RESEARCH

PROJECT REPORT

QUALITY OF WORK

LIFE IN HOTEL

INDUSTRY

CHARACTERISTICS OF HOTEL INDUSTRY

A Hotel is a funny industry. Almost every businessman

uses their services, but a few know how they really work.

Never before has the hotel industry’s bottomless bulged

so much from the boom in tourism, business or otherwise.

Though the fact remains, the hotel industry depends on

the tourism sector.

The major characteristics of Hotel Industry are:

a) The Hotel Industry is a labour intensive requiring

skilled labour, being a service-oriented industry.

b) The industry is also highly capital intensive due to

soaring real estate prices and has a gestation

period of 3 to 5 years.

c) The industry is seasonal in nature, especially for

hotels in tourist places where the occupancy rate

touches 100% in peak season and 30-40% in off

season.

d) Most of the approved hotels have collaborations

with foreign hotels and have Franchise

agreements with international hotel chains.

In India, hotels can be broadly classified in two

categories viz. Approved by Department of Tourism

(DOT), Government of India and non approved hotels.

Hotels are categorised into a number of segments. The

Department of Tourism has assigned ratings to the hotels

from 1 star to 5 star deluxe depending on the facilities

offered.

Department of tourism has also added one more category

of Heritage class hotels which comprises old palaces

converted into hotels.

Hotels have various working codes. These are referred

to in packages designed for the consumers:

1. Category of Rooms

i) (a) Normal (b)Deluxe (c)Executive

(d) Suite (e)Deluxe Suite (f) Presidential Suite

(g) Elite (h) Classic (i) Comfort

ii) Air-conditioned or Non Air conditioned rooms.

2. Plans of Hotels

Hotels have various Meal plans which they work on:

EP (European Plan) Room only basis

CP (Continental Plan) Room plus Breakfast basis

MAP (Modified American Plan) Room Plus

Breakfast, plus one meal i.e. launch or Dinner. Also

called Half Board.

AP (American Plan) Room plus three meals

(Breakfast, launch & Dinner). Also full board.

3. Tariff of Hotels are presented as follows:

FIT (Free Independent Traveller). This is applied for

individual travelling.

INTRODUCTION

The 3 commandments of this philosophy are: -

The Customer is the King

In God only we trust, rest all gather data

Variation is the enemy of all processes

Manufacturing, automobile, aviation, medical transcription,

software, ITES, banks and even other financial institutions are

following this methodology.

The question then is why not Hotels?

If the first commandment of Six Sigma talks about the customer,

how can we leave out an industry which is the epitome of customer

service and thrives purely on achieving customer delight

consistently.

In an industry where customer interactions occur on an hourly

basis, each customer touch point is critical for building

personalised service credibility and developing customer affinity.

Some of the areas/ processes where this approach may add value:

-

Hotel-wide

Enhance Customer Loyalty

Reduce Employee attrition

Productivity/Efficiency Improvement

Improve Work-life balance

Reduce Billing errors/losses

Developing better performance measures/ metrics

Increase Revenue

Reduce Cost

Capture 'Voice of Customer' data

Front Office Operations/ Sales & Marketing

Reduce wait time during peak check-in time

Reduce wait time during peak check-out time

Eliminate billing errors and improve accuracy

Reduce No shows

Increase Occupancy

Optimal utilisation of the current product mix

(rooms) to increase revenue

Increase customer delight at the Executive Club

Reduce/eliminate loss calls (Operators area)

Accuracy of information

Food and Beverage Service / Production

To maintain optimal inventory

Minimise wastage/pilferage

Standardised output of Food and Beverage

Reduce the time from order to service

Optimal utilisation of current product mix

(F&B/Outlets) to increase revenue

Accommodation Operation (Housekeeping)

