satisfaction, and customer behavior intention.

In the process of achieving the central aim, the research seeks to achieve the following objectives:

1. To examine the effects of failure types and recovery strategies on customer satisfaction;
2. To study the effects of customer satisfaction on customer behavior intentions;
3. To study the relationship between criticality and service recovery process; and
4. To study in-depth the relationship between loyalty and service recovery process.

Structure of the Dissertation

In order to make it comprehensive, this dissertation is structured to have five chapters. Chapter One presented the overview, background and motivation for the research. The chapter also laid the objectives of the current study. Chapter Two presents a review of related literature for this particular study, including an assessment of relevant theories. Chapter Three deals with the development of a conceptual model and will comprehensively cover the research design, data collection techniques, data analysis, and issues of validity and reliability. Chapter Four An extensive analysis of the results of the research and relevant discussion forms part of Chapter Four, while Chapter Five presents conclusions, limitations, recommendations and future research areas.

Literature Review

Introduction

Providing efficient and timely customer service and ensuing high level of customer satisfaction have gained strategic importance for improving the competitive strength of the companies in every commercial sphere. The economic benefits of customer satisfaction and the resultant customer loyalty has been the central focus of many contemporary researches contributing to the theory of customer loyalty and behavioural intentions. Loyal customers help improving the sales of the company by recommending the product/brand to new customer by exhibiting preference for the products of one firm in preference to those of the competitors. Generally serving loyal customers would cost less to a firm than canvassing new customers. Retaining customers would be possible for any firm by providing utmost satisfaction to the existing customers. This chapter studies the correlation between the relationship factor of customer satisfaction and the customer- loyalty behaviour intentions.

Hotels have the most important marketing objective of improving customer satisfaction and build customer loyalty. Future customer behaviour can be predicted by measuring customer satisfaction levels. With a thorough understanding of the needs and preferences of the customers, hotels will be able to meet the expectations of customers in respect of their service needs. Hotel organizations will be able to achieve their growth and profitability objectives only by satisfying their customers. Satisfied customers not only repeat their visit to the hotels; but also speak high of the service of the hotels to their acquaintances and known people. Hotels operating within the hospitality industry offer a product, which is intangible and complex in nature. The characteristics of service products – intangibility, heterogeneity and perishability – replicate the qualities of the services but also offer the explanation as to the reasons for the emergence of customer satisfaction as a critical factor in the success of the hotel organizations during the last two decades. Apart from the characteristics of service product consists not only tangible and intangible aspects, but also the service setting made up of the customer-staff interaction. During this service counter, there is the likelihood of either nurturing the relationship on a continuous basis or losing it forever.

“Recovery management is considered to have a significant impact on customer evaluations, because customers are usually more emotionally involved in and observant of recovery service than in routine or first-time service and are often more dissatisfied by an organization’s failure to recover than by the service failure itself (Berry and Parasuraman 1991)” (Smith et al., (1999).

In other words, once customers experience a problem and seek resolution, the performance of recovery significantly influences their behavior intentions (Spreng et al., 1995). There is not a best way to recover service failures or handling customer complains. Effectiveness of service recovery strategies are varied depending on the type of service, problem severity, and criticality levels. Recovery strategies need to be matched to the specific incident (Levesque and McDougall, 2000).

Customers’ behavior intentions show strong evidence of their being influenced by service quality (Zeithaml et al., 1996). On the other hand, service quality has been found to be an important input to customer satisfaction (Garuana, 2002). There is enough evidence to show the relationship between customer satisfaction and customer behavior intentions partly because of the role of service quality. Service quality leads to the expected level of customer satisfaction. This in turn results in customer repeat purchase intentions. Service quality will break down on account of service failure. Hart et al. (1990) points out that “A good recovery for service failure can turn angry, frustrated customers into loyal ones.” Hence, it is important to make the service quality better through service recovery efforts. Service recovery strategies are to be implemented in a fitting manner so that the organizations would be able to enhance customer satisfaction and sustain the relationship with the customers. A service recovery action, which was executed properly and effectively, will help in enhancing customer retention (Fornell and Wernerfelt, 1987).

In summary, service recovery plays an important role on influencing customer satisfaction and behavior intentions. There are some contingency variables impacting the recovery efforts. Customers’ evaluation on satisfaction is differed by types of failures, since they represent different categories of loss to customers (Smith et al., 1999). Webster et al. (1998) point out that criticality of a service to customers may also influence their responses. Customers are more likely to complain when problems are in high degree of criticality. Loyalty also impacts the recovery efforts and customer behavior intentions. The following sections elaborate on failure types, service recovery strategies, customer satisfaction and behavior intentions, criticality, and loyalty.

Service Quality

The term “quality” has different meanings. However, because the term is purely relational in nature, a comprehensive definition of the term could not be developed (Leimbach, 2006). It is more difficult to provide a definition of quality applicable to the hotel industry, because what is good service for one customer may not be enough for the other customer (Allen & Wilburn, 2002). According to Ping et al. (2010), the term quality is the extent to which a particular service or relationship is free from inconsistencies, defects and other limitations which do not add value to the expectations set by customers. As mentioned earlier, to remain competitive organizations have to work towards improving service quality, since service quality has strong influence on the financial performance of organizations. This is especially more so in the case of hotels because the success of any hotel is dependent on the ability of the hotel to meet the customer satisfaction levels.

Clement & Selvam (2006) highlight the importance of improving service by organizations by developing its own vision and mission statements outlining the organization’s service strategies. Organizations can develop these strategies by assessing the service expectations of the customers. The management should then pass on these strategies to the employees for implementing them in the organization. According to Clement & Selvam (2006), if the management does not create such service strategies and communicate them to employees, the organization may experience a gap in the quality in the service. This will not be beneficial to the organization for improving its competitive strength.

Service Quality and Customer Satisfaction

The customer satisfaction with service encounter is customer’s satisfaction toward a specific incident. Compared with overall satisfaction, satisfaction with service encounter is modeled in depending on customer satisfaction with specific attributes of the experience (Spreng, et al., 1995). The customer satisfaction is the sum of customer’s perceived evaluation toward a service incident, and sometimes it is a long-term service relationship. Hurt (1997) points out that the customer satisfaction is the emotional evaluation about the product they buy. The overall satisfaction comes from each dimension of satisfaction, which reinforces or reduces interactive.

“Customer satisfaction has become one of the most critical marketing priorities because it is generally assumed to be a significant determinant of repeat sales, positive word-of-mouth, and customer loyalty,” (Ryu & Han). It enhances the customer loyalty by word of mouth. As a result, this aspect in relation to customer loyalty has been the center of focus in the case of many researches. It has also been proved through studies that the perceived performance of the product influences the customer satisfaction largely (Tse & Wilton, 1988). Customer service is another important aspect that contributes to customer satisfaction and thereby affects the customer loyalty. Customer service thus assumes an important role in enlarging the competitive advantage of the firms. Lalonde & Zinszer, (1976) define customer service to include those activities that occur as the interface between the customers and the firm, which enhances or facilitates the sales and use of the products or services of the firm.

There are certain empirically derived dimensions of customer service including responsiveness, assurance, reliability and empathy identified by the researchers (Parasuraman, Zeithaml, & Berry, 1988). One of the key issues in marketing and practice is the element of customer satisfaction and its influence on the behavioral response. Anderson & Sullivan (1990) observed that the repurchase intention of the customers has a close association with satisfaction. This can be equated to the influence of the overall patient satisfaction to the selection of hospital (Woodside, Frey, & Daly, 1989). Singh, (1988) postulates customer dissatisfaction would lead to the complaining behavior of the customers. Theoretically there are threshold of satisfaction that extend to the change the customer behavior. Customer satisfaction thus has a strong influence on the habits and attitude of the customers. Cronin & Taylor, (1992) find that customer service quality and customer satisfaction as distinct constructs and those levels of service quality has a significant influence on the customer satisfaction. Though service quality affects purchase intention, the effect is not found to be significant. However, Taylor & Baker, (1994) found significant effects of service quality on purchase intentions of the customers. Other researchers treat service quality and customer satisfaction as one.

From the discussion, it follows that customer satisfaction forms the basis for customer loyalty and repeat sales actions by the customers. Customer satisfaction will also improve the willingness to recommend the product or brand to friends and relatives of the customer who is satisfied with the brand/product. The perceived performance of the product or brand has its effect on the customer satisfaction. Service quality is one more phenomenon that influences the customer satisfaction and by enhancing the customer satisfaction, it increases the customer loyalty. The customer loyalty results in increased buying interests and the desire to suggest the product/brand to other people. Therefore, perceived performance of the product, customer satisfaction, and service quality of the product or brand can be considered to form the basis for customer behavioral intentions leading to customer loyalty.

Eastlick & Liu, (1997) observe that the decision by the customers to adopt a service is driven primarily by the perceived benefits and perceived costs of using the service. The adoption of the service thus depends on the ‘value’ the service can provide to the customer. The ‘value’ in this case is represented by the service quality of the product (Montoya-Weiss et al., 2003) and the convenience the customer can derive out of using the service (Black et al., 2002; Devlin and Yeung, 2003).

The customers will also consider the risk involved in conducting the transaction using the service and the costs of carrying out the transactions through the service (Devlin, 2002; Fader, Hardie and Lee, 2003). Perceived convenience, service quality and price are the key attributes which influence the perceived value of a service (Bhatnagar and Ratchford, 2004). The perceived value of service therefore depends on the moderating effects such as circumstances under which the customer chooses the service and the distinguishing features of the customer himself (Mattson, 1982). It is to be inferred that the importance of the attributes among convenience, quality and price for choosing a service is most likely to vary depending on the situations and customer features. In consistent with the literature, it is possible to distinguish between two dimensions of loyalty. They are: (i) a past loyalty that is more associated with the customer’s behavioral loyalty (Snehota and Söderlund, 1998; Chaudhuri and Holbrook, 2001). This loyalty stands for the comparative significance of a particular service in the earlier utilization of the customer and (ii) a cognitive loyalty, which implies the attitude of requiring the services from the same service provider in next occassion (Methlie and Nysveen, 1999; Van Rail et al., 2001).

“The perceived service quality, satisfaction and past loyalty are antecedents of the intention of continuing to use the service or future loyalty.” It is therefore important that the service organizations should ensure that they provide a service of high quality for surviving in the highly competitive market and for acquiring a sustainable competitive advantage in the long-term, which cannot be replicated by the competitors (Mefford, 1993; Jun and Cai, 2001).

Service quality is represented by “whatever the customer perceives it to be.” “Service quality as perceived by the customer may differ from the quality of the service actually delivered. Services are subjectively experienced processes where production and consumption activities take place simultaneously” (Jaipuria, n.d). In service delivery both the customer and service provider may have to interact with each other, which might result in the occurrence of a series of moments of truth. Such interactions between the customer and service provider will have a positive or negative impact on the perceived quality of service. Christian Gronroos designed the Nordic Model. This model was later developed by others, pursuing a disconfirmation of expectations approach. According to this approach “customers have certain expectations of service performance with which they compare their actual experience. “If the expectations are met, this is confirmation; if they are over performed, this is positive disconfirmation; if they are underperformed this is negative disconfirmation” (Jaipuria, n.d). Gronroos (1984) has observed the quality of service as perceived by customers to have a “technical or outcome dimension and a functional or process-related dimension.” This is explained in the following chapter.

Dimensions of Service Quality

Customers are seeking the lowest prices that are compatible with an acceptable quality. One of the approaches to improve the service is to identify the important elements of providing better service by the organizations. In one of the models for assessing the service, customer service is assessed based on (i) quality of the service outcome and (ii) quality of providing the service. First dimension of service quality is what actually the customers receive, while they interact with the service provider. “This is one quality dimension, the Technical Quality of the outcome of the service production process” (Jaipuria, n.d). The consumer also considers the way in which he could experience the service and the way in which he receives the production and consumption courses at the same time. This is termed the second quality dimension, the “functional Quality of the process”. The next dimension of quality resembles as to how the service situations are experienced by the customer at times of mistakes and how the service provider takes care of these situations.

