Management Practices on the Quality of Service, Customer Satisfaction, and Organizational Performance in Cypriot Urban Hotel Industry

Abstract

The article examines the effects of Human Resource Management (HRM) practices on the quality of service, customer satisfaction, and organizational performance in the urban hotel industry. The data was gathered through a survey of urban hotels in Cyprus. Quantitative method was used in order to collect necessary data from human resource managers, employees, and consumers from each urban hotel under study. Specifically, the researchers used questionnaires. According to the research findings, HRM practices have a significant impact on customer satisfaction. The strongest association was found between organizational performance and customer satisfaction, which is a significant finding because it is proven for the first time in a study related to the Cypriot urban hotel industry. HRM practices and service quality practices both have an impact on customer satisfaction. Finally, this study supports theclose relationship between HRM practices and hotel performance. The research findings revealthat the HRM practices have an extremely effect on customer satisfaction. The strongest correlation was between organizational performance and customer satisfaction, which an outcome of a major importance since it is confirmed for the first time in a study connected withCypriot urban hotel industry. HRM practices as well as service quality practices reveal their consequences on customers satisfaction. Finally, this research confirms the strong connection between HRM HRM Practices, quality service, customer satisfaction, organizational performance

1. Introduction

The tourism industry in Cyprus has always been a significant contributor to the island's economy. Tourism and hospitality contribute over 15% of the island's GDP [ 1 ]. However, the Cyprus hotel business faces significant challenges as a result of the volatile and continuously changing external environment in which it operates. There is a big difference between today's commercial settings and those in the past, where competition played a significant role. Because of globalization, customers' demands for highquality, timely services have put businesses under pressure, causing them to be unable to manage all functions on their own. Because of the growing rivalry, many hotels have had to discover new ways to maintain their current clientèle while also attracting patrons from competitors.

Human resource management is an essential component or function of any firm, but especially so for hospitality organizations that rely on customer service and other people-related activities as an element of their Unique Selling Proposition. HRM practices that improve service quality, customer satisfaction, and hotel performance constitute a realistic approach for hotels to stay competitive. Service quality, on

2022 Copyright for this paper by its authors. the other hand, is often intangible and non-standardized [ 2 ]. Evaluating service quality is essentially subjective and largely in the hands of customers. Furthermore, the efficacy with which front-line staff engage with clients has a significant impact on service quality [ 3 ].

HR Management Practices are HR-related management projects that include HR planning, staffing, selection, training, reward, performance evaluation, and development [ 4, 5 ]. [ 6 ] define HRM systems as interconnected HR operations meant to ensure that employees have a broad variety of outstanding talents and capabilities that are employed to meet the organization's goals. Numerous studies have shown the importance of customer-service professionals in generating and providing exceptional service [ 7 ]. Much has been written about Human resource management practices and their impact on organizational performance in the HRM literature [ 8, 9, 10, 11, 12, 13 ]. These studies did not examine organizational performance from the viewpoints of employee service quality and customer satisfaction. Similarly, socialization of HRM methods has been highlighted as a channel for improving knowledge and information transfer, resulting in a better understanding of various degrees of customer satisfaction and demands [ 14 ].

Given the foregoing, this article explores the relationship between HRM practices, service quality, customer happiness, and organizational performance in the context of the Cypriot hotel business. The following sections analyze selected literature on the HRM – service quality, HRM – customer satisfaction and following parameters in the hotel business, and the research issues. The final part is devoted to the research methods. The findings are discussed in the fourth section. The article concludes with practical consequences and suggestions for future research initiatives.

2. Literature Review

The literature review is based on a) the relationship between human resource management techniques and service quality; b) the relationship between service quality and customer satisfaction; c) the relationship among HRM practices and organizational performance, and d) the relationship between HRM practices, service quality, customer satisfaction and organizational performance.

Many HR researchers have previously emphasized that in service businesses, quality improvement must be centered on recruitment, training, development, and pay package [ 10, 15, 16, 17, 18 ]. It is also true that in a labor-intensive industry, good human resource utilization can provide a company with a competitive advantage [ 19 ]. According to [ 20 ] hotel contract personnel should be given the appropriate training in order to provide high-quality service. Earlier HRM studies have found a favorable association among employee views of company HR procedures and customer judgments of organizational service effectiveness in the service industry [ 21, 22, 23 ]. These lead us to the the first research question: “Are HRM practices favourably related to the development of service quality in hotels?”

