Estifanos Thesis Paper

YOM POSTGRADUATE INSTITUTE
School of Postgraduate studies
Department of Business Administration
The effect of service quality on customer satisfaction in star rated hotels in Addis Ababa: In
the case of selected hotels in Addis Ababa.
By- Estifanos Abera
March/2023
Addis Ababa/Ethiopia
MSC Thesis Paper submitted to YOM Postgraduate School
The effect of service quality on customer satisfaction in star rated hotels is Addis Ababa: In
the case of selected hotels in Addis Ababa
By: Estifanos Abera
Presented in Partial Fulfillment of the Requirements for the Master of Arts Degree in Master
of business Administration
Advisor name: Dr. Berihun Muche
March/20
23
Addis Ababa,
Ethiopia
Declarations
I, Estifanos Abera, GSMRA/014/14A, do hereby declare that this thesis is my original work
and it has not been submitted partially; or in full, by any other person for an award of degree
in any other university/institution.
Submitted by- Estifanos Abera
Signature ………………
Advisor- Dr. Berihun Muche
Signature…………….
Acknowledgment
First of all, the highest of highest gratitude goes to the almighty GOD as nothing would
become possible without his grace, endless love and support for being here at this stage. It
wouldn’t have been this easy if it hadn’t been for God’s will.
Next to that, my heartfelt appreciation goes to Dr. Berihun Muche for shaping me on how
to progress on every single stage of this paper. His constructive suggestion helps me a lot
while conducting this research. Thank you for the big support.
My friends, Dagne and Tewodros Beletew who guide me a lot when doing this research,
your support has a huge impact on doing this paper. Without your comments and correction,
this couldn’t be achieved. Finally, my wife Eyerus yazachew, who was always there by my
side, being my strength on every step I go, your kindness, will always have a special place
within me.
Table of Contents
Acknowledgment................................................................................................................4
list of tables.........................................................................................................................6
list of figures.......................................................................................................................7
abstract................................................................................................................................8
chapter one..............................................................................................................................1
introduction.............................................................................................................................1
1.1back ground of the study................................................................................................1
1.2 statement of the problem...............................................................................................2
1.3research questions..........................................................................................................3
1.3.1main research question................................................................................................3
1.3.2 specific research questions.........................................................................................4
1.4 objectives of the study..................................................................................................4
1.4.1 general objective........................................................................................................4
1.4.2 specific objectives......................................................................................................4
1.5 significance of the study...............................................................................................4
1.6 scope of the study.........................................................................................................5
1.7 limitations of the study.................................................................................................6
1.8 definition of key terms..................................................................................................6
1.9 organization of the paper..............................................................................................7
chapter two.............................................................................................................................8
review of related literature...................................................................................................8
2.1 introduction...................................................................................................................8
2.2 review of theories..........................................................................................................8
2.2.1 service quality............................................................................................................9
2.2.2 customer satisfaction................................................................................................10
2.2.3. Service quality & customer satisfaction in hotel industry......................................11

2.2.4. Measurement of service quality in the hotel industry.............................................12
2.2.5 types of service quality models................................................................................12
2.2.5.1 servqual..............................................................................................................13
2.2.5.2 servperf model......................................................................................................13
2.2.5.3 holserv.................................................................................................................14
2.3 empirical review.........................................................................................................16
2.4 research gap................................................................................................................17
2.5 conceptua l frame work...............................................................................................18
2.6 hypothesis formulation...............................................................................................19
2.6.1employee behavior and customer satisfaction..........................................................19
2.6.2 tangibility and customer satisfaction.......................................................................20
2.6.3 reliablity and customer satisfaction.........................................................................20
2.7qualitydifference..........................................................................................................21
chapter three.........................................................................................................................22
research design and methodology........................................................................................22
3.1introduction..................................................................................................................22
3.2 research design............................................................................................................22
3.3 research approach....................................................................................................22
3.4. Target population, sampling unit & sample frame..................................................23
3.4.1 Method of sampling...............................................................................................23
3.4.2 Sampling procedure.................................................................................................23
3.4.3 Sample size determination.......................................................................................23
3.5 Data type and Source..................................................................................................24
3.6 Research instrument and Measurements.....................................................................24
3.7 Methods of data collection..........................................................................................24
3.8 Methods of Data analysis............................................................................................24
3.9 Model Specification....................................................................................................25

