Benchmarking Service Quality in the Luxury Hotel Industry

1. Background and Overview

A recent Deloitte report states that the Hotel Industry in the Middle East has been “storming ahead” (Middle East: A decade of Transformation for the Hotel Industry, 2005) in the past few years. Dubai, as always was in the forefront. Doha was the other strong performer in 2005 with Kuwait recording drops in both revPar and occupancy.

The report ascribes this boom to the growing importance of the region, the phenomenal increase in air traffic, the developments in Iraq and the efforts of the Gulf States to diversify into businesses different from oil. Kuwait showed the strongest performance in the hotel industry in 2003 and notwithstanding the drop in revPar and occupancy in 2005 remains a strong travel destination.  It is home to upper crust luxury properties like the Meridien, the Crowne Plaza, the Bayan Palace and the recently opened Holiday Inn. The first Regent hotel in the Middle East is slated to open in Kuwait in 2007.

This mushrooming of higher end five star and luxury rooms can lead to shakeouts in the industry. Similarly, the appearance of slowdown and excess capacity triggers, cyclical or otherwise will allow only the best to prosper. Apart from these considerations, my twelve years of employment with the Bayan Palace have provided me rich experience in various service and management functions. This, as well as my exposure to increasingly evident competition and regular interaction with international guests led me to examine the shortcomings in the management of the luxury hotel space in Kuwait. Fulfillment of these needs will ensure its’ passage towards international standards of excellence.

A preliminary study of successful and distinguished hotels and hotel chains and their reasons for eminence in a cluttered landscape was the next logical step. A reading of “The Customer Loyalty Pyramid” by Michael W. Lowenstein” provided insight into the differentiators behind successful service companies. Back issues of the “Cornell Hospitality and Restaurant Administration Quarterly” were invaluable repositories of information.

I feel that a detailed study of service differentiators and bench marking standards shall help in laying down targets and standards for hotels in Kuwait. This should help the indigenous stand-alone hoteliers, the local General Managers of large chains and other managers responsible for customer satisfaction to add to the experience of their guests.

2. Problem Definition

 The subject for this proposal is to research benchmarking standards in service for luxury hotels in Kuwait. Luxury hotels are usually distinguished by their abundance of amenities and services, along with an attractive physical hotel atmosphere.  They often offer 24-hour room service, fine dining, access to a fitness center, as well as a concierge service.  They mostly have a limited number of rooms, normally ranging from 50 to 400, to enable them to provide more personalized services to provide for their guests. Service is by far the distinguishing feature of a luxury hotel and separates it from competition. As luxury properties charge premiums, the expectations of their customers are more demanding than those of midrange hotels. Resultantly, these properties have a higher ratio of employees to guests to enable superior customer service.

As in other booming markets, the hospitality industry in Kuwait is growing with ever-increasing speed and the pressures of competitiveness, costs, performance, and profits are beginning to make themselves felt. While it is premature to ascribe the poor performance of the Kuwait hotel industry in 2005 to these factors, it is opportune to analyze and locate areas that need work and correction.

The Market Metrix Hospitality Index, based on 10,000 customer responses for hotels outside The United States measures the performance of hotels by Customer Satisfaction, Emotions, Very Likely to Return, Loyalty Program Strength and Reported Price. The Report, for the Third Quarter of 2005, states that hotels in the Philippines, Brazil and Greece are delivering the highest levels of customer satisfaction. Greece was the winning country in as many as 10 categories.  For example, guests at Greek hotels reported feeling more “Comfortable”, “Pampered”, “Elegant” and “Hip/cool” compared to guest evaluations from other countries.

There is no reason why the Kuwait hospitality industry cannot reach these levels of excellence if proper measures for improvement in customer satisfaction are put in place and sustained. It is an accepted statistic that it costs five times as much to attract customers than to retain existing ones. With the customer at the centre of activity, it becomes obvious that the most important single criterion for measurement of service quality in a hotel is customer satisfaction. The problem is thus to first localize areas which are critical for customer service and satisfaction and subsequently benchmark standards for these areas for the use of Kuwait luxury hotels.

