EFFECT OF SERVICE QUALITY ON CUSTOMER SATISFACTION: EVIDENCE FROM

HOTELS IN DEBRE MARKOS TOWN

A THESIS SUBMITTED TO BIRANA COLLEGE, DEPARTMENT OF MANAGEMENT FOR

PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR DEGREE OF MASTER OF BUSINESS
ADMINISTRATION

ADVISOR: - Andargachew Baylie (PhD)

SUBMITED BY: - Asaye wondimu

ID NO.

JUNE 2022
DEBREMARKOS, ETHIOPIA
ACKNOWLEDGEMENT
First and for most, I would like to give my glory and praise to the Almighty GOD for his
invaluable cares and supports throughout the course of my life and helped me since the inception
of my education to its completion and enabled me to achieve my career

Next, I would like to express my deep and sincere gratitude to my supervisor, Dr. Andargachew
Baylie (PhD) for his enthusiasm, dedication, support and guidance throughout my thesis. I really
appreciate the invaluable advice that he has given to me.

I am also profoundly thankful for my wife, Genet Bekele, you tolerated my many hours of
studying and you encouraged and gave me time to complete the thesis. You were truly my
motivation and ultimately responsible for my success in life. Even if words of thanks cannot
express my feeling in return, for your unlimited love, support and encouragement; my darling,
thank you. And my deepest gratitude to Andnet business technology college staff members and
Haile, I would like to say thank you for your moral and support for the success of this thesis.

ii
Acronyms and Abbreviations
A-WOM Acquaintances Word-of-Mouth

BC-WOM Booking Contacts Word-of-Mouth

D-WOM Direct Word-of-Mouth (to hotel management and staff)

Df Degree of freedom

E-WOM Electronic Word-of-Mouth

MoCT Ministry of Culture and Tourism ( of Ethiopia)

SERVQUAL Gap-based model to measure Service Quality

SERVPERF Perception only measure of Service Quality

SPSS Statistical Package for Social Scientists

TRA Theory of Reasoned Action

UNDP United Nations Development Program

WOM Word-of-Mouth (recommendations)

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 Contents
ACKNOWLEDGEMENT....................................................................................................i
Acronyms and Abbreviations..............................................................................................ii
CHAPTER ONE...................................................................................................................1
1. BACKGROUND OF THE STUDY..............................................................................1
Introduction 2
Statement of theProblem................................................................................................................................5
General Objective 7
Specific Objectives of theStudy..............................................................................................7
Significance of the study.........................................................................................................7
Scope /Delimitation of the Study............................................................................................8
Organization of the Study.......................................................................................................9
CHAPTER 2........................................................................................................................10
LITERATURE REVIEW AND THEORETICAL BACKGROUND...........................10
Theoretical Framework................................................................................................................................10
Characteristics ofService.................................................................................................................................10
Conceptualizing the ServiceQuality................................................................................................................13
SERVQUAL versusSERVPERF....................................................................................................................17
i. SERVQUAL.............................................................................................................................18
ii. SERVPERF..............................................................................................................................20
CustomerSatisfaction 22
Table 3.1 Service quality dimensions...............................................................................................33
Table 4.1 Response Rate................................................................................................................38
Table 4.2 Respondent Profile..........................................................................................................38
Table: 4.3 Reliability Test result......................................................................................................39
Table 4.4Correlation between service quality dimensions with satisfaction........................38
Table: 4.5 Tests of Normality.............................................................................................41
Table 4.6SERVQUAL dimension and Customer satisfaction analysis................................39
Table 4.7ANOVA.................................................................................................................39

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 Table 4.8Regression result of service quality dimension and overall customer....................38
Table 4.9Summary of Hypothesis Testing Results................................................................38
Empirical Literature Review.......................................................................................................................24
Conceptual Framework................................................................................................................................26
Conceptual Framework............................................................Error! Bookmark not defined.
CHAPTER THREE............................................................................................................26
3 METHODOLOGY.......................................................................................................26
introduction 26
Study Area 26
Approach 26
Research Design......................................................................................................................27
Data Source 27
Data Collection Method..................................................................................................................................27
Table 3.1 Service quality dimensions............................................................................................28
Target Group/Population of the Study............................................................................................................28
Sampling techniques................................................................................................................28
Sample Size.............................................................................................................................28
Data Processing and Analysis..................................................................................................29
Reliability and Validity Tests...............................................................................................35
Reliability Test.........................................................................................................................31
Validity Test............................................................................................................................36
Research Ethics 36
CHAPTER FOUR............................................................................................................................33
4. DISCUSSION AND DATA ANALYSIS.................................................................................................33

DESCRIPTIVE STATICS…................................................................................................................................................33
Correlation analysis 36
CHAPTER FIVE..............................................................................................................................44
5. Conclusion and Recommendation...............................................................................................44
Conclusion........................................................................................................................................44
Recommendation.............................................................................................................................44
6. Reference.......................................................................................................................46

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Abstract

The basic purpose of this study was to see the effect of service quality on customer
satisfaction, in the case of Debre Markos Town particularly at ETHIOPIA, FM, LBS and
ABIMA hotel. Service quality has been revealed as a key factor in search for sustainable
competitive advantage. Satisfying and retaining customer has been recognized as an
important factor in hospitality industry. To collect primary data, questionnaire was
distributed to 384 respondents for four hotels by using simple random sampling method
and 384 data were collected with a response rate of 100% and used for the purpose of
analysis. Descriptive statistics such as mean and standard deviation and inferential
statistics such as correlation and regression were used to examined, analyzed and
summarized the factors affecting customers’ satisfaction with the support of SPSS
version 25.0.. From the service quality dimensions’ assurance has highest significant
and positive effects on customer satisfaction followed by reliability and empathy

Key words: Customer Satisfaction, SERVQUAL model, multiple regression,

Service quality dimension.

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 CHAPTER ONE

1. BACKGROUND OF THE STUDY

Introduction

The birth of hotel industry took place in Europe. At the beginning of the fifteenth

century, in France, the first time, there was a law required that hotels keep a register.

During this period, the first guide books for travelers were also published. English rules

for inns also introduced at that time. At the same time, around 1500 thermal spas were

developed in Carlsbad and Marienbad. However, the real growth of the modern hotel

industry took place in the USA by the opening of the City Hotel in New York in the year

1794. It emerged the wave of hotel building activity in different cities. Some of the best

hotels of the USA were built in this era, but the real boom came in the early of 20th

century. This period also saw a beginning of chain operations under the guidance of E.M

Sattler which would spread into all the continents. It involved big investments, big profits

and trained professionals to manage the hotel business. In the ancient business days, the

main focus was marketing products to customers. However, according to current trends,

businesses have shifted towards enhancing customer satisfaction as the pivotal point to

drive sales (Farooq& Salam, 2018). Currently, more focus has been drawn towards

consumers compared to product marketing and consumption. Customer satisfaction is

built on the quality of services offered by an enterprise (Sharma &Srivasta, 2018). With a

better service quality in place, the organization is assured of increased sales because their

consumer base shall be reliable and stable. This factor results in constant profits for the

organization which in the long run boosts overall performance. The nature of service

being essentially intangible, perishable, inseparable and highly variable makes service

7
marketing a challenging task (Grönroos, 1990; Sanjay & Gupta, 2004). Both marketing

researchers and service marketers should take into consideration the peculiar nature of

service while attempting to address service quality issues (William, Taylor

&Jayawordena, 2003; Barbara & Pamela, 2004; Kotler& Armstrong,2006).

Service quality as defined by Parasuraman, Zeithaml and Berry (1988) is ―a global

judgment or attribute relating to the superiority of service. Since customers are always

looking for consistently superior service the marketer should fulfill their expectations

irrespective of the variability nature of service. The delivery of consistent service quality

creates brand differentiation (Konstantinos, Nikos &Dimitri, 2002), enhances brand

image (Jay &Dwi, 2000; Jing & Andrew, 2009), adds to the competitive advantage of the

firm (Riadh, 2009), improves customer satisfaction (Fiju, Frenie& Sid, 2004), positively

contributes to customers„ value (Shahin& Reza, 2010), and increases the likelihood of

favorable behavioral intentions ofcustomers towards the brand in terms of revisit and

positive Word-of-Mouth recommendations (Riadh, 2009)

Customer satisfaction, on the other hand, has long been recognized, in marketing thought

and practice, as a central goal, realization of which is important for all business activities

(Chaniotakis&Lymperopoulos, 2009). It is described as customers‟ evaluation of the

service encounter based on their expectation and actual performance (Tse& Wilton,

1988), and has been considered as the extent to which a product/service experience meets

customer‟s xpectation from the same.

