2020 8th International Conference on Reliability, Infocom Technologies and Optimization (Trends and Future Directions) (ICRITO)
Amity University, Noida, India. June 4-5, 2020
Impact of Hotel Classification on Service Quality-
A Case Study of the Indian Hotel Industry
Tahir Sufi Satinderpal Singh
Amity School of Hospitality Department of Business Management
Amity University, Uttar Pradesh Chandigarh University
Noida, India Gharuan, Punjab
tsufi@amity.edu 76satinderpal@gmail.com
Abstract— Hotel classification systems are prone to
criticism for overemphasising infrastructure and facilities at
the expense of service quality. Hotel professionals in India also
are debating the relevance and effectiveness of the Hotel
classification system. This case study explored the impact of
hotel classification system on service quality as perceived by
the hotel managers. A survey of one hundred forty-seven
managers of classified hotels was conducted in north India
through a structured questionnaire. The stepwise linear
regression between the different constructs of the hotel
classification system and overall hotel service quality revealed
the positive impact of hotel classification on hotel service
quality across all star categories
Keywords— Hotel Classification systems, service quality,
stepwise regression, classified hotels.
I. INTRODUCTION
The professional hotel industry in India witnessed
incredible growth over the decades, especially after
Independence in 1947. The Government's first initiative
towards establishing the professional hotel Industry was
setting up of Indian Tourism Development
Corporation(ITDC) in 1966 to fulfil the country’s hospitality
requirements (Devendra, 2001). The economic reforms of
1990 made the Indian Hotel Industry more competitive and
professional in its approach and also promoted the growth of
private entrepreneurs. Several Indian hotel chains like Taj
Hotels, Oberoi hotels become world-renowned for providing
exceptional service Quality. Apart from commercial hotels,
even the Spa Industry in India made its mark on the
international stage. “Ananda In The Himalayas” a
destination Spa, won numerous international awards.
However, unfortunately, the number of such success stories
is limited. Several instances are reported, where travel agents
sell some five-star hotels as four-star properties, to overcome
dissatisfaction with the promised five-star rating. Such cases
have only raised questions about the effectiveness of hotel
classification system in providing the ratings to hotels they
deserve (Nath, 2013).
A review of the literature confirms such doubts about the
hotel classification system, in spite of its many claims. The
primary objective of the hotel classification systems
according to (Failte Ireland, 2017) is “informing customers to
recognise quality and to help in differentiating between the
levels of facilities and services”. Hotel Classification India
also emphasises that the objective of such a system is
“providing contemporary standards of facilities and services
available in the hotels (Hotel Classification, 2017). Similarly,
(Visit Scotland, 2017) stresses “raising quality standards in
line with the ever-evolving expectations of consumers”. In
spite of this background, several studies have refuted such
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Manohar Sajnani
Amity Institute of Tourism & Travel
Amity University, Uttar Pradesh
Noida, India
msajnani@amity.edu
claims of hotel classification systems. Briggs, Sutherland &
Drummond’s (2014) study on Scottish hotels found that such
systems focus on tangible aspects of the hotel only and
ignore the service quality. Such doubts about the hotel
classification system are prevalent in India as well (Nath,
2013). The reason why hotel classification systems fail to
ensure hotel service quality is the gap between customers’
expectations and experience. Customers have high
expectations from high star-rated hotels (Ariffin & Maghzi,
2012), but the hotel ratings provided by the classification
system do not guarantee quality. In the backdrop of such
apprehensions about the hotel star rating, this case study,
therefore, attempts to explore the impact of hotel
classification system on hotel service quality as perceived by
hotel managers and customers.
II. REVIEW OF LITERATURE
The primary objective of the hotel classification system
also referred to as “hotel-rating system” is informing the
travellers about the facilities and services offered by the
hotels to reduce the gap between expected and experienced
facilities and service delivery. The hotel star-rating system,
therefore, is expected to evaluate hotels based on specific,
measurable characteristics like infrastructure, amenities,
facilities and hotel services to create the hierarchy of
hotels(Holloway and Humphrey’s, 2016). Hotels are
classified either by the Government agencies, called as the
“official” classification system, or it can be the “unofficial”
classification system, carried out by the private organisations