The criteria for benchmarking should be taken from reliable and proven sources. The legendary Malcolm Baldrige Service Quality Awards states that two times winner the Ritz Carlton feels that general caring and comforting for its guests is its most critical measure. This is very similar to the feelings expressed by customers for the hotels in Greece in 2005. The criteria for benchmarking should thus focus on the care and comfort given to the guests and identify the hotel services that together make up this total guest experience. In this exercise, it would be logical to use the ServQual method and apply it more specifically to the requirements of luxury hotels in Kuwait.

The ServQual model for assessing customer satisfaction has five dimensions for assessing customer perception about service quality. These are as follows.

Tangibles: Physical facilities, equipment and appearance of personnel.

Reliability: Ability to perform the promised service dependably and accurately.

Responsiveness:  Willingness to help customers and provide prompt service.

Assurance (including competence, courtesy, credibility and security): Knowledge and courtesy of employees and their ability to inspire trust and confidence.

Empathy (including access, communication, understanding the customer): Caring and

individualized attention that the firm provides to its customers.

When making use of the ServQual method it would also be logical to use the three important gaps in the provision of service quality relevant to customer perception.

Customers’ expectations versus management perceptions

Customer expectations and their perceptions of the service delivered.

Customer expectations and employees’ perceptions

Benchmarking standards will need to be fixed from a selection of hotels, which have achieved remarkable success in the hospitality industry. The preferred choice for the physical area of study is New York, the commercial capital of the United States and possibly the most competitive marketplace in the world today for hotels to exist, compete and thrive. For the selection of hotels, the first choice is the legendary Ritz Carlton, two times winner of the Malcolm Baldrige Award and a member of the J.W. Marriott group. The other two hotels chosen for the study are the Four Seasons and the Mandarin Oriental, both high-end luxury properties. All three hotels are champions, frontrunners and strong competitors amongst themselves in a marketplace cluttered with banners and names. They are known for continuous innovation and enhancement of customer value.

When applying these standards and techniques we will also need to assess the current quality of customer satisfaction provided by the luxury hotels in Kuwait.

The problem can thus be defined as the need to quantify the current levels of customer satisfaction provided by the luxury hotels in Kuwait and benchmark these against the service quality provided by the three chosen hotels in New York. The identification of these specific gaps will then allow a focus to be built on areas that will need improvement and thus lead to the achievement of standards of excellence.

3. Research Question(s)

The required research questions stem out of the definition of the problem. Our basic research question focuses on two specific areas.

The first matter to be taken up pertains to the present state of the luxury hotel industry in Kuwait with regard to customer satisfaction. There is little data available in print on the subject, other than independent figures for revPar and occupancy. However most luxury hotels in Kuwait track customer satisfaction internally and data will need to be obtained directly from the management of these hotels on the six customer satisfaction parameters (in order of importance): guest room, check-in/check-out, costs and fees, hotel facilities, food and beverage, and hotel services. A JD Power study finds a strong correlation between satisfaction and the comfort of the bed, a key attribute of the guest room factor, and a guest’s likelihood to return to the same hotel.

The second aspect concerns the benchmarking standards in these areas adopted by the Ritz Carlton, Four Seasons and Mandarin Oriental hotels in New York.

The research questions can be formulated as follows.

 “What are the current standards available with respect to customer services quality in the three luxury hotels in New York, namely the Ritz Carlton, the Four Seasons and the Mandarin Oriental and how do they compare with the current standards in these areas in the  luxury hotels in Kuwait?”

 “Furthermore, what are the improvements necessary in guest room, check-in/check-out, costs and fees, hotel facilities, food and beverage, and hotel services in the hotels in Kuwait to achieve the best standards of excellence?”

4. Research Methodology

The three hotels have been chosen for benchmarking standards because they represent the very best. A preliminary search into these three brings out the following information.

The Ritz Carlton, New York is a legendary hotel and is part of the approximately sixty properties, luxury Hotel Company, bearing the same name, founded in 1983 by William Johnson. The name was  acquired from Cesar Ritz, the Swiss Hotelier. The Company is a subsidiary of Marriott International.

