A Study of Service Quality in Budget Hotels: Impact on Hospitality and Tourism Industry

In this dissertation we will discuss about hospitality & tourism Industry and below are the summaries point:- Acknowledgement: Expressing gratitude to the supervisor, university staff, participants, and family for their support and contributions. Abstract: Exploring the impact of service quality on budget hotel operation in the hospitality and tourism industry, aiming to enhance customer satisfaction and address gaps in expectations and perceptions. Research Findings: Utilizing survey research strategy and quantitative analysis, the study highlights the reliability of the questionnaire and the significant impact of service quality on the successful operation of budget hotels.

Running head: DISSERTATION
A Study of Service Quality of Budget Hotel Operation in the Hospitality and Tourism Industry
Name of the Student:
Name of the University:
Author’s Note:

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Acknowledgement
Thank you to all of those who have helped listened and encouraged me throughout this study. I
am indebted to my supervisor ……………………. whose guidance, advice and patience have
been immeasurable. My sincere thanks to all members of the…………… [Mention your
university/college name], both staff and students, whose continuous support have made this
thesis possible.
I would like to thank all of the participants in the study: students, teachers and Local Education
Authorities, for the time and help given throughout. Without their participation, this research
would not have been possible. In this context, I am also thankful to them, whose research work
helped me to execute this paper well.
Finally, I thank my family, without whom this thesis would not have been started or completed!
Your encouragement and support have never faltered; thank you.

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Abstract
The aim of the research is to study the impact of service quality on budget hotel operation in
hospitality and tourism industry that underlies the idea of enhancing the service quality standards
for ensuring customer satisfaction by eradicating the stereotypical expectation about budget
hotel.
The hospitality and tourism sector has seen a high rise over the past few years due to increased
demands of travelling for both career and leisure requirements. It has been seen that the
hospitality and the tourism sector contribute largely towards the economic growth of the country.
Some of the countries even rely solely on tourism and hospitality for their GDP. Service quality
determines the success of the hospitality industry, as this helps in understanding the expectation
and the perception.
Issues in terms of service quality are noticed in the operating procedures of budget hotels in
tourism and hospitality sector due to the existing gaps between expectation and perception. The
expectation and the perception of the customers and the employees differ largely due to the
distinctive personalities, needs, demands and requirements. The potential gaps in the service
quality include communication, empathy, assurance and being responsive.
Positivism philosophy, deductive approach, descriptive design and survey research strategy. As
survey research strategy has been selected, 50 people are selected for surveying by using simple
random probability sampling technique. The data has been collected by circulating online survey
questionnaire that contains 20-25 questions that is developed for studying service quality of
budget hotel operations in hospitality industry. This suggests primary data collection process
followed by quantitative data analysis technique that is presented using SPSS software.

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The reliability test result highlights that the questions developed for the study are aligned
because it has an internal consistency of .988. Therefore, the questionnaire developed is suitable
for determining the gap between customer expectation and perception for budget hotels. The
results obtained from the regression analysis also highlights significant difference, as the result
obtained is 0.000 thereby, rejecting the null hypothesis. Therefore, it can be inferred that service
quality has an impact on operation of budget hotels successfully.

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Table of Contents
Chapter 1: Introduction....................................................................................................................8
1.0 Overview...........................................................................................................................8
1.1 Problem statement.................................................................................................................8
1.2 Research aim..........................................................................................................................9
1.3 Research objectives...............................................................................................................9
1.4 Research questions...............................................................................................................10
1.5 Research hypothesis.............................................................................................................10
1.6 Research rationale................................................................................................................11
1.7 Structure of the dissertation.................................................................................................11
1.8 Summary..............................................................................................................................12
Chapter 2: Literature review..........................................................................................................14
2.0 Overview..............................................................................................................................14
2.1 Conceptual framework.........................................................................................................14
2.2 Overview of hospitality and tourism sector.........................................................................15
2.2.1 Define hospitality and tourism system.........................................................................15
2.2.2 Hospitality and tourism sector as a service sector........................................................16
2.2.3 Accommodation sector.................................................................................................16
2.3 Service quality and the relevant dimensions.......................................................................17

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2.3.1 Concept of service quality............................................................................................17
2.3.2 Service nature...............................................................................................................17
2.3.3 Service characteristics..................................................................................................17
2.3.4 Dimensions of service quality......................................................................................18
2.4 Customers of a service organization....................................................................................20
2.4.1 SERVQUAL model..........................................................................................................20
2.4.2 Significance of internal customers (employees)...........................................................23
2.4.3 Understanding the difference between customer expectation and perception..............23
2.5 Service quality and budget hotel operation.........................................................................24
2.5.1 Relationship marketing theory......................................................................................24
2.5.2 Impact of service quality on customer retention of budget hotel operation.................25
2.5.3 Impact of service quality on customer loyalty of budget hotel operation....................25
2.5.4 Impact of service quality on budget hotel profitability................................................26
2.6 Summary..............................................................................................................................26
Chapter 3: Research methodology.................................................................................................28
3.0 Overview..............................................................................................................................28
3.1 Research outline...................................................................................................................28
3.2 Research philosophy............................................................................................................29
3.2.1 Explaining the use of positivism philosophy................................................................29
3.3 Research approach...............................................................................................................29

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3.3.1 Explaining the use of deductive approach....................................................................30
3.4 Research design...................................................................................................................30
3.4.1 Explaining the use of descriptive design......................................................................31
3.5 Research strategy.................................................................................................................31
3.5.1 Explaining the use of survey research strategy.............................................................31
3.6 Sampling technique and sample size...................................................................................32
3.6.1 Explaining the use of simple random probability sampling technique.........................32
3.7 Data collection process........................................................................................................32
3.7.1 Explaining the use of primary data collection process.................................................33
3.8 Data analysis technique.......................................................................................................33
3.8.1 Explaining the use of quantitative data analysis technique..........................................33
3.9 Ethical considerations..........................................................................................................34
3.10 Accessibility issues............................................................................................................35
3.11 Summary............................................................................................................................35
Chapter 4: Data analysis................................................................................................................36
4.0 Overview..............................................................................................................................36
4.1 Descriptive analysis.............................................................................................................36
4.2 Inferential statistics..............................................................................................................38
4.2.1 Reliability test...............................................................................................................38
4.2.2 Co-relation test..............................................................................................................41

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4.2.3 Regression analysis.......................................................................................................44
4.3 Summary..............................................................................................................................47
Chapter 5: Conclusion and recommendations...............................................................................48
5.0 Conclusion...........................................................................................................................48
5.1 Linking with objectives.......................................................................................................49
5.2 Recommendations................................................................................................................51
5.3 Future scope of the study.....................................................................................................53
References......................................................................................................................................54
Appendix 1.....................................................................................................................................61
Survey questionnaire.................................................................................................................61

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Chapter 1: Introduction
1.0 Overview
The hospitality and tourism sector has seen a high rise over the past few years due to
increased demands of travelling for both career and leisure requirements. It has been seen that
the hospitality and the tourism sector contribute largely towards the economic growth of the
country. Some of the countries even rely solely on tourism and hospitality for their GDP. Service
quality determines the success of the hospitality industry, as this helps in understanding the
expectation and the perception (Padilla-Melendez and Garrido-Moreno 2014). Understanding
and bridging the gap between the expectation and the perception helps in enhancing the quality
of the service, as this determines successful fulfillment of customer needs, desires, expectations
and requirements. The service quality is judged based on the SERVQUAL model that determines
the effectiveness of the quality of the service in budget hotels by analyzing five dimensions
namely, tangibles, responsiveness, assurance, empathy and reliability (Ali and Raza 2017).
The hospitality sector is growing at a faster pace with a broad outlook and budget hotels are
gaining popularity. The aim of the budget hotels is to serve the customers taking trips such as
backpacking and it is necessary to satisfy the needs of the customers by ensuring excellent
service quality (Dzhandzhugazova 2016).
1.1 Problem statement
Issues in terms of service quality are noticed in the operating procedures of budget hotels
in tourism and hospitality sector due to the existing gaps between expectation and perception.
The expectation and the perception of the customers and the employees differ largely due to the
distinctive personalities, needs, demands and requirements. The potential gaps in the service