3.10 Model Equation.........................................................................................................25
3.11 Validity and reliability..............................................................................................25
3.11.1 Validity..................................................................................................................25
3.11.2. Reliability..............................................................................................................26
3.12 Ethical Considerations..............................................................................................26
CHAPTER FOUR................................................................................................................28
4. Data presentation, analysis and interpretation..................................................................28
4.1 Introduction.................................................................................................................28
4.2 Response Rate.............................................................................................................28
4.3 Characteristics of Respondents...................................................................................28
4.3.1 Gender distribution of the respondents....................................................................28
4.3.2 Age distribution of the respondents.........................................................................29
4.3.3 Educational background of the respondents............................................................30
4.3.4 Purpose for visiting the hotels.................................................................................30
4.3.5 Hotels star category.................................................................................................31
4.4 Descriptive statistics for study variable......................................................................32
4.4.1 Mean distribution of Customer Satisfaction............................................................32
4.4.2 Descriptive Analysis of Service Quality Measurement...........................................33
4.4.2.1 Reliability of service.............................................................................................33
4.4.2.2 Employee behavior...............................................................................................34
4.4.2.3 Tangibility of service............................................................................................35
4.5 Inferential statistics of the Study................................................................................36
4.5.1 Assumptions of Multiple Linear Regression Analysis............................................36
4.5.1.1 Test of linearity.....................................................................................................36
4.5.1.2 Test for normality.................................................................................................37
4.5.1.3 Test of heteroscedasticity (homoscedasticity) {var (ut) = σ2 <∞}:-....................37
4.5.1.4 Test for assumption of autocorrelation {cov(ui,uj) = 0 for i ≠ j}:-.......................39

4.5.1.5 Test for multi-collinearity.....................................................................................39
4.5.2 Correlation Analysis................................................................................................40
4.6 Multi linear Regression analysis.................................................................................42
4.6.1 Model summery.......................................................................................................43
4.6.2 ANOVA (Analysis of Variance)..............................................................................44
4.6.3 Result of multiple regression (coefficient of determination)...................................44
4.7 Hypothesis Test...........................................................................................................45
4.8 Summery.....................................................................................................................46
CHAPTER FIVE..................................................................................................................47
Summary of Findings, Conclusion and Recommendation...................................................47
5.1 Summary of Findings..................................................................................................47
5.2 Conclusion..................................................................................................................48
5.3 Recommendation........................................................................................................48
5.4. Recommendation for future researcher......................................................................49
References:........................................................................................................................50
Appendix I........................................................................................................................51
List of tables
List of figures
Abstract
The role of service quality in bringing success in the hotel industry is something that cannot
be easily denied. Therefore, The main objective of this research was to evaluate the effect of
service quality on customer satisfaction of star rated hotels in Addis Ababa by applying a
modified SERVQUAL model called HOLSERV from the point of the three service quality
dimension (employee behavior and appearance, tangibility and reliability) of the service
delivered by the star rated hotels in Addis Ababa. To achieve this objective, mixed types of
research approach (qualitative and quantitative) and mixed types research design(descriptive
and explanatory) were used to analyze the data collected through a structured questionnaire
from a sample of 384 hotel guests. These respondents were selected using non-probability
and probability sampling techniques such convenience and simple random sampling were
used respectively and hotels were selected purposefully. The data collected through a
questionnaire were analyzed using central tendency statistical tools such as mean, standard
deviation, correlation and regression analysis via SPSS Version 25. The major finding of the
study indicates, the employee behavior and appearance dimension can highly affect customer
satisfaction, followed by reliability and tangibility. Based on the findings of the study, the
researcher recommended that the owners or top management to improve quality services so
as to satisfy customer’s needs should hire professional, self-motivated, passionate employees
who are capable to deal with customer and solve customer complaints and other issues in an
effective manner.
Key words: service quality, customer satisfaction, HOLSERV, service quality dimension,
SPSS.
CHAPTER ONE
INTRODUCTION
1.1BACK GROUND OF THE STUDY
Nowadays, services are becoming one of the most important and influential sectors for the
daily activities of mankind. Those diversified sectors of service plays an important role in
delivering what people are seeking for their needs. In order to meet the needs of people
through service delivery, quality plays an important role in the process. A high quality service
in turn has a power to generate high profit, market share and acceptance from the consumer
to the service provider. Despite the number of researches conducted at the area of service
quality, such related issues haven’t been conducted especially at the area of hospitality,
specifically at star rated hotels in the context of our country.
As an influential component of business activity, it is crucial to be able to see the effects of

