The Taiwan Hospitality Industry
The Problem and its Background
The Taiwan hospitality industry developed after experiencing a business cycle with its initial high during the implementation of the Six-Year National Development Plan applicable for the years 1991 to 1996. However, hospitality industry becomes low during the outbreak of severe acute respiratory syndrome in 2003 but a rise in the performance of the hospitality industry at present among other external and internal factors affecting the number of tourists whose needs the industry meets becomes apparent Global Hospitality News Archive, 2003).
Actually, the hotel industry in Taiwan is delineated into international and domestic hotels based on business ownership and domestic hotels are also subdivided into domestic company owned hotels and family owned hotels depending on the scale of operation and ownership of the hotel. These hotels differ in a variety of ways according to the manner that they utilize their available and created resources and business strategies to actualize their business goals.
Despite the differences in the scale of operation, organizational structure and business strategies of international and domestic hotels, the common objective is to utilize and maximize their resources to achieve a high brand equity founded upon efficient and excellent quality of service that results to customer satisfaction and eventually to customer loyalty. International and domestic hotels build a strong industry through their ability to cater to the diverse needs of customers in terms of price, customer relationship, accommodation arrangements, and other diverse hospitality needs of customers. Although there is competition among international hotels, international and domestic hotels, and among domestic hotels it cannot be denied that these hotels provide distinct hospitality services giving customers options for their service preferences.
According to Taiwan Travel Agency (2005), travelers are more likely to stay in an international tourist hotel that offers high-level of accommodation to customers, such as outstanding services on food and beverage, social activities, meetings, and entertainment. Travelers are also willing to wait in line for a particular facility that they prefer to stay based upon intangible qualities such as the intangible, inalienable, heterogeneous and convenient characteristics.
On the other hand, the family owned and operated hotels are in a disadvantageous position to compete with the international tourist hotels. Factors such as the overhead costs to operate, the building appealing, location, and limited number of rooms, etc. are causing them to be unable to adjust with the tourists’ unpredictable demand at any time. For that reason, it becomes a challenge to the family-owned hotels to survive competition and sustain a high accommodation rate.
With tough competition within the tourist hotel industry, how a hotel, regardless its size, can deliver intangible values as the core competence in order to attract consumer and enhance brand image recognition, to sustain high customer loyalty, is a key question in this study.
Aiming to dedicate this research to the tourist hotel industry in Taiwan, the author will focus on the hotels in the selected cities of Taiwan, including three major urban areas in Taiwan. The author will also visit the selected five-star hotels as well as the selected small family-owned hotels in Taipei, Teaching, and Kaohsiung. The purpose is to gather the accommodation information within the past two years for this research.
1.2 Aims and Objectives
In an attempt to distinguish the differences on Brand Image, Service Quality, Customer Loyalty, and Customer Satisfaction between International Tourist Hotels and Domestic Hotels in Taiwan, the study intends to establish the quality dimensions related to the Taiwanese hotel industry, and then analyze the factors that influence the above mentioned elements known to maintain and determine Competitive advantage in the service, hotel and tourism industry. In addition, the study will also address the decision making process performed on customer reservation in the hotel industry, based on the hotel’s management environment and customer relations.
The study aims to produce results that may be applicable to the real hotel operations in Taiwan through sales tactics in order to establish a strong foundation of customer loyalty based on the inter-dynamic relation.
Particularly, the research’s objectives, in the context of the Taiwanese hotel industry, are to:
1) Discuss customer satisfaction and what can influence service quality.
2) Discuss service quality and what can influence brand image.
3) Discuss service quality’s connection and influence to customer loyalty.
4) Discuss brand image and how this can influence customer loyalty.
5) Discuss customer loyalty and what may be the most important variable within this concept.
Finally, the author will summarize all the factors related to customer satisfaction and conclude on what can influence brand image and customer loyalty.