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quality include communication, empathy, assurance and being responsive (Peprah and Atarah
2014). Often in the hospitality and the tourism industry, the difference between the expectation
and the perception tend to broaden, as lack of understanding arises. The gaps in the service
quality results in customer dissatisfaction and decreases the popularity of the budget hotels.
Additionally, failures to understand the expectation of the leads to operational issues in the
budget hotels, as the hotels are unable to fulfill the needs and expectations of the customers
(Yarimoglu 2014).
1.2 Research aim
The aim of the research is to study the impact of service quality on budget hotel operation
in hospitality and tourism industry that underlies the idea of enhancing the service quality
standards for ensuring customer satisfaction by eradicating the stereotypical expectation about
budget hotel.
The study links the standard of service quality with the overall feedback of the customers
about the quality of service on budget hotel thereby, ensuring improvement of the service
quality. As a result, more knowledge and ideas can be provided for enhancing the service quality.
Additionally, in future the information can be used for enhancing service quality in the
hospitality and tourism industry.
1.3 Research objectives
The questions of the research are:
 To identify general service quality on budget hotels.
 To identify feedbacks from customers on how they experienced service quality in budget
hotels.

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 To understand what are the obstacles that disturb budget hotels to improve on service
quality.
 To observe how does service quality of budget hotels give impact on hospitality and
tourism industry.
 To predict how the service quality of budget hotels will be improve in the future.
1.4 Research questions
The questions of the research are:
 What is the general service quality on budget hotels?
 What are the feedbacks from customers on how they experienced service quality in
budget hotels?
 What are the obstacles that disturb budget hotels to improve on service quality?
 What does service quality of budget hotels give impact on hospitality and tourism
industry?
 What are the suitable recommendations for improving service quality of budget hotels in
hospitality and tourism industry in the future?
1.5 Research hypothesis
The hypotheses of the research are:
H0: Service quality has no impact on the budget hotel operation is tourism and hospitality
industry
H1: Service quality has an impact on the budget hotel operation is tourism and hospitality
industry

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1.6 Research rationale
Studying the impact of service quality on budget hotel operations in the hospitality and
tourism sector is important, as this will help in addressing the prevalent gaps in the service
quality that affect the operation in the budge hotel. The significance of the research lies in
identifying the potential service quality gaps in terms of customer and employee expectation and
perception that has both positive and negative impact on the operating system of the budget
hotels. Addressing the reasons of service quality issues will allow assessing the relationship
between service quality and budget hotel operation in hospitality and tourism industry thereby,
making it easy to compare and contrast service quality in the presence and absence of budget
hotel operation (Yousapronpaiboon 2014).
1.7 Structure of the dissertation
Six major chapters form the overall structure of the dissertation that comprises of
introduction, literature review, research methodology, data analysis, discussion, conclusion and
recommendations.
Chapter 1: Introduction
The initial chapter draws the foundation of the entire work by providing a background
about the research topic followed by research aim, objectives and hypothesis. This chapter also
justifies the reason of conducting the research by highlighting the research problem according to
the sector selected.
Chapter 2: Literature review
The literature review chapter that addresses the independent and the dependent variable
follows the first chapter. This chapter mentions the concepts, factors and relevant theories and

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variables according to the identified variables. This chapter helps in developing in-depth
knowledge and understanding of the research topic due to extensive research and critical
evaluation.
Chapter 3: Research methodology
The research methodology chapter provides an overview of the existing methodological
tools that can be used while carrying on a research. This chapter defines each of the
methodological tools followed by rationalizing the selection of the specific research
methodology for this study. Selection of appropriate and suitable research methodology is
necessary for developing a conclusive and authentic study.
Chapter 4: Data analysis
According to the selected methodologies in the previous chapter, this chapter analyzes
the data that is being collected. Data collection is necessary for knowing the opinion and
perspective about the selected study topic thereby, achieving the aim and objectives successfully.
Chapter 5: Conclusion and recommendations
As the name suggests, this chapter deduces a conclusion from the overall information and
findings in the above chapters by highlighting the research gap and providing suitable
recommendations. This chapter also highlights linking with objectives that ensures completion of
a research successfully.
1.8 Summary
Thus, in this chapter, it can be summarized that customers are the main aspect that
determines success in the service industry. Hospitality and tourism sector is mainly customer

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centric and customer satisfaction is one of the important factors for business growth, expansion,
profit maximization and revenue generation. In order to do so the budget hotels need provide
incredible and excellent service quality to the customers. The concept of budget hotel is new that
increases the necessity of ensuring exceptional service quality in the hospitality and tourism
industry. However, excelling service quality is difficult due to the various gaps between the
expectation and perception thereby, having an impact on the operating system of the budget
hotels.

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Service quality
Expected service
Perceived service
Expectations exceeded
Expectations met
Expectations not met
Chapter 2: Literature review
2.0 Overview
The first chapter provides a concise overview of the overall research successfully after
which the literature review chapter is formulated. This chapter mainly focuses on identifying the
independent and the dependent variables followed by defining the concepts and critically
analyzing the factors. This chapter reveals service quality and its effectiveness on budget hotel
operation that is dependent on customer loyalty, customer satisfaction and customer retention.
This chapter discusses service quality by referring to SERVQUAL model and discussing the
potential gaps between expectation and perception for internal customers, that is, the employees
and the external customers along with discussing relationship management theory.
2.1 Conceptual framework

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Figure 1: Conceptual framework
(Source: Created by Author)
2.2 Overview of hospitality and tourism sector
The travel and tourism industry is one of the largest and fastest growing industries in the
world and contributes largely towards economic growth. The direct economic impact of the
hospitality and tourism industry includes entertainment, accommodation, transportation and
attractions. The multiple fold growth of the hospitality and tourism sector has made travel fun,
easy, cost effective and safe. The hospitality and tourism industry contributed an estimated $8
trillion to the global economy in 2017 and is expected to cross $10 trillion by 2025 officially.
The World Tourism Organization said that an estimated 1350 million international tourists were
accounted. Additionally, the hospitality and tourism sector provides 1 out of 8 jobs in the world.
Another breakthrough in the hospitality and tourism industry is that the sector employs 55% of
global workforce as women while almost every sector is fighting gender biasness (Subramanian,
Gunasekaran and Gao 2016).
2.2.1 Define hospitality and tourism system
Hospitality and the tourism sector is a vast industry and are also the fastest growing
sectors in the world. The hospitality and the tourism sector comprises of three essential things for
the humans that includes food, dress and accommodation. Hotels are a part of the hospitality
industry that serves as an umbrella for a wide range of services such as food, accommodation,
restaurants and casinos. The maximum use of hotels is seen in the tourism sector, as the tourists
use hotel facilities while travelling. Taking into account the increased demand of travelling, be it
leisure or professional, has increased the demand of hospitality sector in the past years
(Guttentag 2015)

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2.2.2 Hospitality and tourism sector as a service sector
Hospitality and tourism sector is a service sector that that contributes largely towards the
economy of the countries. The hospitality and tourism sector is considered as one of the
successful service sector because this serves the customers as well as individuals with jobs. It has
been seen that the tourism and the hospitality sector offers an estimated 266 million jobs thereby,
contributing approximately 9.5% of the total GDP. Various countries such as South Africa,
Egypt and Nigeria have emphasized on improving the hospitality and the tourism sector for
continuous growth. The service sector of the hospitality and tourism sector include event
planning, lodging, cruise lining, traveling, theme park, transportation and additional fields
(Cheng 2016).
2.2.3 Accommodation sector
Accommodation is an extremely broad sector in the hospitality industry that includes
range of services such as breakfast and bed experiences and lodging services. The success in the
hospitality sector is largely dependent on the efficiency of the hospitality team. As mentioned by
Sloan, Legrand and Simons-Kaufmann (2014), lodging accommodation features a mammoth of
luxurious hotels to lavish resorts and campgrounds. Accommodation is a broad sector that aims
towards providing efficiency, comfort, and world class amenities to the foundations.
The three significant types of accommodation and hotels include lodging, resorts and
suites. Lodging is defined as only shelters for sleeping and keeping tourists safe from atrocities
of nature while travelling places. On the other hand, suites are types of accommodation that
offers luxury considering formal staying and are expensive compared to regular rooms. Resorts
are another type of accommodation that are highly preferable by the travelers, as this facilitates
closeness towards nature (Schuckert, Liu and Law 2015).