like hotel or trade associations. The hotel classification
system has many advantages from hoteliers and customers'
perspectives ( Li, Ye, Law(2013). The system provides an
opportunity for fair competition between hotels, makes the
marketing and positioning of the hotels easier (Proposal,
2017). For hotels, the benefits include confidence in
consumers for purchasing higher priced rooms, providing
comparable information through natural symbols like stars
and diamond’s (UNTWO, 2014) and symbols act like the
marketing and promotional tool for hotels (Quo 2014).
In spite of many benefits, hotel classification schemes
suffer from several flaws. Such systems primarily rely on
infrastructure and facilities for hotel evaluation. Several
studies have indicated that the hotel rating systems put a lot
of stress on quantitative structural factors like room size, bed
size, furniture instead of on service (Lyu, 2016). The
disregard towards service quality is thereby rendering such
schemes ineffective for ensuring customer satisfaction (
Baccarani, Ugolini and Bonfanti, 2017). The study by (
Briggs, 2014) on the Scottish hotel industry also reported that
the classification scheme relies on an infrastructure mainly
for evaluating. Customer satisfaction is dependent on the
ability of the hotel to meet customer requirements (Lopez &
Bedia, 2017).
The Internet also has posed yet another serious challenge
to the rating systems (Mohsin & Lockyer, 2010). The online
rating systems have become a more effective source of hotel
information. Torres, Adler, Behnke(2014) reported that the
hotel ratings from hotel review websites and online travel
agents (OTA’s) have made the traditional hotel classification
redundant. Such sources provide more candid pictures of the
properties and experiences shared by travellers. A large
number of reviews by customers provide detailed
information that helps travelers in booking related decisions
in a better way (Lanz, Fischhof, & Lee, 2010).
The virtual platform with a massive database of feedback
and ratings by the guests who have stayed in hotels has given
one more option to the guest apart from hotel classification
rating to make a purchase decision. Quo’s (2013) study
indicated that due to inherent drawbacks, the hotel rating
system took a back seat because of the soaring popularity of
the online hotel ratings. The study also indicated that the
hotel classification system has a minimum influence on the
hotel booking decision because the customer’s level of trust
is highest for guest feedback websites rather than the official
rating system.
The cases of integration of hotel reviews and hotel
classification system under two options are reported. The
first one is "full integration" mode, where a hotel can move
up or down a star level depending upon the guest's perception
of its service quality. The second option of "comparative
performance" includes guest review rating displayed
separately to the hotel classification without integration. The
TABLE I. DIFFERENT TYPES OF HOTEL RATING SYSTEMS OF THE WORLD
HOTEL CLASSIFICATION SYSTEM
Hotel Classification Country Official / Unofficial Voluntary/
system
European Union, Austria,
Belgium, Czech Republic,
Denmark, Estonia, Germany,
Greece, Hungary, Latvia,
HOTEL STAR UNION Lithuania, Luxembourg, Malta,
Netherlands, Sweden,
Switzerland
AAA Diamond Rating United States
Visit England United Kingdom
Gastro Suisse Switzerland
Indian Hotel
Classification system India
The hotel classification system of India:
Nine years after India became independent, the
Government of India, established the “Hotel standards and
rate structure committee” in 1956 to promote tourism and set
the hotel classification system considering the international
standards. The committee also suggested the suitable rate
structure for the Hotel Industry and chose the use of stars as
symbols for the point-based hotel classification system.
However, no significant changes were made in the system
over the decades and subsequently, apprehensions about the
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full integration model is already in use in Norway. The
combination is achieved using a series of formulae into the
formal classification. Under “comparative performance
mode” as in Switzerland, the guest ratings and the hotel
classification is written separately without integrating
(UNTWO 2014). Hotel Review website “TrustYou” allows
the hotel chains to incorporate the hotel reviews and to rate
(TrustYou score) on their websites. Hotel chains like
Marriott have started their rating process. (Anderson, 2011)
recommends the integration of guest review and hotel
classification; it helps the hotels in improving its services,
image, and revenue.
Overcoming the customer expectations is yet another
challenge for such hotels because of the direct association of
customer expectations of hotel service quality with the star
ratings. The high expectations with higher star rated hotels
result in higher expectations of customers with higher star
rated hotels. Affirin and Maghzis's (2012) study has indicated