The literature has extensively highlighted the strong relation among service quality and customer satisfaction [ 24, 25, 26 ]. Customer satisfaction is a broad sensation that is impacted by the quality of the service or product, the cost incurred, as well as other external and personal elements [ 27 ]. According to [ 28 ], customer happiness requires service experience and is affected by perception of service quality. Customer happiness is a central element in the service sector, success in the hospitality industry. It is described by [ 29 ] as both the result of individual service operations and the quality of service experience. Furthermore, [ 30 ] claimed that attaining and maintaining a high level of customer satisfaction offers numerous advantages for businesses. In addition, customer happiness has always been a goal for businesses, since it aids in customer retention and market share growth [ 31, 32, 33 ]. Based on this, the second study question ensues: "Does the Service quality dimension positively correlate with customer happiness in hotels?"

According to [ 34 ] there is a positive association among service quality and company performance in the hotel industry. Moreover, according to [ 35 ], the connection between HRM systems of resourcingdevelopment and reward-relationships and organizational performance is regulated by HRM activities of skills and behaviors. [ 36 ] found that HRM practices have a beneficial impact on providing efficient and optimal service, which results in increased customer satisfaction and, as a result, the improved performance of the organization.

Many researchers have claimed that HRM practices have a significant impact on service organization performance, quality service delivery, and customer satisfaction [ 10, 37, 38, 39, 40, 41 ]. These researches were primarily carried out with regard to single HRM practices rather than other significant variables such as service quality and customer happiness, and hence their findings may be deemed biased. However, Customer satisfaction has been found as an important indicator of corporate profitability as well as a driver of word-of-mouth behavior and commitment [ 42, 43 ]. As a result, the impact of HRM management on firm performance is also considered in this study. The third research question, thus, is: “Is there any link among HRM practices and organizational performance?”

Many studies have recognized the significance of comprehending the relationship between employees, customers, and organizational performance [ 44 ]. According to [ 45 ], happy and motivated employees resulted in satisfied consumers, and satisfied customers spend more, increasing organizational profits and revenues. As a result, the fourth final research question is: “Is there any connection between HRM practices, service quality, customer satisfaction, and hotel company performance?”

3. Methodology

Data collecting and sampling Data were gathered from HR managers (8), employees (160), and consumers (160) in hotel organizations in Cyprus' urban areas. The survey methodology was chosen because it was thought to be the most efficient way of reaching a large number of respondents, and the necessary data allowed for the use of a mail-administered questionnaire with closed questions. The sample businesses were chosen from the Ministry of Tourism, Government of Cyprus, which serves as a resource center for business information and maintains pertinent records of hotel companies. To gather a sample, we contacted the HR managers of more than 18 hotels in Cyprus's urban centers. Questionnaire packets were distributed to each hotel's HR manager between January and March 2022. Each packet contains 30 staff questionnaires, 30 customer questionnaires, and 1 HR management questionnaire. We respectfully requested that the employee and customer questionnaires be distributed by the HR managers. HR managers gathered the questionnaires and placed them in an envelope at the hotel's reception. The questionnaires were collected by the researcher at each hotel's reception desk. Eight hotel firms responded to the whole sample by returning 20 staff and 20 customer questionnaires. Thus, 8 HR managers (44.44 percent response rate) and 20 responses from employees and 20 responses from guests, from each hotel, returned valid questionnaires. We received 160 questionnaires from employees and 160 questionnaires from customers in total.

4. Measure Development

The literature analysis that identified previously established and tested scales was used for the operationalizing of the constructs. All constructs were assessed using multi-item measures. Presciently the following scales were used.

HRM Practice: We assessed 27 existing HRM practices using a 7-point Likert scale ranging from 1 'Strongly Disagree' to 7 'Strongly Agree. The scale incorporates the following six key characteristics of HRM practices as discussed in the literature (e.g. [ 9, 10, 11, 12 ]): a) recruitment and selection, b) manpower planning, c) job design, d) training and development, e) quality, and f) pay system.

Service Quality: Items for measuring perception of service quality are adapted from previous literature [ 46, 47, 48, 49, 50 ]. To abbreviate the survey and evaluate the sensory component, 15 items (three for each of the five aspects) are identified from SERVQUAL's 22 items. Service quality components were rated on a 7-point Linkert scale, with 1 indicating "Strongly Disagree" and 7 indicating "Strongly Agree".

Customer Satisfaction: Customer satisfaction was measured in this study using three factors based on research by [ 47, 51, 52 ]. These factors are a) the degree of happiness with his or her decision to patronize the hotel, b) the degree of a customer's experience with the service, and c) the degree of the perceived method of service. A Linkert Scale scoring method of 7 points, with 1 indicating "Completely Dissatisfied" and 7 signifying "Completely Satisfied".