Thus, technical quality can be equated to the quality level of service and the way the service was provided to the customer. Functional performance is the new concept in service quality, which the customer is considered as a participant and co-producer in the business of the service organization.

Parasuraman, Zeithaml and Berry (1985) identified ten determinants of service quality. These include “reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding/knowing the customer and tangible” (Joshua and Koshi 2005). The researchers later reduced the ten determinants to include five of them to assess service quality. It may be observed that most of these quality aspects relate to the performance of the service organization at the employee level. Therefore, improvement in service quality by these organizations depends largely on the employees of the organizations possessing the required qualities to provide exceptional service to the customers. The different dimensions of service quality influence the repurchase intentions of the customers largely. The following sections present a discussion on the impact of service quality on the repurchase intentions of the customers.

Service Quality and Repurchase Intentions

Hellier et al (2003) observe that the repurchase intentions of the customer depend on his individual judgment about going in for the same service considering his current situation and the likely circumstances affecting the decision. Within the service quality literature, repurchase intention is viewed as a form of customer loyalty. Law, Hui and Zhao (2004) view this loyalty as a deep commitment of the customer to go in for the repeated use of the particular service consistently in the future. Repurchase intentions are found to have a significant impact on enhancing the business profits. Some of the findings of the past research suggest that almost 95% of the business profits result from repeat purchases of customers (Hoffman et al., 2003).

“Further, loyal customers will also present partnership actions such as spread a positive word of mouth to their friends and relatives” (Wijaya, 2005). Such positive communication by the customers leads to considerable increase in the revenue of service organizations. Schneider and White (2004) argue that service quality is associated with desirable business results such as increased customer loyalty leading to substantial increase in profits. However, Cronin and Taylor (1992) observed that the overall level of quality in the service did not have any impact on the buying habits of the customers. Although there are mixed findings in the extant literature, on the impact of service quality on the repurchase intentions, the overall results show a positive association between customer service qualities and repurchase intentions.

Towards Evaluating Service Quality

According to Subramony et al (2004), “…there is an increasing body of empirical research supporting the notion that customer evaluations of service quality are influenced to a large extent by the way they are treated by front-line service employees” (p. 312). This implies that the employee takes a central position in moulding the customer’s perception about service quality. Barrash & Costen (2008) argues that organizational service-related activities performed by employees are fundamentally associated with service quality. The service climate, according to Wansoo (2009) & Bai et al (2006), greatly influences the customers’ perceptions and beliefs on how to rate a particular type of service offered by different establishments. The service climate virtually depends on how the employees are physically, mentally, and psychologically prepared to extend their services to customers. Lawson et al (2009) & Chiu (1998) postulate that greatness of service does not specifically depend on the value or significance of the intangible service itself; rather, it depends on how that service is packaged and offered to the customers by employees.

Subramony et al (2004) contends that customer satisfaction is certainly related to attitudes exhibited by employees such as customer focus, outgoing personality, and quality emphasis. The directionality of this correlation, however, has remained ambiguous, with some analysts arguing that there exists inadequate evidence to insinuate that employee satisfaction leads to improvements in service quality, hence customer satisfaction (Barrash & Costen, 2008; Kasheji, 2009; Argyle, 1987). Nevertheless, it is prudent to note that business enterprises have continued to develop and execute employee-level interventions such as facilitating employee satisfaction in the hope of improving the set customer outcomes, including improvements in service quality (Subramony et al, 2004). As such, the notion that employees are at the core of service delivery activities, and hence the quality of service advanced to customers rests on their shoulders, still remain palatable

Subramony et al (2004) asserts that “…both common sense and research testify to the fact that customers and employees influence each other’s attitudes and perceptions. In the simplest case, employee attitudes and behaviours influences customer responses, which in turn, further influence employee attitudes and behaviours” (p. 312). For example, an employee who is deeply satisfied in his work environment is more likely to develop positive customer-oriented attitudes. It follows that a customer served by such an employee is more likely to exhibit positive reactions, which in turn are likely to reinforce the employee’s attitude, hence enhancing his satisfaction even further. This view is reinforced by Ekiz (2009), who argue that a positive interaction between the employee and the customer is beneficial to both parties since the employee gains from enhanced satisfaction levels while the customer gains from improved service quality. According to Subramony et al (2004), “…while there is evidence demonstrating the link between employee variables and service quality among Western European and North American businesses, there are few empirical studies generalizing this link to countries with emerging economies (p.312).

Customer Feedback

According to Gilly and Hansen (1985), companies must consider gathering feedbacks from their customers, where they find that customer retention is critical in view of intense competition. Research has proved that it is not possible to eliminate all problems while providing service to the customers (Maxham, 2001). Therefore, companies must work towards differentiating the successful service practices from the ones, which are mot based on the customers’ feedbacks (Ofir & Simonson, 2001). The success of any hotel organization depends on its ability to adjust to ever-changing needs and preferences of its customers. Based on the feedbacks from the guests, the hotels will be able to judge the level of their services. Especially in the hotel industry, the interaction between the guest and the hotel staff is one of the important elements in promoting the business of the hotel. The quality level of service in the hotels determines the number of repeat guests. Opoku (2006) found that guest feedbacks are useful in tracking service quality, locating quality issues in service delivery, and identifying suggestions for improvement in service quality. Goldsmith and Pillai (2006) have proposed that hotel organizations must put a premium in gathering feedbacks from the customers and they must be open to make improvements/adjustments in service quality based on the feedback information.

Getting feedback from the customers will enable the hotels to assess the performance of the hotel operations, speed and efficiency of hotel services and politeness of the front office staff. According to Heung and Lam (2003), effective handling of guest feedback will improve customer loyalty. Gathering and monitoring feedbacks facilitate hotels to evaluate and improve the services and product capabilities, which in turn enable the hotels to maintain and improve their competitiveness (Wisner & Corney, 2001). By contributing to the effectiveness and creativity of the hotels, guests of the hotels gain strategic importance. There are different ways of collecting feedbacks from the guests. “Guest comment cards, in-room questionnaires, guest contact staff, telephone surveys, Internet surveys, personal visits, mail surveys, and focus group interviews” are some of the means of collecting the guest feedbacks.

Perceptions of Quality from the Purview of Customers

According to Harris (2000), perception is the way people look at different things or situations. It is obvious that everyone’s perception of things would be different at least slightly. It is usual that people develop perceptions over a period and perceptions often reflect the way in which others have treated them. Individual values, preferences, judgments and understanding of problems are some of the factors, which influence perceptions of people. One of the important features of perceptions is that they do not reflect rational thinking of the customers and they are often triggered by the impulsive feelings of the customers. Therefore, it becomes important for the employees dealing with customer service to expect resistance from customer based on the previous encounters of the customer. It is also important that the employees must try to provide the customers with superior quality service at the current instance so that they change their perceptions about service quality to positive ones. It is a fact that customers may not retain the memory of every detail of his/her service encounters; but will retain only an overall feeling. It is this “feeling” in combination with related experiences will generate the customers’ perceptions about the service quality. It is to be remembered that it is hard to erase the negative perceptions of the customers, especially where they felt that the quality level was not adequate. However, by their genuine deeds and actions, the employees can make the customer realize that their perceptions are wrongly founded. Training of the employees in this direction will help hotels to change the negative perceptions of customers.

Harris (2000) states that anticipation of a particular quality level of service is one’s idea of the outcomes that emanate from his encounters. Customers’ expectations may be negative or positive in nature and are usually originate from their perceptions. If a customer had a negative experience during his last stay in a hotel, that customer will approach the hotel under a new situation with a negative perception that the hotel service may not be to his expected level.

Expectations may be categorized into prime and minor expectations. Primary expectations represent the most basic requirements that a customer expects from the service or an interaction. For instance, the desire of the customer to have a better and quality facilities can be termed as the main considerations. Secondary expectations represent additions to primary expectations. Secondary expectations are dependent on the experiences of the customer encountered earlier with the service provider. For example, the desire of a customer to have good and courteous service by the employees and tasty food are some of the secondary expectations. When a guest experiences a service failure in a hotel, the guest may decide not to return to the hotel, as he might be of the opinion that the hotel will not be able to provide him a satisfactory service. Zeithaml, Parasuraman and Berry (1990) conducted focus group interviews on the factors influencing customer expectations. The findings reveal that:

• What the customers hear from others through word of mouth is a potential determinant of expectations. According to Gitomer (1998), more than 50% of the businesses of American business are dependent on the word of mouth of their customers. It is a common practice that a customer may not discuss his good stay; on the other hand, if he had a bad encounter, he is most likely to talk about it in his conversation with another.
• Secondly, individual preferences of the customers have a significant role to play in moderating their anticipation of service quality to some extent.
• The level to which that a customer used the services in the past will also have an influence in shaping up his anticipations about the service.
• Quality and information contained in the external communications received from the service provider may also affect the customer expectations. Direct and indirect marketing communications received from the service providers include different promises and specialized service offerings, which make the customer to expect a higher quality level of service.

Service Quality, Organizational Learning and Employee Motivation

Service differs from the manufacturing activities in a number of characteristics. Therefore, assuring services by service organizations is a difficult task than ensuring quality of production in manufacturing. There are two elements, which are particularly influential in contributing to this difficulty. Rendering of services involves the process of interaction of employees and customers. A hotel would find it tough to provide a consistent and reliable service, because of the encounters between staff and customers, while delivering the service. Moreover, it is the personal whims and expectations of the customer make it difficult for the hotel to decide the quality levels for different services it offers. Because of this situation, the hotel finds it tough to identify and rectify the deficiencies in service quality. Thus, for service provision by the hotels, both the employee motivation and organizational learning can be said to play a significant and critical role in ensuring superior service quality. “Much of the evidence supporting the effects of employee motivation and vision and organizational learning on service quality is anecdotal rather than systematic, theory-driven, empirical research,” (Hays & Hill, 1999).

Organizational learning is one of the distinct capabilities of a firm, which supports distinctive competencies. This in turn allows the firm to achieve and sustain competitive edge against the competitors. The hotel organizations can learn from both employees and customers and such learning is sure to help hotel organizations to be successful (Marquardt and Reynolds, 1994). In fact, the survival of the organizations depends largely on their learning ability and adaptability to changing circumstances. Senge (1990) argues that firms gain competitive edge at the rate at which they become learning organization and such competitive edge gained from learning becomes sustainable. Hotel organizations can develop their capabilities and skills for winning over the competitors by adopting the policy of learning from the actions of workers and guests of the hotels. Since there will be constant changes in the needs and preferences of the customers, it becomes important for the organization to update their knowledge through the process of learning, so that they can achieve and maintain superior service quality standards.

Employee motivation is another important element in determining the service quality of hotel organizations. Employee attributes of politeness, understanding and awareness are some of the important elements, which shape the quality expectations of clients (Zeithaml, Parasuraman and Berry, 1990). Bowen and Lawler (1992) state the feelings of the customers about the service quality are most likely to be affected by the feelings of the employees about their working conditions. Any dissatisfaction on the employment is likely to spill over to affect the customer service-quality standards. This superior service will be able to enhance the customer satisfaction levels automatically. Thus, by motivating employees and by providing a vision, the hotel organizations would be able to accumulate a valuable resource adding to the competitive ability.

Achieving employee motivation through empowerment and vision is one of the necessary elements in the learning process of any organization. Senge (1990) introduced the concept of learning organizations. According to Senge (1990), shared vision is the corner stone for the growth and sustenance of a learning organization. “Without a pull toward some goal which people truly want to achieve, the forces in support of the status quo can be overwhelming. Vision establishes an overarching goal. The loftiness of the target compels new ways of thinking and acting,” (Hays and Hill, 1999).

The discussion in the above section focuses on motivating employees to understand the importance of service quality for the success of the organization. The motivated employees will also be willing to learn and achieve higher quality standards in customer service. Previous service literature focuses on two types of employee motivation. They are “motivation to learn or train and motivation to transfer.” In both types of motivation, the desired goal of any organizational training program is to improve the service quality.