star-ratings have a strong influence on the level of
expectation of hotel hospitality. The high customer
expectations are forcing travel agents in India to sell five-star
hotels as four-star properties (Nath, 2014). Incidents as such,
raise questions on the effectiveness of hotel classification
systems in evaluating hotels and establishing confidence
among travellers. Taking an extreme view, Sharke (2009)
made a strong case for scraping the Visit England
classification system because of the massive gap between
what such ratings claim to stand for and what they deliver.
Table 1 explains the different types of hotel
classification/rating systems around the world, the number of
hotels such systems evaluate etc.
Year started Number of Hotels
Mandatory
Unofficial: Sweden & Mandatory in 2009 30000( including
Switzerland Lithuania restaurants)
Official in: Voluntary in
Malta, Belgium, Germany
Luxembourg
Unofficial Voluntary 1936 58000( including
restaurants)
Unofficial Voluntary 2009 24000
Unofficial Voluntary 1891 3000
Voluntary
Official 1954 736
system were reported because of its failure to guarantee
customer satisfaction (Sufi& Singh, 2018).
The subsequent upgrading of the classification system in
2013 was based on the suggestions from the industry to make
the Hotel classification system more customers oriented.
However, the guidelines proved to be just an eyewash and
focused on trivial issues like the requirement of “hooks for
clothes,” “water sprays in bathrooms,” and “blackout
curtains,” etc. The revision only proved to be a futile exercise,
as the revised guidelines were considered to be of low
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standards, then what the hotel brands offer. Further higher tax
structure, the requirement for minimum wage norms, higher
license fees continue to act as a barrier for a large number of
hotels to apply for the classification system (Sharma, 2013).
However, the Government officials maintain that the
“classification system brings national and international
standards by making the statement about their services
globally to consumers by the classification process” (Kumar,
2013).
India has adopted a “voluntary” classification system for
its hotels. The classification system is offered to hotels along
with several incentives that are offered by the Government.
Some of incentives include tax benefits and subsidies for one,
two, three and four-star hotels for serving budget category
clients ("Approval of hotels", 2017). The need for such
incentives is to make the hotel classification system
successful without enforcing it. Talia’s (2016) study explains
that state-enforced voluntary regulations (VR) come in
various models that include “Meta-regulation”, “Co-
regulation”, and “enforced self-regulation”. The state
imposes the VR by either signalling overtly or covertly the
threat of formal intervention or by offering regulatory benefits
to those who join. However, a close look at all such barriers
points out to the fact that the benefits provided by
Government to hotels for getting classified are minuscule in
comparison to the cost incurred in the form of recommended
workforce requirements, the requirement of massive
approvals and higher license fees that are necessary for hotels
to get classified(Sufi & Singh, 2019).
The investment in the star-rating process by the hotels,
does not guarantee that such hotels shall perform better as
compared to unclassified hotels. The study from Kerala has
indicated that unclassified hotels perform better in
comparison to classified hotels (Radhakrishan, 2017). The
study indicated that unclassified hotels take a significant
chunk of business (39%), the next favourite category was
three-star hotels ( 21.3%), five-star deluxe hotels ( 14.7%),
five-star hotels ( 6.5%), two-star hotels 3.4% and one-star
hotels were at lowest (1.7%). The study has indicated the
extent to which the classified hotels have to bear the cost and
finally end up far behind the start rated hotels.
There are thousands of hotels all over India; the exact
number is not established by any agency so far. As per the
statistics published by (Ministry of Tourism, 2017), the total
number of star-rated hotels in India is nine hundred fifty-two
hotels only (123 five star deluxe hotels, 100 five star hotels,
138 four-star hotels, 490 three-star hotels, 66 two-star hotels
and 35 one-star hotels). The number of approved unclassified
hotels in India is 117 leaving behind the question of the
number of unapproved hotels.
Considering the benefits of the hotel classification system,
it is essential to know the reasons many hotels choose not to
apply for the hotel classification system of India. According
to the study by Sufi & Singh (2018), the barriers to star rating
include the following:
A. Higher salaries and wages:
The hotel classification system of India recommends that
sixty per cent of the supervisory staff be qualified with
hospitality degrees in the case of five-star hotels, thirty per
cent in the case of four and three-star hotels and 20% in the