When the actual service experience meets customer‟s prior expectations, he/she will be

satisfied and if it fails to meet the expectations, he/she would be dissatisfied (Gilbert et

al., 2004).Moreover, attaining customer satisfaction is linked with the delivery of quality

8
service (Brown & Swartz, 1989; Francosis, Jeremilo&Mulki, 2007; Raidh, 2009), and

leads to high business performance (Morgan, Anderson & Mittal, 2005). As a result,

customer-perceived service quality has been given increased attention owing to its

specific contribution to develop satisfied customers and business competitiveness

(Enquist, Edvardsson&Sebhatu,2007).

Statement of the Problem

Researchers were revealed that five service quality dimensions, empathy,

responsiveness, assurance, tangibility and reliability are factors which have effect on

customer satisfaction in different countries with different level of significance. According

to Suzana and Sanja (2013), tangibility and reliability are factors in Croatian hotels,

whereas according to Nquyen et al., (2015) in Vietnam hotels empathy, reliability, and

responsiveness and assurance are the major factors. According to Afroza et al (2014)

tangibility, responsiveness and assurance are significant factors for hotels in Bangladesh

hotels.

On the part of conceptualization of service management constructs and suitability of

the tools/approaches to measure service quality, scholars like Francis (1995), Marco

(2001), Francosis, Jeremilo and Mulki (2007) and Riadh (2009), propose different tools

for the measurement of service quality. However, popular approaches remain the

SERVQUAL (Parasuraman, Zethaml& Berry, 1988) and the SERVPERF (Cronin &

Taylor, 1992). Thus, universal applicability of the service quality measurement tools,

across different industries, is questionable (Hokey &Hyesung, 1997; Konstantinos, Nikos

&Dimitri, 2002; Thanika, 2004; Gilbert &Celeopatra, 2006; Wen, 2012; Tsitskari,

Antoniadis & Costa 2014). In addition, a service quality gap (as shown in SERVQUAL

9
approach) may exist even when a customer has not yet experienced the service but

learned through WOM, advertising or other media. Thus, there is a need to incorporate

the potential customer„s perceptions of service quality offered as well as actual

(experienced) quality ofservice.

Moreover, demographics (e.g., , age, gender etc.) are necessary from the perspective of

developing marketing strategy (Ramanathan&Ramanathan, 2011; Wen et al., 2012;

Abubakar, Mokhtar&Abdullateef, 2013; Amin et al., 2013; Jani& Han, 2013). By

considering that hotel sector in Ethiopia is experiencing fast expansion and

accommodating international guests (with varying cultures and preferences), hardly any

attempt has been made to explore the way their socio-demographics and hotel„s

characteristics relate with service constructs (like satisfaction).

The quality of service in hotel industry is an important factor of successful business. The

existing trend of complete quality management in hotel industry ensures the achievement

of competitive advantage of hotel companies and is therefore the subject of contemporary

research into service quality in hotel industry. It is essential to identify the service Quality

& whether the customers are given what they need & expect. So this research is purposed

to evaluate the service Quality and customer Satisfaction in hotel industry in DEBRE

MARKOS TOWN. Therefore going through the very specific idea, the purpose of this

study is to see the effect of service quality and customer satisfaction in four hotels found

in DEBRE MARKOS TOWN because there is no research done specifically on this place

regarding customer Satisfaction on hotel services

In the light of above, one can see that there remained a strong basis to carry out a

research that empirically develop and test a conceptual model to explain the effect of

10
 service quality on customer satisfaction, and examines the way guest„s profile variables

(e.g., gender, age, educational level, etc.) and the five dimensions of service quality

(Tangibles, Reliability, Responsiveness, Assurance and Empathy). Specifically, this

study attempts to seek answer to the questions „how service quality affects customer

satisfaction?

Objectives of the Study

General Objective

The main objective of this study is to see the effect of service quality on customer

satisfaction, in the case of Debre Markos town hotel sector.

Specific Objectives of the Study

1. To examine the effect of tangibles on customer satisfaction.

2. To examine the effect of reliability on customer satisfaction

3. To examine the effect of responsiveness on customer satisfaction

4. To examine the effect of assurance on customer satisfaction

5. To examine the effect of Empathy on customer satisfaction

1.3.2. Significance of the study

One can understand that the latter study is not on hotel. Therefore, as to the knowledge and
understanding of the researcher, a study is not been conducted in the area of hotel with regard to
consumers‟ customer satisfaction behavior of hotel service id Debre Markos.
As this is the observed gap by the researcher, the research is expected to provide its own
contribution by having conceptual and empirical evidence on factors that affect
consumers‟ buying behavior nonlife insurance products. Moreover, after finalization of the
paper, many parties are expected to benefit from the results of the study. Among them are
the following:

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Management: managers, mainly, of hotel corporation interested in identifying sources of
success and failure, in the area of consumers‟ use behavior, will take the necessary actions
in order to improve the performance of their hotel business and able to see possible
alternatives that require the right decision at the right time by the right person that enable
them to frame marketing strategies.
Researchers: other researchers who have an interest in the area may use this paper to fill
the gap that they may observe. That means, they could use this paper to investigate further
issues in the subject area or to investigate facts to establish, or further revise a theory.
Researchers may again adopt this research outcome to build a plan of action based on the
facts discovered. In general, the research contributes that it can potentially serve as a
stepping stone for further research in the area.
Government: As EIC is a government-owned hotel corporation in the country by having
Debre Markos Town and other areas, this paper will benefit in identifying what
influences consumers satisfaction the use of hotel service. As a result of this, the
government would be in a position to take the necessary measures mainly for its state-
owned hotel corporation, EIC. The outcome of the research is also expected to serve the
government in the licensing and supervision of hotel companies under N.B.E.
Investors: Mainly private investors interested in the given hotel service shares may use this
paper for their financial investment plan by considering it as a base for their decision at
country level.
Customers: Customers interested in knowing the benefits upon the hotel service based
on shaped /informed decisions will be the beneficiaries of the study.
Employees: Individuals especially managers and underwriters who work or intend to work in
Hotel organizations may be interested in identifying the opportunities and threats in
connection with their customers‟ Accordingly, this research paper shades light on how
to better understand consumers‟ use behavior on the satisfaction by inferring the case to
Ethiopia. Furthermore, this study does have great importance and added value in
providing better ground by creating awareness of actual and/or potential customers‟
satisfaction.

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 Scope /Delimitation of the Study
The scope of the study that the researcher attempts to assess is consumers‟
satisfaction of hotel service. The study is limited to be conducted in Amihara region, East
Gojjam Zone, Debremarkos town especially at ETHIOPIA, FM, LBS and ABIMA because
of time cost constraints. The scope of the study also confines to 2014 years customers on the
satisfaction of hotel service.
Organization of the Study
The structure of the paper is organized as follows:
Chapter One deals with introductory parts of the study, which includes: the introduction

itself, background of the study, statement of the problem, research objectives, hypotheses,

general objective, specific objectives, significance of the study, scope of the study, and

finally, limitation of the study. Chapter Two presents related literature reviews both

theoretical and empirical, which are relevant to the research in connection with an

Assessment the influence of service quality on customer satisfaction, customer value and

behavioral intentions in the debremarkos hotel sector. Chapter Three focuses on

methodology of the study. It includes: description of study area, research design, target

population, data source and type, data collection methods, data process and analysis.

Chapter Four shows results and discussion, which includes multiple regressions and

different testing. In this chapter, relevant procedures and meaningful test results are seen

and will be discuss; finally, Chapter Five is presented by incorporating summary,

conclusion and recommendations based on earlier findings and relevant literatures of the

study.

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 CHAPTER TWO

LITERATURE REVIEW AND THEORETICAL BACKGROUND

This chapter presents the theoretical framework of the study by reviewing the literature

in the domain of service quality, customer value, satisfaction and behavioral intentions.

Additionally, description of the research constructs and their interrelationships are

explored to develop the conceptual framework and associated hypotheses. Specifically,

the first part of the Chapter presents various theories guiding the research and introduces

study constructs. Second part reviews relevant literature to explore the relationship

among service quality, perceived-value, customer satisfaction and behavioral intentions,

across different sectors/settings, to support theoretical research framework for the study.

Accordingly, the final part presents a conceptual framework and related hypotheses to

test.

Theoretical Framework

Characteristics of Service

Service includes all economic activities the outputs of which are not physical products

or construction, but generally consumed at the time it is produced, and provides added

value in forms (e.g., convenience, amusement, timeliness, comfort or health) that are

essentially intangible concerns of its first purchaser (Zeithaml&Bitner, 2001). Firms

attempt to distinguish their offerings (products) from those of their competitors by

providing good service and/or making services more tangible by offering products as

part of the overall package.

Berry (1980) distinguished between services and goods and argued that, services are

acts, deeds, performances or efforts, whereas, goods are articles, devices, materials,

14
 objects, or things. However, by considering that most businesses (including hotels) and

their activities/offerings consist of both goods and services, any distinction between

products and services is no longer explicit (Osarenkhoe &Bennani, 2007).