Service Failure Types

A service failure occurs partly due to its intangibility, heterogeneity, simultaneity, and prishability (Sasser, 1976). Even following standardization procedures, failures still could happen. When failure occurs, customers may show the behaviors of switch, complain, etc (Richins, 1987). Hence, firms must be aware of service failures actively then resolve them.

“The services marketing literature recognizes two types of service encounter failures: outcome and process (Bitner, Booms, and Tetreault 1990; Hoffman, Kel- ley, and Rotalsky 1995” (Smith et al., 1999). Berry et al. (1991) indicate that outcome is the primary driver of customer evaluations of service during the initial service encounter, while process is the primary driver during the service recovery. Service failures could be core-service problem such as unavailability of the service (no service personnel with the appropriate skills are available), exceptionally slow service, or mistake in the service (e.g. bank statement errors). Service failures can vary in seriousness – from something trivial to being very serious (Kelley and Davis, 1994).

“The outcome dimension of a service encounter involves what customers actually receive from the service , whereas the process dimension involves how they receive the service , that is, the manner in which it is delivered (Gronroos 1988; Parasuraman, Zeithaml, and Berry 1985)” (Smith et al., 1999). “the organization does not fulfill the basic service need or perform the core service (e.g., a reserved hotel room is unavailable because of overb ooking), whereas in a process failure , the delivery of the core service is flawed or deficient in some way (e.g., a hotel desk clerk treats the customer rudely during check-in)” (Smith et al., 1999). “The services marketing literature provides no information on which type of failure has more influence on customers ‘ satisfaction judgments” (Smith et al., 1999). In this study, we examine the effects of recovery strategies on both types of service failures by taking criticality and loyalty into customers.

Service Recovery Strategies

Service recovery has been defined more recently in a more proactive way as the seeking out and dealing with service failures (Johnston, 1995). The way to deal with failure, like actions to respond defects or failures, is called service recovery strategies (Gronroos, 1988). Bitner, Hart, and Kelley et al. (1990, 1993, and 1995) pointed out the common and frequently used actions are apology, compensation, and /or assistance.

Appropriate elements of a recovery strategy depend upon the level of dissatisfaction perceived by a customer. Efficacy of recovery strategies is based on the circumstance and is affected by different factors.

The apology is regarded as the bottom-line and is offered in all recovery strategies (Levesque and McDougall, 2000). “An apology from the service provider communicates politeness, courtesy, concern, effort, and empathy to customers who have experienced a service failure and enhances their evaluations of the encounter (Hart, Heskett, and Sasser 1990; Kelley, Hoffman, and Davis 1993)” (Smith et al., 1999). An apology alone is relatively ineffective when a customer encounters a service failure (Webster et al., 1998). That means that an apology does not mean anything to customers if they do not get gains from it. An apology usually changes nothing from a failure. Hence, customers are often not satisfied with the apology recovery after a failure has occurred. Bell et al. (1987) suggest that “annoyed” customer will be recovered the provision of an apology and the correction of the problem. An apology will be more helpful if it goes along with other strategies.

The compensation contains money payment to the inconvenient customer when the service failure cannot be fixed (e.g., no rooms available). Increasing compensation should lead to great satisfaction with the service recovery (Levesque and McDougall, 2000). The compensation can be in a form such as a free ticket, meal or drink. Bell and Zemke (1987) use atonement to suggest token compensation such as “It’s on us”, “Free drink”, “No Charge”, “Here is a coupon with….” However, in some cases, higher compensation may lead to less satisfaction because customers are over-rewarded (Smith et al., 1999). The compensation seems more helpful than an apology during the recovery process, but it can not fix the failure totally or bring the situation to the original status.

The assistance contains the correction or rectification to fix the failure to the original purpose of buying the service (Kelley and Davis, 1993; Levesque and McDougall, 2000). The assistance is possibly the most effective single strategy, and it can help customers deal with the failure, even fix it totally. Customers usually want the original service goods, not the replacement like coupon.

Customer Behavior Intention

The customer behavior intention comes from customers’ perception about the service quality, resulted in future behavior of customers. The customers’ behavior intention shows strong evidence of its being influenced by the service quality (Zeithaml et al., 1996). Berry et al. (1991) find correlation between customers’ expectations of service quality and their desire to suggest the company to others for service. Recommendation is just one of the behavior intentions, can be viewed as words of mouth. Levesque and McDougall (2000) point out that the future intentions including “complain to provider”, “Word of mouth”, and “Future business with provider (repurchase behavior)”. Zeithaml et al. (1996) indicates that the customer behavior intention include favorite and unfavorite intentions. The customer behavior intention shows how customers will react to the service they experienced in the future or what they will do with the service provider.

Criticality

Criticality is a mental status about customers’ perceptions to the service. Criticality is the extent to which the importance of a service is to a consumer. It is the perceived importance of successful service in a given service encounter (Webster and Sundaram, 1998). When customers encounter failures of services which is of high criticality to them, they will be likely to have lower satisfaction and loyalty, regardless of the recovery strategies applied (Darida et al. 1996). Levesque and McDougall (2000) point out when a core service failure occurs and the service is of low criticality to a customer, for a given service recovery strategy, the customer’s future intentions toward the service provider is likely to be more positive. The criticality of service consumption has a significant effect on customers’ satisfaction and loyalty attitude (Webster and Sundaram, 1998). Criticality has a major role to improve upon the satisfaction of the customer.

Loyalty

Loyalty occurs when “a customer feels so strongly that you can best meet his or her relevant needs that your competition is virtually excluded from the consideration set and the customer buys almost exclusively from you – referring to you as their restaurant or their hotel” (Smith, 1998). Loyalty is the chance of a customer’s repurchasing the product and the customer’s desire to act as a associate of the organization (Bowen and Shoemaker, 1998). “The degree to which a customer exhibits repeat purchasing behaviour from a service provider, possesses a positive attitudinal disposition toward the provider, and considers using only this provider when a need for this service exists (Gremler and Brown, 1996)” (Gavalas).

Customer loyalty is not the same as customer satisfaction. Satisfaction is important to build loyalty and at the same time, satisfaction alone is not enough for customer loyalty. Alternatively, one can experience satisfaction devoid of loyalty. However, loyalty will not be built up in the absence of satisfaction (Shoemaker and Lewis, 1999). It truly shows that loyalty is the enhanced satisfaction. Increasing customer loyalty is a critical driver of a firm’s long-term financial performance (Jones and Sasser, 1995).

Shoemaker et al. (1999) also points out that the “Loyalty Triangle”, a second side the equilateral loyalty triangle is termed value creation in order to create long-term loyalty. According to the model, value-recovery strategies are primarily designed to rectify a lapse in service delivery by providing amendments and compensation to alleviate the cost associated with failure (Hart et al., 1990). Loyalty is a key factor that influences service recovery.

Summary

In the hospitality industry, with increased competition, maintaining superior quality level of customer service has become an absolute priority. This review discussed several aspects relating to customer satisfaction, service quality and dimensions including the concepts of perception and expectations of customers. The review was based on the findings of previous research on the topic of service quality and customer satisfaction. Pursuing customer satisfaction has become a competitive strength and successful hotel organizations focus on the employees as the critical link for delivering customer satisfaction and for improving the growth and profitability of hotel organizations. Learning organizations, which increase employee commitment by continuous training and development, are sure to withstand the market competition, as trained and empowered employees are motivated to understand the needs and preferences of customers in a proper perspective and meet them. This review reveals that training is critical for the hotel organizations to remain competitive. Another source of information to remove any deficiencies in the service quality is the feedbacks received from the customers. In most instances the courtesy, responsiveness and politeness of the employees may make the customer forget some deficiencies in the service quality. In such cases, the customer may return to the hotel, despite having some bad experience on the extension of service in the previous instance.

Conceptual Model Development

Introduction

There has been a rapid increase in the hotel room inventory with the proliferation of the hotel chains all over the world. This has resulted in increased in the competition, as the customers have wide choices of hotel accommodations. The hotels have to assess their relative competitive abilities as compared to other hotels operating in the area. This calls for an assessment of the customer satisfaction level about the service quality of the hotel concerned. Especially in the hotel, industry customer satisfaction is of particular importance, as in the success of the hotels, customer satisfaction makes the difference. Various practitioners and researchers have researched the importance of satisfying the customers in order to promote business from repeat customers largely. However, with the passage of time there has been a significant change in the expectations of the customers, which calls for a revisit into the assessment of the influence of customer satisfaction and its impact on the success of the hotels.

In the matter of service delivery by the hotel organizations it becomes critically important that the hotels avoid service failures. However, because it may not always be possible to avoid service failures, hotels must evolve strategies to service recovery so that they can retain the customers. The current study has the objective of investigating the effects of service recovery efforts on customer satisfaction and customer behavior intention in international tourism hotels by undertaking a comparative study of failure types, recovery strategies, and situation variables in hotels. This chapter describes the development of a conceptual model, which prepares the theoretical ground for the empirical study undertaken as a part of the research. The review of the literature in the previous chapter formed the basis for the development of the conceptual model under this chapter.

In the following four sections, we present a model and a set of hypotheses that describe the effects of service recovery efforts for different failure types on customer satisfaction and behavior intention, and the relationship among criticality and loyalty.

Recovery Strategies for Service Failures on Customer Satisfaction

Two types of service encounter failures can occur in the operations of a service organization. They are outcome and process failures (Bitner et al., 1990; Hoffman et al., 1995). The type and quality of service that a customer receives represents outcome dimension of a service encounter. The manner in which the customer received the service represents process dimension (Gronroos, 1988; Berry et al., 1985).

The appropriate components of a recovery strategy depend upon the degree of dissatisfaction perceived by customers. Effectiveness of recovery strategies could be influenced by such factors as service failure type, service criticality, and customers’ loyalty. The apology is regard as the bottom-line and is offered in all recovery strategies (Levesque and McDougall, 2000). An apology alone is relatively ineffective when a customer encounters a service failure (Webster et al., 1998). The apology will be more helpful if it goes along with other strategies. In this study, we consider the following four service recovery strategies for a hotel which its customers encounter a service failure.

1. apology only;
2. apology plus compensation;
3. apology plus assistance; and
4. apology, compensation, and assistance.

“Customers prefer to receive recovery resources that “match”the type of failure they experience in “amounts” that are commensurate with the magnitude of the failure that occurs” (Smith et al., 1999). The combinations of failure types and recovery strategies could have different impacts on customer satisfaction.

Based on the above statement, we set up the first research hypothesis are follows (See Figure 1):

• H1 : In service failure/recovery encounters, the combination of failure types with service recovery strategies are significantly related to customer satisfaction.

Effect of Customer Satisfaction on Customer Behavior Intention

Customer satisfaction with service encounter is customer’s satisfaction toward a specific incident. Service quality leads to the level of customer satisfaction, and well-executed service recovery is important for enhancing customer satisfaction. On the other hand, customers’ behavior intentions show strong evidence of their being influenced by service quality (Zeithaml et al., 1996). Positive customer satisfaction surely leads to positive customer behavior intention. If customers perceive higher service quality to enhance their satisfaction, then they will show reactive behavior intentions.

Based on the above inference, we establish the second research hypothesis below (See Figure 1):

• H2 : After a service failure/recovery occurred, customer satisfaction has a positive impact on customer behavior intention.

Relationship between Criticality and Service Recovery Process

Criticality is the importance of the service to a consumer. It is the perceived importance of successful service in a given service encounter (Webster and Sundaram, 1998). Criticality is a mental status about customers’ perceptions to the service. In this study we divide loyalty into high level and low level.

Levesque and McDougall (2000) point out when a core service failure occurs in a lower criticality situation, for a given service recovery strategy, customers’ future intentions toward the service provider will be more positive. Webster and Sundaram (1998) also indicate that there is a significant interaction effect of criticality of service consumption with failure recovery effort on customer satisfaction. In this study, we consider that the criticality has moderate impact on the service recovery process.

According the previous statement, we set up the third hypothesis below (See Figure 1):

• H3 : In the high criticality situation, the incremental improvement in customer satisfaction during service recovery process is lower than in the low criticality situation.