Reduce the turnaround time of making/turning

down a room

Standardisation of cleanliness across areas

Purchase/Stores

Reduce Inventory surplus

Cost Benefit Analysis between cost of inventory and

cost of storage of products where prices vary

seasonally

Standardise the operating procedure of issuance to

various departments

Reduce the turnaround time of issuance to various

departments

Human Resources/ Personnel

Accuracy of payroll

Documentation management

Reduce the turnaround time of recruitment

Reduce the turnaround time of relieving

Increase the employee satisfaction rate

Leveraging the approach of the Starwood group, our leading hotel

chains in India viz. Oberoi, Taj, Hyatt, Meridien, Intercontinental,

ITC, Leela, Park etc can also benefit from this program. In order

to enhance Customer Experience and Reduce Cost, all they need

to do is welcome Six Sigma with open arms and make it a part of

their culture.A number of Hotel Management graduates like me

are today a part of the Six Sigma galaxy and we wait for the day

when Six Sigma becomes a household name in the hotel fraternity

- an industry which launched their careers, an industry which

would remain their first love.

SERVICES MARKETING

THE CONCEPT OF SERVICES

To define service narrowly as only relating to service industries is

clearly incorrect. Today there is an increasing trend to attempt to

differentiate product by service elements.

Understanding the position of a particular service on each

continuum, and the position of competitors, is an important step

towards finding possible sources of competitive advantage.

POSITIONING AND DIFFERENTIATION OF SERVICES

The positioning of a restaurant is a very important aspect for the

marketers since it helps them to recognize the component

characteristic of the services the customers need. Combining an

analysis of customer needs on a segment-by-segment basis with an

understanding of competitive offerings enables the marketer to

identify opportunities for serving a particular segment’s needs

better than anyone else. If offering such a service is seen as

compatible with the organization’s resources and value, then the

firm should be able to develop a profitable niche for itself in the

market.

Here we have to understand that the buyers have different needs

and hence they are attracted to different offers. It is therefore,

important to select distinguishing characteristics, which satisfy the

following criteria.

Importance – the difference is highly valued to a sufficiently

large market.

Distinctiveness- the difference is distinctly superior to other

offerings, which are available.

Communicability – it is possible to communicate the difference

in a simple and strong way.

Superiority – the difference is not easily copied by competitors.

Affordability – the target customer will be and is willing to pay

for the difference. Any additional cost of the distinguishing

characteristic(s) will be perceived as sufficiently valuable to

compensate for any additional cost.

Profitability – the company will achieved additional profits as a

result of introducing the difference

It is very important for the restaurants to position their services

and products to recognize the component characteristic of the

services the customers need. It helps the Hotel managers to

identify opportunities for serving a particular segment’s needs

better than anyone else.

SERVICE QUALITY:

One of the major ways a service firm can differentiate it

is by delivering consistently higher quality than its

competitors do. Studies have shown that service quality

affects customer satisfaction, which in turn affects buying

intentions. Outstanding service quality can give a service

company to superior sales and profit performance. The

key is to exceed the customer’s service quality

expectations.

Productivity:

There are seven approaches to improve service

productivity.

1. Work more skillfully.

2. Increase the quantity of service by surrendering some

quality.

3. Industrialize the service by adding equipments and

standardizing production.

4. Make obsolete the need for a service by inventing a

product solution.

5. Design an effective service.

6. Present customers with incentives to substitute their

own labor for company labor.

7. Harness the power of technology.

HUMAN RESOURCE STRATEGIES

The subject matter of personnel policies is as wide as the

scope of personnel management. In most companies,

polices are established regarding various functions of

personnel management which are as follows:

1. Employment: All policies concerning recruitment,

selection, and separation of employees are included in

this function. Employment policies should provide

clear guidelines on the following points:

a. Minimum hiring qualifications.

b. Preferred sources of recruitment.

c. Reservation of seats for scheduled castes, scheduled

tribes, handicapped persons and ex-servicemen.

d. Employment of local people and relations of existing

staff.

e. Reliance on various selection devices such as

university degrees, tests, interviews, reference

checks, physical examination, etc.

f. Basis (length of service or efficiency) to be followed

in discharging employee.

g. Probation period.

h. Layoff and rehiring.