service on the hospitality sector. It is a clear phenomenon that service quality at the hotel
sector has a direct impact on the performance and progress of an organization and plays a
vital role in getting a competitive advantage. The main reason for conducting this research, as
mentioned above is the vast and rapidly growing hotel industry and issues regarding the
service have to be deeply observed in order to bring a fruitful result in the area.
In order to create a satisfying customer, it is a must to make the service a well organized and
quality one with the fierce competition that the concerned service providers are facing. It will
give a brief understanding on how to create satisfaction among users of the service and how
to become more successful on this area will be answered by the findings of this research. A
modified version of service quality SERVQUAL (Parasurman, Berry & Zeithmal, V.A, 1988)
… which is called HOLSERV model is applied. This model is specifically customized for the
hotel industry. This kind of gathering information has crucial impact for hotel owners and
managers as they have to show the areas which they need to focus in order to meet
customers’ expectations by providing quality service.
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1.2 Statement of the problem
In today’s competitive environment, service quality is the most influential thing that has the
power to make an organization a chosen one among its competitors. When it comes to
activities which needs direct interaction of customers and service providers, the impact of
service quality on the process will be high in terms of creating satisfied customers
When it comes to the hotel industry, the role that service quality plays has a huge effect on
the overall hotel management system. Decision makings, overall management process,
gaining high market share and increasing revenue all have direct connection with service
quality. From observations and surveys one can conclude that hotels are now facing problems
regarding the services they are giving in terms of quality. They are witnessed failing what
important factors are there from customer’s side which is mostly important to retain them.
Recent studies show only what customer’s perceptions are regarding service quality. But the
industry needs a high interaction and involvement of the concerned stakeholders which
includes owners, employees, governmental sectors which have a direct connection with the
industry.
There are several reasons for the growth of hotel industry in Ethiopia. As the country is one
of the most strategically important countries in the horn of Africa, several international
meetings are taking place in Ethiopia. In addition to that, the capital city, Addis Ababa, is the
base of the head quarter o African union. International organizations, NGO’s, Embassies and
several institutions are found in Addis Ababa which in turn brings a huge need for hotel
service at the level o international service delivering trend. Not only this, the demand to
operate their organizations in the country is rising in a high and rapid way from the side of
foreign companies. In order to meet the demand of all these needs, there should be a high
quality and standard customer service from the hotels which are functional and giving service
for their customers.
Some studies have shown that there were gaps in between customer’s expectations and
the service they are getting in star rated hotels in Addis Ababa. Although new
international hotel brands are joining the industry, new techniques and internationally
accepted ways of customer service has to be implemented, still the progress of good
customer service is becoming one of the questions which is not answered yet. Most hotels
are observed on focusing their revenue only rather than working on providing a quality
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service. Their customer handling strategy, service providing techniques, implementing
internationally accepted service standards and many more gaps are observed on the star
rated hotels in Addis Ababa. Although there are few hotels which satisfy the requirements
of a good customer service with a quality service, most of the hotels are running on a very
non standardized way of service quality.
Providing a good service can be expressed in a number of ways. Greetings, facial