For the purpose of analysis, a service may be considered in three different ways:
i) as a process;
ii) as a solution to customers„ problems; and
iii) iii) as a beneficial outcome for customers.
Grönroos(1990:27), defined service as ―an activity or series of activities of more or less
intangible in nature that normally, but not necessarily, take place in interactions between
the customer and service employees and /or systems of the service provider, which are
provided as solutions to customer problems. The second perspective (service as a solution
to customer‟s problems) views services as provider of solutions to customer‟s problems.
From this perspective, service is conceptualized as an activity of an intangible nature that
usually takes place during the interaction between the customer and service employees to
provide solutions to customer‟s problems (Grönroos, 2001). The final perspective (service
as a beneficial outcome) suggests that service is the main function of business enterprises:
it is an application of specialized competences (knowledge and skills) through deeds,
processes, and actions for the benefit of another entity or the entity itself
(Vargo&Lusch,2004).

Furthermore, Sanjay and Gupta (2004) described the nature of service as

essentially intangible, perishable, inseparable and highly variable.

i. Services are Intangibles: It cannot be seen, tasted, felt, heard or smelt before

purchase. It is an abstraction that cannot be examined prior its purchase

(Adrian, 1998). Since services are intangible and cannot be sensed before

purchase and consumption, it gives little or no chance for pre purchase trail to

customers. Hence, service marketers have to use the tangible elements of

service (like facility, equipment, furniture etc.) for promotion so that

15
 customers can infer quality service.

ii. Services are Inseparable: it involves simultaneous production and consumption.

It is not possible to separate service from service provider. Inseparability of

service leads customer to being co-producers of the service with other

consumers and having to travel to the point of service production (Sanjay &

Gupta, 2004). Inseparability usually makes the service provider and the

customers to have physical contact, which gives lower chance for the service

provider to correct service failures before they are perceived by customers

(Barbara & Pamela,2004).

iii. Variability of Services: Variability of service means that the quality of services

depends on who provides them, as well as when, where, and how they are

provided (Kotler& Armstrong, 2006). Since services vary across context, this

poses challenge to service marketers to deliver standard quality all the times

and in every situation. Service quality thus, has to be pre-planned

continuously monitored and periodically reviewed (William, Taylor

&Jayawordena,2003).

iv. Services are Perishables: This implies that services cannot be produced and

stored for later use. The customers should be presented while the service is

being produced to get served otherwise it will perish or cannot be produced at

all. Service production takes resources and if what is produced is not sold and

cannot be stored, it results in a loss. On the other hand, if the resources are not

devoted and the service is not ready when customers show up, it will cause

dissatisfaction due to longer waiting time and poor service quality.

16
Conceptualizing the Service Quality

Over the past two decades, service quality became major area of attention to both

academicians and practitioners (Cronin & Taylor, 1992; Newman, 2001), as customers„

willingness to maintain a relationship with a firm is contingent upon their perception of

the benefits and values of the firm„s high-quality service (Nikos &Dimitri, 2002; Wen,

2012; Cho, Byun&Shen, 2014). Indeed, many empirical researchers have confirmed the

positive impact of service quality on a variety of behavioral outcomes, such as customer

satisfaction, perceived-value and behavioral intentions (e.g., Cronin, Bradly&Hult,

2000; Konstantinos, Chatura& Neely, 2003; Gilbert &Celeopatra, 2006; Bedi, 2010;

Wen et al., 2012; Kitapci et al., 2013; Tsitskari, Antoniadis & Costa2014).

Service quality is described as the comparison that customers make between their

expectations about a service and their perceptions of the actual service performance.

According to Lewis and Boom (1983), service quality is a measure of how well the

service level delivered matches customer expectations. To measure the quality of

intangible services, researchers generally use the term perceived-service quality„, which

is a result of the comparison of perceptions about service delivery process and actual

outcome of service. Thus, customer expectations (before purchasing any service) and

quality performance (as perceived by customers) are important factors in order to

determine perceived service quality. As a result, an assessment process will be

experienced if the perceived service quality meets or does not meet consumer

expectations.

Moreover, a number of researchers have examined the service quality construct in

different contexts and developed different types of measures/models to help in

17
defining, measuring and improving understanding of the construct. While some studies

focused on general models (e.g., Cronin & Taylor, 1992; Grönroos, 1988;

Parasuraman, Zeithaml, & Berry, 1988), others developed and revised models for

particular industries (Caro & Garcia, 2007).

Perception of quality in the service context can be studied from customer or service

provider perspectives. Exploring these two perspectives, researchers have noted that

gaps do exist in the perception of quality between providers and consumers, which

ultimately, underlines the necessity of studying quality from the viewpoint of the

consumers (as they decide which product to consume). This has been called the

‗perceived quality„approach (Garvin, 1984).

The commonly cited definition for service quality is the one put forward by

Parasuraman, Zeithaml and Berry (1988:16) denoting service quality as ―a global

judgment or attribute relating to the superiority of service.‖ Later, they stated it as a gap

between the customer„s expectation and the service received, whereby expectation

becomes a major influence on the way the characteristics of service will be perceived

and consequently influences the resultant level of satisfaction derived from the service

delivery.

Furthermore, while Dabholkar et al. (1996) expanded the concept of service quality

vertically by proposing a model of retail service quality (RSQ), horizontal expansion to

the concept was carried out by Brady and Cronin (2001). In the RSQ model (Figure

2.5), retail service quality is viewed as a higher-order factor defined by two additional

levels of attributes (the dimension and sub-dimension levels). The RSQ model was

empirically validated by Dabholkar et al. (1996) using triangulation of research

18
techniques- interviews with several retail customers, in-depth interviews with six

customers and a qualitative study that monitored the thought process of three customers

during an actual shopping experience. It included a 28-item scale, of which 17 items

were from SERVQUAL and 11 items were developed by using qualitative research.

Similar to Cronin and Taylor„s (1992) SERVPERF, Dabholkar et al. (1996) used only

performance-based measures and found that their scale possessed strong validity and

reliability and adequately captured customers„ perceptions of retail service quality.

Dabholkar et al. (1996) also considered that service quality is defined by and not

formed by several dimensions, and this made their conceptualization very different

from previous models. The RSQ model has been widely applied in various retail

formats within various cultural contexts and has been widely replicated in various

studies (Kaul, 2007; Nadiri&Tumer, 2009). However, studies like Ravichandran et al.

(2010) did not support the five-dimensional structure due to inconsistency of the

number of dimensions with the original RSQ, as well as inadequacy with reference to

the country„s context (Kaul, 2007; Kim & Jin, 2002).

Brady and Cronin (2001) developed a model for measuring service quality. According

to the model; interaction quality that was formed by attitude, behavior, and expertise;

physical service environment quality that was constituted by ambient conditions,

design, and social factors; and outcome quality that was formed by waiting time,

tangibles, and valence affect service quality. Continual horizontal expansion by Brady

and Cronin (2001) conceptualized the five dimensions of the Dabholkar et al. (1996)

model into three dimensions and proposed nine sub-dimensions

19
 Brady and Cronin (2001) combined the three-component model by Rust and Oliver

(1993) and the multilevel conceptualization of service quality by Dabholkar et al.

(1996). The service quality is formed by three primary dimensions: interaction quality,

physical environment quality and outcome quality. Each of these dimensions is formed

by three corresponding sub-dimensions such as attitude, behavior and experience

(interaction quality); ambient conditions, design and social factors (physical

environment quality); waiting time, tangibles and valence (outcome quality).

SERVQUAL versus SERVPERF

By recognizing the complex and challenging feature of service quality and its

relationship with customer satisfaction, value and behavioral intentions, the assessment

requires an understanding of the associated dimensions to these and valid instrument to

measure them. Despite the fact that service quality attracted the attention of large

number of researchers, there is no universally accepted single tool to measure it.

Different scholars proposed different instruments to measure service quality among

which the most popular are SERVQUAL and SERVPERF (Parasuraman, Zethaml&

Berry, 1988; Cronin &Tayor, 1992; Francis, 1995; Marco, 2001; Sanjay & Gupta,

2004; Francosis, Jeremilo&Mulki, 2007; Riadh, 2009b). The two major paradigms of

service quality measures: the disconfirmation paradigm- SERVQUAL, and the

perception paradigm- SERVPERF are discussed in detail as follows (Marco, 2001).

20
 i. SERVQUAL

In the disconfirmation model, as presented by Parasuraman, Zeithaml and Berry

(1988), service quality is considered as an attitude resulting from the comparison of

customers„ expectation and perception of service encounter (Francosis,

Jeremilo&Mulki, 2007). They introduced an instrument to measure service quality

(called SERVQUAL) based on the disconfirmation (gap based) model, while measures

the difference between the perception and expectations (P-E) of customers on service.