2. Training and Development:

a. Attitude towards training- whether it is regarded as

a device overcome specific problems or as a

continuing relationship between superior and

subordinate.

b. Objectives of training

c. Opportunities for career development.

d. Basis of training

e. Methods of training - on the job or off the job.

f. Programmes of executive development.

g. Orientation of new employees.

3. Transfer and Promotions:

a. Rationale of transfer.

b. Periodicity of transfer.

c. Promotion from within or outside the organisation.

d. Seniority required for promotion.

e. Relative weightage to seniority and merit in

promotion.

f. Seniority rights.

g. Channels of promotion.

4. Compensation

a. Job evaluation system.

b. Minimum wages and salaries.

c. Method of wage payment.

d. Profit sharing and incentive plans.

e. Non monetary rewards

f. Executive stock option plan

g. Procedure for getting pay

h. Whether to pay prevailing or more than prevailing

salary scales.

5. Working Conditions:

a. Working hours.

b. Number and duration of rest intervals.

c. Overtime work.

d. Shift work.

e. Safety rules and regulations.

f. Leave rules.

g. Employee Services and Welfare:

a. Types of services - housing, transportation, medical

facilities, education of children, group insurance,

credit facilities, purchase of company's products at

discount, company stores, social security, etc.

b. Financing of employee services

c. Incentives to motivate.

6. Industrial Relations:

a. Handling of grievance

b. Recognition of trade union.

c. Suggestions schemes.

d. Discipline and conduct rules.

e. Workers' participation in management.

f. Employees' news sheet and house journals.

Present Marketing Strategies of Major Players

As occupancy rates is premium hotels drop, and the

demand for mid range and budget hotels is growing, most

hotel chains are now turning to the less glamorous

segments for growth. Falling occupancy rates, at an

average of 10-15% in the past year, has made it clear

that hotels can no longer rely on their premium

categories alone to rake in the kind of money that they

were:

Consider the case of ‘ The East India Hotel’ owned

Oberoi chain of hotels, that is investing Rs. 1500 crore

over the next four years. The thrust of this investment

will be for leisure destination properties & budget hotels

in Jaipur, Cochin, Delhi, Udaipur, Mysore, Madras,

Coimbatore, Varanasi Jaisalmer & Jodhpur.

When East India hotels, which is known for its strictly

luxury - oriented hotels, concentrates the better part of

its future investment on the budget segment, it implies

that, while on the micro level, the hotel majors are

chalking out strategies to counter the slump with

aggressive marketing by the way of discount & freebies,

on the macro level, a distinct trend is shaping up. The

trend is - Hotel majors are looking towards expanding

their base hence, looking down towards the mid-market

category.

The Taj Group of Hotels, part of the Indian Hotel

Company Limited (IHCL), has definite future plans for its

Gateway & Residency brand to keep pace with its

competitors. Its Rs. 800-900 crore, 5 year expansion

plans includes the setting of one hotel in Rajasthan.

In a market a particular service industry does marketing

based on three basic strategies. They are:

DIFFERENTIATION

SERVICE QUALITY

PRODUCTIVITY

Differentiation

This can be done through:

a) Offer

b) Delivery

c) image

The offer can include innovative features to distinguish

it from competitor’s offers. What the customer expects

is the primary service package and to this can be

added secondary service features.

E.g., the high-tech travelers can be provided with

computers, fax machines, e-mails, by a hotel in their

accommodation.

A service company can distinguish its service delivery

quality by having more able and reliable customer-

contact people than its competitors.

E.g., in a hotel, a more attractive physical environment

can be developed in which the services are delivered.

Service companies can also work on differentiating

their image. They often do this through symbols and

branding. E.g., the Taj Group of Hotels have their own

symbols which they use in their stationery, crackers,

bed-sheets, advertisements and incluvery tangible that

is included in their service.