When customers encounter service failures in high-criticality situations, they are more likely to have lower satisfaction and loyalty, regardless of what recovery strategy is applied (Darida et al., 1996). Loyalty is the chance of a customer’s repurchasing the product and the customer’s desire to act as a associate of the organization (Bowen and Shoemaker, 1998).

Based on the above statement, we set up the following hypothesized (See Figure 1):

• H4 : When a service failure occurs, for a given service recovery strategy, customers satisfaction toward the service provider is lower in the high criticality situation than in the low criticality situation.
• H5 : When a service failure occurs, for a given service recovery strategy, customers’ behavior intention toward the service provider is more negative in the high criticality situation than in the low criticality situation.

Relationship between Loyalty and Service Recovery Process

“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” (Gremler and Brown, 1996 quoted in Johnny & Esther, 2001). Loyalty is the mental status about customers’ perceptions to the service. In this study we divide loyalty into high level and low level. High loyalty means the customers highly engage with the service provider. Low loyalty means customers view the service provider indifferent from other providers.

Based on the previous statement, we establish the sixth hypothesis (see Figure 1):

• H6: In the high loyalty situation, the incremental improvement in customer satisfaction during service recovery process is higher than in the low loyalty situation.

Satisfaction is important to build loyalty and at the same time, satisfaction alone is not enough for customer loyalty. Alternatively, one can experience satisfaction devoid of loyalty. However, loyalty will not be built up in the absence of satisfaction (Shoemaker and Lewis, 1999). Loyalty can enhance customer satisfaction. Besides, loyalty is the likelihood of repurchasing a product and the willingness to behave as a partner to the organization (Bowen and Shoemaker, 1998). Loyalty also influences the behavior intention of a customer.

Based on the above statement, we set up the following two hypotheses (See Figure 1):

The Study Design

In order to evaluate the effectiveness of service recovery strategies to improve customer satisfaction, the research adopts an experimental research design. The experimental design takes into account the failure types, recovery, criticality and loyalty. The design is developed based on the findings from the previous research. For testing the already established hypotheses, we designed 32 different scenarios. The experimental design is a 2 (failure type) by 4 (recovery strategies) by 2 (levels of criticality) by 2 (levels of loyalty) between subjects design. Table 1 provides the design for the hotel service scenarios in this study.

Manipulation of Factors and Measurement of Variables

In the experimental design, scenarios are made by failure type, service recovery strategies, criticality, and loyalty. “On the basis of the results of extensive pretesting, una vailable service was chosen as a representative outcome failure , and inattentive service was chosen as a representative process failure” (Smith et al., 1999). Each service recovery strategy is manipulated into apology (say sorry), compensation (coupon) plus apology, assistance (rectification) plus apology, and apology, compensation and assistance all together. Criticality shows the importance of the international tourism hotel service to a customer. It is manipulated at two levels, high and low. Loyalty is also varied by two levels, high and low, and it shows the chance of a customer’s returning to a hotel and that customers’ desire to act as an associate to the organization (Bowen and Shoemaker, 1998).

Methodology

The objective of the following sections is to describe the methodology adopted for meeting the aims and objectives of this study. “In the discussion of the selection of a problem suggests valuable criteria: (1) novelty of the problem, (2) investigator’s interest in the problem, (3) practical value of the research to the investigator, (4) worker’s special qualification, (5) availability of the data, (6) cost of investigation, and (7) time required for the investigation,”(Watkins (1994) quoted by Reyes, (2004); Burn and Grove, (2005). While considering all these aspects one of the most important issue in conducting the social research is to find a way of getting the focus on the different aspects like the problem statement, conceptualizing the theory and choosing the research design. “Focus provides the integration of seeming diversity of the elements of the process from the presentation of the problem to the scope of research, conceptual framework, related literature, instrumentation, appropriate statistical methods to be used as well as the design and methodology used,” (Reyes, 2004, p 3).

Denzin and Lincoln (1998) state the researcher is independent to engage any research approach, so long as the method engaged enables him to complete the research and achieve its objectives. However, it is essential that the researcher consider the nature of the research inquiry and the variables that have an impact on the research process. The researcher has to evaluate the appropriateness of the methodology as to its ability to find plausible answers to the research questions within the broad context of the nature and scope of the research issue. For the current research on the effect of customer satisfaction in relationship between service failures and service recovery strategy base on customer behavior intention, considering the research issue under study, a quantitative approach was adopted. This chapter presents a description of the research method and discusses the salience, merits and demerits of the method adopted. The justification of the research method also forms part of the chapter.

Research methodology is not just about data collection and the rules for evidence; it is more about the nature of explanation and the means by which the explanations are produced. How knowledge is developed from these explanations depends on the methodology used. Research design on the other hand provides the plan and structure as to how explanations can be obtained.

This chapter explains the research methodology and design adopted. This research was conducted in three phases. In Phase 1 (exploratory study), several research questions were developed. Using a questionnaire survey, some of the research questions were tested in Phase 2 (empirical survey). In Phase 3, the results of Phase 2 were reviewed by conducting statistical analysis of the results of the findings of the survey.

The current study is designed to experiment in the hotel. The hotel industry is suitable to investigate the relative effectiveness of recovery strategies in different situation. Interviews are easy to be implemented in hotels. This service category is typically characterized by variability in the quality of service provider (Zeithmal et al., 1993). For these reasons, we choose the hotel industry as our research target. The following sections describe the research design, research process, construction of the questionnaire, data collection and analysis techniques. The sections also describe sampling and the process of survey.

Research Design

This study engaged qualitative interview method in investigating the effects of service recovery efforts on customer satisfaction and customer behavior intention in international tourism hotels by undertaking a comparative study of failure types, recovery strategies, and situation variables in hotels. The researcher employed a descriptive qualitative approach for achieving the research objectives. Maxwell (2005) suggests that qualitative research designs are preferred when the researcher is interested in evaluating human behaviour, values, attitudes, preferences, and perceptions, not mentioning the fact that the designs are utilized to generate leads, notions, and concepts, which can then be used to prepare a pragmatic and testable hypothesis. Qualitative research designs can use either, the case study approach or survey design to collect the requisite data (Maxwell, 2005). The researcher chose to employ the research technique of qualitative semi-structured interviews. The advantage of qualitative approach is that data validity is not reliant upon the size of sample as it is the case with quantitative research methods. Still, the qualitative approach can be used to determine the correlation between the various concepts under study (Maxwell, 2005), in this case, the correlation between quality management and service quality is being studied.

Research Philosophy

Saunders, Lewis, and Thornhill (2007) define research philosophy as a phenomenon that “relates to the development of knowledge and the nature of that knowledge” (p. 101). Any research whether it is qualitative or quantitative is bound to have some underlying assumptions about the elements of a valid research and the suitability of the research methods. It therefore becomes important to have a detailed knowledge about these underlying assumptions. Research philosophy encompassed the knowledge on these assumptions. Epistemology, ontology and axiology are the three basic research assumptions used in social researches. For conducting this research, the relevant philosophical postulations connected to the basic epistemology that steers the study through. The term ‘epistemology’ denotes the assumptions about the knowledge and the ways in which such knowledge can be acquired (Hirschheim 1995). According to Guba and Lincoln (1994), there exist four underlying paradigms for qualitative research. They are (i) positivism, (ii) post-positivism, (iii) critical theory and (iv) constructivism. Out of these four principles, this research used positivist approach, since this strategy applies the existing theory for developing hypotheses. Positivist approach has the advantage of used effectively within the limitations of available possibilities.

Research Approach

Research approach is the method of reasoning applied to any research and often deductive or inductive approach is undertaken to conduct the research. Deductive approach flows from the more general towards the direction of more specific. Conclusion of the research in the case of deductive approach is arrived based on the available facts relating to the issue researched. Deductive reasoning adopts arguments based on laws, rules and accepted principles. According to Saunders et al. (2007), deductive approach can be used when the research intends to test a hypothesis. The purpose of the deductive approach is to “explain casual relationships between variables” (p 117).

Saunders et al. (2007) identified exploratory, descriptive and explanatory studies as the three categories research purposes normally used by social researches. When the research issue that is studied cannot be defined properly, exploratory research becomes handy. Exploratory research approach relies largely on qualitative method like detailed review of available literature, and other qualitative approaches like interviews with samples selected for study. This study is descriptive in nature as it adopts qualitative interviews with the guests of some five star hotels in Taiwan. The survey focused on the perceptions of the customers on the quality of service and its effect on their behaviour intentions. The study becomes exploratory as it intends to make recommendations for the improvement in service quality of hotels to avoid service failures and to employ strategies for service recovery resulting in improved customer satisfaction. The purpose of an exploratory study is explained by Saunders et al (2007) as “an exploratory study is a valuable means of finding out ‘what is happening; to seek new insights; to ask questions and to assess phenomena in a new light” (p. 133). The authors suggest interviewing the people exposed to the subject as the best method of conducting exploratory research.

Qualitative and Quantitative Method

Being one of the principal methods in conducting researches in the realm of social science the qualitative method involves examining the viewpoints, outlooks and experiences of the individuals taking part in a research from the points of view of the informants. As against the quantitative research method, the qualitative research method does not make use of quantitative data and statistical analyses. Logical deductions to infer information concerning the human element forms the basis of qualitative method. A major criticism against qualitative method is that it always has a smaller sample size, which makes generalization difficult. The qualitative method makes use of data collection and analysis methods, which do not involve collection of quantitative information (Lofland & Lofland, 1984). Qualitative research method has been identified to focus on “quality” instead of “quantity” of information. Some of the researchers are of the opinion that qualitative method uses a subjective methodology and makes the researcher to substitute as the major research instrument (Adler and Adler, 1987). There is abundance of past literature on the qualitative research methods. Qualitative research method is also referred to as a ‘naturalistic’ research (Bogdan and Biklen (1982); Lincoln and Guba (1985); Patton (1990); Eisner (1991). These researchers have identified several distinguishing features of the qualitative research method.

Patton states one of the requirements of qualitative method is that the researcher has to locate a natural surrounding for taking up the process of data collection. It is also important that the researcher maintain emphatic neutrality throughout the research process. If the researcher is keen on deriving the optimal outcome from the qualitative research, he has to make a proper definition of the natural surrounding and its boundaries. There is the likelihood of the researcher becoming a research instrument himself.

The qualitative method makes use of the inductive process for analyzing the collected information. Eisner admires the qualitative method for using vivid reports with a communicative language and comprehensive and meaningful research report. Hoepfl (1997) states the qualitative research adopts ‘trustworthiness’ as the fundamental factor that influences its process. The qualitative research enables the researcher to acquire an interpretative temperament, which in turn helps him find out the meanings of the happenings conveyed to the people, who deal with them (the happenings). Qualitative research gives the researcher also, the ability to interpret these meanings. Lincoln and Guba (1985) found the interconnection between these characteristic features. Its emergent nature forms one of the salient features of the qualitative research. Patton (1990) observes that the qualitative research suffers from a drawback in that the researcher can arrive at the research strategies after he starts with the process of data collection. This is because the researcher has to adhere to the systematic follow up and understanding of the meanings of the information and data in respect of the background in which they are collected. Under qualitative method, it becomes essential that the researcher spell out the primary questions to be examined in advance and subsequently to proceed to formulate the strategies for collecting the required data.

The quantitative method is objective in nature and can in general be applied to a large population. “Quantitative research is designed to provide objective descriptions of phenomena and to demonstrate how phenomena can be controlled through specific treatments.” (Taylor, 2005, p. 235) In the quantitative study, the objective measurements are accomplished using instrumentations like a questionnaire avoiding human judgment to maximum extent possible. Personal values and philosophies are kept away from influencing the research process. “Quantitative researchers prefer to study phenomena by dividing the variables into parts, examining and analyzing selected variables and determine the interrelationships among them,” (Taylor, 2005, p. 236). Quantitative research is “a formal, objective, systematic process in which numerical data is utilized to obtain information about the research question,” Burns & Grove (1993). Clear, reliable and valid results can be obtained by employing quantitative methods.