The SERVQUAL model presents 44 questionnaire items having two parts: 22 for

expectation and other 22 for perception (Francosis, Jeremilo&Mulki, 2007; Sanjay &

Gupta, 2004).

A number of scholars applied SERVQUAL in their researches on service quality in

various service sectors (Riadh , 2009b). Besides its popularity, the model invited a

great deal of debates from other service quality researchers (Cronin & Taylor, 1992;

Fiju, Frenie& Sid, 2004; Francosis, Jeremilo&Mulki, 2007). However, Sanjay and

Gupta (2004) appreciated the diagnostic power of the SERVQUAL and prescribed it

for service quality studies emphasizing managerial interventions in particular.

After conducting a meta analysis on SERVQUAL based research done for 20 years,

Raidh (2009b) commented that the SERVQUAL is useful instrument for service

quality researches despite criticisms related to its reliability, validity (convergent,

discriminate and predictive), emphasis on process, scale generalizability in different

settings, and hierarchical construct. However, scholars like Cronin and Taylor (1992)

and Francis (1995) critically emphasized on the drawbacks and suggested its

21
replacement: the SERVPERF. Francis (1995), for example, reviewed the critiques on

the SERVQUAL model and presented them in two groups: Theoretical and

Operationalcriticisms.

Francis (1995) further questions the validity of the SERVQUAL on the following
issues:

 Face validity: The extent to which the instrument measures what it is supposed

to measure.

 Construct validity: Particularly on nomological and convergent validity.

o Nomological validity: The extent to which a measure correlates in

theoretically predictable ways with measures of different but related

constructs.

o Convergent validity: The extent to which a scale correlates with other

measures of the same construct.

The above discussion on SERVQUAL shows that there are proponents and opponents

of the model. The proponents claim:

 The model is a popular instrument to measure service quality;

 Its reliability and validity is acceptable;

 Its diagnostic ability is well appreciated; and

 It is advised for service quality research, particularly, meant for managerial

intervention.

Opponents criticize SERVQUAL based on:

 The model has a number of theoretical and operational drawbacks; and

 Its face and construct validities are questionable.

22
 ii. SERVPERF

This model is based on the ‗perception only paradigm„. It is first introduced by Cronin

and Taylor (1992) and suggests that expectations are irrelevant and misleading to

evaluate service quality and hence the measure of service quality should be based on

performance only. Researchers who critically compared SERVQUAL and SERVPERF

suggested that service quality can be and/ or shall be evaluated using performance

instrument. For example, Sanjay and Gupta (2004) argued that the psychometric

soundness and instrument parsimoniousness makes SERVPERF preferable for

researches focusing on the assessment of service quality of a firm or an industry.

Similarly, Halil and Kashif (2005a) commented that the use of SERVPERF instrument

provides useful information to managers for developing quality improvement strategies

and suggested that SERVPERF is sufficient to measure service quality. Marco (2001)

discussed that SERPERF explains more customer satisfaction than service quality

construct. Juan and Zornoza (2000) stated that SERVPERF has greater reliability,

convergent and discriminate validity, and explains variance better than SERVQUAL.

However, Francosis, Jeremilo and Mulki (2007), have done a meta analysis to determine

the validity of SERVQUAL and SERVPERF taking 42 research done for 17 years and

concluded that both instruments are equally valid predictors of overall servicequality.

As discussed earlier, the use of P-E approach in SERVQUAL has peculiarities in

measuring service quality; customers„ expectations are unreliable as they change

through time and the term expectation might mean different things for customers. Other

23
 researchers are testifying the validity of SERVPERF to measure service quality and

recommending it for assessment of service quality in an industry or a firm. The problem

related to double administration of the SERVQUAL and the number of issues discussed

above makes SERVPERF a preferable model.

As to Cronin and Taylor (1994, p.127), ―the superiority of the SERVPERF

approach pertains in some psychometric properties of the measure, the fact remains- it is

a better measure of service quality.‖ Therefore, after assessing the pros and cons of the

SERVQUAL and SERVPERF models, the present research inclined to adopt the

SERVPERF approach (perception only measure of service performance) in the process

of assessing service quality in the Ethiopian hotel sector.

Customer Satisfaction

Ensuring and achieving customer/guest satisfaction is quite often the main goal of most

organizations, as this is assumed to be a vehicle to increase profit through customer

revisits and reduced cost to serving him/her. Heskett, Sasser and Schlesinger (1997)

report that increased customer satisfaction results in retention and positive WOM, which

subsequently lower the marketing costs and increase profit. Therefore, the study of

satisfaction becomes crucial to many managers and researchers alike, particularly in

service sector. It describes customer (rational and information processing being)

experiences, which are the end state of a psychological process (Lee, Yoon & Lee,

2007).

Empirical Literature Review

Service Quality, Satisfaction and Behavioral Intentions

Establishing a link between service marketing constructs like quality, customer

24
satisfaction and perceived-value, and behavioral intentions is both important and

challenging. It is important being an evidence for the value of service quality research,

and challenging as the relationships between specific service quality dimensions and

other constructs are not yet clear, due to the use of different service quality models

and varying contexts (Theodorakis&Alexandris,2008).

Following Rust and Oliver (1994), the need for research to empirically examine the

relationships between these constructs is emerged. Accordingly, a number of studies

have attempted to conceptualize the links between these variables across different

sectors (Fornell et al., 1996;

In a nutshell, limited researches have been done that simultaneously capture the relevant

variables related to service quality, satisfaction, value and behavioral intentions along

with the association of these constructs with the research participants/customers profiles

(Tsaur, Lin & Wu, 2008; Wen et al., 2012). Also, research works done in hotels context

across different cultural settings like USA, Greece, Taiwan, Portugal, Turkey and

Korea, produced varying outcomes (Konstantinos, Nikos &Dimitri, 2002; Michael et

al., 2009; Salazar, Costa & Rita, 2009; Kuruuzmu&Koksal, 2010; Cho, Byun& Shin,

2014), which signifies that this research has unique contextual contribution to the

existing knowledge.

The above discussion focused on the major findings of literatures in the domain of

service quality, customer value, satisfaction and behavioral intentions, however, a

chronological summary of research works done in relation to these constructs is annexed

25
 (Annex-B) for reference.

Research Hypotheses:

Ho: Tangibles has no significant effect on customer satisfaction

Ho: Reliability has no significant effect on customer satisfaction

Ho: Responsiveness has no significant effect on customer satisfaction

Ho: Assurance has no significant effect on customer satisfaction

Ho: Empathy has no significant effect on customer satisfaction

Conceptual Framework

Theory of Reasoned Action (TRA) proposed by Ajzen (1971) provides the conceptual

frame as to how the human behavior might be guided by marketers through effective

delivery of service quality, which can create customer satisfaction and lead to favorable

behavioral intentions. Accordingly, consumer behavior is directed by rational thinking,

whereby the more reasons they have to behave in a certain manner, the more likely they

would be behaving in the same way. Therefore, marketers can influence their customers

to exhibit positive behavioral responses to their brand like positive word of mouth,

loyalty and repurchase by delivering quality service which satisfies their customers and

creates customer value. Another dominant model useful in explaining the link between

service quality, customer satisfaction and behavioral intentions is the

‗Cognitive-Affection- Behavioral‟ response model, which was originally suggested by

Bagozzi (1992) and explains the relationship of customers„ perception (cognitive),

emotional satisfaction (affection) and behavioral intentions (action or response).

In line with these theories, a number of scholars attempted to investigate the relationship

between service quality, satisfaction, value and behavioral intentions of customers in

26
different industries and countries. Although, the empirical findings suggest differences

in the nature and extent of the relationships and the roles played by the variables (as

predictor, criterion or moderator), there is agreement that service quality is antecedent to

customer value, satisfaction and behavioral intentions (Konstantinos, Nikos &Dimitri,

2002; Chen, 2008; Maria, Lorenzo & Antonio, 2007; Tsaur , Lin & Wu, 2008; Salazar,

Costa & Rita, 2010; Kuruuzmu&Koksal 2010; Naik, Gantasala&Prabhakar, 2010;

Basheer, 2012; Ravichandran, Bhargavi& Kumar, 2010; Lertwannawit&Gulid,2011).

Conceptual framework is diagrammatic presentation of the relationship between

dependent and independent variable. The dependent variable of this study is customer

satisfaction and expected to be influenced by explanatory variables which has expressed

as service quality. To understand the concept of factors affecting customer satisfaction

the following conceptual framework will give clue to the study. The conceptual frame

work developed based on literature review is the following.