case of one and two-star hotel category. As such, this is
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treated as a challenge by the unclassified hotels on account of
higher salaries such workforce expect.
B. Higher licenses fees:
The license fee for the service of foreign liquor in a bar of
a five-star hotel in Delhi is forty lakh rupees (Excise, 2017).
There are about fifty licenses that are required for hotel
operations the cost of which is higher in comparison to the
licences required by unclassified hotels. Similarly, the star
categorised hotels are expected to follow stringent
environmental regulations as compared to other hotels that
involve lots of investment in effluent treatment plants, sewage
treatment plants to ensure that entire wastewater generated is
biologically treated. There is a whole list of formalities to be
provided by star-rated hotels, and it does involve lots of
investment (Hotel Classification, 2017).
C. Approval from Government agencies:
A large number of approval documents from many
Government agencies is yet another barrier perceived by
hotels as a barrier for applying for the classification process.
A large number of reports and approvals are required at the
project stage for the application of the hotel classification
system.
D. Massive documentation:
The extensive documentation required for the
classification process is yet another barrier preventing hotels
from classification for the classification process. The
documents required include complete details of the project,
details of the feasibility report, architectural blueprints and
details of layout, safety plans, local approvals (municipality,
police, pollution, airport, and forests), and information on the
capital structure. The system makes it mandatory for hotels to
inform the Government if any changes are made in the hotel
infrastructure or even in the management structure. It is
evident, therefore that the hotel rating system in India is
challenging for hotels on account of such barriers. In the
backdrop of the discussion about the hotel rating process as
discussed in the literature, the following hypothesis is
established.
H1o. There is no significant perceived influence of the
Hotel Classification system on service quality as perceived by
the hotel managers.
H1a: There is a significant influence of the hotel
classification system on service quality as perceived by the
hotel managers.
III. METHODOLOGY
This objective of this study was to examine the impact of
hotel classification system on hotel service quality as
perceived by the hotel managers. The study involved the
following activities: the survey of hotel manager’s response
to the impact of the different areas of hotel classification on
the hotel service quality across an all-star category of hotels
and their response to the overall level of satisfaction with the
classification system. Stepwise regression analysis using
SPSS software was used for data analysis. The study was
conducted between June 2019- October 2019.Using the
questionnaire technique, a survey of hotel managers was
conducted across all-star category hotels in north India
utilising the online database of the of star-rated hotels of India
from the website of Ministry of Tourism. Using multi-stage
stratified sampling technique, data was collected through a
structured questionnaire from the hotel managers of classified
hotels in north India(New Delhi, Haryana, Punjab, Himachal
and Jammu Kashmir) to ensure that the hotels of all-star
category (two-star, three, four, five stars, five stars deluxe are
given the representation in the study. One star hotel was not
included in the sample because no such hotel category was
found to be in north India. The proportionate sampling
method was used to determine the sample size to be studied.
Two hundred fifty questionnaires were sent across to the
managers of classified hotels. The managers include
Departmental hotel heads (HR Managers, Training Managers,
Front Office Managers etc) who were sent Google doc link to
fill in the survey. The data of the hotels (star category wise)
was downloaded from the website of the Ministry of Tourism,
India. The pilot study with a sample of twenty hotels was
conducted. Keeping in consideration the length of the
questionnaire, twenty-five criteria items representing the
broad areas of hotel classification system( infrastructure,
services, facilities and legal requirements) that are
recommended by the policy document were identified( Fig 1)
and used for a questionnaire that was filled in by the hotel
managers on a Likert Scale of 1-5. The managers of the hotels
were also asked to evaluate their overall level of satisfaction
with the hotel classification system that was used as a
dependent variable for conducting regression analysis while
the twenty-four items of the hotel classification system are
used as an independent variable. The manager's perceptions
about the influence of each such variable on hotel service
quality were evaluated in this study.