The Mandarin Oriental, New York belongs to the Mandarin Oriental Hotel Group, an international hotel investment and management group and a member of the James Matheson group. It operates 8500 rooms in 17 countries and has about 30 deluxe and first class hotels and resorts with many more under development.

The Four Seasons New York also belongs to another huge chain, Four Seasons Inc. The Company manages some 70 luxury properties in more than 30 countries. Most properties are operated under the Four Seasons name, but some are Regent hotels. It has ownership interests in only about half of its properties, having shifted from a hotel owner to a hotel operator in the 1990s.

All three hotels belong to Companies owned by large chains, which own and manage properties all over the world.  Sales for 2005 were USD 250 million for Four Seasons and approximately USD 400 million for Mandarin. The New York properties for all three are prestigious top of the line spa hotels and feature in the ten best lists of special hospitality and travel portals like www.gayot.com. It is relevant to note that the Ritz Carlton topped the Market Metrix rankings for 2005 in Hotels-Overall for 2005, with a 92.7 grade in Customer Satisfaction. (Market Metrix Announces Second Quarter 2005 Hospitality Index Results)  Both the Ritz Carlton and the Four Seasons registered 62% in Customers Very Likely to Return in an industry scenario where the drop in Customer Satisfaction was the highest at -10.8% in the luxury segment.

The research methodology will first need to address the different types of data needed for the study, quantitative or qualitative, primary or secondary and  its’ veracity and reliability. The data will of course needed to be compiled, standardized and analyzed for findings. Conclusions and recommendations will form the concluding portion of the research.

Data will be needed from both the hotels in Kuwait and the hotels in New York. All the hotels chosen for benchmarking are champions because they have always kept the customer at the top of the pyramid, empowered their employees and never hesitated to innovate. Their internal approaches to achieving excellence in customer satisfaction though different from each other strive to achieve satisfaction. It will thus be essential to tailor these diverse responses into a standard format and thus achieve benchmarking capable of comparison against similar parameters for Kuwait hotels.

The Ritz Carlton for example set the target of “defect-free” experiences for guests, implementing a measurement system to chart progress toward elimination of all customer problems, no matter how minor. Steps for all quality-improvement and problem-solving procedures are documented, methods of data collection and analysis are reviewed by third-party experts, and standards are established for all processes. Key processes are dissected to identify points at which errors may occur. For example, to meet its goal of total elimination of problems, The Ritz-Carlton has determined that there are 970 potential instances for a problem to arise during inter-actions with overnight guests and 1,071 such instances during interactions with meeting event planners.

. A J D Power Report states that Four Seasons Hotels and Resorts returned to the highest-ranked position among luxury hotels in 2004 with top ratings in five out of the six measures of guest satisfaction: check-in/check-out, guest room, food and beverage, hotel services, and costs and fees.

Like the Ritz Carton and the Four Seasons, the Mandarin Oriental has used brilliant and innovative methods to get to the top of the heap. Ten years ago, they came up with a detailed customer satisfaction measurement plan, which found that every year there are 1.6 million touch points between the customers and the hotel. These could range from a call to the front desk to a visit by the host at the dining table. Each of these touch points needed to be positive for delight to be established.

The research methodology needs to take account of these various management styles, each brilliant in their own way to arrive at questionnaires, which will enable the eliciting of comprehensive information.

It is proposed that a significant amount of data be collected from secondary sources. The bibliography lists a number of publications, which will need to be considered on the three hotels. These provide details on the various quality awards won by the three hotels, their rankings in various independent and evaluative surveys, corporate philosophy on customer satisfaction and approach towards its attainment. I understand that there may be an element of risk in the use of only secondary data to arrive at credible findings. Secondary data will be used only for background information and the study will depend on primary data for its findings and conclusions.

. For primary source data, it would be advisable to collect data at three operating levels from each hotel, on strategy from the senior management level, i.e., the General Manager or the CEO of the Hotel and the Executive Chef, and on actual service delivery from the employees in direct contact with the clients possibly the Banquets Manager, the Restaurant Manager as well as the bell staff, front desk, housekeeping, parking and room service employees. The sample size should thus include five people from each hotel making fifteen respondents. Enquiries can be through either tele-interviews and/or requests for answers to structured questionnaires. There is also the possibility of direct interviews with the employees of Ritz Carlton who have a property at Doha and the Four Seasons who have hotels in Riyadh, Amman, Doha and Cairo.