27
Figure 2.1 service quality and customer satisfaction relationship framework.

Source: Wilson et al., 2008; Bennett &Barkensjo, 2005 Negi, 2009

Independent variable Dependent variable

Tangible(x1) Ho

Reliability(x2) Ho

Responsiveness(x3)
Ho

Customer satisfaction
Ho

Assurance (x4)

Empathy(x5)
Ho

28
 CHAPTER THREE

3. RESEARCH METHODOLOGY

Introduction
This chapter presents the methods and procedures that were followed in conducting

research. The methodology objective is to test the prepositions that: Tangibles has

significant effect on customer satisfaction, Reliability has no significant effect on customer

satisfaction, Responsiveness has no significant effect on customer satisfaction, Assurance

has no significant effect on customer satisfaction, Empathy has no significant effect on

customer satisfaction. The chapter is structured into research design, study population,

sample, data collection and data analysis.

Study Area
Debre Markos, the capital city of Administrative Zone is located in the North- west of the
capital city of the Federal Democratic Republic of Ethiopia, Addis Ababa at a distance of
300 Kms and 265 kms to the capital city of Amhara Nation Regional State Bahir Dar. It was
founded in 1852 by DejazmachTedlaGualu who was the then administrator of the town. Its
name was initially called Menkorer. The name of the town was changed to Debre Markos
when due to the establishment of Saint Markos church, King Teklehaimanot who came to
power in 1879 proclaimed that the town shall be named Debre Markos instead of Menkorer.
During its founding the total extent of the area was 272 hectares. Until 1995, the town was
the administrative city of the province of Gojjam and currently served as the capital city
Debre Markos town.
The town has a structure plan which was prepared in 2009. Despite old age of the town, the
socio-economic statuses of the citizens as well as infrastructural developments in the area
were almost paused for a number of decades. But nowadays, motivated by the liberalized
free market economy and other motivating instruments by the local government, the socio-
economic status of the society is showing a considerable progress (Kalkidan, 2007;
Abebaw,2017; Ziena,2017). The geographical location of the study area is located between

29
 10°17′00′′ to 10°21′30′′ N Latitudes and 37°42′00′′ to 37°45′30′′ E longitudes and its
elevation ranges in altitude from 2350-2500 meters above the sea level. The town has 1380
mm average annual rainfall and minimum and maximum temperatures of 15 C and 22 C
respectively (Debre Markos Town Administration, 2011).
Approach
For this study quantitative research approach was used. Creswell (2009) mixed method
approach is a model for social research combining qualitative and quantitative
methodologies which is adequately flexible, accessible and multilayered to interpret real
meaning from the collected data. Qualitative research is concerned with qualitative
phenomena, that is, phenomena relating to or involving quality or kind. Quantitative
research is numerical data that collecting from questionnaire and using numerical form such
as graph or statistic. Quantitative data is a raw form of data which needs to be processed and
interpreted to change into information. This method is a scientific measurement as it
involves numerical data of larger sample sizes in a systematic way, so as to gather
representation information. It analyzes a huge amount of data through the use of diagram
and statistics. The aim of the quantitative research method is to exhibit generalizable results
by addressing the questions of how much and how many (Saunders, et al., 2012).
Research Design
The study was used cross-sectional data. The reasons for preferring cross-sectional study
are due to the vast nature of the customers and effective to manage and collected data and
since the data collection took place at one point in time from the sample respondents to
describe the total population
The type of research employed under this study explanatory research which is actually a
type of research design that focuses on explaining the aspects of the study.
Data Source
The data were collected using primary source of data from relevant sources that help to
achieve the above objectives. The primary source of information was collected from hotel
customers.
Data Collection Method
My intention was to collect the primary data through close ended, self-administered survey
questionnaire. This is because survey research has several inherent strengths compared to

30
other research methods The questionnaire was designed in the context of Ajzen‟s (1991)
TPB model; Francis et al. (2004); and Greens lade et al. (2005). It was firstly designed
in English version and then translated into Amharic language for ease of understanding by
the respondents. Moreover, the instruments was piloted (pre-tested) with a small number of
respondents in the study area and was tried to get comments from experts to assess their
reliability, validity and effectiveness of the data which were collected. That is, the test for
validity was done with some selected sample respondents, and was review by experts (thesis
advisors), before its final distribution to the whole sample of the population. Moreover,
Cronbach Alpha was used to check the reliability of items on the questionnaire. The pre-test
for validity revealed that few respondents were misinterpreting some questions and adjusted
in a concise/understandable manner accordingly. The questionnaire was divided into two
parts. Part A contains the demographic information, which was sought to represent the
characteristics of the respondents. The respondents were requested to give information
regarding their gender, age, educational qualifications, income level, transactions time and
frequently used service. Part B includes questions regarding the five independent
SERVQUAL dimensions and one dependent variable in developed research model using a 5-
point Likert scale that is from (1) „strongly disagree‟ to (5) „strongly agree
Measurement of variables
Table 2.2 presents the service quality dimensions, associated definitions to them and the
number of items in corresponding dimensions, as proposed by the SERVQAL, which got
reduced from ten in 1985 (earlier version) to five in 1988 (Parasuraman, Zeithaml& Berry,
1988).

31
 Table 3.1 Service quality dimensions

Dimension Definition Items in the scale

Reliability The ability to perform the promised service 5
dependable and accurately
Assurance The knowledge and courtesy of employees and their 5
ability to convey trust and confidence
Tangibles The appearance of physical facilities, equipments, 5
personnel and communication materials
Empathy The provision of caring and individualized attention 5
to the customers
Responsiven The willingness to help customers and to provide 5
ess
prompt assistance
(Source: Parasuraman, Zeithaml& Berry, 1988)
Target Group/Population of the Study
Keller (2009) stated that a population is the group of all items of interest to a statistics
practitioner. According to McDaniel (2001) target population is a total group of people from
whom the researcher may obtain information to meet the research objectives. For this study
the population is all customers of Debre Markos town who are served among the four hotels.
Sampling techniques
It is true that census survey requires so much time, effort and money. To this end, social
science research is generally about inferring patterns of behaviors within specific
populations. That is, it is difficult to study the entire population because of feasibility and
cost constraints, and hence, it is a must to select a representative sample from the
study area. This study used a probability sampling technique that relies on data collection
from population members who are conveniently available to participate in the study. To
achieve the purpose of the study, the data sources and samples were customers of the hotels
for which the hotels were selected purposively based on their activity and accessibility. The
respondents are selected using simple random sampling from the four hotels in Debre
Markos town

32
Sample Size
The following sample size formula for infinite/unknown population is used to arrive at a
representative number of respondents (Godden, 2004; Daniel, 1999):
𝑧2𝑝𝑞
SS= 𝑒2
Where: SS = Sample size for the infinite population
Z = 1.96 for 95% confidence level of significance
P = population proportion 0.5 (50%) since this would provide the maximum sample size
e = Margin of Error (allowable error or acceptable sampling error) at 5% (0.05)
A higher margin of error in statistics indicates less likelihood of relying on the results of
a survey or poll, i.e. the confidence on the results will be lower to represent a population. It
is a very vital tool in market research as it depicts confidence level the researchers should
have in the data obtained from surveys
Therefore, the calculated sample size was derived by the following proportions probability
formula;
Where; n =sample size Z=parameter related to error risk (1.96 for 95% confidence level)
Since there is no previous study conducted on service quality on customer satisfaction in
Debre Markos city administration, the value of p must be considered as 0.5 to maximize the
sample size
𝑧2𝑝𝑞
Sample size, n= 1.962(1−0.5)0.5
𝑒2 = 0.052 = 384
Hence, the sample size for this study will be 384 customers from four hotels namely
ETHIOPIA, FM, LBS and Abima hotel. So, the data will be generated from these
respondents. Since each hotel has different number of customers, to give equal chance the
researcher was employed proportional sampling based on the hotel customers‟ number
until the required sample size full filled
Data Processing and Analysis
The data collected from the field are process. The data is first checked/edited to ensure
completeness, accuracy and uniformity. All instruments are assigned serial numbers to
facilitate identification and data entry into the computer. The data is coded after
checking/editing, and entered into the computer for analysis.
Data analysis section of this study is based on descriptive and inferential analyses.
The descriptive analysis includes mean, standard deviation, tables, frequency, percentage

33
and the like. It is preferred because it facilitates the organization of data, early detection of
error, ease of comparison of findings and statistical simplification of data computation.
The inferential analysis of the survey data and variables for the study were applied in
collaboration with some important tests such as validity and reliability of data. The
correlation and multiple regression analyses between variables were also included. The
reason is that correlation analysis helps to show association or relationship between
variables of the study while regression analysis is used to measure the effect of
independent variables (AB, PBC and SN) on the intermediate variable (BI).and also the
intermediate variable (BI) effect on buying decision(BD). Moreover, the inferential analysis
dealt with the results of the linear regression and data analysis that constituted the main
findings of this study.
The dependent variable in this research is overall customer satisfaction while the independent
variable is service quality which measures the level of customer satisfaction. The type of
customer will act as a moderating variable in the conceptual framework. The dimensions
included in this variable are reliability, responsiveness, assurance, empathy and tangibility.