Hotels Low Occupancy in a Row

IT was a year of waiting for the Indian Hotel Industry -

for the guests who never came and the Government that

dithered and stumbled as it tried to put forward a tourism

policy to lure foreign tourists to India.

The year saw the red carpet rolled out for foreign tourist

with their dollars but only 2.55 million of them are

expected to touchdown by the end of the year as per the

Government estimates - a dismal performance by any

standards.

With the turn around in the economy in the second half of

the year and a new Government installed things will

hopefully be better in the new year as foreign investment

creeps up slowly.

A silver lining was offered by the domestic tourists whose

number continued to swell as the Indian middle-class zig

zagged across the country discovering and rediscovering

the eternal tourist dream foreign Indian hoteliers to

recognise the home market.

This could be gauged from the fact that hoteliers.

Including the big hotel chains, have started focussing on

budget hotels and four-star hotels exemplified by the

Trident Hotels. Major hotel groups have also been on an

expansion and revocation spree during the year in

preparation for better times in the new millennium. Like

ITC Hotels is currently expanding its Maurya Sheraton

Hotel in New Delhi besides planning to open one more

five-star hotel in the Capital and also in Mumbai by the

middle of next year.

The year also witnessed major international chains

setting up shops in India as the Marriott in Goa readies

itself for an opening by the end of this year.

The Hilton, Chennai, heralded the return of the American

hotel major even as the Radisson group expanded its

presence in India through several sub-brands.

Along with this, all major chains have also expressed

interest in acquiring stake in the Government-owned

India Tourism Development Corporation (ITDC)

managed hotels which have been put on the block for

sale.

The New Year will have to see the Government take a

final decision on this front if it wants privatisation in the

sector to take off.

Several States have shown considerable progress on this

front, especially Madhya Pradesh which has already put

up various properties for long term lease to the private

sector as the State Government takes on the role of

facilitator leaving actual management of the hotels and

resorts to the private entrepreneur.

Another problem which remains unresolved during the

year was the open sky policy which the entire tourism

sector has been advocating to bring in foreign tourists.

Hotel Occupancy Decreases

The Indian Hotel Industry has registered a fall in

occupancy levels from 52.2 per cent in 1999-2000 to 49.7

in 2000-01. While average room in the same period

increased by 2.7 per cent, a decrease in revenues of 2 per

cent in 2001-02 was recorded.

Inspite of falling revenues, the Indian Hotel Industry

showed an inability to manage departmental operating

expenses such as rooms, Food and Beverages, telephone

etc., with these expenses rising 10.2 per cent during this

same period.

Undistributed operating expenses like administration,

marketing, operation and maintenance too were

uncontrolled and rose by 10.9 per cent.

Food sales showed a growth of only 0.1 per cent, perhaps

reflecting the supply and popularity of independent

restaurants in many Indian cities, as well as consumer

resistance to the exorbitant pricing and tax levels at in-

hotel restaurants. Telephone revenue showed a fall of

8.7 per cent, reflecting the increasing use of E-mail and

mobile phones.

"In the changing market scenario in the country the

hospitality industry has to demonstrate an ability to

drastically cut costs and improve productivity otherwise

many hotels will soon find their existence threatened.

There must be paradigm shift towards a value

proposition to consumers and the industry must reinvest

itself in terms of product, service and pricing.

The government must rationalise tax structure, which in

some cases as high as 40 per cent.

The significance due to reliability and viability of the

database drawn from the audited results of participating

hotels form almost all the major chain and key

independent hotels.

The five leading countries on rooms yield are Italy,

France, Russia, UK, Sweden, while the bottom five are

Egypt, Pakistan, India, Kenya and Morocco. Even in

occupancy, India ranks third from the bottom after

Kuwait at 42.7 per cent and Kenya at 47.5 per cent.

As a result, operating profit recorded a staggering fall of

20 per cent from 40.9 per cent to 33.3 per cent.

Hotel Industry Seeks Service Tax Abolition

The hotel and restaurant industry has sought abolition of

five per cent service tax. There is no justification in

levying service tax as they are already paying 10 per cent

expenditure tax and sales tax on the same bill.