Questions to senior managers and decision makers need to be on corporate philosophy, general approach, methods of innovation and very importantly their employee training and reward policy, the cornerstone for customer satisfaction. Questions to the employees in direct contact with the customers will need to be quantitative in nature and focus on the six parameters used for measuring customer satisfaction.

These questions will need careful segregation into open-ended and closed-ended questions, there being more open-ended questions with the increase in seniority and responsibility of the respondent. It will be necessary to contact the respondents by email and/or telephone to obtain their consent before the dispatch of the questionnaire. The same enquiry structure will be followed for the Kuwait hotels. Here it would be advisable to obtain the information through direct interviews to get authentic response.

The small sample size will lend itself more to qualitative analysis. The data being diverse and subjective will need careful interpretation before accurate benchmarking standards can be arrived at. The information obtained from the Kuwait hotels will be much easier to analyze as most of the information will be fresh and raw. The analysis in this case will be weighed more towards a simple survey based assessment of the six parameters of customer satisfaction, the philosophy of the hotels towards customer satisfaction and their employee policies.

While the findings will of course tell their own story, I do not expect the difference in standards to be unbridgeable. The very fact that, outside of the US, hotels in Greece lead in ten counts on customer satisfaction parameters and are far ahead of countries like England is indicative that managerial inputs are more important than physical location for standards of excellence. I am sure that there will be significant gaps between the benchmarked standards of the New York hotels and the actuals available in Kuwait.

It will take time and excellent managerial inputs to narrow the gap and I hope this study will play an important part in this improvement.

5. Problems and Limitations

A number of constraining factors could arise with the progress of the assignment. These would first relate to establishing the credibility of the researcher and the respondents agreeing to spend their time in answering queries.

I feel that my credibility for carrying out this research assignment could be established comfortably, given my background at the Bayan Palace and my academic assignment in this area. A comprehensive write-up on the assignment will need to be made detailing the scope of the thesis, and its’ possible use by students and professionals in the industry. This summary along with an official covering note from KMBS will be sent to the responsible managers of each of the three hotels with a request to co-operate. Respondents will have a choice to answer the structured questionnaire or talk directly to the researcher through a tele-interview at their convenience. A suitable slack shall be built in for each response to enable more time in case of contingencies. The selection of books, journals and articles, many of which are listed in the bibliography shall be decided beforehand. On-line libraries shall be used, as far as possible, to ensure availability and access at all times. The periods for each part of the assignment, listed and broken into discrete sections shall be mapped and monitored with the progress of the assignment to ensure completion within time.

It is pertinent to note that Dube and Renaghan (34 to 41) conducted a study of four champion hotels, including the Ritz- Carlton, sixteen years ago and it will be of interest to compare the results of this research with their work.

Works Cited

Bitran, G., 2004, ‘Service Quality, Ritz-Carlton and British Airways Cases’, Sloan’s School 15.778, Available: http://ocw.mit.edu/NR/rdonlyres/Sloan-School-of-Management/15-778Summer-2004/4441213B-F9EB-42C7-AF9E-C065C2452CCF/0/lec7_july291.pdf, May 28, 2006

Hartline, M .D. Wooldridge, B.R, Jones, K.L., 2003, ‘Guest Perception of Hotel Quality: Determining which Employees count most’, Cornell Hotel and Restaurant Administration Quarterly, vol. 44, No. 1, pp 43-52

Lowenstein, Michael W., 1997 The Customer Loyalty Pyramid. Westport, CT: Quorum Books,. Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=23383321>.

‘Market Metrix Announces Second Quarter 2005 Hospitality Index Results, 2005’, Hotel Online Special Report, Available: C:Documents and SettingsAdministratorMy DocumentsMarket Survey Hotels.htm, May 28, 2006

‘Middle East: A decade of Transformation for the Hotel Industry’ 2005, Deloitte Reports, hospitality.net, June 14, 2006, Available at:<http://www.hospitalitynet.org/news/4022995.search?query=hotel+industry+in+kuwait>

Bibliography

Arasli, H., 2002, ‘Gearing Total Quality into Small- and Medium-Sized Hotels in North Cyprus.’ Journal of Small Business Management . Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=5000841183>.