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2.3 Service quality and the relevant dimensions
2.3.1 Concept of service quality
Service quality plays a significant role in determining the success of any business
organizations. According to Dabholkar (2015), it is said to be an assessment that helps in
knowing whether the service delivered is up to the expectation of the customers. The business
organizations offering services often review and assess their service quality for enhancing the
service by prompt identification of issues thereby, ensuring better customer satisfaction.
However, a argued by Wang et al. (2014), service quality is a contemporary conceptualization
that helps in comparing the difference between expectation (E) and perception (P). The service
quality is calculated by the equation (SQ = P – E).
2.3.2 Service nature
The nature of service in the hospitality and tourism industry has to be caring, warm and
empathetic. In spite of having varied definitions of, generating a conclusive definition has not yet
been possible. According to Bansal and Taylor (2015), the service nature of hospitality and
tourism industry is based on kindness. The employees in this sector provide service in terms of
foods, drinks and accommodation with care and warmth. However, as argued by Taylan Dortyol,
Varinli and Kitapci (2014), service nature in the hospitality sector defines the relationship status
between the host and the customer. Positive relationship between the host and the customers
results in customer satisfaction thereby, indicating satisfactory service.
2.3.3 Service characteristics
As known, the hospitality and tourism industry provides wide range of service to the
customers for ensuring customer satisfaction. The hospitality sector has unique characteristics

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that give rise some challenges. The different characteristics of the hospitality industry are
product-service mix, two way communication, and diversity in culture, labor incentive and
relationship building (Han and Hyun 2015). Implementing the aforementioned services in the
hospitality sector ensures mitigating the gap between the perception and the expectation of the
customers. The product-service mix is determined by the successful execution and offering of the
tangible and intangibles followed by effective communication between the customers and the
hospitality organizations for mitigating the gap.
2.3.4 Dimensions of service quality
Different dimensions results in ensuring and offering successful service quality in the
hospitality and tourism sector. The five major dimensions that help in determining service
quality are tangibles, reliability, responsiveness, assurance and empathy. The customers have
their expectation standard while selecting a hotel when travelling but what they receive is not
always the same. Thus, the gap between the expectation and the perception in the customers is
judged by the five dimensions in the service sector (Kitapci, Akdogan and Dortyol 2014).
Tangibles are one of the five dimensions that determines satisfactory and appropriateness
of the service quality. According to Orel and Kara (2014), the first impression of the selected
hotel affects the service quality largely. The physical appearances such as the staffs, equipment
used and the facilities offered in the budget hotel determine the service quality standard. For
example, customers prefer hotels with fancy decorations, recent facilities such as internet
connection and well dressed and well-behaved staffs rather than hotels offering outdated
facilities and out of the trend equipment.

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However, as argued by George and Kumar (2014), apart from the first appearances, the
reliability ensures efficient operations of budget hotels in terms of service quality. Reliability is
the second dimension of measuring the service quality that highlights the efficiency of the
employees to deliver the service that is promised to the customers. For instance, while selecting
the hotel, the employees of the budget hotels ensure successful reliability by promising to deliver
the best. Failure in keeping the promise made by the employees questions the reliability thereby,
hampering the service quality of the budget hotel operations.
Responsiveness is said to be the third dimension of service quality that highlights the
spontaneity and promptness of the employees in serving the customers. According to Bezerra
and Gomes (2015), prompt responsiveness in service quality ensures successful budget
operation, as this highlights the willingness of the internal customers, that is, the employees to
help the external customers. Spontaneity and promptness towards the customers make them feel
valued and significant for the budget hotel thereby, resulting successful customer satisfaction and
loyalty. As a result, the image of the budget hotel improves thereby, gaining greater preference in
the hospitality and tourism sector.
However, as argued by Sharma (2015), apart from being responsive, assurance also
ensures better and improved service quality offered by the budget hotels. Assurance is said to be
the fourth dimension that determines successful service quality that ensures trust and confidence
of the customers on the budget hotel operations of the tourism and hospitality sector. Confidence
and trust are the two major factors that influence the customers to select a hotel while travelling.
The customers show trust and confidence on the facilities, the employees and the service offered
thereby, determining the selection of hotel. Increased customer trust and confidence highlights

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customer satisfaction and loyalty that maximizes or minimizes the preference of the budget hotel
operations.
According to Kaura, Durga Prasad and Sharma (2015), being empathetic is necessary in
ensuring superior service quality for budget hotel operation, as the employees show caring
attitude towards the customers. Customer satisfaction and loyalty is developed if the customer
feels empathy upon visiting the budget hotel while travelling. Customer satisfaction and loyalty
allows word of mouth promotion that helps the budget hotel gather more customers thereby,
ensuring profitability of the hotel.
The aforementioned five dimensions are used for measuring the effectiveness and
efficiency of service quality of budget hotel operations in hospitality and tourism sector.
2.4 Customers of a service organization
2.4.1 SERVQUAL model
SERVQUAL model is one of the significant and most popular models of measuring the
level of customer satisfaction in majority of the service industries. The concept of the model is
based on the customer analysis of service quality by finding the difference between the
expectation and the perceptions in service provision. Effective and satisfactory service quality
determines the budget hotel operation, as successful service quality ensures customer
satisfaction, loyalty and retention thereby, improving the image of the respective hotels.
However, the model is developed on the basis of seven gaps that potentially exist in the concept
of service quality. The formula of measuring service quality is “Q = P – E” (Parasuraman,
Zeithaml and Berry 1985).

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Gap 1: Gap between the management perception and the customer expectation is said to be the
first gap. This is a major gap for the external customers because the basic standards of the
management of the budget hotels might differ from that of the customers availing the service of
the hotel thereby, resulting in the gap. Additionally, big organizations have increased number of
management levels that leads to communication issues, as the higher management is unable to
know the actual desires and needs of the customers. Moreover, incorrect market research also
results in the formation of this gap.
Gap 2: Gap between the service specification and the management perception is said to be
second gap in service quality that arises due to commitment issues towards service quality by the
employees or managers, unequal task standardization and unclear and absence of clear goals. As
a result, the customers feel unattended and insignificant that affects their level of satisfaction and
loyalty and the image of the budget hotel.
Gap 3: Gap between the delivery and specification of the service is said to be the third gap in
service quality. The employees lack a clear idea of their job roles and responsibilities thereby,
resulting in the gap. Additionally, in spite of having an idea of their roles, the employees is
unable perform their roles and tasks successfully, due to ineffective guidance and inefficient
team work is noticed. As a result, the service quality of the budget hotel is hampered that affects
the customer satisfaction, retention, image and loyalty of the budget hotels.
Gap 4: Gap between external communication and delivery of service is said to be the third gap.
Promising more than the ability to deliver by the budget hotels to both internal customers, that is,
the employees and the external customers develops the gap. In this case, the budget hotels are
unable to fulfill the promise made to their employees and the customers in terms of service

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quality that affects their image thereby, questioning the successful operation in the hospitality
and tourism sector.
Gap 5: Gap between the expectation of the customers and the perception of the service that is
being delivered is said to be most important gap that helps in measuring service quality in a true
sense. This gap is related directly to the external customers and influences the foundation of the
SERVQUAL model. All the budget hotels in the hospitality and tourism industry aim towards
satisfying the customers by fulfilling their needs and demands that are highly distinctive.
However, the perception is not only based on the service but also of external factors such as
word of mouth and breakthrough of the competitors in the selected sector.
Gap 6: Gap between the perception of the employees and expectation of the customers is aid to
be the sixth gap and is also related directly with the external customers. If the employees are
unable to understand the expectation of the customers, it has an immediate effect on the level of
customer satisfaction thereby, hampering the image of the budget hotel operations.
Gap 7: Gap between the perception of the managers and the employees is said to be the seventh
gap that arises due to ineffective communication between the managers and the employees. Lack
of effective communication between the managers and the employees fails to deliver the best
service due to lack of clarity.
According to the concept of service quality, higher service quality can be achieved if the
gaps are minimized. Thus, it can be said that occurrence of even one gap affects the service
quality of budget hotel operation because the level of customer satisfaction is compromised.