The mathematical expression for the regression model represented by this conceptual
framework is given as follows:

Y = β0 + β1X1+ β2X2 + β3X3 + β4X4 + β5X5 + ε

Or

Customer satisfaction = β0 + β1*Tangibles + β2*Reliability + β3*Responsiveness +

β4*Assurance + β5*Empathy + є

Where, Y is the dependent variable representing Customer Satisfaction whereas X1, X2,
X3, X4 and X5 are the independent variables, that is, Tangibles, Reliability,
Responsiveness, Assurance and Empathy
Respondents are also asked to rate their opinion according to five point Likert rating scale,
with rating five being “Strongly Agree” and one being “Strongly Disagree”. Because,
the Likert scale is a measurement tool commonly used in many studies on cognitive
behavior applied theory of planned behavior (Francis et al., 2004). It is considered
symmetric since there are equal amounts of positive and negative positions (Burns &
Burns, 2008).

34
 An inherent assumption with the usage of any Likert scale is that although the scale is truly
ordinal in nature, it is assumed to be on an interval scale with which statistical
properties such as the mean can be justifiably used. It is an assumption made quite
frequently in empirical studies (Edmindson, 2005).
Recently, an empirical study found that a 5- point scale may produce slightly higher mean
scores relative to the highest possible attainable score, compared to those produced from a
10-point scale, and this difference was statistically significant (Dawes, 2008).
Moreover, Lewis (1993) criticized the use of a seven- point Likert scale for its lack of verbal
labeling for points two to six which may cause respondents to overuse the extreme ends of
the scale. Babakus and Mangold (1992) suggested that five-point Likert would reduce the
“frustration level” of respondents and increase response rate and quality. For these reasons,
in this specific type of survey, a 5 - point Likert scale was chosen by the researcher.
The collected data is regressed and analyze with the help of a tool, which is called Statistical
Package for Social Science (SPSS) version 20; and Ms Excel 2007 for overall mean
computation with regard to Behavioral Intention (BI) for the purpose of crosstabs.
Reliability and Validity Tests
It is not adequate just to measure social science constructs using any scale that we prefer. I
also must test these scales to ensure that: (1) these scales indeed measure the
unobservable construct that we wanted to measure (i.e., the scales are “valid”), and (2) they
measure the intended construct consistently and precisely (i.e., the scales are “reliable”).
Reliability and validity, jointly called the “psychometric properties” of measurement scales,
are the yardsticks against which the adequacy and accuracy of our measurement procedures
are evaluated in scientific research (Bhattacherjee, 2012). So, the researcher checks for
reliability and validity of the data collected through survey.
Reliability Test
Reliability is the degree to which the measure of a construct is consistent or dependable. There
are many ways of estimating reliability one of which is internal consistency reliability.
It is a measure of consistency between different items of the same construct. If a multiple-
item construct measure is administered to respondents, the extent to which respondents
rate those items in a similar manner is a reflection of internal consistency.
This reliability can be estimated in terms of Cronbach‟s alpha (Bhattacherjee, 2012). Zikmund

35
 (2003) stated that the researcher should conduct the pre-testing to ensure the
questionnaire‟s reliability and to make sure that measures are free from error and
therefore yield consistent result. The reliability of the questions for each variables are
obtained when Cronbach‟s coefficient alpha is at least 0.6. And the internal consistency and
reliability of the questions will be considered higher, if the result is near to 1. In
general, a reliability of a scale or item may fall between 0 and 1.
George and Mallery (2003) also stated that a reliability score of greater than 0.9 is
excellent, greater than 0.8 is good, greater than 0.7 is acceptable, greater than 0.6
questionable, greater than 0.5 is poor and less than 0.5 is unacceptable.
There are no specific rules about the number of items to be used under each scale
(variable), but some helpful heuristics exist. Based on different constructs, Hinkin, Tracey,
and Enz (1979) suggest that the minimum number of a quality scale could comprise of
four to six items. Accordingly, attitude towards the act of buying has 8 scale items, subjective
norm has 6 items, and the rest two have 5 items under each construct, whereby they sum up to
35 items for the entire variables.
Validity Test
Validity refers to the extent to which a measure adequately represents the underlying
construct that it is supposed to measure (Bhattacherjee, 2012). Content validity is check
through getting the questionnaire reviewed by experts. Moreover, the researcher conducted
content validity of the questionnaire by selecting some customers of the company and made
some wording adjustment mainly under the scale items of subjective norm.
Research Ethics
Some of the expected tenets (principles) of ethical behavior that are widely accepted
within the scientific community are: voluntary participation and harmlessness, anonymity
and confidentiality, disclosure, analysis and reporting (Bhattacherjee, 2012). Therefore, the
researcher of this thesis attempted to consider these issues in respect of each as
follows.
Voluntary participation and harmlessness: Subjects in a research project must be
aware that their participation in the study is voluntary, that they have the freedom to
withdraw from the study at any time without any unfavorable consequences, and they are not
harmed as a result of their participation or non-participation in the thesis.

36
Anonymity and confidentiality: to protect subjects‟ interests and future well-being, their
identity must be protected in a scientific study. This is done using the dual principles of
anonymity and confidentiality. Anonymity implies that the researcher or reader of the final
research report or paper cannot identify a given response with a specific respondent.
Confidentiality means the researcher can identify a person‟s responses, but promises not to
divulge (reveal) that person‟s identify in any report, paper, or public forum. In both cases,
this has been confirmed by the researcher in such a way that there is no need to fill their
name on the questionnaire. Even if there were face-to-face interview questions, they were
assured that their identity would not be disclosed. Hence, much trust is developed between
the researcher and sample respondents.
Disclosure: usually, the researcher has an obligation to provide some information about
his/her study to potential subjects before data collection to help him/her decide whether or
not they wish to participate in the study. For instance, who is conducting the study, for what
purpose, what outcomes are expected, and who will benefit from the results. Guided by this
ethical principle, the researcher has disclosed about the content and purpose of the study.
Moreover, the benefit of the research after finalization has been well-disclosed to the
respondents.
Analysis and reporting: it has been evident that the researcher also has ethical obligations
to the scientific community on how data is analyzed and reported in the study.

37
 CHAPTER FOUR
4. DISCUSSION AND DATA ANALYSIS
Here, statistical analysis which includes descriptive statistics, correlations, and regression analysis
through SPSS version 25 are presented and discussed.
DESCRIPTIVE STATICS
In this process, frequency, descriptive statistics such as mean, percentage and frequencies were
employed
Table 4.1: Response Rate
No. activity Response rate
No. percent
1 Sample size 384 100
2 collected 384 100
Response Rate shows in Table 4.1 and it has out of 384 distributed questionnaires, 384 (100%)
where collected. hence the analysis was made based on the responses obtained from the 384
questionnaires. Respondent Profile
The frequency and the percentage of the respondents profile are summarized in the
below. Table 4.2 Respondent Profile

sex of customers frequency Percentage

male 286 74.5
female 98 25.5
age of customers
less than 20 39 10.2
21-30 205 53.4
31-40 104 27.1
above 40 years 36 9.4
marital status customers
single 188 49.0
married 157 40.9
divorced 39 10.2
educational background of customers
secondary school and below 17 4.4
diploma 115 29.9
degree 188 49.0
masters or above 64 16.7
occupational status of customers

38
 student 118 30.7
Employee 196 51.0
business owner 48 12.5
agriculture and related 8 2.1
other 14 3.6
year of customers serviced at the hotel
below 1 year 131 34.1
1-4 years 176 45.8
4-7 years 41 10.7
above 7 years 36 9.4
monthly income customers
below 2000 birr 87 22.7
2001-4000 birr 122 31.8
4001-7000 birr 92 24.0
above 7000 birr 83 21.6
Total 384 100.0

From the Table 4.2 above, sex of the respondents,74.5 % are males and 25.5% are females
and from ages of the respondents, majority of (80.5%) customers who participated in this
study are in between age of 21-40 years. Moreover 10.2% are below 20 years old. The
remaining 9.4% are above 40 years.. Hence, this shows that the majority of customers‟ age
categories understand the questionnaires. And from the marital status of the respondents,
49% are single, 40.9 re married and 10.2% are divorces. From the occupation of respondents
51% are employee, 30.7% are student, 12.5 are business owners, the remaining 2.1% and
3.6 % are, agriculture (and related) and other respectively. This implies that the
respondent‟s opportunity to provide better understanding the service quality, regarding the
hotels. Similarly from the educational level of the respondents, 49%, 29.9%, 16.7% and
4.4%, degree, diploma, master or higher and secondary school and below respectively. From
this result, we can say that the respondents are able to measure the level of customer
satisfaction by the variable indicated in the questionnaire. And also the experience of the
respondents in the hotels as indicated in Table 4.2, 45.8%, 34.1%, 10.7%, and 9.4%, are 1-4, below
1, 4-7, and above 7 years‟ experiences in the hotels respectively. It implies that, they have better
knowledge about the hotels. Finally from the income perspectives of the respondents 31.8% of the
customers 2, 001-4, 000 birr , 24% above 7000, 22.7% below 2000 and 21.6% are from 4,000 –
7,000 thousand birr respectively.