Size of the bathroom

Communication facilities

Mattress thickness minimum

Connectivity of devices in bedroom

Overall quality of bed and bathroom

Size of the bedroom

Bathroom linen

Hooks for clothes in bathroom

Quality of the food

Skilled staff

Telephone in toilet

Room and bathroom amenities

Multi-cuisine restaurant

Cleanliness of the rooms

Bar Hotel Classification System Hotel Service Quality

Room service

Well equipped kitchens

Quality of front office services

Latest equipment for customers and staff

Hotel safety and security

Housekeeping & laundry services

Policy for safe tourism

Doctors details

Clean and impressive public areas

Fig. 1. Framework for conducting regression analysis of different areas of hotel classification system with overall hotel service quality.

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 regression is used to explore the predictive capabilities of the
IV. RESULTS variables in linear combination with each other and is
The questionnaire elicited one hundred forty-seven usable designed to insert one variable at a time into predictive
responses. This represents a response rate of 52%( 147 out of equation (Afghari, Washington, Prato & Haque, 2019).
250). The distribution by hotel star category is illustrated in Twenty-five variables were derived from the hotel
Table 2. There are 147 star rated hotels in north India and as classification system of India policy document. These
is clear from the table majority of such hotels is of five-star variables are related to all significant hotel areas that involve
deluxe hotels. customer involvement.The results of the regression analysis
conducted collectively for the all-star category of hotels (
TABLE II. THE NUMBER OF QUESTIONNAIRES RECEIVED BY five-star deluxe, five star, four-star, three-star and two-star
HOTEL TYPE AND NUMBER. hotels) revealed a positive relationship between hotel
Star Category managers perceptions about the different areas of the hotel
Number of Hotels
classification system and managers overall level of
Two Star 6 satisfaction with the hotel classification system. Table 3
Three Star 40 summarises the results of regression conducted collectively
for the all-star category of hotels and separately for individual
Four Star 21 star category. At step 1 of the analysis, only four variables
Five Star 25 were entered into the regression equation that was
Five Star significantly related to overall hotel service quality that
Deluxe 55 contributed significantly (p<.001) in predicting the
Total 147 relationship. The variables include- a specialty restaurant,
provision of connectivity of devices/gadgets, laundry services
To examine the null hypothesis (H0) that there is no and cleanliness of rooms and bathrooms. These four areas
significant perceived influence of Hotel Classification system explained to a significant R square (multiple correlation
on service quality as perceived by the hotel managers, coefficient values of 0.766) and also has a significant Durbin
stepwise regression was conducted on multiple stages. First, Watson value(1.46 < 1.5). Field (2009) considers Durbin
stepwise multiple regressions were undertaken to evaluate the Watson value of less than 1.5 of significant value.Thus the
impact of hotel classification system on the hotel service regression equation for predicting the relationship was
quality and identify the areas of the classification system that (y= -0.241+0.506x1 +0.371x2+0.455x3-0.325x4+0.759)
have the most impact on the service quality. This method of

TABLE III. COMPILED RESULTS OF STEPWISE REGRESSION

Areas of hotel classification Stepwise Variables R R2 Durbin Coefficient Coefficient Std.