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2.4.2 Significance of internal customers (employees)
The employees are designated as the female customers and are said to be the key pillars
that determines customer satisfaction, loyalty and retention. According to Raub and Blunschi
(2014), the employees are the ones representing the company in the business sector. Thus,
effective and efficient employee offers provision for better customer satisfaction that ensures
customer loyalty and retention. Empathetic employees shows caring attitude towards the
customers thereby, feeling that their presence is valued and enjoyed. The feeling of being
significant and important during their visit ensures customer satisfaction.
However, as argued by Wojtczuk-Turek and Turek (2016), employees are the ones
delivering the promise made by the business organizations in the specific business sector.
Fulfilling the organizational aim and objectives of the budget hotel operations for the customers
is dependent on the employees. In order to achieve this successfully, the employees have to
develop a clear understanding about the organizational aim and objectives, their respective job
roles and responsibilities and effective communication with the supervisor. Reliable employees
helps in ensuring customer satisfaction thereby, enhancing the image of the budget hotel
operations in hospitality and tourism sector. Increased numbers of satisfied employees help in
creating better image of the budget hotels thereby, ensuring customer loyalty and trust and
creating a better image and sustaining in the competitive market.
2.4.3 Understanding the difference between customer expectation and perception
The success of the business organizations relies of the customer expectation and the
customer expectation. However, both the concepts are different and needs clear understanding
for successful execution and fulfillment. According to Ren et al. (2016), customer expectation is
defined as the belief and assumption a customer have about the products and services of a

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specific business organization. The customers build expectations based on the marketing
undertaken by the companies. However, as argued by Ali and Raza (2017), previous experience
of the customers also helps in developing customer expectation about a company. Understanding
the expectation of the customers provides an opportunity for the business organizations to fulfill
their expectation thereby, ensuring customer satisfaction, loyalty and retention.
On the other hand, as mentioned by Karim and Chowdhury (2014), customer perception
is defined as the feeling of the individual customer about the product of an organization or the
service after using the product or service for the first time. The customer perception is influenced
by various physical and emotional factors that customers use while analyzing their experience.
The different factors influencing customer perception are credibility, reliability, competence,
communication and responsiveness. Thus, understanding the difference and gap between
customer perception and expectation in the hospitality and tourism sector is necessary for
ensuring improved service quality and sustaining in the competitive market.
2.5 Service quality and budget hotel operation
2.5.1 Relationship marketing theory
Developing and establishing a positive and healthy relationship is an integral part of
ensuring improved service quality of budget hotel operations. According to this theory, trust is
the major factor in integrating the corporate activity and the loyalty of the customers (Baker and
Saren 2016). As a result, increased trust helps in establishing a positive relationship between the
customers and the products or services offered by the business organizations. As mentioned by
Kozlenkova, Samaha and Palmatier (2014), the relationship marketing theory believes in
building long-term relationship with the customers for the growth of the business organization.

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Successful and improved service quality allows trust building in the hospitality and tourism
industry that develops long-term relationship. Trust of the customers is resulted due to customer
satisfaction followed by customer loyalty and retention. Successful implementation of service
quality allows the business organizations to identify and mitigate the potential gaps thereby,
earning customer trust and ensuring long-term relationship (Miquel-Romero, Caplliure-Giner
and Adame-Sanchez 2014).
2.5.2 Impact of service quality on customer retention of budget hotel operation
In the competitive market with so many hotels offering similar products and services,
service quality is used for gaining competitive advantage by retaining the customers. According
to Rahimi and Kozak (2017), improved service quality by the business organizations helps in
retaining the customers, as the customers feel highly satisfied. Retaining the customers is
essential, as the business organizations can count on the return on investments. The business
organizations are able to generate revenue by maintaining long-term relationships with the
customers by ensuring customer retention. The customers judge the quality of the service by the
ability to fulfill the expectation of the customers. Improved service quality helps in achieving
customer satisfaction that facilitates customer retention. However, as argued by Loureiro (2014),
service quality is not always able to retain customers because of the difference between
expectation and perception. Thus, successful budget hotel operation is difficult if customer
retention is inadequate due to unsatisfactory service quality.
2.5.3 Impact of service quality on customer loyalty of budget hotel operation
The concept of budget hotel is fairly new in the hospitality and tourism sector but is
gaining popularity quickly. In order to survive in the competitive market, it is necessary for the
budget hotels to build a loyal customer base. According to Xie, Zhang and Zhang (2014),

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improved service quality helps in identifying the existing gaps between customer expectations
and perceptions and delivering the customers what they want. Once the budget hotels are able to
mitigate the gaps in terms of their demands and needs, this ensures developing a satisfied
customer base that eventually leads to loyal customer base. The customers develop the trust that
they will not be disappointed upon visiting the budget hotel and tend to return to the same in the
future.
2.5.4 Impact of service quality on budget hotel profitability
Improved and successful service quality ensures profitability for the budget hotel thereby,
gaining competitive advantage. According to Saleem and Raja (2014), improved and successful
service quality helps in identifying the unhappy and unsatisfied customers due to the gaps in
service quality. Identifying the customers provides an opportunity for the business organizations
to lose customers as well as prevent negative word of mouth. As a result, the business
organizations are able to increase the revenue and profit. However, as argued by Ali, Hussain
and Ragavan (2014), improved service quality helps in understanding the needs and demands of
the customers and consider that while developing products and services. As a result, the business
organizations are able to attract more customers and retain the existing ones.
2.6 Summary
Thus, in this chapter, it can be summarized that the chapter reviewed past researches on
service quality on operation of hotels successfully by taking into account the existing gaps
between perceptions and expectations in both internal and external customers. The primary
factors that affect service quality of budget hotel operations are functional quality, technical
quality and the corporate image in the hospitality and tourism sector. Additionally, the existing
image of the budget hotel plays a significant role in the selection process by the external

27DISSERTATION
customers in the hospitality and tourism sector. Thus, it can be said that customer loyalty and
satisfaction can be achieved if the budget hotels in the tourism and hospitality sector ensures
satisfactory service quality.

28DISSERTATION
Chapter 3: Research methodology
3.0 Overview
This chapter provides an overview of the existing methodological tools that are known to
be used while performing a research study. Each of the research methodologies are defined with
their distinctive characteristics followed by justifying the selection of particular research
methodologies for this study by aligning the research topic. Appropriate selection and
justification of the methodological tools for each of the stances helps in developing a conclusive
and authentic study. The chapter is based on the different stances of the research onion that
includes research philosophy, approach, design, strategy, sampling technique, data collection
process and data analysis technique.
3.1 Research outline
For studying the impact of service quality of budget hotel operation, positivism
philosophy, deductive approach, descriptive design and survey research strategy. As survey
research strategy has been selected, 50 people are selected for surveying by using simple random
probability sampling technique. The data has been collected by circulating online survey
questionnaire that contains 20-25 questions that is developed for studying service quality of
budget hotel operations in hospitality industry. This suggests primary data collection process
followed by quantitative data analysis technique that is presented using SPSS software. The
selection of each of the research tools helps in studying the service quality of budget hotel
operations in hospitality and tourism industry.

