1

Impact of service quality on customer satisfaction, customer loyalty and brand

image in hotel industry

Submitted to Lovely Professional University

In partial fulfillment of the

Requirements for the award of Degree of
Master of Business Administration
Submitted by:
Srishti Priya

Pavitarjit Singh
W.Sagar

DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
JALANDHAR NEW DELHI GT ROAD
PHAGWARA
PUNJAB

DECLARATION

We (Srishti Priya, Pavitarjit Singh and W.Sagar), students of Btech-MBA dual program at
Lovely Professional University, Phagwara, of 2010-2015 batch, hereby declare that this project
titled, Impact of service quality on customer satisfaction, customer loyalty and brand
image in hotel industry has been carried out at Lovely Professional University, Phagwara.
We also declare that this project is a true work of our undertaken in partial fulfillment of the
requirement for the Masters Degree in Business Administration Program.
We solely declare that this report has not been submitted to any other Institution for any other
rewards or recognition.

Srishti Priya
Pavitarjit Singh
W.Sagar

ACKNOWLEDGMENTS
WE take immense pleasure to express my deepest gratitude and sincere thanks to my faculty
Guide, Mr. NIKHIL MOONGA at lovely PROFESSIONAL UNIVERSITY, who has always
helped me round the clock morally as well as academically. His scrutinizing attitude towards
work has helped to me to analyze my work every time and substantiate it with good points. He
has always motivated us towards good work. We are also very thankful to him for more than
sufficient time that he has always given to us.
He also gave us the opportunity to carry out our capstone program and his endless cooperation to
get acquainted with the policies, procedures and practices to carry out the project work in the
field of marketing. We also thank him for spending his valuable time and helping us in the
completion of our project.
We are also deeply grateful to Mr. Rajesh Verma, HOS, LOVELY PROFESSIONAL
UNIVERSITY for giving us continuous guidance, support and exposure to the corporate
practices and providing me with all the necessities and comforts while doing the project.
Last but not the least we would like to thank our team and all those people who have directly or
indirectly helped in every possible way.

Table of illustrations
PARTICULARS
Abstract

1. Introduction

6-7

2. Literature review

8-13

3. Purpose and objective of study

14

4. Research Methodology

14-15

5. Timeline for work plan

15

6. Pilot study

16-18

7. Recommendations

19

7.1 Limitations and future scope 20

8. References

22

9. Questionnaire

23-26

ABSTRACT

The focal point of this project is to see the impact of service quality on the hotel industry. As it is
a very old and one of the very known of service implemented as business so it is very important
to understand the customer behavior regarding this service to keep an upfront position into this
changing market. For understanding customer behavior regarding home hotel service,
Technology Acceptance Model (TAM) will be used as a base model, because this model is
capable of explaining user behavior across a broad range of end-users. Some extension will be
made in TAM on the basis of discussions with hotel manager and head of employees (who have
a experience of more than 4 years in the same field ) , And one new model will be developed
named as Services Acceptance Model ,which is based on the research conducted by our team.
Three dimension- customer satisfaction, customer loyalty and brand image have been added to
the TAM. Also determinants of Customer perceived value
model.

have been added into the final

INTRODUCTION

Today, companies face their toughest competition ever. Moving from a product and sales
philosophy to a holistic marketing philosophy, however, gives them a better chance of
outperforming the competition. And the cornerstone of a well-conceived marketing orientation is
strong customer relationships. Service quality leads to higher customer loyalty. Services of hotel
unfavorable image leads to dissatisfaction. Factors like Customer perceived value (CPV) have
direct effect on the customers decision. Customer perceived value is the difference between the
prospective customers evaluation of all the benefits and all the costs of an offering and the
perceived alternatives. Total customer value is the perceived monetary value of the bundle of
economic, functional, and psychological benefits customers expect from a given market offering
because of the products, services, personnel, and image involved. Total customer cost is the
perceived bundle of costs that customers expect to incur in evaluating, obtaining, using, and
disposing of the given market offering, including monetary, time, energy, and psychic costs. In
the end, the buyer will buy from the source he thinks delivers the highest perceived value.
Customer Satisfaction:
Customer satisfaction is the internal feelings of every individual which may be satisfaction or
dissatisfaction resulting from the assessment of services provided to an individual in context to
customers anticipation by an organization improve the service just to satisfy their customer
because higher customer satisfaction will leads towards customer loyalty.
The most important concept of customer satisfaction is accepted all around the world is the
expectancy disconfirmation theory [16]. This theory was presented by Oliver in 1980, he
presented that satisfaction stage is the resultant of distinction between anticipated and supposed
performance. Satisfaction will be encouraging when the actual level of services or products is
better than the anticipated (positive disconfirmation), whereas (negative disconfirmation) when
the product or services level is lower than expected These errors can be improve by giving
questionnaire to the hotel guests and give them incentives for completion of the questionnaires.

