=Paper=
{{Paper
|id=Vol-3293/paper65
|storemode=property
|title=The Effect of Human Resource Management Practices on the Quality of Service, Customer Satisfaction, and Organizational Performance in Cypriot Urban Hotel Industry
|pdfUrl=https://ceur-ws.org/Vol-3293/paper65.pdf
|volume=Vol-3293
|authors=Christos Papademetriou,Sofia D. Anastasiadou,George Konteos
|dblpUrl=https://dblp.org/rec/conf/haicta/PapademetriouAK22
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==The Effect of Human Resource Management Practices on the Quality of Service, Customer Satisfaction, and Organizational Performance in Cypriot Urban Hotel Industry==
https://ceur-ws.org/Vol-3293/paper65.pdf
The Effect of Human Resource Management Practices on the
Quality of Service, Customer Satisfaction, and Organizational
Performance in Cypriot Urban Hotel Industry
Christos Papademetriou 1,2, Sofia D. Anastasiadou 3 and George Konteos 4
1
University of Western Macedonia, 51100 Grevena, Greece
2
Neapolis University Pafos 1, Pafos 8042, Pafos, Cyprus
3
University of Western Macedonia, 50200 Ptolemaida, Greece
4
University of Western Macedonia, 51100 Grevena, Greece
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
practices and Hotel Performance.
Keywords 1
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 high-
quality, 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
Proceedings of HAICTA 2022, September 22–25, 2022, Athens, Greece
EMAIL: cpapademetriou@uowm.gr (A. 1); sanastasiadou@uowm.gr (A. 2); gkonteos@uowm.gr (A. 3)
ORCID: 0000-0002-7167-7786 (A. 1)
©️ 2022 Copyright for this paper by its authors.
Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0).
CEUR Workshop Proceedings (CEUR-WS.org)
342
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 resourcing-
development 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
343
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
344
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].
Table 1
HRM practices scale
Eigen Commu- Cronbach’s
Construct Variance % Loadings CR AVE M DV
value nalities a
HRM 98.278 .973 5.9278 .64921
A. Recruitment and selection 7.481 44.007 .897 .922 .665 5.8115 .65052
1. Harmonized and term
.874 .764 6.11 .880
conditions
2. Single status for all staff .853 .629 6.04 .917
3. Internal promotion norm .840 .727 5.97 .820
4. Employment test criteria .793 .582 5.50 .709
5. Merit element in selection .763 .705 5.61 .810
6. Multi-skilling and experience .761 .580 5.65 .636
B. Manpower planning 3.865 22.735 .929 .949 .824 5.8375 .73395
1. Formal manpower planning .926 .858 6.05 .823
345
Eigen Commu- Cronbach’s
Construct Variance % Loadings CR AVE M DV
value nalities a
2. Work culture .908 .825 6.02 .781
3. Career planning .899 .807 5.68 .821
4. Involvement of all departments .898 .807 5.61 .810
C. Job design 3.396 19.976 .904 .934 .780 6.1047 .76040
1. Flexible job description .935 .770 5.91 .827
2. Development of learning
.905 .819 5.84 .977
organization
3. Cross-cultural job design .877 .874 6.10 .818
4. Team working .811 .658 6.57 .821
D. Training and development 1.307 7.688 .908 .935 .783 6.2766 .73630
1. Need based training and
.873 .762 6.52 .832
development criteria
2. Formal system induction .899 .808 6.09 .842
3. Learning organization .873 .762 5.96 .823
4. Formal training and
.894 .800 6.54 .831
development
E. Quality circle .447 2.630 .914 .946 .815 6.2766 .73630
1. Staff involvement in objective
.923 .851 5.71 .732
setting
2. Production/service staff
.904 .817 5.66 .768
responsible for their service
3. Employee’s involvement in
.941 .885 5.73 .689
quality circles
4. Regular use of attitudes
.841 .707 5.93 .949
surveys
F. Pay system .211 1.243 .833 .942 .766 5.2600 .64459
1. Staff informed about market
condition and company .905 .820 5.89 .990
performance
2. Merit element in pay package .800 .640 5.96 .910
3. Formal appraisal for all staff .921 .849 6.13 .845
4. No-financial incentives .887 .737 2.18 .381
5. Social appreciation and
.858 .786 6.15 .892
recognition
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].