Organizational Performance: We used multiple organizational performance variables (profitability against business unit objectives, sales volume against business unit objectives, ROI against hotel industry average, profitability against hotel industry average, sales growth against hotel industry average, market shares against hotel industry average, and overall assessment of company performance against hotel industry average). Earlier research has uncovered a close relationship between subjective and objective measures of performance [ 10, 53, 54 ] that were measured using the ideology of a perception score of the organization’s effectiveness. These measures were utilized in the current article to examine the performance of the hotel business in the Cypriot context. The components of the organization were scored on a 7-point Linkert scale, with 1 indicating "Strongly Disagree" and 7 indicating "Strongly Agree".

5. Statistical Hypothesis

The objective of current study is to evaluate the effect of Human Resource Management practices on the quality of service, customer satisfaction, and organizational performance in Cypriot urban hotel industry. In addition, the current paper examines the following statistical hypotheses.

Ho1: Human Resource Management practices are strongly correlated with quality of service.

Ho2: Human Resource Management practices are strongly correlated with organizational performance.

Ho3: Human Resource Management practices are strongly correlated with customer satisfaction. Ho4: Quality of service is strongly correlated with organizational performance.

Ho5: Quality of service is strongly correlated with customer satisfaction.

Ho6: Organizational performance is strongly correlated with customer satisfaction.

6. Analysis and Discussion

Instrument’s reliability was evaluated by Cronbach alpha coefficient as well as Composite Reliability and AVE. Cronbach’s alpha coefficient for HRM practices scale counts for 0.973. Its conceptual constructs named Recruitment and selection, Manpower planning, Job design, Training and development, Quality circle and Pay system have Cronbach’s alpha coefficient above the cutoff point of 0.70. Cronbach alpha coefficient for Recruitment and selection, Manpower planning, Job design, Training and development, Quality circle and Pay system equals to 0.897, 0.929, 0.904, 0.908, 0.914 and 0.833 respectively [ 55, 56, 57, 58, 59, 60, 61 ] (Table 1).

Composite reliability (CR) for Recruitment and selection, Manpower planning, Job design, Training and development, Quality circle and Pay system equals to 0.922, 0.949, 0.934, 0.935, 0.946 and 0.942 respectively. These values are larger than the cutoff point of 0.7 and they indicate internal consistency [ 63, 64 ]. Average Variance Extracted (AVE) is equal to 0.665, 0.824, 0.780, 0.783, 0.815 and 0.766 for Manpower planning, Job design, Training and development, Quality circle and Pay system respectively. AVE’ Values greater than the cutoff point of 0.5 are considered as satisfactory [ 64 ] (Table 1). The following indices named Eigenvalue, %Variance, Loadings and Communalities are acceptable and revealed the constructed validity of HRM practices scale [ 65 ] (Table 1). The measurement model fits the observed data (X2/df=1.79, CFI=0,95, GFI=0.93, RMSEA=0.04, AGFI=0.90, IFI=0.95) [ 66, 67, 68, 69 ].

Communalities .764

Cronbach’s alpha coefficient for Service Quality scale counts for 0.991. Its conceptual constructs named Tangibles, Reliability, Responsiveness, Assurance, Empathy and Sensory have Cronbach alpha coefficient above the cutoff point of 0.70. Cronbach alpha coefficient for Tangibles, Reliability, Responsiveness, Assurance, Empathy and Sensory equals to 0.994, 0.927, 0.994, 0.995, 0.994 and 0.968 [ 55, 56, 59, 60, 61, 70, 71,72 ] (Table 2). Composite reliability (CR) for Tangibles, Reliability, Responsiveness, Assurance, Empathy and Sensory equals to 0.964, 0.954, 0.996, 0.996, 0.991 and 0.984 respectively. These values are larger than the cutoff point of 0.7 and they indicate internal consistency [ 62, 63, 64 ]. Average Variance Extracted (AVE) is equal to 0.898, 0.873, 0.988, 0.988, 0.975 and 0.968 for Tangibles, Reliability, Responsiveness, Assurance, Empathy and Sensory respectively. AVE’ Values greater than the cutoff point of 0.5 are considered as satisfactory [ 62, 63 ] (Table 2). The following indices named Eigenvalue, %Variance, Loadings and Communalities are acceptable and revealed the constructed validity of Service Quality scale [ 65 ] (Table 2). The measurement model fits the observed data (X2/df=1.77, CFI=0,95, GFI=0.94, RMSEA=0.04, AGFI=0.90, IFI=0.95) [ 66, 67, 68, 69 ]. 2. Work culture 3. Career planning 4. Involvement of all departments