29DISSERTATION
3.2 Research philosophy
Interpretivism, positivism and pragmatism are the three known philosophies that can be
used for researches. As mentioned by Mackey and Gass (2015), interpretivism philosophy
emphasizes on considering the perspectives of the human society regarding a specific research
topic and analyzes it further. On the other hand, positivism philosophy highlights the use of
factual knowledge that influences quantifiable observations by using appropriate logic. The data
derived by positivism philosophy are more valid and reliable, as they are scientifically tested.
Additionally, positivism philosophy is used for testing and proving the formulated hypothesis.
Pragmatism philosophy reflects both the characteristics of interpretivism and positivism
philosophy (Silverman 2016).
3.2.1 Explaining the use of positivism philosophy
The characteristics signify positivism philosophy as the most suited one. The use of
positivism philosophy is required when deduction approach is used. For this research, positivism
philosophy is favored, as this helped in testing the hypothesis formulated in the first chapter
thereby, figuring out whether service quality of budget hotel operation in hospitality and tourism
industry or not. Additionally, using positivism philosophy allows making quantifiable
observations in terms of service quality and budget hotel operation by using scientific knowledge
and logic that helps in understanding service quality and budget hotel operation in tourism and
hospitality industry (Taylor, Bogdan and DeVault, 2015).
3.3 Research approach
Inductive and deductive are the two known approaches that can be used for researches.
As the name suggests, inductive approach signifies inducing new theories and models according
to the observations made. However, on the contrary, deductive approach is based on deducing

30DISSERTATION
suitable observations according to the existing theories and models and the past researches.
Deductive approach also ensures transforming general information into specific information
(Flick 2015).
3.3.1 Explaining the use of deductive approach
The characteristics signify deductive approach as the most suited one. Firstly, deductive
approach is used because this is best suited when positivism philosophy is used. Additionally, the
application of deductive approach is offers the provision of referring to past and proven theories
and model of service qualities in respect to budget hotel operations in the hospitality and tourism
industry thereby, transforming general information to specific information of service quality of
budget hotel operation in hospitality and tourism industry (Vaioleti 2016). The use of deductive
approach for this research has facilitated the use of SERVQUAL model that is one of the best
models in understanding service quality by identifying the potential between expectation and
perception. As a result, the formulated hypothesis can be proved or rejected accordingly (Lewis
2015).
3.4 Research design
Explanatory, exploratory and descriptive are the three known designs that can be used for
researches. As the name suggests, descriptive design signifies describing the factors by
identifying and explaining the reasons. On the other hand, explanatory design signifies
explaining the reason of the issues whereas exploratory design signifies addressing or identifying
the issues only (Bresler and Stake 2017).

31DISSERTATION
3.4.1 Explaining the use of descriptive design
The characteristics signify descriptive research design as the most suited one. Using
descriptive research design is most suitable, as this offered the provision of identifying the
service quality problems by finding the expectation and perception issues of the customers and
the employees that gives rise to unsatisfactory service quality of budget hotel operations in
tourism and hospitality industry eventually broadening the gap. Additionally, identifying the
service gaps by understanding the difference between expectation and perception allows
suggesting ways for bridging the gap and enhancing service quality of budget hotel operations.
As a result, the improved quality standard allowed ensuring customer satisfaction and erase
stereotype expectation of availing a budget hotel (Alvesson and Skoldberg 2017).
3.5 Research strategy
Case study, action research, interview and survey are the four known research strategies
that can be used for researches. Each of the research strategies is different from one another due
to varied characteristics. Case study research strategy highlights referring to similar and relevant
studies in conducted in the past for justifying own findings. Action research signifies predicting
the occurrences of phenomenon in the future. Survey research strategy signifies data collection
from a large population whereas interview suggests collecting data from limited number of
individuals regarding the selected topic (Smith 2015).
3.5.1 Explaining the use of survey research strategy
The characteristics signify survey research strategy as the most suited one. Using survey
research strategy is appropriate, as this facilitates collecting data from a large population. The
data has been collected by circulating online survey questionnaire that contains 20-25 questions
that is developed for studying service quality of budget hotel operations in hospitality industry.

32DISSERTATION
While developing the survey questionnaire, it was kept in mind that it focuses on the gaps
between the perception and expectation in service quality that affects the hospitality and tourism
industry. Ability to collect data from a large population helped in considering wide range of
perspectives thereby, reducing biasness and giving effective results (Quinlan et al. 2019).
3.6 Sampling technique and sample size
Non-probability and probability are the two known sampling techniques that can be used
for researches. As the name suggests, non-probability sampling technique signifies lack of equal
chances for the individuals in a particular population to be a part of the data collection process.
On the other hand, the term random probability sampling technique itself highlights the random
opportunity for the individuals in a particular population to be associated with the data collection
process (Ledford and Gast 2018).
3.6.1 Explaining the use of simple random probability sampling technique
The characteristics signify simple random probability sampling technique as the most
suited one. The hospitality and the tourism is a wide sector thereby, selecting participants
individually is time consuming and ineffective. The aforementioned sampling technique allows
random selection of 50 people from the population of customers in the hospitality and tourism
sector that help in studying service quality of budget hotel operation in the sector. Random
selection of 50 people by using the sampling technique mitigates biasness thereby, ensuring
authentic data collection (Bauer 2014).
3.7 Data collection process
Primary and secondary are the two known data collection processes that can be used for
researches. As the term suggests, secondary data collection process allows collection of data

33DISSERTATION
from secondary resources. The various secondary resources that are used for collecting data are
books, journals, articles, online newspapers and other internet facilities. On the other hand, the
term primary data collection process indicates collecting data in the present from individuals
those have fair idea about the research topic. Primary data collection process helps in collecting
recent and updated information about the research topic (Dang and Pheng 2015).
3.7.1 Explaining the use of primary data collection process
The characteristics signify primary data collection process as the most suited one. Using
primary data collection process helped in taking into account the service quality of few budget
hotels that has received 4 or 5 stars along with considering the perspectives of the samples
selected for the study in terms of service quality of budget hotel operation in tourism and
hospitality industry. As a result, collecting present mind set about service quality offered in the
budget hotel is gathered, as the concept of budget hotel is gaining popularity due to touring
experiences such as backpacking (Choy 2014).
3.8 Data analysis technique
Qualitative and quantitative are the two known data analysis techniques that can be used
for researches. As the term suggests, qualitative analysis signifies analyzing the viewpoint and
opinion by interpreting and explaining the ideas gathered from the selected samples. On the other
hand, quantitative data analysis technique indicates analyzing the data from taking into account
the numbers in determining the positive and negative responses (Humphries 2017).
3.8.1 Explaining the use of quantitative data analysis technique
The characteristics signify quantitative data analysis technique as the most suited one.
Using quantitative data analysis technique is preferred as this is easy and simple than any other

34DISSERTATION
analysis techniques, as the technique is based on numbers. As a result, it is easy to collect
statistics for this research study thereby, ensuring data validity and reliability. In order to analyze
the data, reliability test, co-relation and regression tests have been done using SPSS software
(Walliman 2017).
3.9 Ethical considerations
Abiding by the ethics of the research and ensuring compliance results in successful
completion of a research. The list of ethical considerations while performing a research study is
furnished below:
 One of the most significant research ethics is data confidentiality. It is necessary to keep
the identity and the data shared by the participants confidential and disclosing them
against the consent of the individual is completely unethical. Identity and data disclosure
might lead to conflicts that are not encouraged (Haahr, Norlyk and Hall 2014).
 Harming of any species, be it animals, plants or humans are not at all encouraged while
carrying on a research.
 Willing participation is also a significant ethical consideration while performing a
research study. According to this ethics, forcing the individuals to be a part of the data
collection process is strictly prohibited. Therefore, making the individuals or the people
sign the consent form before collecting data is a way of research ethics compliance
(Fontana and Prokos 2016).
 Using the data and information collected for the research for commercial purpose is
against the research ethics. The information should only be used for academic purpose.