The revenue collected by the Government by way of

service tax is the range of Rs.100-150 crores.

The Government had imposed service tax on the industry

in 2002, mainly targeting the unorganised sector of

caterers, who did not pay any tax on transactions. But

the Government exempted service tax for shamiana

contractors last years.

The hotel and restaurants industry to be included in the

list of infrastructural facilities. If the hotel industry is

included in the list of infrastructure sectors, then 100 per

cent exemption from income tax will be available for the

first five years. Loans from financial institutions can

also be availed of.

On recession in the industry, the industry was hoping to

come out of it in 2002; but hopes were dashed since the

growth in the peak season of December to February was

just three to four per cent.

The industry is expecting a growth rate of over five per

cent in the coming years. The trend of brand hotels

entering into contracts to manage other hotels seems to

be gaining ground and would be a welcome boost to the

smaller hotels to become a part of the organised sector.

Hotel Sector Demands All Export Incentives

The hotel industry has demanded the status of an export

industry with all tax incentives at par with computer

software exporters besides withdrawal of expenditure tax

on guests making payments in foreign exchange.

In its pre-budget memorandum although the hospitality

industry had been granted the status of export industry

last year, in reality it had only got the status of export

industry last year, in reality it had only got the status of

export house as the Government had not extended all

incentives as available to other exporters.

"Hotels and tourism units earning foreign exchange are

not treated as exporters and are not treated as exporters

and are not given all the incentives available to other

exporters. The Government should new give us the

balance of the incentives available to exporters.

The industry had last year been given income tax

incentives facilities of EPCG (Export Promotion Capital

Goods) imports, EEFC (Export Earner Foreign

Currency) accounts and some other benefits.

Pointing out that exporters are not required to pay any

local taxes on their foreign exchange earnings.

Reduction of service tax leveled on the hotel and

restaurant industry since 1999. The threshold limit of

turnover for service tax should be the same as for

exemption of excise duties for small-scale units as a

large number of restaurants have a very small annual

turnover for services on which the tax is levied.

ACTION PLANS

1. Recruitment Plan:

a. Number and type of person required

b. Time periods when required

c. Possible sources of recruitment

d. Selection techniques to be used

e. Any special problems anticipated and how they are

to be overcome.

2. Redeployment Plan:

a. Transferring to other units.

b. Retraining for new jobs.

3. Redundancy Plan:

a. Number and names of redundant

b. Departments/units where redundancy exists

c. Time of redundancy

d. Retraining whenever possible

e. Voluntary separation

f. Retrenchment and layoff

4. Promotion Plan:

a. Ratio of promotion to external recruits

b. Basis of promotion

c. Reservations, if any, in promotion.

5. Transfer Plan:

a. Transfer policy and rules

b. Channels of transfer

6. Training and Development Plan:

a. Number of people to be trained

b. Existing employees to be retrained

c. Skill areas for training

d. Availability of trainers

e. Methods of training

f. Training period

g. New courses to be developed and changes to be

made in existing courses.

7. Productivity Plan:

a. Work simplification

b. Mechanisation and automation

c. Job redesign

d. Training and refresher training

e. Incentives and profit-sharing schemes

f. Participation

g. Productivity bargaining

8. Retention Plan:

a. Improving compensation levels

b. Providing opportunities for career development

c. Changes in work requirements

d. Opportunity for participation

ACTIVITY FLOW CHART

Corporate Mission - Strategy - Structure

Planning Horizon - HRI System - Inventory Profile

Changes + Needs + Deployment

Need for Defining HRP

Basis for Planning - Demand - Supply - Environment (Ext. - Int.)

Methods - Judgement - Ratios

Organisation Process - Approvals

Redeployment/Retraining/Voluntary Retirement Scheme

SWOT Analysis of the Hotel Industry

Strengths

India’s rich cultural

heritage

Second largest forex

earner

Demand exceeds supply

Opportunities

Boom in tourism

Privatization of airlines

Increase in disposable

incomes

Weaknesses

Capital intensive

Labour intensive

Non-availability of land

Threats

Sensitive to disturbances

in the country

Competition from

International chains

High taxes may render

India as an unviable

destination.