1.3 Definition of Terms
1.3.1 Definition of Satisfaction
As Oliver (1981) asserted, customer satisfaction is the response or a kind of mood coming out from the pleasant surprise that the customer obtains in buying experience. Similarly, Westbrook (1981) observed that it is a state of a kind of mood to be satisfied which reflects the evaluation in real experience. And Churchill & Superman (1982) stressed that customer satisfaction is the kind of purchase and result of using the products; the customer relatively expects the remuneration of the result for the emerging input cost.
It is a relative judgment that Oestrum & Iacobuci (1995) considered a customer would be either satisfied or unsatisfied during a buying experience, which is the result of not only the quality but also the interests obtained at the same time considering the cost associated with the experience. Kotler (1999) also noted that satisfaction could be expressed in the level of the joyful degree that a person feels related to the consciousness performance of the products and expectation to the products that this person purchased.
1.3.2 Service Quality
According to Leavitt's point of view (1972), service quality means the serving result in accordance with customer’s pre-established standard. He further defined quality of service as closely related with material, equipment, and personnel surface, not to mention the way to provide service: it is the service quality that yields the best results. In addition, Gringos (1984) thought that customer's service quality of the consciousness is the result via the course income of service and consciousness that are relatively expected.
(1985) stated that the service quality is perceived as the level of customer expectation and the customer consciousness disparity during which the service is delivered, namely Service quality = Service expected - The service of the consciousness. If the service level of the consciousness is lower than the service level expected, then the quality of serving is perceived as low; On the contrary, if the service level of the consciousness is higher than the service level expected, then the quality of service is high.
PUB (1985) attempted to characterize the service quality as follows: 1.To a customer, service quality is more difficult to assess than the quality of the products; 2.Service quality recognition usually comes from a customer's result expectance the result after comparing with the real service performance; 3.The assessment of service quality must not merely include the assessment to course of serving but also must include the assessment which serves the result.
1.3.3 Definition of loyalty
(1994) believed that customer’s loyalty could be regarded as the personal attitude and the intensity behaviour to purchase again. (1995) stated that customer's loyalty is the customer’s will toward purchasing again in the future for specific products or service. They mentioned that customer's loyalty could be either for a long term or a short period of time: long-term loyalty is customer's long-term purchase, it is when customer encounters better manufacturer or products to be loyal; In a short time, customer will turn to the new goods or services.
Griffin (1996) emphasized that customer's loyalty will influence the customer's purchase behavior and ” customer satisfaction “ is only the behavior or a kind of attitude. Furthermore, Seybold (1998) thought that enterprises profit would improve by protecting customer's loyalty for the following reasons:
1. The longer the enterprise can sustain the relationship with its customer, the more income that enterprise can obtain from the same customer and the basic incomes of the enterprise will increase.
2. The quantity that the loyal customer purchases will also significantly increase.
3. The loyal customer will recommend new customer for the enterprises.
4. The loyal customer would willingly pay higher expenses in order to get the satisfactory products and service, so it does not need price or other inducements.
1.3.4 Definition of brand Image
Keller (1993) tthought the image of the brand will have significant impact on consumers purchase behaviour and will be reflected in consumer's memory to the consciousness of the brand aassociated with purchasing decision. Another set of information linked with node of the brand and how it is formed in the memory of association department of the brand: include the brand image meaning represented toward consumer awareness of brands.
Based on consumer’s brand concept, Dobbin (1990) regarded image of the brand as the subjective consciousness phenomenon, it is not as easy to understand but is forming via consumer's reason or the perceptual one. In addition, since the Brand Image does not physically exist in the products and in the entity, it would be influenced and meld by its own declaration of specialties of the content and by the persons who accept the image throughout the purchase activity; Therefore, it is more important to consult the image of the brand than the consciousness appeared of fact.
Anker (1991) explained that the image of brand is usually associated with the organization in a meaningful way and it is reflected the attitude of group of characteristics such as: Product performance, customer's interests, compare price, the user/the customer, famous person/person, life style/personality, product category, competitor, etc. Each of those characteristics has different level of intensity in influencing the brand image.