Quantitative research considers numeric values. Under this method, the study makes use of different statistical analytical methods and processes to achieve the research objectives. Quantitative method is based on empirical data collected for carrying out the research. There are different research tools including survey for collecting primary empirical data for the purposes of quantitative research. Objectivity and reliability embedded in quantitative research makes the researcher feel comfortable and therefore this method becomes a preferred research method. Same findings will result from the study, even when, the same research is conducted by different researchers. Quantitative research has the capability to produce the findings in the form of quantifiable and reliable data, which is a unique strength of this method (Trochim, 2001).

Quantitative methods, which include questionnaire survey and structured interviews, seemed to have been employed widely in conducting the empirical studies. Several contextual factors such as size, structure, technology, environment and culture are among those that have been identified to affect the adoption of turnaround strategies and management accounting practices by the firms. Results and conclusions of these studies are usually prescriptive in nature. In general, the quantitative approaches can be characterized as “thin”, “narrow”, but generalisable.

Despite the generalisability of its findings, quantitative methods such as questionnaire survey and structured interviews have been criticized for failing to provide detailed coverage and specifications of management and accounting control systems under study. Such criticism is clear evidence in indicating dissatisfaction with currently available research methodologies. Therefore, questionnaire survey as the only research method to study the effectiveness of service recovery strategies should be considered inappropriate and insufficient for any study of these aspects.

The widely use of the quantitative approach has led to a number of findings which are dispersed, simplistic and rather superficial. Although being interesting and useful, these findings do not provide opportunity for the researcher to examine the actual practices in the hotels. The lack of descriptive empirical information of the functioning of service recovery strategies in their organizational contexts has also led to theoretical developments being largely unrelated to actual practice. Because of these criticisms leveled against the quantitative survey method, the current research used qualitative interview method.

Target Population and Sampling

The researcher has the obligation to define the target population clearly. Even though there are no definite tenets for sample selection, the researcher has to depend on his logical deductions. Target sample population has to be selected based on the aims of the research. When the population to be studied is too large, the researcher can carefully make a selection of samples, which will represent the entire population.

The sample should be chosen in a way that it represent the characteristics of the population from which the sample was selected. Samples may be selected using probability or non-probability sampling methods. In the probability sampling procedure, each unit of the universe has the chance of being chosen as samples. In non-probability sampling, samples are selected following some nonrandom ways of selection. While the researcher engages probability sampling, he will be able to detect sampling error. In non-probability sampling, however, there is no possibility of the sampling error be detected. In random sampling, each constituent of the population has an equal chance of being chosen as sample. For the current research, random sampling method was adopted. “Sampling involves any procedure that uses a small number of items or that uses parts of the population to make conclusion regarding the whole population,” (Zikmund 2000, p 64).

This study adopts a non-probability sampling because of the constraints on resources and other limitations. The target population represents the upscale hotel employees, where a precise estimation cannot be made of the total population. According to Saunders et al (2007) “non-probability sampling is the probability of each case being selected from the total population is not known and it is impossible to answer research questions or to address objectives that require you to make statistical inferences about the characteristics of the population” (p. 207). When there is only a small sample population available the study resorts to non-probability sampling. This sampling method may be considered as appropriate despite the fact that the study uses a deductive approach (Saunders et al., 2007).

The samples selected were guests of five star hotels in Taiwan setting, who have fair knowledge on the relationship between quality of service and its impact on customer satisfaction. They have the idea on the importance of customer service-quality levels provided by the hotels in Taiwan and the way in which it can be linked to customer satisfaction, because of their experience in the industry. Totally 960 questionnaires are distributed. Each experimental scenario has 30 questionnaires replied by 30 hotel guests. We interview guests in international tourism hotels in Taipei. After the hotel guests read the scenario in details, they answer the questionnaire. The interview starts in Jan. 2011 and ended in April 2011.

Questionnaire

Although the terms “survey” and “questionnaire” are used interchangeably, both of them differ from each other. While survey represents the process of relating some characteristics of the total population through inferences from a sample, a questionnaire is the instrument made use of to collect the required information to describe the characteristics either in a survey or in an interview. The interview was conducted using the research instrument of questionnaire constructed based on the knowledge gained from the review of literature on the topic of service quality (see Appendix for the specimen of the questionnaire). Questionnaire is one of the best tools for the collection of primary information from the respondents to the interview. Questionnaire is a document comprising of questions, designed to collect appropriate information from the samples selected. The construction of the questionnaire usually is undertaken by drawing from the previous research in then chosen topic to gather different aspects applicable to the current study.

The questionnaire was divided in to two parts. The first part contained questions on the demography of the respondents. The demographic information is of vital importance to judge the homogeneity of the sample population. The second part of the questionnaire consisted of questions on customer service quality and exposure of the respondents to the service quality attributes. Because the topic dealt with the customer service provided by the international hotels, the researcher was constrained to limit the scope of the questionnaire, as the guests of the hotel might find it difficult to answer critical questions, because they are exposed to the provision of a particular type of service.

Variables for the questionnaire were obtained from the review of the literature and findings of the previous research. Wherever appropriate, relevant questions from the previous studies were adopted in constructing the questionnaire. The initial questionnaire drafted was revised a number of times to arrive the final set of questions. The researcher decided not to undertake any ‘pilot testing’ in view of the nature of the questions contained in the questionnaire and the time available for the completion of the project. Most of the questions in the questionnaire were open-ended questions so that the respondents would find it easier to answer.

Appendix 1 contains 32 examples of the scenarios used in this study. Appendix 2 is the customer response to the scenario. Appendix 2 contains customers’ satisfaction to the hotel and customer behavior intentions. The customer satisfaction was measured by a 7-point scale ranging from 1 (very dissatisfied) to 7 (very satisfied). Customer behavior intention has divided 13 items (Berry et al. (1996). These items contain favorite intentions (e.g. say positive things) and unfavorite intentions (e.g. switch to competitor). Customer behavior intentions are measured by a 9-piont scale ranging from 1 (not at all likely) to 9 (extremely likely). The questionnaire was presented to the interviewees for their study and reply after careful consideration of the various issues involved in service recovery.

Data Collection

According to Marshall and Rossman (1995), the qualitative research is based on collection of data from different sources and the data already collected forms the basis for reporting the findings of the study and making recommendations. Yin (1984) suggests a number of sources including structured interviews, which can be used in conducting qualitative research. Quantitative research uses tools like surveys for data collection. The data collection methods for the current research include e mail survey, information retrieval from archival records, and other documents for completing the research. The quality of data collected determines the validity and reliability of the research findings. Thus, “qualitative modes of data analysis provide ways of discerning, examining, comparing and contrasting, and interpreting meaningful patterns or themes. Meaningfulness is determined by the particular goals and objectives of the project at hand” (Boojihawon, 2006).

Any of the following data collection methods can be used in following the case study research approach. They are; “(i) documents, (ii) archival records, (iii) interviews, (iv) direct observation, (v) participant observation and (vi) artifacts.” Either the researcher can use a single or a combination of these or other methods for data collection and the selection of data collection method rely on the nature of research proposed to be undertaken. There are only few tenets, which define the mission of data collection. Each research study has to use a data collection method, which fits into the research methodology chosen by the researcher. The goals of both quantitative and qualitative research studies are to make the most of responses from the participants and to enhance the accuracy of the results to the maximum extent possible.

Powell & Renner (2003) illustrate that there is no single way to analyze the qualitative data however the basic approach is to used ‘content analysis. All research methods make use of some practices for gathering the required experimental data. The word ‘empirical materials’ is considered more appropriate for the purpose of some social research as majority of data collected are not numeric data. The methods adopted for collection of empirical materials include face-to-face interviews with participants, focus groups, observations and other methods involving study of behaviour and actions of people. For the current study, personal interview method was used to collect primary data. An email survey was an alternative method of data collection. Zikmund (2000) finds e-mail interviews as inexpensive and less time-consuming. However, there is the limitation of only fewer samples responding to the interviews than anticipated. For improving the ‘response rate’ Saunders et al., (2007) suggest following up the samples after the e-mail interview sheets were sent to the samples. In order to ensure one–hundred-percentage participation of the selected samples and the time constraints involved in completing the study, it was decided to adopt the qualitative research method of interviews.

Data Analysis

Based on the nature of the research issue, there was the necessity to gather sufficient qualitative data. Miles and Huberman (1994) have identified (i) data reduction, (ii) data display and (iii) drawing up conclusion and verification as the three major steps in data analysis. Data reduction helps in transforming the raw data provided by the respondents and data display facilitates simplifying the complex data collected during the data collection process. Once the complete data are collected, the last step of drawing up conclusion and verification can be undertaken (Miles & Huberman, 1994). During this step, it can be ensured whether the data collected are valid and are relevant. This step also helps in bridging the connection between the arranged and abridged data (Saunders et al., 2007).

Research Ethics

Saunders et al., (2007) define research ethics as “ethics refer to the appropriateness of your behaviour in relation to the rights of those who become the subject of your work, or are affected by it” (p.178). This study has ensured the privacy of the respondents by keeping their identities anonymous. Zikmund (2000) suggest the specific responsibility of the researcher to keep up the anonymity of the respondents. He argues, “Privacy is a profound ethical issue in business research” (p. 73). The respondents were advised about the confidentiality of their participation in the interview as well as their right to withdraw from their participation at any time during the process, at their own will.

Validity and Reliability

Whenever a questionnaire is used to collect data in a survey process, the researcher has to ensure that he tests validity and reliability of the research design including the questionnaire. In this case, the nature of the research inquiry is not complicated and the questions contained in the questionnaire are easy to answer by the respondents, and therefore the questionnaire satisfies the test validity. Reliability can be equated with the consistency in the findings that will emanate from the use of the research instrument. In the current research, the questions contained in the questionnaire are likely to evoke consistent responses from the participants irrespective of any change in the researcher or in the timing of the research. Therefore, test reliability is satisfied. However, the research could not engage any observers in view of the constraints on the resources.

Briefly, the demographic characteristics of the sample are as following. In terms of gender, these are 53.5% male, 46.5% female. The majority of respondents (86.5%) are between 25 and 40 years old.

Results

Introduction

The purpose of this section is to present the results of the experimental design of the quantitative survey conducted under the study for assessing the effectiveness of service recovery strategies in the hotel industry. Totally 960 questionnaires were distributed to the guests in hotels of international standards in Taipei. Each experimental scenario has 30 questionnaires replied by 30 hotel guests. The guests were explained the purpose of the survey and the different scenarios included in the questionnaire.

Analysis of Customer Behavior Intention

With the increased competition in the hotel industry, it has become important to consider the impact of behavior intention on the customer preferences and satisfaction in respect of the services provided by the hotels. However, service failures cannot be avoided even in best- maintained service organizations. It has been considered necessary that organizations have to enter service recovery mode to retain the customers, on occurrences of service failures. Repeat sales actions are important for the sales growth of any organization, especially service organizations like hotels. For ensuring that the same customer returns to the hotel more times, it is necessary that the hotels provide satisfactory service to the customers. Customer satisfaction will also improve the willingness on the part of the customer to recommend the hotel to friends and relatives, when the customer is satisfied with the service quality of a particular hotel. Therefore, perceived performance of the hotel reflected by the service quality and customer satisfaction about the hotel service forms the basis for customer behavioral intentions leading to customer loyalty.

Customer behavior intention originates from the customers’ perceptions on the quality of service provided by the hotels, which in turn influences the behavior of customers. Zeithaml et al. (1996) observed that service quality is one of the key factors in deciding the customer behavior intention. This point was supported by the study conducted by Berry et al. (1991). Recommendation of the hotel to friends and relatives is one form of behavior intentions, which is expressed by positive words of mouth by the customers. The results of the study by Levesque and McDougall (2000) add support to the findings about behavioral intentions. The authors found intentions like “complain to provider”, “Word of mouth”, and “Future business with provider (repurchase behavior)” affecting the business of any hotel. Zeithaml et al. (1996) argued that the customer behavior intention might be favorite or unfavorite affecting the business of the hotel either positively or negatively. Analyzing the customer behavior intentions, will reveal how customers will react to the service they experience in the future or whether the customer will execute repurchase intention?