Regression Entered Watson Static Value (constant) Value (variables) Error
1. Size of the bathroom Overall i. Provision of food and dining 0.875 0.766 1.426 -0.241 0.506 0.759
2. Communication facilities ii. Room and bathroom
3. Mattress thickness minimum amenities 0.371
4. Connectivity of devices in iii. Clean Room and bathroom
bedroom iv. Connectivity of devices 0.455
5. Overall quality of bed and
bathroom -0.325
6. Size of the bedroom 5 Star Level i. Impressive bedroom and 0.57 0.62 1.47 2.143 0.563 0.0628
7. Bathroom linen bathrooms
8. Hooks for clothes in bathroom ii. Provision of food and dining 0.458
9. Quality of the food iii. Clean and impressive Public
10.Skilled staff areas 0.161
11.Telephone in toilet 4 Star Level i. Hotel safety and security 0.91 0.84 0.99 1.315 1.270 1.622
12.Room and bathroom ii. Cleanliness of the rooms,
amenities specialty restaurant -1.571
13.Multi-cuisine restaurant iii. Size of the bedroom
14.Cleanliness of the iv. Communication facilities 0.919
rooms
15.Bar -0.853
16.Room service
17.Well equipped kitchens 0.602
18.Quality of front office services 3 Star Level i. Quality of bedroom and 1 1 1 2.36 1 0
19.Latest equipment for customers bathroom
and staff
20.Hotel safety and security
21.Housekeeping & laundry
services
22.Policy for safe tourism
23.Doctors details
24.Clean and impressive public areas

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 V. CONCLUSION
The study investigated the impact of the hotel rating
system of India on hotel service quality. The results have
indicated that hotel rating system has a positive impact on the
hotel service quality according to the hotel managers. The
study has also indicated that the rating system has a
significant influence on all the star category of hotels. Such
findings provide a fresh evidence in support of the hotel
rating system. These findings are notable against the
backdrop of claims about the hotel rating systems in India.
The conclusion confirms the findings of Xu, X., & Li, Y.
(2016). Baccarani, Marta and Angelo’s (2015).Lockyer’s
(2003) study also support the same findings. Other studies
that support these findings include Xu and Li (2016) and
Lopez &Serrano’s (2017) study on critical factors of
customer satisfaction with different star-rated hotels.
This study found that location, staff, and quality of room
important for customers of five and four-star hotels. At a
three-star level, quality of the room and friendly staff were
found to be important factors for customer satisfaction. The
differences in perceptions among managers of different star
category hotels are also confirmed by Briggs's (2014) study
on Scottish hotels who found that there is a lack of consensus
among hotels about the determinants of hotel service quality.
The different areas identified from this study that have a
significant impact on hotel service quality also contribute to
the overall customer experience. Many hotels go beyond the
requirements of the hotel rating systems for surprising
customers with exceptional services and facilities (Lashley,
Morrison, Randall , 2015). The results of this are contrary to
the review of literature that discussed how the hotel
classification system is micromanaging hotels for star ratings.
There are suggestions that the hotel rating system must focus
on broader issues only- as the hotel brand standards are
enough to take care of the minor requirements.
As confirmed in this study that the hotel rating system has
a positive impact on the hotel service quality- it is
recommended therefore that the hotel rating system is not
treated as a rubber stamp by hotels and other stakeholders.
However, the system needs to overhaul itself to be of
international standards to enhance its creditability for
allocating star ratings to the hotels. The rating system is not
comprehensive- it suffers from several drawbacks primarily
not focussing on evaluating hotel service quality. Instead, it
puts stress on the tangible aspects – infrastructure, facilities,
and services. Many other areas are not taken into account by
the system- especially the intangible areas of hotel evaluation.
VI. IMPLICATIONS:
The study has multiple implications. First, the study has
shown that the rating system has a positive impact on the
hotel service quality as perceived by the hotel managers
which assures us that the system doesn’t deserve to be
ignored. Instead, the bold changes are required to make it
more effective so that the ratings awarded to hotels are the
result of more robust hotel evaluation. This study has also
found the areas with maximum impact on hotel classification
systems at the different star levels. The importance of such
areas can be enhanced by increasing their weights in the
classification scheme.
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VII. LIMITATIONS
The study was confined to north India only; comparative
analysis must be conducted region wise to understand the
problems and challenges of the hotel classification system in
the other areas of the country. The study can be repeated with
the larger sample size. Separate in-depth studies are required
to identify the issues, challenges, and problems with the
hotels in different regions.
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