Bitran, G., 2004, ‘Service Quality, Ritz-Carlton and British Airways Cases’, Sloan’s School 15.778, Available: http://ocw.mit.edu/NR/rdonlyres/Sloan-School-of-Management/15-778Summer-2004/4441213B-F9EB-42C7-AF9E-C065C2452CCF/0/lec7_july291.pdf, May 28, 2006

Brian, R., 2006, ‘Survival of the fittest: Confronting today’s travel and hospitality challenge’, Deloitte Canada, Available: http://www.deloitte.com/dtt/article/0,1002,sid%253D56640%2526cid%253D49719,00.html, May 29, 2006

Chatzkel J, 2000, ‘Quest for Excellence XII’, The Official Conference of the Malcolm Baldrige National Quality Awards, Washington DC, March 13-15, 2000, Available: www.progressivepractices.com/articles/Baldrige_2000.pdf , May 2008, 2006

Claycomb, C, Lengnick-Hall, C.A.,and Inks, L.W. 2001, ‘The Customer as a Productive Resource: A Pilot Study and Strategic Implications.’ Journal of Business Strategies . Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=5001010148>.

Connoly, D., Olsen, M., and Moore, R. 1997 ‘Competitive Advantage – Luxury Hotels and the Information Superway’, Center for Hospitality Research at Cornell University

Enz, C.A and Canina, L, 2005, ‘An Examination in Revenue Management in relation to Hotels’ Pricing Strategies’ CHR Reports, vol. 5, no.6, pp 1 to 15

Enz, C.A., and Siguaw, J.A., 2003, ‘Revisiting the Best of the Best: Innovations in Hotel Practice, Cornell Hotel and Restaurant Administration Quarterly, pp 115 to 123

Hartline, M .D. Wooldridge, B.R., Jones, K.L., 2003, Guest Perception of Hotel Quality: Determining which Employees count most’, Cornell Hotel and Restaurant Administration Quarterly, vol. 44, No. 1, pp 43-52

Hill, A.K., Geurs, S., Hays, J.M., John, G., Johnson, D.W., and Swanson, R.A., 1998, ‘Service Guarantees and Strategic Service Quality Performance Metrix at Radisson Hotels Worldwide’, Journal of Strategic Management, pp27 to 31, Copyright RIA/WG & L, Available: http://www.csom.umn.edu/assets/3586.pdf, May 29, 2006

‘Industry News’, 1999, hospitality.net, Available: http://www.hospitalitynet.org/news/4003842.search?query=service+quality+benchmarking+four+seasons+hotel+new+yorkV, May 28, 2006

Jeffrey, D., Barden, R.R.D., Buckley, P.J., and Hubbard, N.J., 2002, ‘What Makes for a Successful Hotel? Insights on Hotel Management Following 15 years of Hotel Occupancy Analysis in England’, The Service Industries Journal, vol. 22, no. 2, pp 73 to 88

John, J., 2003. Fundamentals of Customer-Focused Management:  Competing through Service. Westport, CT: Praeger, Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=106801971>.

Lau, P.M., Akbar, A.K., and Fie, D.Y.G., 2005,  ‘Service Quality: A Study of the Luxury Hotels in Malaysia’, The Journal of American Academy of Business, Cambridge, vol. 7, no. 2, pp 46 to 55.

Lazer, W and Layton,R, 1999, ‘Quality of Hospitality Service: A Challenge for the millennium’ Ideas and Trends Hotel Online’, May 28, 2006, Available: http://www.hotel-online.com/Trends/EI/EI_ServiceChallenge.html

Lovelock, C., 2001, ‘A Retrospective Commentary on the Article – New Tools for Achieving Service Quality’, Cornell Hospitality and Restaurant Administration Quarterly, vol. 42, no. 4, 39 to 46

Lowenstein, Michael W. 1997 The Customer Loyalty Pyramid. Westport, CT: Quorum Books,. Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=23383321>.

