Chapter 1

INTRODUCTION

Background of the Study

The challenge for all organizations in this industry is to ensure that their personnel

always provide at least the level of service that their guests want and expect-every time,

perfectly. Even more challenging for those in hospitality organizations is the simple

reality that service quality and service value are defined not by managers, auditors or

rating organizations. They are defined entirely in the mind of the guest.

So how do we measure quality in hospitality sector? This is what we refer to as

Total Quality Management (TQM). Total quality management (TQM) is an approach to

management that focuses on quality as the key to success. TQM originated in a

manufacturing environment and its terminology and techniques have largely been

developed in that environment. Its application in a service environment thus requires

adaptation of the ideas to a different set of circumstances.

The hospitality industry is made up of organizations that offer guests courtesy,

food, drink, and lodging services, alone or in combination. But the hospitality industry is

more than just hotels and restaurants. Beyond these, the industry has been defined in

many ways. An expanded definition would include theme parks, airlines, gaming centers,

cruise ships, trade shows, fairs, meeting planning and convention organizations.

In today’s highly competitive business environment, a company’s capability to

sustain its competitive advantage is crucial for the continuity of the business (Calingo,

1996). Quality is the most important factor for sustaining the competitive advantage. It is
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the measurement of how well a company can meet or exceed its customers’ requirements

and expectations (Oakland, 2003).

One of the fastest growing sectors of the economy in our time is the hotel

industry. The hotel industry alone is a growing enterprise. It is exciting, never boring and

offers unlimited opportunities. The hotel industry is diverse enough for people to work in

different areas of interest and still be employed within the hotel industry.

The hospitality industry has strong market competition; therefore, customer

satisfaction and retaining loyalty will be crucial for a hotel’s success. The Total Quality

Management (TQM) methodology can help organizations to achieve business excellence

by improving customer satisfaction (both internal and external), cost effectiveness and

competitive advantage (SME Toolkit, 2011). This methodology is useful for the

hospitality industry. In a hotel, any quality problem will induce guest complaints; the

impact is direct and immediate without any time delay. Also, a hotel serves human beings

and no two people are alike. People have different preferences and requirements which

makes it more difficult to control quality in a hotel.

According to Walker and Miller (2010), given an increasingly competitive market

and fluctuations in guest service levels in many hospitality organizations, it is no wonder

that so many companies have adopted a Total Quality Management (TQM) continuous

improvement process. TQM is a concept that works well in the hospitality industry,

because its goal is to ensure continuous quality improvement of services and products for

guests.
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For successful TQM practice, organizations have to integrate the quality

management into the business strategy and to align the goals both horizontally and

vertically throughout the various levels within the organization.

Nowadays, almost all hotels focus on quality management to improve their

business. Oakland (2003) emphasizes that TQM is about teamwork; every functional

department must work cohesively together and support each other in order to achieve

business excellence. The effectiveness of teamwork determines the success of TQM in

each hotel; this is why some hotels have better performance than others.

Modern methods of quality control were developed and matured in manufacturing

industries. These involve the processing and fabrication of materials into finished durable

and nondurable goods. Service, however, is a relatively distinct non-manufacturing

activity. Work is performed for someone else.

In service provision the situation is very different. The involvement of the

customer makes the definition of quality varying from moment to moment. 'Service'

cannot be stored, so the measurement must be immediate. Finally, the service is delivered

at the moment it is produced. Any measurement taken is thus too late to avoid a failure in

contact with the customer. The critical difference in the application of TQM to service

industries thus lies in the area of quality measurement and it is this issue that the

researcher shall address in this paper.

In measuring quality in service organizations, the researcher focuses on three

components of the guest experience. According to Ford, Sturman and Heaton (2012), the

three components of the guest experience are the service product, the service setting

and the service delivery system. The service product, sometimes called the service
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package or service/ product mix, is why the customer, client, or guest comes to the

organization in the first place. The second component of the guest experience is the

setting or environment in which the experience takes place. The third part of the guest

experience is the service delivery system, including the human components and the

physical production process plus the organizational and informational systems and

techniques that help deliver the service to the customer.

Services are partly or wholly intangible. If the service rendered includes a

tangible item, then the total guest experience is the sum of the service-product mix, the

environment within which it is delivered, and the service product’s delivery. Because all

or part of the service product is intangible, it is impossible to assess the product’s quality

or value accurately or objectively, to inventory it, or to repair it. Since the customer

decides whether or not quality is acceptable or value is present, the only way to measure

either quality or value is through subjective assessment techniques, the most basic of

which is to ask the customer. A second implication of this intangibility characteristic is

that every guest experience is unique. The less tangible the service provided, the more

likely each guest will define the experience differently. The point is simple: Since ever

guest is unique, every guest experience will also be unique. Another implication of

intangibility is that hospitality organizations cannot keep an inventory of guest

experiences. The inability to inventory experiences has important implications for

hospitality organizations. One of the more important is the management of capacity.