Factors Affecting Demand & Supply

There is an enormous demand supply mismatch in the

industry. This is mainly due to the continuously inflow of

tourist into the country. On the other hand, there has not

been a corresponding increase in the number of rooms.

Factors Affecting Demand

1. Corporate Travellers:

Large hotel companies have historically earned around

65 per cent of their revenues from foreign travellers.

There was pronounced seasonally in tourist arrivals into

Indian with April - September accounting for around 40

per cent of total arrivals and the second half for 60 per

cent. However, in the post - liberalisation era, with the

entry of corporate travellers, off-season occupancies in

business hotels in the metros have shot up to around 80

per cent as compared to 60 per cent earlier. As result,

most of the hotels in the metros have positioned

themselves as corporate hotels.

2. Industrial Activity:

With the opening up of the economy, MNCs have made

an entry into India and this has led to flurry of industrial

activity in the country. A number of companies are now

setting up new hotels to cater to the increase in demand.

3. Service:

The industry, being a service industry, has to provide

certain facilities and service to its users. There is a

direct relation between customer satisfaction and the

occupancy rates. The business traveller, who has stayed

in international hotels, demands for similar facilities in

the domestic hotels thus necessitating tie - ups with

international chains.

Therefore, hotels are striving hard to provide a “home

away from home” and an “office away from office” to

the customers. To lure the international customer, who

expects the best, hotels have introduced various facilities

like health club, golf club, etc.

Latest communication facilities like E-mail, and fax, are

becoming common in most of the 5 star hotels.

Management is also paying particular attention to

individual / group preferences, as these are return

visitors. Companies are also wooing customers by giving

them discounts. Corporate discounts range between 10

to 15 per cent while the discounts to tourists are around

25 per cent. In addition, hotels are also offering

innovative value - added series to lure the customer, like

the Oberoi's have gone one-step ahead by computerizing

all the operations. Others have also set up cyber clubs to

enable the tourists to surf the net. Only Hotels offering

the best services are expected to survive in the long run.

4. Disposable Income:

Given that political disturbances act as deterrent, over -

relined on foreign tourist might cripple the industry. It is

hare that the domestic travellers come to the resource of

the industry. Of late, with the rising disposable incomes,

there has been a perceptible shift in the spending pattern

of the domestic travellers. A 250 million strong middle

class offers a potential market for the industry. With the

domestic travellers preferring reasonably priced

accommodation, the demand for the budget hotels and

holidays resorts has increased. Therefore, rising

incomes will have beneficial impact on the industry.

Factors Influencing Supply:

1. Land:

Land is the Most critical for the growth of the industry.

The prices of land in prime cities like. Mumbai, Delhi,

Calcutta, Bangalore, etc. are astronomically high. In

fact, the land prices in Mumbai are the highest in Asia

next only to Hong Kong. Various factors like location

importance as a tourism or business center, availability

of land, presence of an international airport, etc. have a

bearing on land prices. Hotels in centres of business,

catering to corporate travellers and foreign tourists

usually have high occupancy rates.

2. Regional Concentration:

Around 70 per cent of the rooms are situated in 12 manor

cities. Mumbai and Delhi alone account for 42 percent

of the total rooms, since these two cities have a high

incidence of business traffic. This leads to high

occupancy rates in these towns resulting in

unprecedented increases in average room's rates (ARRs).

The ARRs in these two destinations has grown at an

average compound annual growth rate of above 20 per

cent in the past. Mumbai has 7,102 rooms while Delhi

has 7,328 rooms in 5-star category. In contrast, Hong

Kong has more than 40,000 rooms.

3. Occupancy rates and ARRs:

The high occupancy rates, as seen above, have led to

hikes in the room tariffs leading to higher profitability

for the companies. Lured by high profits a number of

players are entering the industry.