Customer Loyalty:
The customer loyalty in their research that customer who repurchases from the same service
provider whenever possible and who continues to recommend or maintains a positive attitude
towards the service provider. Julander et al., (1997) explained that customer loyalty has two
magnitudes: the first one is behavioral and the other is attitudinal. The behavior loyalty means
the customer is intend to repurchase the brand or services from the service provider over time,
whereas, attitudinal loyalty means the customer intend to repurchase and also recommend other
which is the good sign of customer loyalty. Some empirical researches suggest that there is
strong activist relationship between customer satisfaction and the most important variable that is
customer loyalty [2]. Moreover, service quality studies proposed that higher service quality will
leads towards higher and positive customer repurchase behavior.

Brand Image:
The brand is one of the important assets of the company. Brand image is brand is reflected by
the brand links held by in consumer memory. In simple words brand image is basically what
comes into the consumers mind when brand placed in front of him. Consequently, these
associations are building up into the consumers mind from the direct experience of service they
have, after those experiences they make conclusion by contrasting their previous experiences
with the company and the set associations [2]. There are many empirical evidences that proved
that customer loyalty and brand image have positive correlation with each other .Whereas, other
researches proved positive contact on brand image by that service quality and customer
satisfaction comprise positive relationship with brand image.

Another study found that image is positively related with customer satisfaction and customer
preference in lavishness hotels. This showed that pleasing image leads towards customer
preferences and customer satisfaction whereas, unpleasing image can leads towards customer
dissatisfaction.

Literature Review:
In this cut throttle competition, every company wants to get edge over other. For hotel industry,
service quality is an important consideration, so companies striving to attain maximum customer
satisfaction by providing quality services. According to [4] service quality is the life blood for
hotel industry and service quality is further linked with customer satisfaction being studied and
the other one, customer satisfaction is related with customer loyalty [6]. Service quality is
considered an evaluation between service prospect and what actually has been received the ten
useful requirements to measure the quality of services provided to the customers. These are:
responsiveness, reliability, tangibility, credibility, communication, security, competence,
understanding the customers, courtesy and service accessibility. In 1990, Zeithaml ET, al.
presented the five dimensional SERVQUAL scale to measure the service quality. These
dimensions are: responsiveness, reliability, assurance, tangibility and empathy.
They provided the four aspects to improve service quality those were: hotel employees, service
delivery, prestige and guest facilities and surroundings. They argued that high levels of tools are
used to satisfy the customers regarding service quality. This all happens when the managers are
efficient, but unfortunately this is the great problem with hotel managers to captivate the
customers [5]. Service quality is the key ingredient for every customer and customer is the key
person who describes the quality. To provide the good quality services to the customers, hotel
managers should understand the expectations of their customers.
These constructs have higher correlation with each other presented a study in which they
explored that hotel performance is unswervingly related to service quality. They concluded that
higher service quality can be maintained due to change in hotel performance.