In this study, we operationalize customer behavior intention by using 13 items (See Table 2) that measure subjects’ likelihood of engaging in loyalty, paying more, switching, and complaining behaviors ranging from 1 (not likely at all) to 9 (extremely likely). These items are taken from a precious study on behavior intentions in service industries (Zeithaml et al., 1996). A factor analysis of the customer behavior intention is conducted to examine the dimensionality of the items. We use the program SPSS 13.0 to analyze the data.

Table 2 Customer Behavior Intention

1. Say positive things about this hotel to other people.
2. Recommend this hotel to someone who seeks your advice.
3. Encourage friends and relatives to do business with this hotel
4. Consider this hotel your first choice to buy.
5. Do more business with this hotel in next few years.
6. Do less business with this hotel in next few years.
7. Switch part of the business to another player in the market that offers competitive rates.
8. Continue to do business with this hotel if its prices increase.
9. Offer a better rate than the other player charge for the services you presently receive from this hotel.
10. Switch to a competitor if you experience a problem with this hotel’s service.
11. Complain to other customers if you experience a problem with this hotel’s service.
12. Complain to external agencies if you experience a problem with this hotel’s service.
13. Complain to this hotel’s employees if you experience a problem with this hotel’s service.

Reliability and Validity

In the factor analysis, 7th item and 10th item in Table 2 are attributed to factor 3 with the reliability measure, Cronbach α, equal to 0.467. Reliability below 0.6 can not be accepted in a research (Murphy and Davidshofer, 1988). It is clear that factor 3 does not fit in this model. Because the 10th item (switch to the competitor) in customer behavior intentions items made the reliability lower, which Alpha value is 0.631. From the reliability analysis, the α value is raised to 0.73 if we delete the 10th item in Table 2. The acceptable reliability for basis of a research is 0.7 above (Kaplan and Saccuzzo, 1982). Hence, we would delete the 10th item in customer behavior intention to make sure the reliability of the model and three factors valid. Deleting 10th item is not too far from the factor analysis. The 7th item can be factor 3 alone, and the reliability of the experiment will be raised to 0.73 in this study.

Validity is the accuracy of the study measure. For content validity, the questionnaires are designed by the literature review and the appendixes from the references to make sure the validity. For construct validity, the factor loading and eigenvalue of the factor analysis are adopted to measure in this study. The eigenvalue must be greater than 1, and the absolute value of factor loading must be greater than 0.5 (Kaiser, 1966). In this study, the absolute values of factor loadings are all above 0.5. The eigenvalues for three factors are 6.330, 1.550, and 1.074 in order. Hence, the validity has the standard for this study.

Dimensions of Customer Behavior Intention

Customers’ behavior intention is bound to turn positive, when the organization is able to provide acceptable quality service at the lowest prices. Such service provision is bound to enhance customer satisfaction resulting in favorable behavior intention. The customer will exhibit the positive behavior intention by spreading positive word of mouth to friends and relatives and by repeating his visits to the hotel. Therefore, it becomes important for the hotel to find out the ways in which, the hotel can improve the service to the customers and ensure better customers satisfaction.

It is possible for the hotel organization to assess the level of service effectiveness based on (i) outcome of the service and (ii) functional (or process) quality. As observed in the review of literature in the earlier chapter, technical quality represents the quality level of service and the way in which the hotel provides service to the customer. Functional performance is the new concept in service quality, where the customer is considered as a participant and co-producer in the business of the service organization and the perceptions and feedbacks of the customer are given utmost importance for improving the service quality of the hotels.

In order to assess the behavioral intentions of the customers, Parasuraman, Zeithaml and Berry (1985) have identified ten determinants of service quality, which include “reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding/knowing the customer and tangible” (Joshua and Koshi, 2005). However, these determinants on a later consideration were reduced to five important ones. Most of these determinants influence the customer behavior intentions and thus help in assessing the service quality. By assessing the ability of the hotel to improve upon these determinants, it is possible to assess the quality aspects relating to the performance of the service organization at the employee level. Therefore, hotel organization must ensure that they perform well in these aspects to improve the service quality, which ultimately would influence the customer behavior intention positively. Improvements in service quality dimensions will improve the financial performance of the hotels, as satisfied customers are likely to return to the hotels. In addition, they will also recommend the hotels to other people through words of mouth.

The factor analysis is to identify the dimension of the customer behavior intention. A three-factor solution is obtained. We do an oblique rotation to allow for potential correlations among these 13 items (Zeithaml et al., 1996).

Table 3 shows the oblique rotation pattern of the final factor solution. Factor 1 contains items in favorable terms describing the subjects’ intentions to loyalty or returning to the hotel in the future. This factor is related to the faithful (loyalty) intentions of the subjects. Factor 2 is measured by items that have to do with the subjects’ reactions to a dissatisfactory experience. The third factor is related to the switching behavior. This behavior intention indicates the possibility of switching to a competitor who offers a lower price

The coefficients in Equation (2) that are relevant for examining the hypotheses H1,

H3, H4, H6, H7 are β1 to 7, β10 to β16, β8, β17 to β23, and β9 in order.

The Relationship among Service Recovery Strategies, Customer Satisfaction, and Customer Behavior Intention

In a service organization like hotel, the chances for occurrence of service failures are too many. In a hotel, a service failure may occur because of the reason that service possesses the characteristic of intangibility, heterogeneity, simultaneity, and perishability as observed by Sasser, (1976). Service failure may arise even because of the following of standardization procedures. Service failures may lead to customer reactions like the behaviors of switch, complain, or other actions, resulting in customers neglecting the services of particular organizations. Therefore, it becomes critical that hotel organizations must be aware of service failures and take actions for resolving them effectively.

According to results of prior studies, two types of service encounter failures have been recognized, which needs to be considered by the service-oriented organization, when they want to change customer attitude and behavior intention positively. They are outcome and process failures (Bitner et al., 1990; Hoffman et al., 1995). We observed in the literature review that Berry et al. (1991) indicate outcome as the primary driver of customer evaluations of service during the initial service encounter. On the other hand, during service recovery phase, process becomes the primary driver. It is also observed that service failures could be core-service problem, in the operations of a hotel. Service failures in a hotel organization might occur because of unavailability of the service (no service personnel with the appropriate skills are available), exceptionally slow service, or mistake in the service (e.g. bank statement errors). Literature also states that there can be varying degrees of service failures having different level of seriousness. According to Kelley and Davis (1994), the seriousness might range from something trivial to being very serious.

The manner in which service is delivered, is the outcome dimension of a service encounter. In the case of a service organization like a hotel, it is necessary that the organization studies the outcome dimension to improve service quality. On the other hand, the manner in which the customer receives the service is the process dimension, which is also an important factor that the hotel organization must consider for improving the customer satisfaction. Gronroos (1988) studied the outcome and process dimensions of customer service and added to the existing knowledge in the field. When the hotel organization has not fulfilled the basic service need, it becomes an outcome failure. When there is a deficiency in the delivery of core service by the hotel or the service delivery is flawed in some respect, it is treated as process failure (Smith et al., 1999). However, no clarity could be obtained from the service marketing literature as to which type of failure could influence customers’ satisfaction and behavior intentions most. In this study, we examine the effects of recovery strategies on both types of service failures by taking criticality and loyalty into customers.

In the review of the relevant literature, we observed that service recovery has been identified to be a more proactive way for seeking out and dealing with service failures (Johnston, 1995). We also observed that the way in which hotel organization can deal with failure include taking actions to respond defects or failures. Such actions collectively are known as service recovery strategies. According to Bitner, Hart, and Kelley et al. (1995), different recovery strategies can be adopted. “The most common and frequently used recovery strategies are apology, assistance, or compensation, or some combination of these three” (Run and Ting, 2006). These three service recovery strategies have been considered predominantly in the current research. The hotel organization could decide on appropriate elements of recovery strategies, based on the level of dissatisfaction perceived by a customer. Specific organizational circumstances prevailing determine the effectiveness of the recovery strategies. Factors like failure type, criticality and loyalty influence the effectiveness of the recovery strategies adopted by the hotel organizations. From the review of the literature, it is observed that apology is regarded as the bottom-line in the service recovery strategies. According to Levesque and McDougall (2000), apology is offered in all recovery strategies. Apology from the service providers encompasses several elements, which are meant to pacify the feelings of the dissatisfied customers because of the service failure on the part of the service provider. “An apology from the service provider communicates politeness, courtesy, concern, effort , and empathy to customers who have experienced a service failure” (Smith et al., 1999). The objective of communicating these feelings through an apology is to enhance the customer’s evaluations of the encounter. However, researchers like Hart et al., (1990) and Kelley et al., (1993) are of the opinion that a service organization like a hotel might not be able to achieve service recovery simply by offering an apology alone, as it is relatively ineffective in the instance of a customer’s experience of a service failure. This implies that the customer might not change his attitude or behavior simply because the hotel organization offered an apology. The customer might consider the chances of repeat purchase intention if he/she is able to obtain a monetary gain from the apology offered by the service provider. An apology usually does not have the ability to change something from a failure. Therefore, it so happens that the customers might not be satisfied with an apology alone and a service recovery cannot take place by the hotel offering an apology after a failure has occurred. Bell et al. (1987) are of the opinion that a customer might consider repeat purchase when he/she is offered an apology and the service provider corrects the problem that occurred. Thus, it can be inferred that an apology becomes more helpful in service recovery when offered along with other service recovery strategies.

Compensation as a service recovery strategy involves payment of a specified sum to customer, who is subjected to inconvenience, because of the incidence of a service failure. For example, when the customer is put to an inconvenience when no rooms are available, the hotel may have to compensate the customer monetarily for service recovery. When the service provider offers increased compensation, it should lead to great satisfaction with the service recovery and higher level of satisfaction with the customer. The compensation may take the form of a free ticket, meal or drink. Literature suggests the use of token compensation such as “It’s on us”, “Free drink”, “No Charge”, “Here is a coupon with….” However, Smith et al. (1999) provide a caution about potential danger of customer getting lesser satisfaction, when he/she is overcompensated. The compensation seems more helpful than an apology during the recovery process, but even compensation as a recovery strategy might not be able to fix the failure totally or help in bringing the situation to the original status.

The third way of recovering the service is by employing the strategy of assistance. This strategy involves the correction or rectification, which might help to fix the failure to the original purpose of buying the service. The assistance is possibly the most effective single strategy. This strategy could help the customers deal with the failure effectively and this strategy might help even in fixing the failure totally. The hotel organizations must consider the fact that customers usually want the original service goods, not the replacement like coupon or free drinks.

In Chapter 2, we discussed the relationship among service recovery strategies, customer satisfaction, and customer behavior intentions. In the light of the above discussion, the following sections seek to assist in presenting the results of the examination of the hypotheses H1 and H2 developed from the theoretical foundation laid down by the literature review. These hypotheses have relevance to the service recovery strategies and customer satisfaction.

The Effects of the Composing of Failure Types and Service Recovery Strategies on Customer Satisfaction

H1 implies that the combination of failure types with service recovery strategies are significantly related to customer satisfaction in service failure/recovery encounters. The hypothesis is examined by testing the regression coefficients β1 to β7 of variables STR1 to STR7 in (2). Table 5 reports the results in terms of estimated differences between the effects of failure types and service recovery strategies on customer satisfaction with service encounter. All effects are significant at.05 levels.

With respect to H1, the estimates of effects differences are significant to customer satisfaction. The result is consistent with the propositions that the effect of the combination of failure types with service recovery strategies are significantly related to customer satisfaction. In Table 5, we see that the coefficients of STR1, STR2, STR4, STR5, and STR6 are significant. Comparing with the effects in terms of STR1, STR2, STR4, STR5, and STR6, H1 has been supported. Hence, in service failure/recovery encounters, the combination of failure types with service recovery strategies are related to customer satisfaction significantly.

Comparing the estimated coefficient β1 of STR1 with β2 of STR2 for example (See Figure 2), we can find that the effect of apology plus compensation on customer satisfaction is larger than that of apology only. The effects of STR4 (outcome failure, all recovery strategy) on the customer satisfaction is least among all (-.042), and it is also significant. The analysis suggests that the combination of service recovery strategies (apology, compensation, assistance) would be more ameliorative than individual strategy (Levesque and McDougall, 2000). We can also find that apology is comparatively useless when a customer experiences a deficiency in service (Webster et al., 1998) according to the coefficient β1 of STR1 (-.2375).