Biel (1992) expressed the image of brand for the product attributes and linked back the product to the associated brand name to come to the conclusion: The characteristics of brand image can be divided into to materials and flexibility' materials, not rigid, to the tangible and intangible such as consumer special feeling, etc.
1.4 Background of the Study
People travel to experience different cultures, interact with different kinds of people and taste different cuisines first hand. They travel because they have the urge to set forth and discover for themselves the beauty of this planet they call home. Pictures and images from postcards, magazines brochures and television advertisements fall short of providing fulfilment that actually being in the place can surpass.
This pilgrimage to see the wonders of nature has both helped sustain and end lives, depending on who is speaking. The phenomenon of tourism has taken the world by storm. An industry often built on the places natural wonders, it has proven to be very profitable.
Capitalizing on what has been in existence, all the investors have to do is frame the view with hotels, restaurants and bars to make the people feel like it was nature that came to them and not the other way around. The main idea is to present the natural beauty of the place and at the same time offering the comforts of home. Tourism is an opportunity for people to play (Smith, 1989). Tourism in its true sense represents a human behaviour that Berliner (1962) calls “Human exploratory behaviour.” This human behaviour includes expressive culture like the arts, sports and folklore.
Given the expanse of tourism, it is important to break down its components to have a better understanding of how the industry operates. The first thing that needs to be taken into consideration is the impact of tourism in economics. As stated earlier, tourism has become one of the world’s largest industries. It, therefore, follows that the financial aspects of this industry has been contributing a lot to the improvement of world economy.
According to (1999), the World Travel and tourism council estimated that tourists are spending 3.6 trillion dollars on goods and services directly or indirectly which is about 10.6 percent of the 1996 gross global product. And because of the number of people availing tourism services it has provided one out of ten jobs worldwide or around 25.5 million people employed in tourism related companies. According to an article in the Westin Bulletin in 1994 (as cited in , 1997), out of nine workers worldwide, one is employed in the tourism industry.
In the midst of all the travelling being done by people everyday, it cannot be helped that those who are far away from home wants to seek refuge in accommodations that feels like home. This means that people who are travelling want to feel secure and comfortable while staying in hotels. Include in the wide web of the tourism is the hotel industry. They are the ones who ensure that tourists can temporarily come home after a tiring day of sightseeing. They are the ones to make sure that tourists feel at home while they are away from home. In addition, the hotel industry provides various services for varied needs of the market. They offer vacation, business and convention services. This means that they cater to a wide variety of customer types.
According to Bain and Co. (as cited in , 2005), the cost of gaining new customers is 6-7 times more expensive than retaining customer and a 5 percent increase in customer retention can also increase profit by 25-95 percent. This, to a certain degree, proves that there is an indirect relation between customer satisfaction and increase in sales through increased customer retention.
The hotel industry, in general, is a customer centric industry. Companies that choose to enter in the said industry must be prepared to accept that in order for them to make profit they must put the customer considerations on top of profit making itself. This means that they would have to invest a great deal of capital, time and effort to create their own image that would eventually lead to patronage. Therefore, it is important that hotel management implement programs that will teach their employees the value of providing quality service all of the time. In addition, it has been stipulated that customer satisfaction, usually obtained through quality service, results to customer retention, increased profitability and increased brand equity.
Therefore, customer interaction is part of the nature of hotel employees. This also means that customers create images of the hotels based on their relationship with the hotel employees. This is the case since hotel employees represent the hotel in the perspective of the customers. Their conception of the hotel in general is based on every single interaction they have with the hotel employees. Therefore, one unpleasant incident can result to the customers’ thinking that hotel is no good.
With this, it can be stated that customer relationship is one of the key aspects that needs to be focused in order to provide quality service to hotel customers. Customer relationship management programs are part of total Quality management since they are processes that hotel managements take in order to improve the quality of service they provide. Furthermore, it is important to implement an effective customer relationship program since they result to more satisfied customers. With this, the question becomes how are customer satisfied?