35DISSERTATION
 Manipulating the data and collecting the data from unauthentic sources are also against
the ethics of the research, as this can lead to the development poor quality and
unauthentic research (Bugos et al. 2014).
3.10 Accessibility issues
Both time and budget are the major accessibility issues that were encountered while
performing the research. Lack of adequate time forced the researcher to push the limits and
restricted conducting extensive and in-depth studies while developing the study. Additionally,
due to time inadequacy, regular follow ups with the research supervisor was also restricted that
questioned whether the research is going in the right direction or not. In addition to, availability
of limited budget prohibited accessing some of the significant and highly relevant past researches
and information due to which the information could not be used. Accessing the information
required paying certain amount that was not possible due to budget issues.
3.11 Summary
Thus, in this chapter, it can be summarized that the chapter has been successful in
underlying and defining the methodological tools that has been applied for this research. As a
result, it has been possible to study the impact of service quality of budget hotel operations in
tourism and hospitality industry. The application of the specific research tools allowed referring
to past researches and information about service quality, SERVQUAL model and budget hotel
operations in hospitality and tourism industry. The methods selected in this chapter ensured that
a conclusive and authentic study is developed at the end along with abiding by the research
ethics and overcoming the accessibility issues.

36DISSERTATION
Chapter 4: Data analysis
4.0 Overview
This is the data analysis section that analyses the collected data in terms of the impact of
service quality on budget hotel operations. The service quality has been determined by
considering both the expectation and perception of the customers upon visiting the budget hotels.
The expectation and perception of the customers are analyzed in respect to the five dimensions
of the service quality. Tangibility, responsiveness, assurance, reliability and empathy are the five
service quality dimensions that help in determining the service quality and identify the areas that
budget hotels need to improve in order to minimize the gap between customer expectation and
perception.
4.1 Descriptive analysis
Statistics
Gender Age Group How frequently
do you avail
hospitality and
tourism sector
N Valid 50 50 50
Missing 0 0 0
Age Group
Frequency Percent Valid Percent Cumulative
Percent
Valid 20-25 years 18 36.0 36.0 36.0
26-30 years 20 40.0 40.0 76.0
31-35 years 6 12.0 12.0 88.0
36 years and above 6 12.0 12.0 100.0

37DISSERTATION
Total 50 100.0 100.0
How frequently do you avail hospitality and tourism sector
Frequency Percent Valid Percent Cumulative
Percent
Valid
Weekly 10 20.0 20.0 20.0
Monthly 17 34.0 34.0 54.0
Yearly 16 32.0 32.0 86.0
Never 7 14.0 14.0 100.0
Total 50 100.0 100.0
Figure 2: Demographic factors
From the above demographic analysis, it can be indicated that the majority of the
customers in this study were male aged 26-30 years and avails budget hotel services on a

38DISSERTATION
monthly basis. It is supposed that the use of budget hotels in the hospitality and tourism sector
for the aforementioned demographics is the highest because they are more prone to travelling
both for leisure and official purposes. As the tourism and hospitality industry is rapidly gripped
by the budget hotels and offers reasonable use of money, it is widely preferred compared to the
already established and dominant hotels in the sector.
4.2 Inferential statistics
4.2.1 Reliability test
Reliability Statistics
Cronbach's
Alpha
Cronbach's
Alpha Based on
Standardized
Items N of Items
.987 .988 42
Cronbach’s Alpha test is conducted in order to determine the reliability of the questions
that has been developed for investigating the research topic. Cronbach’s Alpha value of more
than 0.805 indicates high level of internal consistency. Thus, reliability value or 0.805 and more
than that signifies that the questions developed are highly relevant. For this study, the reliability
test results obtained is 0.988. This indicates that the questionnaire developed for investigating
study in terms of the five dimensions of service quality is justified and highly reliable.
The expectation and perception of the customers in terms of service quality are divided
into five dimensions. Tangibility, responsiveness, assurance, empathy and reliability were the
main aspects based on which the service quality of budget hotels has been analyzed.

39DISSERTATION
The physical layout and outlook of the budget hotels are crucial in determining the gap
between customer expectation and perception. The concept of budget hotel is rapidly growing
and the rapid growth is also increasing the expectation of the customers when they visit it. In
terms of tangibility, the customers expect that the budget hotels have updated equipment,
visually appealing physical facilities, well dressed and neat employees along with ensuring
consistency in the appearance of the physical facilities. The questions developed in the
tangibility section are reliable because it aims towards understanding the expectation of the
customers based on the first impression.
The reliability dimension is also a crucial factor in determining the service quality of the
budget hotels. The customers expect the employees will deliver that is being promised at the first
go. Additionally, the customers also expect that the employees are sympathetic and reassuring
while handling their requests and needs. Additionally, in terms of reliability, the customers of the
budget hotels expect also expects highly dependable staffs, delivering within promised times and
ensuring accurate record keeping. The questions developed in the for determining the reliability
dimension of the service quality are suitable, as this aim towards identifying whether the
employees of the budget hotel are sympathetic, reassuring, dependable, deliver within promised
time and keep accurate records. Judging the employees based on reliability dimension helps in
determining whether the expectation of the customers in terms of employee reliability while
visiting budget hotels are fulfilled or not thereby, mitigating the gap between expectation and
perception of the customers.
The responsiveness factor of the service quality includes to the point answer, prompt
service, willingness to help and always available to help the customers. The customers travel to
places that they are not familiar with and require adequate assistance from the employees of the

40DISSERTATION
hotels. Therefore, the customers want employees that are highly responsive towards their queries
and needs. Upon visiting the budget hotels, the customers expect that the employees should be
clear about the service that they would offer without hiding followed by expecting prompt
services. The customers also expect the employees of the budget hotels to be willing to help
always and without compromise and are never too busy to respond promptly. These factors
under responsiveness dimension helps in determining service quality appropriately because the
questions analyzes the expectations of the customers from the employees while handling them
upon their visit.
One of major factors that influence the selection of hotels for the customers is the
assurance they offer. The customers expect complete assurance before or while selecting the
hotels. The customers expect that the employees are trustworthy, safe to interact, polite and
highly supportive. As a result, the customers can expect to rely on the employees of the budget
hotels in terms of the services offered to them. The customers feel satisfied when the employees
of the hotels are interactive and polite as well as are supportive and safe to communicate. As a
result, the queries and needs of the customers are solved promptly. The aforementioned
characteristics will help in fulfilling the expectations of the customers while visiting budget
hotels thereby, satisfying the customers.
Being empathetic is highly expected by the customer whenever the visit a hotel. The
customers expect that the employees of the budget hotel will be highly empathetic and give
individual attention to them upon their visit. The customers expect that the employees will treat
them with high significance and operate at hours convenient to all the customers. This is because
the customers feel free and comfortable in in accessing the services of the budget hotels. This
will ensure customer satisfaction, as the customers will have access to the services of the budget

41DISSERTATION
hotels irrespective of the time. However, the customers also believe that it is unrealistic that the
employees will understand the needs to the customers at the first go but should be aware of the
basic needs when a customer visits a budget hotel.
Therefore, from the reliability test value it can be confirmed that that questions developed
are highly reliable because it analyzes the expectations of the customers when they intend to visit
budget hotels and the satisfaction level thereby, mitigating the gap between customer expectation
and perception and improving the service quality of the budget hotels.
4.2.2 Co-relation test
Correlations
Expectation Perception
Expectation Pearson Correlation 1 .830**
Sig. (2-tailed) .000
N 50 50
Perception Pearson Correlation .830** 1
Sig. (2-tailed) .000
N 50 50
**. Correlation is significant at the 0.01 level (2-tailed).
Correlation is a statistical technique that shows the strong association between the pairs
of the variables thereby, determining the relationship of the factors with each other. The range
between -1 to +1 highlights the values of correlation between the variables. The correlation value
from 0 to -1 highlights negative association between the variables whereas correlation values
from 0 to +1 highlights positive association between the variables. The value 0 signifies no
association between the two variables. Very strong association between the two variables is
highlighted if the correlation value is higher than 0.7. Therefore, the co-relation test is done by
the researcher to determine the impact of service quality on budget hotel operations. According

42DISSERTATION
to the table given in the above-section, it can be seen that co-relation value between customer
perception and expectation is 0.830. This signifies that there is a strong association between the
customer expectation and the perception. Thus, it can be interpreted that customer expectation
and perception are interrelated and needs to be analyzed simultaneously for determining the
impact of service quality on budget hotels.
Both customer expectation and perception are integral part that determines service
quality. The budget hotels need to focus on the fulfilling the expectation of the customers
because the customers are the key pillars that determines the success of the business
organizations in the hospitality and tourism industry. The budget hotels should always aim
towards fulfilling the needs and expectations of the customers that reflects the standard of service
quality offered by the budget hotels. The test value signifies strong association between the
expectation and the perception of the customers thereby, signifying that both need to be
considered equally for improving the service quality of the budget hotels.
The employees of the budget hotels should emphasize on giving excellent service to the
customers. Ensuring customer satisfaction is the only way of mitigating the gap between
customer perception and expectation. The customers expect to take shelter in a hotel that is
visually appealing, offers the latest facilities and have empathetic employees. This makes the
stay of the customers comfortable and satisfactory thereby, minimizing the gap between
customer expectation and perception and signifying high service quality of the budget hotel.
Service quality influences the operation of the budget hotels because improved and better service
quality attracts more customers for the budget hotels.