C. Job design 1. Flexible job description 2. Development of learning

organization 3. Cross-cultural job design

4. Team working D. Training and development 1. Need based training and

development criteria 2. Formal system induction 3. Learning organization 4. Formal training and development

E. Quality circle 1. Staff involvement in objective

setting 2. Production/service staff responsible for their service 3. Employee’s involvement in

quality circles 4. Regular use of attitudes

surveys

F. Pay system 1. Staff informed about market condition and company

performance 2. Merit element in pay package 3. Formal appraisal for all staff 4. No-financial incentives 5. Social appreciation and

recognition .908 .899 .898 .935 .905

Communalities .989 .988 .989 .919 something by a certain time, it does

so 2. This hotel keeps its records

accurately 3. This hotel provides its services at the time it promises to do so

C. Responsiveness 1. This hotel does tell consumers exactly when services will be

performed 2. This hotel’s employees are always willing to help customers 3. This hotel’s employees respond to customer requests promptly

D. Assurance 1. I can trust employees of this

hotel 2. This hotel’s employees know well their jobs to help customers 3. This hotel’s employees get adequate support from this restaurant to do their jobs well

E. Empathy 1. Employees of this hotel know

what my needs are 2. This hotel has my best interests

at heart 3. This hotel has operating hours convenient to all their customers

F. Sensory 1. This hotel serves quality food with a high degree of excellence

in its presentation 2. This hotel’s food is consistently served in the freshest state and with an uncommon degree of visual

and olfactory appeal

Cronbach’s alpha coefficient for Hotel Performance scale counts for 0.969. Composite reliability (CR) for Hotel Performance equals to 0.980. This value is larger than the cutoff point of 0.7 and they indicate internal consistency [ 62, 63, 64 ]. Average Variance Extracted (AVE) is equal to 0.858 for Hotel Performance scale that is considered as satisfactory [ 62, 63 ] (Table 3). The following indices named Eigenvalue (6.858), %Variance (85.722), Loadings and Communalities are acceptable and revealed the constructed validity of Service Quality scale [ 65 ] (Table 3). The measurement model fits the observed data (X2/df=1.69, CFI=0,95, GFI=0.92, RMSEA=0.04, AGFI=0.90, IFI=0.95) [ 66, 67, 68, 69 ] (Table 3). 14.098 .994 .996 .988 6.39 6.08 .957 .994 .947 .949 .948 .949 .949 .949 .943 .943 .943 6.43

.962

Communalities .816 .816 .816 .758 .913 .913

Cronbach’s alpha coefficient for Hotel Performance scale counts for 0.882, Composite reliability (CR) for Customer Satisfaction scale quals to 0.931. This value is larger than the cutoff point of 0.7 and they indicate internal consistency [ 62, 63, 64 ]. Average Variance Extracted (AVE) is equal to 0.858 for Customer Satisfaction scale that is considered as satisfactory [ 62, 63 ] (Table 4). The following indices named Eigenvalue (2.456), %Variance (81.882), Loadings and Communalities are acceptable and revealed the constructed validity of Service Quality scale [ 65 ] (Table 4). 6.25 6.25 M .434 .434 SD .913 .913 7. Return on investment compared to hotel industry

average 8. Overall assessment of your company’s performance compared to hotel industry

average

7. Conclusions and Implications

The current paper examines the effect of Human Resource Management practices on the quality of service, customer satisfaction, and organizational performance in the Cypriot urban hotel industry. The structural equation model validated the measurement model fit in related to observed data. Accordingly, the conceptualized HRM practices model constitutes a valid model, with a very good fit as well as SERVAQUAL, and a Hotel Performance model. Furthermore, the research findings show that HRM practices have a significant impact on customer satisfaction. The strongest association was found to be between organizational performance and customer satisfaction, which is a significant finding because it is proven for the first time in a study related to the Cypriot urban hotel industry. HRM practices and service quality practices both have an impact on it. Finally, this research confirms the strong connection between HRM practices and Hotel Performance [ 10 ]. Future studies may broaden the scope of the issue by including more countries and cultures. Future research may expand the scope of the issue to other countries and different cultures. Big Data applications, pipeline Dynamic Scheduling of Big Data Streams and algorithms can assist us in gathering a large amount of data from the websites of hotel industries, to assess the impact of HRM practices on Hotel Performance [ 73, 74, 75, 76, 77, 78, 79 ].

8. References

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