4. Demand - Supply Gap:

With the eight plan target to add 55,000 rooms at an

outlay of Rs. 39,000 crore by the end of 1997 out of

reach, there is likely to be a shortage of 37,000 rooms

which is expected to increase to 70,000 rooms by 2002.

The government has estimated that at least 1,25,000

classified hotel rooms are required to accommodate the

foreign business and leisure travellers and domestic

travellers in the coming years. This clearly represents

the gross demand supply mismatch prevalent in the

industry.

To meet the demand, the government has approved in all

a total of 592 hotel projects (31,026 rooms involving a

total investment of Rs. 10,000 crore, which will result in

a 66 per cent incase in supply. These projects are

expected to come on stream by the year 2005. The 5 star

segment accounts for only 20 percent of this increase

while 53 per cent of the new rooms are in the 3 star

segment. This implies that the new projects are highly

skewed towards the budget hotels and on completion, the

share of the 3 star segment will increase from 16 per cent

to 30 per cent. Even if the existing projects are

completed there is expected to be a shortage of about

30,000 rooms.

CUSTOMER SATISFACTION & RETENTION

CUSTOMER SATISFACTION

‘Satisfaction is defined as a post consumption evaluation that the

chosen alternative is consistent with prior beliefs and expectations

(with respect to it). Dissatisfaction, of course, is the outcome

when this confirmation does not take place.

Consumer satisfaction is the outcome when expectations are

matched by service experience, conversely, dissatisfaction occurs

when there is a mismatch and expectations are not fulfilled by the

service delivered.

The Importance of Customer Satisfaction

In principle, an organization can increase its turnover in two

ways:

1. Increase sales to existing customers: In order for the

organisation to do this, the customers need to be satisfied and

still want to buy more products and services from the

organisation.

2. Win new customers: In order to the organisation to do this, the

new customers need to form a positive impression of the

organisation. This impression may be formed either through

marketing and sales initiatives or because satisfied customers

speak favorably of the organisation’s products, services, and

staff.

Customer satisfaction is crucial to the organisation’s future,

because:

Satisfied customers come back. Dissatisfied customers do not

come back.

Satisfied customers are often “goodwill” ambassadors and help

the organisation to win more customers. Dissatisfied customers

share their dissatisfaction with anyone who will listen and in

the process give the organisation a bad reputation.

Satisfied customers are usually prepared to buy new products/

services from the organisation. Dissatisfied customers rarely

return as customers.

Potential customers are more inclined to listen to existing and

previous customers than to the organization’s marketing

campaigns. The “information service” provided by dissatisfied

customers can spoil the effect of even the most powerful

marketing campaigns.

Satisfied customers are a source of inspiration to the

organization and contribute to giving the employees increased

job satisfaction.

It is very important for an organization to satisfy the needs and

expectations of their customers. The organization should deliver

quality products and services to their customers in order to

maximize the repeat clientele. Strategically, they should try to

provide all the services and products in the same way, which they

promised during the campaigns and advertisements.

RELATION BETWEEN EMPLOYEE AND GUEST

SATISFACTION

Customer satisfaction has emerged as an important component in

the bottom-line success of service businesses. Satisfying

customers is especially important because it encourages repeat

business and fosters word-of-mouth advertising.

Employees feel good when they feel that they are involved in

decision making, receive adequate training, and are recognized

for their contributions. Empowerment is recognized as an

important tool for improving employee morale and performance.

Pay and benefits are a strong consideration in employee

satisfaction, and most employees feel that they are underpaid for

the job they do regardless of their compensation. Pay and

benefits, however, are only one factor among many. A study by

Bruce and Blackburn, for instance, indicated that the absence of

those economic factors will lead to discontent, but their presence

will not add to long-term satisfaction. On the other hand, job-

enrichment factors, such as recognizing contributions, employee

involvement in decision making, and management keeping the

lines of communication open, continue to be important factors in

employee satisfaction.