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Budget hotels are rapidly rising and giving tough competition to the already established
and dominant hotels in the hospitality sector. As these are the new players of the tourism and
hospitality sector, effective and improved service quality of the budget hotels has a significant
impact on the hospitality and tourism industry. The budget hotels need to emphasize on the
employees for fulfilling the expectations of the customers. As the employees are the key aspects
that determines improve service quality, the budget hotels need to ensure that employees are able
to fulfill the expectations of the customers in terms of tangibility, reliability, responsiveness,
reliability and empathy.
The co-relation value signifies strong association between customer expectation and
perception because higher level of customer expectation highlights higher level of customer
satisfaction thereby, signifying better customer perception. The service quality of the budget
hotels are determined by the difference between the customer expectation and perception.
Considering the information provided about budget hotels in the previous sections, it can be
inferred that the budget hotels still need to work on the employees in order to offer better service
to the customers. The dominant and established hotels in the tourism and hospitality sector have
highly trained and skilled employees that are excellent in engaging and interacting with the
customers. Additionally, such hotels also use highly technological, updated and stylish physical
appearances for attracting the customers. Therefore, the budget hotels should focus on the
physical appearance, outlook and layout along with training the employees in order to fulfill the
expectation of the customer thereby, ensuring higher service quality.
Therefore, the co-relation value signifies strong association between customer
expectation and perception that indicates the service quality is co-related with the operations of
the budget hotels in the tourism and hospitality industry.

44DISSERTATION
4.2.3 Regression analysis
Model Summary
Model R R Square
Adjusted R
Square
Std. Error of the
Estimate
1 .830a .689 .682 .68604
a. Predictors: (Constant), Perception
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 49.989 1 49.989 106.214 .000b
Residual 22.591 48 .471
Total 72.580 49
a. Dependent Variable: Expectation
b. Predictors: (Constant), Perception
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
95.0% Confidence Interval
for B
B Std. Error Beta Lower Bound Upper Bound
1 (Constant) .417 .289 1.444 .155 -.164 .998
Perception .860 .083 .830 10.306 .000 .692 1.028
a. Dependent Variable: Expectation
In a statistical test, the null hypothesis signifies there is no significant difference
between the two variables taken for the research. If the P – value is less than 0.05, then the null
hypothesis is rejected whereas if the P – value is more than 0.05 then the null hypothesis is
accepted. The value of the P – value is determined by 95% confidence level. Additionally, the
difference between R2 and adjusted R2 are 0.689 and 0.682 respectively. The minimal difference
highlights a strong fit of the regression analysis thereby, signifying that the test is justified in this
case. The P-value obtained for the regression analysis is 0.000 indicates high significant

45DISSERTATION
difference. Therefore, the null hypothesis is rejected and the alternate hypothesis is accepted
thereby, stating that service quality has an impact on the operations of budget hotels.
In the competitive market with so many hotels offering similar products and services,
service quality is used for gaining competitive advantage by retaining the customers improved
service quality by the business organizations helps in retaining the customers, as the customers
feel highly satisfied. Retaining the customers is essential, as the business organizations can count
on the return on investments. The business organizations are able to generate revenue by
maintaining long-term relationships with the customers by ensuring customer retention. The
customers judge the quality of the service by the ability to fulfill the expectation of the
customers. Improved service quality helps in achieving customer satisfaction that facilitates
customer retention. However, the successful budget hotel operation is difficult if customer
retention is inadequate due to unsatisfactory service quality.
As the concept of budget hotel is fairly new, surviving the competitive market requires a
loyal customer base. Improved service quality helps in identifying the existing gaps between
customer expectations and perceptions and delivering the customers what they want. Once the
budget hotels are able to mitigate the gaps in terms of their demands and needs, this ensures
developing a satisfied customer base that eventually leads to loyal customer base. The customers
develop the trust that they will not be disappointed upon visiting the budget hotel and tend to
return to the same in the future.
Improved and successful service quality ensures profitability for the budget hotel thereby,
gaining competitive advantage. Improved and successful service quality helps in identifying the
unhappy and unsatisfied customers due to the gaps in service quality. Identifying the customers

46DISSERTATION
provides an opportunity for the business organizations to lose customers as well as prevent
negative word of mouth. As a result, the business organizations are able to increase the revenue
and profit. Improved service quality helps in understanding the needs and demands of the
customers and considers that while developing products and services. As a result, the business
organizations are able to attract more customers and retain the existing ones.
Developing and establishing a positive and healthy relationship is an integral part of
ensuring improved service quality of budget hotel operations. According to this theory, trust is
the major factor in integrating the corporate activity and the loyalty of the customers. As a result,
increased trust helps in establishing a positive relationship between the customers and the
products or services offered by the business organizations. The relationship marketing theory
believes in building long-term relationship with the customers for the growth of the business
organization. Successful and improved service quality allows trust building in the hospitality and
tourism industry that develops long-term relationship. Trust of the customers is resulted due to
customer satisfaction followed by customer loyalty and retention. Successful implementation of
service quality allows the business organizations to identify and mitigate the potential gaps
thereby, earning customer trust and ensuring long-term relationship
The employees are designated as the female customers and are said to be the key pillars
that determines customer satisfaction, loyalty and retention. The employees are the ones
representing the company in the business sector. Thus, effective and efficient employee offers
provision for better customer satisfaction that ensures customer loyalty and retention. Empathetic
employees shows caring attitude towards the customers thereby, feeling that their presence is
valued and enjoyed. The feeling of being significant and important during their visit ensures
customer satisfaction. Employees are the ones delivering the promise made by the business

47DISSERTATION
organizations in the specific business sector. Fulfilling the organizational aim and objectives of
the budget hotel operations for the customers is dependent on the employees. In order to achieve
this successfully, the employees have to develop a clear understanding about the organizational
aim and objectives, their respective job roles and responsibilities and effective communication
with the supervisor. Reliable employees helps in ensuring customer satisfaction thereby,
enhancing the image of the budget hotel operations in hospitality and tourism sector. Increased
numbers of satisfied employees help in creating better image of the budget hotels thereby,
ensuring customer loyalty and trust and creating a better image and sustaining in the competitive
market.
4.3 Summary
Thus, in this chapter, it can be summarize that in budget hotels the gap between customer
expectation and perception is wide that is compromising the service quality. This is because the
budget hotels are unable to fulfill the expectations of the customers in terms of tangibility,
responsiveness, assurance, empathy and reliability that is resulting in customer dissatisfaction.
As a result, though the customers are visiting the budget hotels with high expectations, their
perception is low. The reliability test result highlights that the questions developed for the study
are aligned because it has an internal consistency of .988. Therefore, the questionnaire developed
is suitable for determining the gap between customer expectation and perception for budget
hotels. The results obtained from the regression analysis also highlights significant difference, as
the result obtained is 0.000 thereby, rejecting the null hypothesis. Therefore, it can be inferred
that service quality has an impact on operation of budget hotels successfully.