Related Theories
In broad sense service acceptance model is developed majorly from Five studies1) Theory of reasoned action (Fishbein & Ajzen 1975)2) Technology acceptance model (Davis et al. 1989)

3) Technology acceptance model-2(Venkatesh& Davis 2000)

4) TAM account for extension in determinants of perceived ease of use (Venkatesh 2000)
5) Study of Behavioral consequences (Zeithaml, Berry, Parasuraman)
a) Fishbein & Ajzen 1975 developed a theory that could predict and understand behavior and
attitudes. Their framework, which has become known as the Theory of Reasoned Action, looks
at behavioral intentions rather than attitudes as the main predictors of behaviors. This theory
provides a framework to study attitudes toward behaviors. According to the theory, the most
important determinant of a person's behavior is behavior intent. The individual's intention to
perform a behavior is a combination of attitude toward performing the behavior and subjective
norm. The individual's attitude toward the behavior includes; Behavioral belief, evaluations of
behavioral outcome, subjective norm, normative beliefs, and the motivation to comply.
Intentions are a function of salient beliefs and/or information about the likelihood that
performing a particular behavior will lead to a specific outcome.

Beliefs and
evaluations

Normative beliefs
and motivation to
comply

Attitude
towards
behavior(A)

Behavior
Intention(BI)

Actual
behavior

Subjective
Norms(SN)

Fig. 1 A) Theory of Reasoned Action (TRA) (Based on Fishbein & Ajzen 1975).

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B)Technology acceptance model:

Technology Acceptance Model (TAM) is capable of explaining user behavior across a broad
range of end-user computing technologies and user populations. In its original form TAM has
been extensively incorporated as a methodology to measure attitude towards technology
adoption from users in multiple domains, as well as within financial domain. TAM variations
have also been proposed and applied for measuring users attitude towards adoption of several IT
based services.

Perceived ease
of use (PEOU)

External
variables

Attitude

Behavior
Intention

Actual use

Perceived
usefulness (PU)

Fig. 1 B) Technology Acceptance Model (TAM) (Based on Davis et al. 1989)

c) Technology acceptance model-2(Venkatesh& Davis 2000): Both the researchers have

develop an extension of TAM that explained perceived usefulness and usage intentions in terms
of social influence and cognitive instrumental process and it has been found that both social
influence process(subjective norms, voluntariness and image ) and cognitive instrumental
process (job relevance, output quality, result demonstrability ) and perceived ease of use
significantly affect user acceptance.

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Experience

Prestige

Subjective
norms

Image

Perceived
usefulness(PU)
Intention to
use

Job relevance

Output quality

Usage behavior

Perceived ease
of use(PEOU)

Luxury

Fig. IC) TAM-2 Extended to account for determinants of perceived usefulness(Venkatesh

&Davis 2000)

d) TAM account for extension in determinants of perceived ease of use (Venkatesh 2000)
Much previous research has established that perceived ease of use is an important factor
influencing user acceptance. However very little has been conducted to understand how this
perception forms and changes over time. To remove this drawback, Venkatesh has proposed a

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new model to find determinants of perceived ease of use. The model proposes control (internal
and external conceptualize as self efficacy and facilitating conditions respectively), intrinsic
motivation (conceptualize as computer playfulness), and emotion (conceptualize as computer
anxiety) as anchors that determine perception about the ease of use of the system

Self efficacy

External
control

Anxiety

Playfulness

Perceived
usefulness

Perceived
ease of use

Behavior
intention to
use

Perceived
enjoyment

Objective
usability

1 d)TAM extended to account for determinants of perceived ease of use (Vishwanath

Venkatesh 2000)

e)Study of Behavioral consequences of service quality (Zeithaml , Berry,Parasuraman):

The major objective of this study is to identify the behavioral consequences in terms of 1)
loyalty to company (loyalty), 2) propensity to switch (switch),3) willingness to pay more (pay
more),4) external response to problem (external response), and 5)internal response to problem
(internal response).Favorable behavioral intentions signal that customers are forging bonds

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with a company. When customers praise the firm, express preference for the company over
others, increase the volume of their purchases, or agreeably pay a price premium, they are
indicating behaviorally that they are bonding with the company. Loyalty may be manifested in
multiple ways; for example, by expressing a preference for a company over others, by continuing
to purchase from it, or by increasing business with it in the future.

Increase spending
Service
quality(su
perior)

Behavioral
intention(f
avorable)

Remain

Behavior
Service
quality(In
ferior)

Behavioral
intention(
unfavorabl
e)

Defect

Price premium
Referred customer
Financial
consequences
Lost customer
Cost of attracting
new customer

1 e)Developed by Zeithaml , Berry,Parasurama

Proposed Service Acceptance Model

This will be proposed after the completion of project with all the variables
taken into considerations and analyzing the effect of each variables.