‘Malcolm Baldrige National Quality Award 1992 Winner The Ritz-Carlton Hotel Company’, 2001, Baldrige National Quality Program, Available: http://www.quality.nist.gov/Ritz_Carlton_Hotel_Co.htm , May 28, 2006

‘Mandarin Oriental International Limited, 2006’, AHLA SmartBrief ALL ACCESS, May 29, 2006, Available: http://www.smartbrief.com/news/AHLA/companyData.jsp?companyId=13890

‘Mandarin Oriental International Limited-Company Profile Snapshot’, 2006, WrightReports, May 28, 2006, Available: http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_562600205

‘Market Metrix Announces Second Quarter 2005 Hospitality Index Results, 2005’ Hotel Online Special Report, Available: C:Documents and SettingsAdministratorMy DocumentsMarket Survey Hotels.htm, May 28, 2006

‘Maryland Performance Excellence Awards’, 2006, Available: http://www.mpea.umd.edu/awards/2005/index.html, May 28, 2006

‘Middle East: A decade of Transformation for the Hotel Industry’ 2005, Deloitte Reports, hospitality.net, June 14, 2006, Available at:<http://www.hospitalitynet.org/news/4022995.search?query=hotel+industry+in+kuwait

Nankervis, A. R., 1995. ‘Management Strategies in the Production of Service: A Study of Hotel Practice in Southeast Asia’, Research and Practice in Human Resource Management, vol. 3, No. 1, pp 71 to 83.

Oh, H, 2001, ‘Measuring Service Quality, Customer Satisfaction and Customer Value in the Hospitality Industry’, Hotel, Restaurant and Institution Management, Available: http://old.fcs.iastate.edu/hrim/research/customervalue.asp,  May 29, 2006

Ottenbacher, M., Goth, J., 2005, ‘How to Develop Successful Hospitality Innovation’, Cornell Hospitality and Restaurant Administration Quarterly, vol. 46, no.2, pp. 205 to 222

Pizam, A., Ellis, T., 1999, ‘Customer Satisfaction and its measurement in hospitality enterprises’ International Journal of Contemporary Hospitality Management, vol. 326, pp 326 to 339, ISSN 0959-6119

Dube, L., and Renaghan, L.M., 1999, ‘Surprisingly Simple Routes to The Top: Leaders’ Perspectives On The Success Of The Lodging Industry’s Best-Practice Champions’, Cornell Hospitality and Restaurant Administration Quarterly, vol. 40, No.6, 34 to 41

‘Ritz Carlton’, 2006, trainingmag.com (Online), Available: http://www.trainingmag.com/training/search/article_display.jsp?vnu_content_id=1000791065, May29, 2006

Shetty, Y. K., and Vernon M. Buehler,eds, 1991,  The Quest for Competitiveness: Lessons from America’s Productivity and Quality Leaders.  New York: Quorum Books, 1991. Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=30401650>.

Sinickas, A., 2002, ‘Defining benchmark questions for great results’, Best Practice Management Strategies, vol.1, ed. 10,  pg. 4

Stankard, Martin F., 2002, Management Systems and Organizational Performance: The Quest for Excellence beyond ISO9000. Westport, CT: Quorum Books,  Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=101316095>.

Tesone, Dana V. 2000, ‘Leadership and Motivating Missions: A Model for Organizations from Science Literature.’  Journal of Leadership Studies  Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=5001777660>.

Testa, M.R., Sipe, L.J., 2006, “A Systems Approach to Service Quality: Tools for Hospitality Leaders’, Cornell Hospitality and Restaurant Administration Quarterly, vol. 7, No.1, pp 36 to 48

Veigle, Anne., 1997, ‘Sorry U.S. Standards of Service Sap Customer Confidence in Companies.’ The Washington Times  Questia. 29 May 2006 <http://www.questia.com/PM.qst?a=o&d=5001569216>.

Walsh, K., 2000, ‘A Service Conundrum: Can Outstanding Service Be Too Good?’ Cornell Hospitality and Restaurant Administration Quarterly, vol. 41, No. 5, pp 40 to 50