The Effect of Customer Satisfaction on Customer Behavior Intention

H2 implies that the customer satisfaction with service encounter positively affects the customer behavior intention. The hypothesis is tested by using the multiple regressions model. In the of factor analysis, the customer behavior intention is represented by three factors: faithful, complain, and switch. Hence, we will test the H2 respectively (regression models 1.1 to 1.3). The effects of customer satisfaction on the three behavior intentions are reported in Table 6.

As discussed in 4.1.1, the complain intention and the switch intention are negative intention while the faithful intention is a positive one. Therefore, we have to change the sign in H2, H7, and H8 to opposite signs as we test the effects of satisfaction on the complain and switch intentions. From Table 6, we can see that the effects of customer satisfaction on three customer behavior intentions are all significant. Therefore, H2 is supported by the results of the multiple regression analysis.

For the faithful intention, the higher customer satisfaction leads to a higher faithful intention after a failure/recovery has occurred. The customer satisfaction is negatively related to the complain intention. The higher customer satisfaction leads to the lower complain intention after a failure/recovery has occurred. We can realize from unstandardized coefficients in Table 6 that the effect of the customer satisfaction on the complain intention is negative. For switch intention, the effect of the satisfaction is also significant. But the coefficients are different from the signs we assume. The findings of the study revealed a positive influence of service quality on the switch intention of the customers by improving the satisfaction level. It means that the higher satisfaction leads to high switch intention. Although it is significant for the satisfaction on the switch intention, we have to deliberate upon the reason for the result.

Role of Criticality in a Service Recovery Process

Customer loyalty defined based on criticality approach is based mainly on consumer perception and motivation. The criticality concept of loyalty derives from the cognitive school of thought, where the emphasis is on the role of human thought processes (e.g. stated preference; commitment; purchase intention; etc) of building loyalty. Specifically, researchers define and confirm brand loyalty through assessing the extent to which consumers are critical to the service failure. Other related research also involved in detecting any existing antecedents of criticality of customers.

The criticality approach appeals many researchers since it is empathetic with the search for strategies to sustain the relationship between consumers and their loyalty. It is of vital importance to marketers to have a knowledge and understanding of the attitude of criticality of customers towards the act of using services of different service providers.

Criticality approach also has its shortcomings. Although it is believed that thoughts and feelings can be causes behaviour, some scholars argue that other variables such as the social and physical environment as well as personal abilities should be taken into account in the decision system. In addition, it has been widely accepted that loyalty based on criticality may not be any more stable than behavioral loyalty. If the attitude is the only element used to measure loyalty, there is a danger that loyalty may be assumed because of a decided choice process, which takes little account of unique consumer settings.

Loyal customer would continue to make repeat purchases even under the pressure from the situational factors or even against the actions of the competitors to attract the customer. From this definition, it can be observed that there exist both behavioral and attitudinal dimensions to loyalty. However, the past literature has extensively studied and analyzed the behavioral elements of loyalty ignoring the criticality aspects as well as the relationships with several other constructs, which affect the loyalty behavior of the customers. However, some of the researchers have made a distinction between criticality and behavioral aspects of loyalty. Customer loyalty may take the form of purchase loyalty where the outcome is the repetition in buying actions.

Criticality on the other hand focuses on the cognitive basis of loyalty. Strong internal disposition of the customers steer attitudinally loyal customers to commit him or her to a specific product or brand. Therefore, positive word-of-mouth recommendations along with encouraging others to buy particular products or brands become part of mitigating the impact o criticality in service failures. Research conducted recently indicates that customer satisfaction is an important determinant of criticality. Satisfaction is considered as an affective antecedent of customer loyalty while criticality is conative.

Criticality is a mental attitude and perceptions of the customer to the service provided by the service provider. Criticality implies the extent to which the customer considers service as important. Criticality represents the perceived importance and quality of service in a given service encounter. When customers encounter failures of services, which they consider is of high criticality to them, they are most likely to have lower satisfaction and loyalty, regardless of the recovery strategies applied. When a core service failure occurs and the service is of low criticality to a customer, for a given service recovery strategy, the customer’s future intentions toward the service provider is likely to be more positive. The criticality of service consumption has a significant effect on customers’ satisfaction and loyalty attitude. Criticality also plays a key role on customer satisfaction and intention.

We now examine the effects of criticality on the service recovery process. The hypotheses H3, H4, and H5 will be examined further in this section.

The Moderating Effects of Criticality

According to Figure 1, H3 represents a moderating effect on service recovery process. Namely, in the high criticality situation, the incremental improvement in customer satisfaction during service recovery process is lower than in low criticality. The following results were obtained from Table7.

H3 postulates the combination of the failure types with recovery strategies is less effective in high criticality situation than in low criticality situation. It indicates that negative influence upon interaction of criticality on recovery process to customer satisfaction. In other words, there is a moderating effect of criticality on service recovery process.

The second part in Table 7 shows that the interaction effects of the combination of failure types with recovery strategies and criticality on customer satisfaction are not significant. Hence, H3 is not supported. It means that the moderating effect of criticality on the relationship between the combination of failure types with recovery strategies and satisfaction are not significant (p＞.05). Hence, there is no difference in the effects of combination of failure types with recovery strategies on customer satisfaction whether criticality level is high or not. Contrary to the observation by Webster and Sundaram (1998), there is not a significant interaction effect of criticality in this study.

The Effects of Criticality on Customer Satisfaction

H4 implies that the impact of criticality on customer satisfaction with service encounter is significant. Table 7 shows the testing result of H4. We can find that the situation effect part in Table 7, the effect of criticality is not significant on customer satisfaction with service encounter. The result suggests that criticality is not a critical factor to influence the customer satisfaction.

The Effects of Criticality on Customer Behavior Intentions

H5 implied the impact of criticality on customer behavior intention is significant. The result is obtained from Table 6. We also have to test H5 individually for the three behavior intentions. For the faithful intention, the effect of criticality is negatively significant. The β coefficients show the same sign as we expect. It means the high criticality situation leads to lower faithful intention after a failure/recovery has occurred. For complain intention, the effects of criticality are positively significant on the complain intention. Therefore, customers tend to complain more in high criticality situation than in low criticality. This is consistent with finding of the Webster et al. (1998). For the switch intention, the effect of criticality is not significant. It means criticality doesn’t impact the switch behavior intention significantly.

Role of Loyalty in a Service Recovery Process

Customer satisfaction is one of the major determinants of customer loyalty. This is because customer satisfaction leads to repeat sales decisions by the customers. Once the customer feels satisfied with the service quality, it acts to enhance the customer loyalty. Improved customer loyalty provides for the sales growth of the hotel organizations, as the satisfied customers will spread positive words of mouth among their friends and relatives. Consequently, the relationship between customer satisfaction and loyalty has been the focus of many researches. Results of research reveal that perceived quality of service has a strong influence on the customer satisfaction levels. Thus, customer service is an important factor that contributes to increased customer satisfaction and thereby influences the customer loyalty. In turn, customer service quality has an important role to play in enhancing the competitive advantage of the hotel organizations. From the review of the literature, we observed that customer service encompasses activities that take place as the interface between the customers and the hotels, which have the effect of either enhancing or facilitating the sales and use of the services offered by the hotels. Previous researches have empirically derived certain dimensions of customer service including responsiveness, assurance, reliability and empathy, which contribute to an increased customer loyalty by affecting the customer satisfaction levels. Literature has observed customer satisfaction through enhanced quality of the customer service as one of the key issues in marketing and practice, which has a strong influence on customer loyalty. The repurchase intention of the customers has a close association with satisfaction and the customer loyalty is the main factor that triggers repurchase intentions among the customers. This is equivalent to the influence of the overall patient satisfaction to the selection of hospital. On the other hand, customer dissatisfaction would lead to reduction in customer loyalty, as the customer would feel the service failures and might not return to the hotel for getting the services. Customer dissatisfaction thus negatively affects customer loyalty. Theoretically there are threshold of satisfaction that extend to the change the customer loyalty. Customer satisfaction thus has a strong influence on the purchase intentions and loyal behavior of the customers. Cronin & Taylor, (1992) find that customer service quality and customer satisfaction as distinct constructs and those levels of service quality has a significant influence on the customer satisfaction and in turn on increasing the customer loyalty. Though service quality affects purchase intention, the effect is not found to be significant in other services. However, Taylor & Baker, (1994) found significant effects of service quality on purchase intentions of the customers in service organizations like hotels. Other researchers treat service quality and customer satisfaction as one to influence the customer loyalty levels.

From the discussion, it follows that customer satisfaction forms the basis for customer loyalty and repeat sales actions by the customers. Customer satisfaction will also improve the willingness to recommend the product or brand to friends and relatives of the customer who is satisfied with the brand/product. The perceived performance of the product or brand has its effect on the customer satisfaction. Service quality is one more phenomenon that influences the customer satisfaction and by enhancing the customer satisfaction, it increases the customer loyalty. The customer loyalty results in increased repeated buying actions and the desire to suggest the product/brand to other people. Therefore, perceived performance of the product, customer satisfaction, and service quality of the product or brand can be considered to form the basis for customer behavioral intentions leading to customer loyalty.

Brand loyalty, in quite a long period was defined as “consumer’s repeating purchase a specific brand in the product category” (Ehrenberg, 1972). Initial research of brand/customer loyalty took on a market focus, looking at penetration, repeat buying, brand shares, price elasticity, and other indicators that can be monitored over a period. For the reasons that these variables are observable and can be quantificated in empirical work, the behavioral approach is widely used to assess the performance of brand loyalty by researchers and practitioners. Ehrenberg (1972) put forward the mathematical NBD/LSD repeat-buying theory to help measuring the loyalty, which later supported by Odin, Odin, & Valette, (2001).

Nevertheless, this “purely behavioral oriented stochastic approach” is criticized by many researchers. Day, (1969) first refers to the issue of true loyalty in the literature. “Likewise Dick and Basu (1994) point out that even a relatively important repeat purchase may not reflect true loyalty to a product but may merely result from situational conditions such as brands stocked by the retailer” (Fensen and Hansen, 2004). Similar thoughts are found in many other literatures. Fensen and Hansen (2006) argue, “Brand loyalty from this approach is considered tantamount to repeat purchasing and grounded on no manifest factors determining the behavior”. In addition, Kotler (2001) in his buyer decision model pointed out that consumer in the situation of low involvement and rare brand difference existed will easy incline to inertia repurchase, which cannot be regarded as brand loyalty.

To sum up, the behavioral approach of brand loyalty focuses on examining the pattern of consumers’ past purchases. Repeat buying as the outcome of brand loyalty are useful variables in empirical research work and practical marketing research to measure, assess brand loyalty, and brand equity. However, it has shortcomings. For example, there lie many other factors could encourage consumers’ repeat purchase, such as consumers’ attitude towards a specific product, sales promotion, inertia repurchasing, retailer monopolize, etc. Moreover, it is meaningless for researchers to observe the repeat buying behaviour with only secondary regard to underlying consumer motivations or commitment to the brand (Uncles, et al. 2003). In addition, it is believed in this study that even in some relatively low involvement product categories (e.g. toothpaste; packaged food; etc.); the brand decisions are rarely made on a purely arbitrary basis.

We now examine the effects of loyalty in a service recovery process. The hypotheses H6, H7, and H8 will be tested in this section.

The Moderating Effects of Loyalty

According Figure 1, H6 represents a moderating effect of loyalty on a service recovery process. In a high criticality situation, the incremental improvement in customer satisfaction during service recovery process is higher than in low loyalty situation. The results are obtained from Table 7.

H6 postulate the combination of failure types with recovery strategies is more effective in a high loyalty situation than in a low loyalty situation. It indicates that the influence of interaction of loyalty and the combination of failure types with recovery strategies to customer satisfaction is positive. In other words, there is a moderating effect of criticality in a service recovery process.

