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

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:

1DISSERTATION
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