On the other hand the guests feel strongly about the treatment they

receive from the hotel’s employees, and guests are happier if

employees respond to guests individual needs. We can thus

conclude that a happy employee does influence the guest’s attitude

towards the hotel and thereby increasing customer loyalty.

CUSTOMER RETENTION

Companies must be customers centered to be successful in current

market scenario. They must deliver superior value to their target

customers and must become adept in building customers and not

just building products.

Many companies think that obtaining customers is the job of the

marketing or sales department. But in reality although marketing

plays a leading role, it can be only a partner in attracting and

keeping customers.

Customer satisfaction measures how well a customer’s

expectations are met. If customers received what they expected,

they are satisfied. If their expectations were exceeded, they are

extremely satisfied. Customer loyalty, on the other hand,

measures how likely customers are to return and their willingness

to perform partnershipping activities for the organization.

Customer satisfaction is requisite for loyalty. The customer’s

expectations must be met or exceeded in order to build loyalty.

But the real issue is retention of customers that all marketers need

to consider. The restaurant industry benefits from continued

patronage of loyal customers because of reduced marketing costs,

decreased price sensitivity of loyal customers, and partnership

activities of loyal customers. The restaurant requires fewer

marketing dollars to maintain a customer than to create one and

the creation of new customers through the positive word of mouth

of loyal customers thereby reducing marketing costs.

Reichheld and Sasser found that a 5% increase in customer

retention resulted in a 25 to 125% increase in profits in nine

service industry groups they studied. It is found that that building

a relationship with customers should be a strategic focus of most

service firms.

As the competition is strong and often there is little differentiation

between products in the same product class in the restaurant

industry it becomes imperative to reatin customers. Increased

competition with little differentiation between core product is one

of the factors that led to the development of relationship marketing

in the 1990s. Relationship marketing enables companies to build

loyalty with their customers. Developing customers as partners is

different from traditional marketing, which is more transactions-

based. Beyond building a stronger relation with their partners in

the supply chain, thus companies today must work to develop

stronger bonds and loyalty with their ultimate customers. Thus

relationship marketing is a useful tool to retain customer,

RECOMMENDATIONS

The Hotel Industry as a whole must understand the importance

of Customer Satisfaction and Loyalty and make all efforts to

retain customers.

Hotel must be given a higher ratio of importance as future

trends signify that the mentioned sector will be a cash cow for

the investors.

Advertising costs should be minimized as they account for

nearly 10 percent of a businesses profit.

Ensuring exceptional guest care by each and every employee

should be the norm. To ensure this, flatter structures are

recommended to stimulate communication process and close

working as a team.

Staff levels must be offered better pay packages since they are

the ones in direct contact with your customers. Competitive pay

packages will also help in retention of staff and better services

to the customers.

Empower employees, encourage and -support them in their

decisions to build confidence. This will lead to better customer

service at guest contact points.

Outsourcing options should be considered seriously, and in as

many services as possible. This will definitely lower payroll

costs and may also improve efficiency of operations.

LIMITATIONS

The dissertation is based on the use of secondary data. It gives us

a birds eye view of the Hotel Industry.

Time was a biggest constraint but all efforts were made by me to

collect all the relevant information for the dissertation.

BIBLIOGRAPHY

1. Various Publications and Journals By Confederation

of Indian Industry [CII]

2. Various Magazines and Newspapers

3. Various Journals and Magazines By British High

Commission Library

4. Various Journals and Magazines By INSDOC Library

5. Human Resource Management By Frederick E.

Schuster

6. Publications and Journals By Various Hotels

Trade journals & magazines:

1. Hotelier and caterer

2. FHRAI magazine

3. Cornell Hotel and Restaurant administration Quarterly

4. Journal of Marketing

5. Business Week Magazine

6. Indian Journal of Marketing

Websites

www.fhrai.com

www.hotelinteractive.com

www.thomsonlearning.co.uk

www.hcima.com

www.ehotelier.com