Observe from the third section in Table 7 (interaction effects by H6), we can see that H6 is supported. The moderating effects of loyalty on combinations of STR1, STR3, STR4, and STR6 are significant. The interaction between loyalty and recovery efforts impacts the customer satisfaction with service encounter is positively significant. For LOY × STR3, the interaction effect is negative and differs from LOY × STR1, LOY × STR4, and LOY × STR6. It means the higher loyalty leads to the higher incremental improvement on service recovery process except for LOY × STR3.

Effects of Loyalty on Customer Satisfaction

H7 implies the impact of loyalty on customer satisfaction with service encounter is positively significant. Table 7 shows the result of the hypothesis test. We can see the situation effect part in Table 7. The effect of loyalty is not significant on customer satisfaction with service encounter. The results suggest that loyalty is not a significant factor to affect customer satisfaction with service encounter.

Effects of Loyalty on Customer Behavior Intention

H8 indicates that the effect of loyalty on customer behavior intention is positively significant. The result is obtained from the previous Table 6. We also test H8 for classified three behavior intentions individually.

For the faithful intention, the effect of loyalty is positively significant, and the coefficient has the same sign as we assume. It means that the higher loyalty leads to the higher faithful intention after a failure/recovery has occurred. As to complain intention, the effect of loyalty is negatively significant on complain intention. Customers tend to complain less in high loyalty situation than in low loyalty situation. For the switch intention, the effect of loyalty is significant, too. It means that loyalty impacts, the switch behavior intention significantly. In summary, H8 is supported.

Effect of Gender on Service Recovery Effort

The purpose to test the gender effects is to see gender has significant influence on customer behavior intentions, customer satisfaction between males and females.

Comparison on Customer Satisfaction with Service Encounter between Males and Females

The effects of the combination of failure types with service recovery strategies, STR1, STR2, STR5, and STR6 are all significant in both male and female groups. STR7 is only significant in the male group, and STR4 is only significant in the female group. It means that there does not exist much difference between the male and female groups.

As for the moderating effects, there are differences between male and female groups. Interaction CRI × STR3 is both significant in the male and female groups. LOY × STR1 and LOY × STR 4 are only significant in the female group. We can conclude that the males’ concerns to service failure and recovery strategies are different from the females’.

Comparison on Customer Behavior Intentions between Males and Females

For the faithful intention, criticality is significant in the female group. Loyalty and satisfaction are both significant to the faithful intention in the male and female groups.

For the complain intention, loyalty is significant in the female group. Criticality and satisfaction are both significant to the complain intention in the male and female groups.

For the switch intention, satisfaction, criticality and loyalty are all significant in both male and female groups. The sign of coefficient of the criticality are opposite for male and female groups. It is positive for the female group but negative for the male group. It means the higher criticality males feel the lower switch intention they will have. And, the higher criticality females feel the higher switch intention they will have.

Conclusion

The current study was undertaken with the main aim of evaluating the effectiveness of service recovery strategies for different service failure types on the customer satisfaction directly and the behavior intention indirectly. The research was conducted engaging a quantitative survey among the guests of five star hotels of international standards operating in Taipei, Taiwan. The findings of the survey lend support to the theoretical foundations evolved through the review of the relevant literature, which shows the impact of service recovery strategies and commitment on quality of service delivery and eventually on customer satisfaction. The study has achieved its central aim of evaluating the service recovery strategies on improving customer satisfaction. The study, evolved suggestions for improving customer service quality from the guests surveyed. In service organizations such as hotels, service failures are common. However, service failures have serious implications for the business of the hotels, as with such failures, the customers are most likely to switch other service providers. In service organizations especially for hotels of international repute, customer retention is a critical element to ensure the growth and profitability of the hotel organizations. The results of the current research and the extensive discussion on the results go to stress the point that customer satisfaction is the key to improved customer loyalty and hotels could enhance customer loyalty by increasing the customer satisfaction levels, by improving the service quality levels. This is because the ability of the hotels to increase the loyalty of customer depends entirely on the ability of the hotels to establish a positive track- record in the early stages of the relationship with their customers. The results of the research reveal that satisfied customers not only exhibit repurchase intentions but also spread positive words of mouth among their friends and relatives, which is likely to result in increased sales for the hotels.

On the other hand, customer dissatisfaction with respect to service offered by a hotel is likely to affect the chances of the hotel to build customer loyalty. With the dissatisfaction among the customers on the service quality, there will be a reduction in the reputation of the hotel organization. With continued service failures, the hotels would not only lose the existing customers, but also the chances of getting prospective customers, as the words of mouth of dissatisfied customers have more negative effect than positive words of mouth. Therefore, hotel organizations face a serious and significant risk of losing the customers, when frequent service failures occur. The current research suggests that the service organizations like hotels must implement suitable strategies to recover from the service failures for establishing the renewed relationship with the customer, so that the business is not affected adversely.

The service dimensions of five star hotels include ambience and well-maintained equipments. Apart from these, the study found that service recovery strategies also contribute to improvement in customer loyalty. The study analyzed the importance of customer recovery strategies in the success of five star hotels to recover the lost customers. The study focused on the implementation of service recovery strategies and their impact on increasing customer loyalty. Service recovery strategies of apology, compensation and assistance were the ones studied under the current research. Since, personal attention is one of the most important expectations of the customers for service quality, the study suggests that hotels could practice personal attention as one of the additional service recovery strategies in addition to apology, compensation and assistance. The study also found that continuous training and customer feedbacks are the most important factors that could improve the customer service-quality levels. The customers of five star hotels have different perceptions about quality services provided by hotels of international repute. The study could not extend to comparison of the service recovery strategies and practices with the established theoretical practices, because of time constraints.

The findings of the study revealed that the employee satisfaction and service quality have a serious impact on the profitability of the hotels. This is because customer satisfaction and employee motivation has a multiplier effect on the wellbeing of an organization. In that context, not only do the variables lead to improved service quality, but they also enable the enterprise to cut down on supervision costs since motivated employees act on their own without necessarily been triggered into action by the supervisors or management. On the revenue side satisfied customers through word of mouth promotes the business for the hotels, which improve the revenue and dissatisfied customers provide a negative publicity to reduce the earnings of the hotel concerned.

This study examines the effect of service recovery strategies for different service failure types on the customer satisfaction directly and the behavior intention indirectly. These failures are common, manifest, serious, and will cause customers to switch service providers (Keaveney, 1995). In the service industry, customer retention is critical to growth and profitability. Customer loyalty depends on the provider’s ability to establish a positive track record in the early stages of the relationship (Levesque and McDougall, 2000). Customer dissatisfaction with a transaction at this stage reduces the opportunity to build loyalty and erodes the firm’s reputation. Therefore, customer retention is at risk when a service failure occurs. The providers’ recovery from a failure is crucial to rebuilding the relationships and maintaining the customer retention.

Conclusion to the Whole Work

With some exceptions, the data analysis results support the concept that customer reaction to service failure and recovery strategies. Offering compensation or assistance is more effective than offering apology only, and offering all (apology, compensation, and assistance) are the most effective (See Table 5). In diverse failure types (outcome and process), the effects of apology, apology plus compensation, apology plus assistance, and all are different. The customers in general prefer to receive resources for recovering the service in the amounts, which adequately cover the magnitude of the service failure experienced by them..

According to Table 8, for service failure/recovery encounters, the combination of failure types and service recovery strategies has significant influence on customer satisfaction.

Higher customer satisfaction leads to higher customer behavior intention, which is supported by H2. If customers receive better service quality to enhance their satisfaction, then they will show positive behavior intention.

In addition, criticality and loyalty do not have impact on customer satisfaction with service encounter (H4 and H7). Nevertheless, high criticality or low loyalty results in lower customer behavior intention than low criticality or high loyalty does (See H5 and H8). Hence, applying suitable recovery strategies based on the proper situation is beneficial for the service recovery process.

Loyalty has an interaction effect with service recovery efforts (H6). Service providers should consider the customer’s loyalty level when they are doing the service recovery. If customers are at high loyalty level, the recovery efforts will be more effective. There are gender effects existing in the service recovery process. Males’ concerns with the service failure are different from females’.

In summary, service providers should view the service failure as a chance to create positive customer behavior intentions. Once customers experience service failure and seek resolution, the performance of service recovery significantly influences behavior intentions rather than the service failure itself (Spreng et al., 1995). People usually can accept the occurrence of service failures. Classifying service failures into outcome and process may be useful to service recovery in the first step. Firms need to recognize failure types when applying developing recovery strategies. Other than service failures from occurring, a firm should carefully apply a suitable recovery strategy.

The results of the study indicate that the implications of service failures and the necessity for implementing service recovery strategies for customer retention and improvement in service quality for increased customer loyalty. The study suggests that customer service quality, customer satisfaction and customer loyalty are closely interrelated with each other and by improving customer satisfaction by offering improved quality service the hotels might be able to enhance the customer satisfaction and thereby the customer loyalty. Therefore, the management of hotels can be comfortable in their feeling on the knowledge and awareness of their service recovery strategies and their impact on improving the customer retention.

The results of the study, based on the review of the literature indicate the following attributes as important for improving the service quality.

1. customer feedbacks are important for improving the service quality – the hotels can organize customer satisfaction surveys to tackle this issue.
2. customer suggestions need to be implemented for service recovery strategies – since at the employee level there may not be any clarity on this aspect. It is better for the hotels to depute a senior manger may be deputed to analyze the customer suggestions with respect to implementation of customer recovery strategies in cases of service failures, to decide which ones can be implemented and instruct the staff accordingly,
3. upgrading service facilities – this is one of the important findings that hotels must put to practice immediately to avoid service frequent service failures, and
4. applying more emphasis on the service to regular customers – with respect to this aspect, the company must evolve a policy so that the employees can strictly follow the hotel policy, as individual decision at the employee level may lead to dissatisfaction to other customers who are not given preferential treatment.

As far as the hotel managements are concerned, the results of the study reveal the necessity for addressing the issues connected with service failures and their recovery in their respective establishments for improving customer retention. The managements should convene weekly review meetings to review the performance of each employee in the preceding week to make a critical and constructive analysis of the employee performance in the area of service failure. The management should identify deficiencies and implement suitable measures for improving upon the deficiencies forthwith. This will lessen the incidence of service failures and the hotels may implement suitable service recovery strategies, wherever service failure occurs.

Limitation and Further Research

There were some limitations, which acted on the progress of this research. Customer service quality and its impact on customer satisfaction being a popular topic for several social researches, there were a number of resources in the form of findings from prior research on the subject, which needed considerable time to assess the usefulness of them. Assessing their relative usefulness and contributions to the study and segregate the resources was a complex task. This acted as a limitation in the progress of the research. Second, the number of samples does not advocate overgeneralization of the findings of the study as the topic of study relate to a larger population. Despite sincere efforts, the researcher was able to conduct survey only with limited number of hotel guests. Another drawback with the samples was that some of them were tourists who might not visit the same hotels again for stay and hence their responses might have been subjected to a bias. This might have affected the validity of the findings of the research. Being one-time visitors without much experience of staying in the hotels their responses would have been immediate and emotional without considering the intricacies of the issues involved. Apart from the limitations indicated, the research progressed the way it was expected and yielded satisfactory results.

The analysis results of this study may not be able to generalize to other types of service failures. In the experiment we measure stated customer behavior intentions. Although researchers have found these measures to be correlated reasonably for actual behavior (Rust et al., 1995), there may be discrepancies between stated behavior intentions and actual behaviors. Furthermore, the criticality or loyalty points may indicate variations between the assumptions made and the existing positions. The situation scenarios have the difficulties for all customers to fathom themselves then answer the intentions exactly.

Two suggestions for future research are provided. First, the scenarios can be captured by using videos as part of the experimental design. The objective is to understand the relative effectiveness of how and what strategies or situations are exactly. A second suggestion is to broaden the types of service failures. In this study we classify the failures into two types: outcome and process. It may not be adequate for the actual situation. The service failure types determine the service recovery strategies. If the failure types are classified exhaustively, the effective of what recovery strategy will be analyzed more accurately.

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