According to John (2003), customer satisfaction can be achieved by businesses if they are customer focused and being customer focused means that the business is interested in understanding their customers and their endeavours, as well as their interests and perception of the value of the products and services that the business is offering. Moreover, this interest should not wear out with the passing of time; it must be embedded in the business’ culture. Once this is achieved, ensuring profit while serving customers will be a lot easier to balance. Serving the customer means that the business is actually considering what the customers need. Customer focused businesses will usually include products and services developed with the thought of providing total value to the customer in mind.
In order to build up Competitive Advantage, International and domestic hotels will be able to keep up with the demands of a growing market for the industry by allowing customers to experience goods and making the industry service-based instead of price-based thus building brand image. It is important that the service employed is also superior in quality so customer satisfaction may ultimately be attained.
Customer Satisfaction serves that basis in which Competitive Advantage and hotel performance may be measured. This consequently yields customer loyalty due to mutual trust and consistent experience of satisfaction due to the impressive meeting of expectations as well as preferences.
1.5 Business Significance
The purpose of customer relation management is to create customer's value as the starting point, and maintains a life-long relationship with the customer. In order to improve the customer service and improve customer loyalty to gain the competitive advantage, hotel industry must manage and find out the tactics suitable for continuous relationship marketing, an approach that seeks to deepen and broaden relationships with existing and potential customers by targeting, tailoring, and measuring outcomes.
Also, the service qualities that the hotel industry offers will be improved as a result. As long as the hotels can increase the customer loyalty base, the frequent patronage from customer will boost up the hotel industry profit. It is one of the most important tactics for the hotel industry in Taiwan currently.
Once the author discovers the relationship on quality factors that can influence band image, customer loyalty, customer satisfaction, and the findings can then be utilized by both the international tourist hotels and family-owned hotels, to develop databases, trend analysis, and other marketing tools to identify and drive efficiency their revenues. Therefore, service quality can be personalized and offered to attract more loyalty customer bases thus improve operating profit. The results would be a win-win situation for both travelers and lodging providers.
As earlier stated, the study aims to produce results that may be applicable to the real hotel operations in Taiwan through sales tactics in order to establish a strong foundation of customer loyalty based on the inter-dynamic relation. This will also yield a better delivery of services.
The findings of the research being proposed can prove to be valuable for Taiwanese hotel managements, hotel employees and customers. The hotel industry in Taiwan can benefit from the research by being informed about the brand image, service quality, customer loyalty and customer satisfaction trends as well as their effect and impact on the industry particularly in Taiwanese International Tourist and Domestic hotels. This way they will be able to use the findings of the research in formulating a perceived effective promotion, marketing and management program suited for their case.
In addition, employees will be able to benefit from these said programs that their companies will implement since they will be given the opportunity to enhance their skills and be more competitive both inside and outside the company.
Lastly, customers will also benefit since all of the improvements are geared towards providing them with high-quality services. The benefits are thus, holistic and not just benefiting a particular group or sector. The benefits of the hotel affects from the administration to its employees and especially its customers. The study may detail the methods that will boost the Taiwanese hotel industry that will not only bring an upsurge of interest and returns in that industry sector, but also the country it belongs to as a whole. Once the country will benefit from the rewards of the Taiwanese hotel industry, the Chinese citizenry will experience an added improvement in their way of life. The effects of this research thus proceeds in a chain that will benefit the Taiwanese and the Chinese. As this is a study belonging in the HRM industry, it will also contribute greatly to international hotel and human resources management as a case study and a historical development of such industry.
1.6 Scope and Limitation
As the study will determine the Difference on Brand Image, Service Quality, Customer Loyalty, and Customer Satisfaction between International Tourist Hotels and Domestic Hotels in Taiwan, it will only focus on these three subject topics and categorizations. Although separate studies will be performed on these three subject matters in the review of related literature for background information purposes and in order to situate the research. It will also be essential to put the research in the context of the hotel industry and more particularly, the Taiwanese hotel industry. There are still specifications in this general umbrella topic which would be International Tourist Hotels and Domestic Hotels.
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