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Purpose of study:
The focal point of this project is to see the impact of service quality on the hotel industry. As it
is a very old and one of the very known of service implemented as business so it is very
important to understand the customer behavior regarding this service to keep an upfront position
into this changing market.

Objectives:
1. To see at whether service quality has a direct and significant effect on customer
satisfaction, customer loyalty and brand image.

2. Analyze if customer satisfaction has a direct and significant effect on customer loyalty
and brand image.

3. Analyze if customer loyalty has a direct and significant effect on brand image.

Research Methodology
Research aimed to explain the processes involved in conducting the research, from research design,
to report preparation, as well as setting up the hypothesis for the research. Firstly, the nature of
research would be identified. Then, the conceptual framework would be introduced. The research
hypothesis would be set up. Also, the research approach and data collection processes would be
clarified and all the details about the questionnaire would be discussed. Finally, some important
techniques for data entry and analysis would be introduced. By defining the research methods in a
clear and systematic manner, the research would be more organized and the mistakes could be
minimized, which was critical to the entire study.

Area of research: - Ludhiana, Jalandhar, Amritsar

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We have selected these cities to conduct the research because these cities are most
urbanized in Punjab barring Chandigarh and there are much more reputed hotels in these cities
rather than other cities of Punjab.
Scales used in research Nominal scale.

Nature of research
This research was based on the exploratory and quantitative research in order to examine the
effects of celebrity endorsements in Electronics products to consumers pre- purchase intention.
To begin with the study, exploratory research aimed to gain insights, identify and define the
topic better. In the second stage, quantitative research would be applied in order to further
discover consumers responses towards the celebrity endorsement and find out any hidden
variables.

Timeline

Number of Weeks
Activities
Pilot Study
Review of
Literature
Objective and
structure of the
research
Data Collection,
Analysis and
Interpretation of
the result
Error analysis
Final Result and
the outcomes

( 0-2)

(2-4)

(4-6)

(6-8)

(8-10)

(10-14) (14-18)

(18-22)

Done
Done

Done
Done

Not yet

Not yet

Not yet
Not yet

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Pilot Study:
This pilot study is being done to do a preliminary analysis before conducting the full-blown
study.
For this purpose we have taken a small sample of customers i.e. 5, and their response was taken
through the questionnaire and analysis was done on it.
For the analysis purpose customer satisfaction was taken as the dependent variable and staffs
hospitality, resorts cleanliness, resorts ambience and atmosphere, Value of price and
restaurants food quality were taken as independent variable individually.
We can see the outcome in these graphs:
We can see that the customer satisfaction and dissatisfaction is dependent upon the different
service qualities provided by the Hotels and Resorts.
The study is feasible to be conducted.

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4. Recommendations
The following recommendations on important predictors of acceptance of this service. The
following parameter should be consider for training sales people and making sales pitch for this
service

2nd priority

a)Usefulness of the service

b)Ease of use of the service

1st priority

rd
c)Ease of accessibility of the service 3 priority
th
d)Subjective norms of taking the service. 4 priority

, Points important for sales pitch:

Usefulness of the service

Ease of use of the service
Ease of accessibility of the service
Benefits of taking the service
High Quality assurance
Importance of service for customer
Relevance of service for customer
Making customer convince about the benefits of Service
Use of Brand Image of the company
Removing anxiety of customer by listening to him properly
Associating some pleasure components (like discounts, additional luxury
and add-ons) with the use of service
Increasing customer self efficacy by giving him some professional
knowledge about service.
Value of customer's time
Making customer feel that he can easily afford the service
Making customer feel that he can easily locate the hotel

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Also it is suggested to the front level team to not overdo or oversell. Sometimes in the process , a
person do not realizes and promise things beyond the scope. But in long term, it comes back on
the company. So, it is suggested to keep the expectation settings of the client proper.