39
/Figure 4.1: Pie chart representation of respondents by sex

Source: own survey, 2014 E.c

From the pie chart above, sex of the respondents constitute 74.5 % males and 25.5% females
Figure4.2: Pie chart representation of respondents by age. This implies that the majority of hotel
customers are males.

Source: own survey, 2014 E.c

40
 From the pie chart above, ages of the respondents presented, majority of (80.5%) customers
who participated in this study are in between age of 21-40 years. Moreover 10.2% are
below 20 years old. This implies that more customers are on the age between 21 to 40 years
Reliability Test result
Table: 4.3 Reliability Test result
Reliability Statistics
Items Cronbach's Alpha
Tangibility 0.827
Reliability 0.829
Responsibility 0.746
Assurance 0.738
Empathy 0.697
Customer Satisfaction 0.847

As shown in table 4.3, Scale Reliability Cronbach Alphas coefficient for service quality items
ranges from 0.694 to 0.869. And the overall Cronbach alpha coefficient for expected-scale items is
0.847.
Therefore, the expected scales used in this study demonstrate high reliability.
4.2. Correlation analysis
The correlation analysis result was performed to see the association between modified
SERVQUAL dimensions and overall customer satisfaction. Therefore, the correlation
analysis reveals the relationship between Reliability, Responsiveness, Assurance, Empathy
and Tangibility with the overall customer satisfaction. If the correlation result lies between -
1 and 0, the two variables are negatively related. But if the correlation lies between 0 and 1,
the two variables are positively related. Furthermore, according to Field (2005) general
guidelines correlations of 0.1 – 0.29 are considered small, correlations of 0.30 – 0.49 are
considered moderate and correlations above = > 0.5 are considered large.

41
 Table 4.4: Correlation between service quality dimensions with satisfaction by overall service quality

customer
tangibility reliability Responsiveness assurance Empathy satisfaction
tangibility 1 .630 .538 .554 .412 .512
reliability 1 .744 .622 .412 .606
Responsiveness 1 .627 .409 .566
assurance 1 .531 .641
Empathy 1 .506
customer 1
satisfaction
** Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Source: own survey, 2014 E.c

The above Pearson correlation matrix shows that tangibility, reliability, respectiveness, assurance
and emphasy has positive and highest associations with overall customer satisfaction with a
value of (r=0.512, p<0.01), (r=0.606,p<0.01),(r=0.566, p<0.01), (r=0.641, p<0.01) and
(r=0.056, p<0.01) respectively.
The correlations of the variables are shown in Table 4.3 above, however, each variable
correlates perfectly with itself, as evidenced by the coefficients of +1 at the intersection of
a particular variables‟ row and column. Correlation coefficients say nothing about which
variable causes the other to change. Although it cannot make direct conclusion about
causality, we can take the correlation coefficient a step further by squaring it (Field, 2005).
The correlation coefficient squared (known as the coefficients of determination, R 2) is a
measure of the amount of variability in the dependent variable that is explained by the
independent variable.
Testing of multiple linear regression assumptions
Normality
Normality After looked at the descriptive statistics for the present study data, and before
looking at the coming statistics test, is better to look at whether the data follows a normal
distribution or not, because many of the statistical procedures including correlation,

42
 regression, and so on are based on the assumption that the data follows a normal distribution
(Zahediasl, 2012).
Figure: 4.3 histogram normality plot

Table: 4.5Tests of Normality

Tests of Normality
Kolmogorov-Smirnova Shapiro-Wilk
Statistic df Sig. Statistic df Sig.
customer .188 384 .000 .907 384 .000
satisfaction
a. Lilliefors Significance Correction
Source: own survey, 2014 E.c
So, the normality assumption is met, because it is normal at 5% level of significance. Hence any
statistical procedures including correlation, regression, can be done after this assumption met.
Normal Q-Q Plot
If the data is normally distributed, the points will fall on the 45-degree reference line. If the data
is not normally distributed, the points will deviate from the reference line

43
 Figure 4.4 Normal Q-Q Plot of customer satisfaction

Hence the data concentrated on the reference line, which implies that it is normal and linear
Figure 4.5Box-Plot

Box plots are used to show overall patterns of response for a group. They provide a useful way
to visualize the range and other characteristics of responses for a large group. Figure 4.4 tells us
that there is no potential outlier in the data of customer satisfaction.

44
Figure: 4.6 Normal P-P Plot of regression standard residual

Hence normality of residual is met, so we can proceed

Table 4.6: SERVQUAL dimension and Customer satisfaction analysis

Model Summary

model R R Square Adjusted R Std. Error

Square of the
Estimate
1 .718a .515 .509 .53816
Source: own survey, 2014 E.c

a. Predictors: (Constant), emphasy, respectiveness, tangibility, assurance, reliability

The regression model above presents how much of the variances in the measure of
customer satisfaction is explained by the underlying factors (independent variables) of
customer satisfaction. The independent variables have accounted for 51.5% (adjusted R
square of 50.9% with estimated standard deviation 0.53816) of the variance in the criterion
variable (customer satisfaction). The remaining 45.7% are explained by other variables out
of this model.

45
Table 4.7ANOVAa
model Source of variation Sum of squares df Mean square F Sig.
1 regression 116.407 5 23.281 80.387 000b
residual 109.475 378 0.290
total 225.882 383
a. Dependent Variable: customer satisfaction
b. Predictors: (Constant), emphasy, respectiveness, tangibility, assurance,
reliability

The ANOVA table shows the overall significance/acceptability of the model from a
statistical perspective. As the significance value of F statistics shows a value (.000), which is
less than p<0.05, the model is significant. This indicates that the variation explained by the
model is not due to chance.
Table 4.8: Regression result of service quality dimension and overall
customer satisfaction
model Coefficientsa t sig

Unstandardized Standardized
Coefficients Coefficients
B Beta
1 (Constant) .858 .155 5.530 .000
tangibility .067 .042 .077 1.595 .111
reliability .208 .055 .225 3.760 .000
responsiveness .092 .056 .092 1.629 .104
assurance .302 .052 .305 5.815 .000
Empathy .133 .031 .182 4.238 .000
a. Dependent Variable: customer satisfaction

The result of regression analysis based on five independent variables (tangibility, reliability,
responsiveness, assurance, empathy) is presented in the table 4.6. The service quality dimensions
of the factors (independent variables) in contributing to the variance of the overall customer
satisfaction (dependent variable) were explained by the standardized Beta coefficient
From the table above, assurance has the first highest standardized coefficient (β=0.305,
p<0.05) and it has positive significant relationship with the customer satisfaction. This

46
 means Assurance is the best predictor in this study context. The second highest standard
coefficient is goes to reliability with the value of β=0.225, p<0.05 and empathy is the third
highest predictor with value of β=0.182, p<0.05 of customer satisfaction.
Responsiveness has insignificant effect on the level of customer satisfaction which
contains hotels staffs keeping customers informed about when services will be performed,
willing to provide prompt assistance to guests‟ problems and have willingness to help
customers with the value of β=0.092, p>0.05. Next to responsiveness tangibility has also
insignificant impact on customer satisfaction with value of β= 0.077, p>0.05.
The above results show that one unit increase in assurance would lead to 0.305 unit (or
30.5%) increase in customer satisfaction provided that other variables being held constant.
Similarly, one unit increase in reliability would lead to 0.225 unit (22.5%) increase in
customer satisfaction provided that other variables remain constant. Lastly one unit
increase in empathy would lead to 0.182 (18.2%) increase in customer satisfaction
provided that other variables remain constant.
Table 4.9 Summary of Hypothesis Testing Results
No. Hypothesis Test result
1 Ho: Tangibles has no significant effect on customer satisfaction among hotels in Accepted
Debre Markos hotels.
2 Ho: Reliability has no significant effect on customer satisfaction among hotels in Not Accepted
Debre Markos hotels
3 Ho: Responsiveness has no significant effect on customer satisfaction among Accepted
hotels in Debre Markos hotels
4 Ho: Assurance has no significant effect on customer satisfaction among hotels in Not Accepted
Debre Markos hotels

5 Ho: Empathy will have significant effect on customer satisfaction among hotels Not Accepted
in Debre Markos hotels

Hence the degree of customer satisfaction can be determined by using independent variables, for
this a regression model is developed: since we have one continuous dependent variable (customer
satisfaction) and more than one independent variable, multiple regressions have been applied.
Generally the equation is given by