Because capacity is limited and demand for guest experiences varies over periods of time,

capacity must be carefully managed to meet demand. Finally, because services are

intangible and therefore difficult to comprehend fully before they are delivered and
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experienced, organizations wanting guests to try their services rather than those of

competitors must find ways to make the intangible tangible. Tangibles help organization

members form a mental image of what their service should be like and what their

organization’s quality should be.

In the hospitality industry, the terms quality, value, and cost have specialized

meanings to fit the guest-focused orientation of the benchmark firms. The quality of the

entire guest experience or of any part of it is defined as the difference between the quality

that the guest expects and the quality that the guest gets. If the two are the same, then

quality in this special sense is average or as expected. If you got more than expected,

quality was positive. If you got less than expected, quality was negative.

Total Quality Management (TQM) methodology can help organizations to

achieve business excellence. This methodology is also useful for the hospitality industry.

Almost all hotels focus on quality management to improve their business by enhancing

customer satisfaction, competitive advantage and retaining guest loyalty. TQM is

teamwork; every functional department must work cohesively together and support each

other in order to achieve business excellence. This thesis is aimed to find out how Total

Quality Management (TQM) affects performance among selected hotels in Subic Bay

Freeport Zone (SBFZ).

Significance of the Study

This study will hopefully benefit the following:

Customers. This study would be able to benefit customers. Since the company

has better products and services due to TQM, and its interactions with customers are

relatively error-free, there should be fewer customer complaints. Fewer complaints may
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also mean that the resources devoted to customer service can be reduced. A higher level

of customer satisfaction may also lead to increased market share.

Instructors and Students. Instructors and students in the business field will

enhance their understanding of TQM and how important its application is in the

hospitality industry. That is why this study will be handy to most instructors and students.

Managers. Managers are obligated to perform well in any business. Managers are

responsible for monitoring the hotel’s performance. And since TQM has a strong

emphasis on improving quality within a process, rather than inspecting quality into a

process, this not only reduces the time needed to fix errors, but makes it less necessary to

employ a team of quality assurance personnel. TQM makes any manager’s job easy.

TQM works best in an environment where it is strongly supported by management, it is

implemented by employee teams, and there is a continual focus on process improvement

that prevents errors from occurring.

Owners. Profitability is the main reason for putting up a business. This study will

benefit owners in a sense that they will learn different strategies to increase the growth of

their business. Knowing how TQM impacts the organization’s strategies is very much

useful.

Prospective Investors. When applied consistently over time, TQM can reduce

costs throughout an organization. Since these cost reductions flow straight through to

bottom-line profits, there can be a startling increase in profitability. Profitability is

usually the focus of every prospective investor.

Staff. The ongoing and proven success of TQM, and in particular the participation

of employees in that success can lead to a noticeable improvement in employee morale,

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which in turn reduces employee turnover, and therefore reduces the cost of hiring and

training new employees.

Statement of the Problem

The study aims to find out the effects of Total Quality Management (TQM) in the

performance of selected hotels in Subic Bay Freeport Zone (SBFZ).

Specifically, it will seek answers to the following questions:

1. What is the profile of the respondents in terms of:

1.1 Age

1.2 Gender

1.3 Civil Status

1.4 Socio-Economic Status

2. What is the profile of the hotels in terms of:

2.1 Quality Food and Service Offered;

2.2 Facilities;

2.3 Accreditation;

2.4 Staff Personal Involvement;

2.5 Staff Welfare and Training;

2.6 Marketing Practice;

2.7 Benchmarking Practice;

2.8 Management Strategy;

2.9 Competitive Advantage; and

2.10 Customer Relationship Management?

3. How is TQM applied in the operations of selected hotels?

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4. How may the performance of selected hotels be described along the perceived

areas of Total Quality Management?

4.1 Service Product

4.11 Tangible

4.12 Intangible

4.2 Service Setting

4.21 Ambient Conditions

4.22 Use of Space

4.23 Functional Congruence

4.24 Signs, Symbols, & Artifacts

4.25 Other People

4.3 Service Delivery System

4.31 Communicating and Planning

4.32 Measuring and Managing

4.33 Fixing Failures

5. Is there a significant difference in the performances of the selected hotels along

the three areas of TQM?

6. Is there a significant difference in the performances of hotels according to

respondents when grouped according to customer profile?

Scope and Delimitation

The study will be delimited to the five selected hotels in Subic Bay Freeport Zone

(SBFZ) for the year 2016. This location is chosen since SBFZ is where most hotels can

be found and still within the region where the respondent’s domicile is. The study aims to
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find the effects of Total Quality Management (TQM) to the performances of selected

hotels in Subic Bay Freeport Zone (SBFZ).

The study is delimited to five hotels such as The Grand Hoya Hotel, The Reef

Hotel and Residence, Subic Bay Holiday Villas, Terrace Hotel Subic Bay and Vista

Marina Hotel & Resort. The study was only delimited to five to be able to carefully

observe and measure the effects of Total Quality Management (TQM) to selected hotels

in Subic Bay Freeport Zone (SBFZ). There are various hotels in SBMA that were not

included.

The study will be further delimited to customers who are staying at the hotel at

the time of taking the survey, including the hotel’s managers and service staff, to be able

to assess the hotels’ current performances.