48DISSERTATION
Chapter 5: Conclusion and recommendations
5.0 Conclusion
Thus, in this chapter, it can be concluded that service quality has an impact on the budget
hotel operation in the hospitality and tourism industry. The hospitality and the tourism sector is
mainly customer centric and the success of this sector on the ability of the business organizations
to fulfill the expectations and perceptions of the customers. As a result, all the business
organizations in the hospitality and tourism sector aim towards ensuring customer satisfaction in
terms of customer service. As known from the information provided, budget hotels are on the
rise due to the rapid expansion of the hospitality and tourism sector that aim towards serving the
customers taking trips such as backpacking and it is necessary to satisfy the needs of the
customers by ensuring excellent service quality. The service quality in the hospitality and
tourism sector is defined by categorizing the entire service into five dimensions.
However, issues in the service quality in the hospitality and tourism sector for budget
hotels are evident due to existing differences between the customer expectation and perception.
The service quality issues in the budget hotels are noticed due to existing differences between the
personalities, needs, demands and requirements of the customers. For instance, the expectation
and perception in terms of tangible dimension of one customer visiting the budget hotel is
different from another. Therefore, considering the wide range of expectations and perceptions of
the customers is a gap that has been identified in this study. Additionally, service quality in
budget hotels is also compromised due to unappealing physical appearance of the hotels, the lack
of reliability, assurance, responsiveness and empathy of the employees while handling
customers.

49DISSERTATION
From the data analysis, it can be inferred that the customers expect to be handled and
attended with care and affection upon their visit to the hotels. However, the customers come in
with an expectation of being treated and served upon their visit but their level of satisfaction
upon visiting determines the perception of the customers. The results obtained highlight the
reliability value that indicates high internal consistency between customer expectation and
perception. Therefore, successful operation of the budget hotel can be ensured when the gap
between the customer expectation and perception is mitigated. The expectations of the customers
are fulfilled in terms of tangibility, responsiveness, assurance, empathy and reliability upon
visiting the budget hotel that will lead to customer satisfaction. As a result, customer satisfaction
will mitigate the gap between customer expectation and perception and ensure effective and
excellent service quality on budget hotel operation.
5.1 Linking with objectives
Objective 1: To identify general service quality on budget hotels
Objective 1 is linked with section 2.3 of the literature review. This section provides a
clear concept about service quality, the service nature, service characteristics and the five
distinctive dimensions of service quality. The information in these sections of the literature
review helps in identifying the general service quality attributes for successful operation of
budget hotels in hospitality and tourism sector. Objective 1 is also linked with the main factors of
the survey questionnaire that has been developed, as the main factors are further categorized that
helps in identifying each of the service quality features under each of the dimensions in terms of
customer expectation and perception.

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Objective 2: To identify feedbacks from customers on how they experienced service quality
in budget hotels
Objective 2 is linked with section 2.5 of the literature review. These sections of the
literature review sheds light on the feedbacks that are considered from the customers about their
experience about service quality upon visiting budget hotels. Considering the feedback of the
customers help in understanding where the budget hotels lack in terms of the five dimensions of
service quality that affects their experience in budget hotels. Objective 2 is also linked with the
survey questionnaire developed, as it focuses on the satisfaction of the customers based on the
various attributes of the five service quality dimensions on budget hotels.
Objective 3: To understand what are the obstacles that disturb budget hotels to improve on
service quality
Objective 3 is linked with section 2.4 of the literature review section. This section talks
us through the various gaps that business organizations encounter that creates obstacles and
disturbs budget hotels to improve on the service quality. This section mentions the seven gaps
that increase the gap between customer expectation and perception thereby, creating obstacles
that restrict the budget hotels in improving on service quality. The data collected in terms of the
perceptions of the customers of service quality helps in understanding the major obstacles that
disturb budget hotels in improving on service quality.
Objective 4: To observe how does service quality of budget hotels give impact on hospitality
and tourism industry
Objective 4 is linked with section 2.5.2, 2.5.3 and 2.5.4 of the literature review section.
These sections observe the impact of service quality of budget hotels on the hospitality and

51DISSERTATION
tourism industry. As known from the information provided in the previous section, budget hotels
are rising rapidly and constitute a large section of the hospitality and tourism sector. Therefore,
service quality issues of the budget hotels affect the overall image of the tourism and hospitality
industry negatively.
Objective 5: To predict how the service quality of budget hotels will be improve in the
future
Objective 5 is linked with section 2.4.3 of the literature review. This section helps in
understanding the difference between customer expectations and perceptions in budget hotels.
Considering the perceptions of the customers helps in identifying the aspects that budget hotels
need to improve in order to fulfill the expectations of the customers.
5.2 Recommendations
Based on the concept of budget hotels and their operations, the suitable recommendations
for improving service quality of budget hotels are listed below:
Giving the employees clear and consistent standards
The employees needs to be given clear and consistent standards about how the
customers’ needs to be served upon visiting the budget hotels. This consistency will help the
employees stick to the basic service quality standards in respect to tangibility, responsiveness,
empathy, assurance and reliability the customers expect when they visit the budget hotels.
Encourage customer feedbacks
The only and best way of improving the existing services is to know what the customers
want in terms of service when they visit a hotel. This is because the needs and expectations of

52DISSERTATION
the customers keeps on changing and encouraging customer feedback is a way to know the latest
service quality expectations of the customers. As a result, the budget hotels can prepare and
modify their service quality that will help in mitigating the customer expectation and perception
gap.
Evaluate regularly
Evaluating the service standards offered by the budget hotels is will also help in
improving service quality of the budget hotels, as regular monitoring will help in identifying the
areas the budget hotels lack and work on it for further improvement.
Eliminate biasness
Eliminating the existing biasness among the employees while providing service will help
in mitigating the gap between customer expectation and perception. As a result, the employees
will provide equal and similar services to all the customers visiting the hotels regardless of any
personal factors. This will help in uplifting the service standard of the budget hotels, as all the
customers expects to be treated equally and are treated equally as well thereby, ensuring
customer satisfaction.
Provide advanced technologies
As the budget hotels have limited financial resources that they allocate for offering
services to the customers, the hotels should focus of providing advanced technological services
to the customers. For instance, free WiFi connections can enhance the level of customer
satisfaction, as internet is a necessity for the customers’ and getting it for free up lifts the
customer satisfaction.

53DISSERTATION
5.3 Future scope of the study
From the data analysis, it could be seen that the study focuses on the male customers
aged 26-30 years using budget hotel services on a monthly basis. Hence, in the future research
can be conducted by focusing on another demographic sector, that is, customers belonging to
different gender, age group and frequency of using budget hotels. This will help in understanding
the customer perceptions and expectations of service quality when they intend to visit budget
hotels.

54DISSERTATION
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Appendix 1
Survey questionnaire
Main factor Questions
Tangibles Up-to-date equipment in the hospitality and tourism sector
Physical facilities are visually appealing in the hospitality and tourism
sector
Well dressed and neat employees in the hospitality and tourism sector
Appearance of the physical facilities are consistent in the hospitality
and tourism sector
Reliability The employees of the hospitality and tourism sector meets their
promised time frames
The employees of the hospitality and tourism sector is sympathetic
and reassuring to the problems of the customers
The employees of the hospitality and tourism sector is dependable
The employees of hospitality and tourism sector provides services at
the promised times
Accurate records regarding the customers are kept by the hospitality
and tourism sector
Responsiveness The hospitality and tourism sector should be expected to tell
customers exactly when the service will be performed
It is reasonable to expect prompt service from employees in the
tourism and hospitality sector
Employees always have to be willing to help customers in the
hospitality and tourism sector
It is not alright to be too busy to respond promptly to customer
requests for the employees of the hospitality and tourism sector
Assurance Employees of the hospitality and sector should be trustworthy
Customers should feel safe when interacting with the employees in the

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hospitality and tourism sector
Employees should be polite in the hospitality and tourism sector
Employees should give adequate support from the hospitality and
tourism sector to do their job well
Empathy Firms should be expected to give each customer individualized
attention in the tourism and hospitality sector
It is unrealistic to expect that the employees of the tourism and
hospitality sector to fully understand the needs of the customer
It is unreasonable to expect the employees of the tourism and
hospitality sector to have the best interests of the customer at heart
Firms in the tourism and hospitality sector should necessarily have to
operate at hours convenient to all customers