47
Y= (β0 + β1X1+ β2X2+--------------+ βnXn)+ei

Where: Y =the outcome variable(customer

satisfaction) Β0=the coefficient of the constant

predictor (Xi) Β1=the coefficient of the first predictor

(Xi)

Βn=the coefficient of the nth predictor (Xn)

ei = the difference between the predicted and observed value of y for the iih participant

Thus, the effect of dependent variables (service quality dimensions) on dependent

variable (customer satisfaction) would be modeled using multiple linear regression
equation as:

CS = β0 + β1 (REL) + β3 (ASSU) + β4 (EMP)

Where,
CS – Customers Overall Satisfaction
REL – Reliability
ASSU – Assurance
EMP – Empathy

Therefore, the equation fitted as,

Overall CS = .858+ (.225)(REL) + (.305)(ASSU) + (.182)(EMP)

48
 CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
Conclusion
This study was originated to examine service quality dimensions and overall customer satisfaction of
four hotels found in Debre Markos town city administration. According to the correlation result
tangibility, reliability, responsiveness, empathy and assurance have positive and high relationship with
customer satisfaction. The results of multiple linear regression analysis indicates assurance has a highest
effect on the overall customer satisfaction level that includes the behavior of employees of the hotel
installs confidence in customers, the service received from the hotel„s staff, safe in all transactions at the
hotel, knowledge to answer customers questions and Hotel staffs welcome guests that create a
comfortable feeling followed by reliability and empathy. The results of regression analysis indicates
that tangibles which contains furniture‟s and equipment‟s are modern looking, fixture and fitting are
comfortable and easy to use and hotel staffs dressing manner & so on do have no significant effect on
the overall satisfaction level of customers which is contradicted with the correlation analysis. And also
responsiveness which contains hotel‟s employees give prompt service, employees willing to help
customers, employees not too busy to respond to customer‟s requests, providing a safe environment,
check-in and check-out services are quick and easy, willing to provide prompt assistance to guests
„requests and problems and telling exactly when services are to be performed is statistically
insignificant. Once customers‟ requirements are clearly identified and understood, hotel managers are
more likely to be able to anticipate and fulfill their customers‟ needs and wants, rather than merely
reacting to their dissatisfaction. The satisfied the customers are, the more likely the customers would
return or prolong their hotel stay.

Recommendation
 The analysis shows that there is a contradiction result between correlation and regression result
of tangibility dimension which says there is no relationship between tangible parts of the
hotels service with customer satisfaction level however the regression result revels tangibility
dimension have a negative significant effect on dependent variable. These kinds of situation
caused by respondent bias therefore, other researcher must give emphasis on this specific
dimension in order to reveal the correct relationship and impact.

49
 Currently customers not only examined for basic services and facilities provided by a hotel,
but also are expecting a high standard of personal service. Hotels owners better to ensure
service quality by constantly, reviewing their customers‟ needs and wants, and strengthening
customer service training programs for their employees at least a year.
 Employees should be enlightened, trained, and empowered on how to handle customers with
different personality traits and resolve guest complaints quickly.. Management must, first of all,
imagine it, take initiatives, plan towards its achievement, deliver, monitor and find the means
of sustaining it

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56
 Annex- Questionnaires in English

BIRANA COLLAGE

DEPARTMENT OF MANAGEMENT

Questionnaire for hotel industries customers

Dear Respondent,

My name is Asayewendmu. I am student of Master of Business Administration in Birana collage. Now,

I am on preparing my thesis. Therefore, first I would like to thank you in advance for your willingness
and cooperation in filling this form. The purpose of this questionnaire is to gather primary data factors
affecting to customer satisfaction in hotel industry at the Debre Markos city administration, as a partial
fulfillment of the graduate study in Master of Business Administration in Birana collage

. In this regard, I kindly request you to provide me reliable information that is the best of your
knowledge so that the findings from the study would meet the intended purpose. I strongly assure
you that your response will be confidential.

Study Title “ASSESSMENT OF SERVICE QUALITY ON CUSTOMER SATISFACTION , IN THE

CASE OF DEBRE MARKOS City administration hotel sector, Ethiopia”

Procedure and duration First of all, you were selected by lottery method. Researcher will be asking you
using a questionnaire to provide me with pertinent data about assessment of factors affecting customer
satisfaction that is helpful for the study. The questionnaire will take about 8-10 minutes, so I kindly
request you to spare me this time for the study.

Risks; The risks of being participating in this study are only taking few minutes from your time.

Other than this the questionnaire will not cause any harm on you and the community. There would not
be any direct payment for participating in this study. But the findings from this research may reveal
important information for the hotel customer.

Confidentiality

Rights

57
Participation in this study is fully voluntary. You have the right to declare for your organization to
participate in this study. You may refuse to answer any question at any time. However, we hope you
will answer the questions, which will benefit the services you get.

Instruction for filling the questionnaire please read each statement carefully and encircle your choice
for the questions indicated in the table and write your opinion on the blank space.

Instructions;

 Do not write your name

 Respond by making tick mark (✔), by circling or in writing wherever appropriate.
 Try to write answers precisely for the open-ended questions One:
 Part Demographic profile of the respondents.
Question Response
1.sex 1. Male 2. Female
2. Age 1. Less than 20 2. 21–30 3.31–0 4. More than 40
3 Marital status 1. Single 2. Married 3. Divorced
4.Educational level 1. Secondary school &below 2. Diploma 3.
Bachelor degree 4. Master or higher
5.The type of jobs that respondents participated 1.Student 2. Employee 3. Business owner
4.Agriculture and related 5.Other
6. How long have you been customer of this 1. 1 year 2.1 – 4 years 3.4 – 7 years 4. 7 years
hotel?
7. Could you indicate in which category your 1.Less than 2, 000 Birr 2.2, 001–4, 000 Birr 3.Br. 4,
monthly income belongs? 001– 7, 000 Birr 4.over 7, 000 Birr
8. Could you indicate your nationality 1. Ethiopian 2. Foreigner
Part: II Assessment the degree of satisfaction of services offered by the hotel.

The following question aims to assess the degree of satisfaction of service offered by the hotel.
Directions: -Please read carefully each item separately and indicate your level of agreement by
putting (✔) mark under each alternative using the scale below. (From 1 to 5 alternatives in the
Likert scale). Key: - SA= Strongly Agree (5), A= Agree (4), UD=Undecided (3), DA=Disagree
(2), SD= Strongly Disagree (1)

58
1. Tangibility

No Service quality SD DA UD A SA
1 The hotel uses modern state of art technology
and equipment in their service delivery
2 The hotel‟s physical facilities are visually
appealing and satisfactory.
3 The hotel‟s employees are well dressed and neat
in appearance.
4 The materials in the hotel like the beverage, food,
and other materials are visually appealing.
5 The hotel‟s rooms are clean and comfortable.

2. Reliability

No. Service quality SD DA UD A SA

1 The hotel provides its services at the time it
promises to do so.
2 When customers have a problem, the hotel Shows
sincere interest in solving it.
3 The hotel has operating hours convenient to all its
customers.
4 The hotel guarantees/ensures reliable reservation
services.
5 The hotel billing and payment systems are free
from error.
6 The hotel performs the service right the first time.

3. Responsiveness

No. Service quality SD DA UD A SA

1 The hotel‟s employees give me prompt service
2 The hotel employees are always willing to help me

59
3 The hotel employees are never too busy to respond to
my requests
4 The hotel provided a safe environment.
5 The check-in and check-out services are quick and
easy at the hotel.
6 The hotel restaurant delivers prompt service to its
customers.
7 The hotel staff are willing to provide prompt
assistance to guests „requests and problems.
8 The hotel employees tell you exactly when services
will be performed.

4. Assurance

No. Service quality SD DA UD A SA

1 The behavior of employees of the hotel installs
confidence in customers
2 I am quite satisfied with the service received from the
hotel„s staff.
3 I feel safe in all my transactions at the hotel.
4 In the hotel, employees are consistently courteous
with me.
5 Employees in the hotel have the knowledge to answer
my questions.
6 Hotel staffs welcome guests that create a comfortable
feeling.

5. Empathy

No. Service quality SD DA UD A SA

1 The employees of the hotel give customers individual
/personal attention.
2 The employees understand customers‟ specific needs.

60
 3 The hotel staffs provide service to meet guest‟s best
interest (as per the requirements).
4 The hotel has employees who are competent.

Customer Satisfaction

No. Service quality 1 2 3 4 5

1 The hotel completely meets my expectations.

2 I feel absolutely delighted with the hotel‟ services
3 The information that is presented by this hotel is
accurate
4 This hotel is exactly what I need.
5 There is a guarantee of this hotel.
6 I am satisfied with the overall service quality
offered by the hotel.

61
lxii