Table 2
SERVQUAL Scale
Eigen Commu- Cronbach’s
Construct Variance % Loadings CR AVE M SV
value nalities a
SERVQUAL 82.123 .991
A.Tangibles 5.919 21.921 .994 .964 .898
1. This hotel has up-to-date
.947 .989 6.39 .963
equipment
2. This hotel’s physical facilities are
.945 .988 6.38 .962
visually appealing
3. This hotel’s employees are well
.952 .989 6.42 .966
dressed and appear neat
B. Reliability 4.253 15.751 .927 .954 .873 6.05 1.002
1. When this hotel promises to do .959 .919 6.05 1.002
346
Eigen Commu- Cronbach’s
Construct Variance % Loadings CR AVE M SV
value nalities a
something by a certain time, it does
so
2. This hotel keeps its records
.955 .788 6.39 .957
accurately
3. This hotel provides its services at
.888 .911 6.08 .994
the time it promises to do so
C. Responsiveness 3.806 14.098 .994 .996 .988
1. This hotel does tell consumers
exactly when services will be .996 .985 6.44 .947
performed
2. This hotel’s employees are
.994 .987 6.48 .949
always willing to help customers
3. This hotel’s employees respond
.992 .991 6.46 .948
to customer requests promptly
D. Assurance 3.587 13.285 .995 .996 .988
1. I can trust employees of this
.996 .993 6.51 .949
hotel
2. This hotel’s employees know well
.993 .986 6.49 .949
their jobs to help customers
3. This hotel’s employees get
adequate support from this .996 .993 6.51 .949
restaurant to do their jobs well
E. Empathy 3.563 13.194 .994 .991 .975
1. Employees of this hotel know
.989 .994 6.49 .943
what my needs are
2. This hotel has my best interests
.994 .997 6.51 .943
at heart
3. This hotel has operating hours
.979 .990 6.49 .943
convenient to all their customers
F. Sensory 1.046 3.874 .968 .984 .968
1. This hotel serves quality food
with a high degree of excellence .984 .969 6.43 .962
in its presentation
2. This hotel’s food is consistently
served in the freshest state and
.984 .969 6.41 947
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).
Table 3
Hotel Performance scale
Eigen Commu- Cronbach’s
Construct Variance % Loadings CR AVE M SD
value nalities a
Hotel Performance 6.858 85.722 .969 .980 .858 6.2656 .44966
1. Profitability compared to
.903 .816 6.38 .486
business unit objectives
2. Profitability compared to hotel
.903 .816 6.38 .486
industry average
3. Market share compared to
.903 .816 6.80 .486
business unit objectives
4. Market share compared to
.871 .758 6.00 .709
major competitor
5. Sales growth compared to
.956 .913 6.25 .434
hotel industry average
6. Sales volume compared to
.956 .913 6.25 .434
business unit objectives
347
Eigen Commu- Cronbach’s
Construct Variance % Loadings CR AVE M SD
value nalities a
7. Return on investment
compared to hotel industry .956 .913 6.25 .434
average
8. Overall assessment of your
company’s performance
.956 .913 6.25 .434
compared to hotel industry
average
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).
Table 4
Customer Satisfaction scale
Eigen Commu- Cronbach’s
Construct Variance % Loadings CR AVE M SD
value nalities a
Customer Satisfaction 2.456 81.882 .882 .931 .858 6.2458 .94908
1. The degree satisfaction or not
for the decision that he/she .766 .586 6.21 1.078
patronizes the hotel
2. The degree of a customer’s
.967 .935 6.26 1.043
feeling of service
3. The degree of the perceived
.967 .935 6.26 1.043
degree of the method of service
Hypotheses testing: According to correlation analysis the posed six null hypotheses are confirmed.
More especially Human Resource Management practices is strongly correlated with quality of service
(r=0.831, p<0.01), with organizational performance (r=0.893, p<0.01) as well as customer satisfaction
(r=0.905, p<0.001). Consequently, the hull hypotheses Ho1, Ho2 and Ho3 are acceptable. In addition,
quality of service is strongly correlated with organisational performance (r=0.833, p<0.01) as well as
customer satisfaction (r=0.906, p<0.01). Consequently, the hull hypotheses Ho4 and Ho5 are acceptable.
Finally, Organizational performance is strongly correlated with customer satisfaction (r=0.981, p<0.01).
Therefore, the hull hypothesis Ho6 is acceptable.
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].
348
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