12.Limitations and additional future research scope: The proposed model for acceptance of
services has some limitations that should be noted . The model is still in its beginning stage
and lot of other research are required before actually using this model for practical purposes. The
proposed model is in its very starting stage and there are various research that can be done to
increase the understanding of this model.
Potential directions for future - is to understand more about the relation of perceived ease of use
and Brand loyalty , Perceived ease of use and price sensitivity and Perceived ease of use and
customer switching behavior because there is a strong relationship either positive or negative is
coming between all these links in the present study.
Is to add one more dimension called perceived ease of accessibility in TAM to make it more
generalize for all the technology driven services. There can be more research that can be done
for finding determinants of perceived ease of accessibility apart from Time, Mode of access,
Money because these are the part of present research and there is a strong link that has been
identified between ease of location, ability to pay money and perceived ease of accessibility. One
more dimension that can be further studied is the extension of TAM to account for the affects of
behavioral consequences. After reading literature on TAM and other related studies it has been
found that TAM understand the acceptance of IT based services but very little has been done to
understand after acceptance behavior of customer. In todays competitive world the acceptance
of the new services is important but more important thing is to retain the customer. There is an
effort that has been made to understand the relationship between After acceptance
behavior(Brand loyalty, Price sensitivity and customer switching behavior) with behavior
intention and also with determinants of behavior intentions(PEOU, PU, PEA, and SN). And it
has been found that there is a strong relationship between Perceived usefulness and brand
loyalty, Perceived ease of use and 1)Brand loyalty 2)Price sensitivity 3)Customer switching

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behavior. Behavior intention and brand loyalty Subjective norms and 1)brand loyalty 2)switch to
competition
Future research can be done on understanding these relation in more descriptive way. The affects
of social influences on behavior intention can also be further studied.

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4. References :
1. Young, R. A., & Kent, A.T. (1985). Using the theory of reasoned action to improve the
understanding of recreation behavior. Journal of Leisure Research, 17, 90106.

2.Viswanath Venkatesh & Fred D. Davis(2000): A theoretical Extension of the Tecgnology

acceptance model: Four Longitudinal Field studies, Management science Vol.46, No.2, pp186-204.

3.Viswanath Venkatesh(2000): Determinants of perceived ease of use: Integrating control,

Intrinsic Motivation, and motivation into the technology acceptance model. Information systems
research Vol.11,No.4 pp-342-365.

4.Davis, F. D.(1986) : A Technology Acceptance Model for Empirically Testing New EndUser Information Systems: Theory and Results, in MIT Sloan School of Management.
Cambridge, MA: MIT Sloan School of Management.

5.Davis, F. D.( 1989) Perceived Usefulness,Perceived Ease of Use, and User Acceptance of
Information Technology, MIS Quarterly, 13, ,pp. 319-340.

6. Anh G. Woodskle,UsaL Fny,RtAert Timothy Daly(December 1988): Linking Service

Quality,Customer Satisfaction, and Behavioral Intention, Journal of health care Marketing
VoL9,No.4 pp 5-17

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Questionnaire
Dear Guest,

We are delighted that you choose this hotel . We strive to make each and every one of our valued
guests have an unforgettable experience. Please complete our guest satisfaction survey to help us
better serve you.
1 Your information

First Name :

last name:

Age :

City:

Address :

Contact no:

Email:

2 Gender

Male

Female

3 Overall, how would you rate our staff's hospitality ?

Excellent

Good

Average

Poor

4 Overall, how would you rate our decor, condition of rooms and public areas?

Excellent

Good

Average

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Poor

5 Overall, how would you rate our cleanliness Room, common areas, lobby?

Excellent

Good

Average

Poor

6 Overall, how would you rate the value for the price paid?

Excellent

Good

Average

Poor

7 How did you book your reservation?

8 Restaurant food quality and efficiency of service ?

Excellent

Good

Average

Poor

9 Other facility like swimming pool and car parking ?

Excellent

Good

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Average

Poor

10 What is the purpose of your visit ?

Pleasure

Business

Both

11 Would you like menu variety , value for price paid, quality of service , quality of food ?

Excellent

Good

Average

Poor

12 Overall how would you rate the resort ability to provide a relaxing atmosphere?

Excellent

Good

Average

Poor

13 Do you want a manager to reach out to you?

Yes

No

14 How satisfied were you with our overall performance during the planning of your event.?

Satisfied

Dissatisfied

Neutral

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