expressions, tone of voice, body gesture, expressions are all included in a single
interaction of a customer. Apart from this, the way that main service is being delivered
shows the difference between expectations and reality of customers at the hotel industry
is a huge concern that needs to be highly addressed. The very few implications of
showing a quality service at these hotels needs to be studied and a change has to be
observed for overall image of the industry and the country at all.
This research aims to assess the service quality and customer satisfaction in star rated
hotels in Addis Ababa, Ethiopia. The wide gap which has been observed on this sector
arises from poor management system, service design and implementation of quality
programs. From this point of view, the purpose of this study is to assess the direct relation
of service quality with that of customer satisfaction and the main reason that a dissatisfied
customer rises which need to be highly improved. I will try to assess and investigate the
term “Service quality and customer satisfaction in star rated hotels in Addis Ababa”,
using the term HOLSERV ( hotel service quality), which is a modified version of
SERVQUAL, and a model which is specifically designed for the hotel industry.
1.3RESEARCH QUESTIONS
1.3.1Main research question
 How does service quality affect customer satisfaction of services provided by

star rated hotel in Addis Ababa?
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1.3.2 Specific research questions
1. How does employee behavior affect customer satisfaction of star rated hotel
customers in Addis Ababa?
2. How does tangibility affect customer satisfaction in star rated hotels of Addis
Ababa?
3. How does reliability affect customer satisfaction in star rated hotels of Addis Ababa?
4. Is there any significance difference quality between star rated hotels in terms
of service quality and customer satisfaction.
5. Is there any quality difference between locally owned and international brand hotels
in Addis Abab
1.4 Objectives of the study
1.4.1 General objective
 The general objective of the study will be to examine the effect of service
quality on customer satisfaction on star rated hotels in Addis Ababa.
1.4.2 Specific objectives
1. To evaluate the effect of employee behavior on customer satisfaction on star

rated hotels in Addis Ababa
2. To assess the effect of tangibility on customer satisfaction in star rated hotels
in Addis Ababa
3. To assess the effect of reliability on customer satisfaction in star rated hotels
in Addis Ababa.
4. To determine service quality difference between star rated hotels in Addis
Ababa
5. To examine service quality difference between locally owned and
International brand hotels in Addis Ababa?
1.5 Significance of the study

The study upon completion can benefit a number of parties by providing relevant and useful
information regarding customer satisfaction and service quality. All those stake holders who
participate in the industry will have a good understanding on how service qualities impact has
on the overall business activities. Through viewing the terms from different dimensions, it
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will be a great benefit and additional benefit on previously conducted researches at the area.
When we see it specifically, there are different involvers who can highly be beneficial by
delivering a quality service for customers. Hotel owners and managers will have a tendency
to develop their practices at the area of their service giving trend. Several programs might
have a chance to be implemented to work on employees’ skills and customer handling
management practices through the results and findings from customer’s feedback.
Several sectors who have direct interaction with the mentioned service providing sectors
will get a good input to shape the industry with appropriate laws and standards which can be
taken as measurement actions for the daily operational activities. Certain standardized
protocols on service delivery might be constructed so that those star rated hotels might
become operational and follow those standards to act on their daily activities.
As an individual working on the hotel industry, feedbacks and findings about service quality
will help me to develop myself at the area of service giving and try to contribute as much as
possible new ideas to the industry. Further specific researches if being conducted in the
future, the results and findings of this research will become a good source of information.
1.6 Scope of the study

As the research mainly focuses on the relationship between customer satisfaction and
service quality, a satisfactory amount of literature relating to the concept is believed to be
drifted. Service quality by its nature is a huge concept and takes a lot of time to cover all the
details of the area. Thus, by the nature of this study at the area of hospitality industry,
specifically at hotels in Addis Ababa, HOLSERV and its dimensions with customer
satisfaction is highly intended.
Regarding the focus areas where the research will be conducted, from two stars up to five
star hotels will be there for the survey study. The reason for choosing from each star type is
to show the service trend and difference between each star category regarding the way they
follow their service structure. Even same star hotels have different kinds of service quality
and other mean of dimensions in giving service. So, taking feedbacks and experiences from
each star category will highly answer the questions of service quality on customer satisfaction
of this research paper. Each star rated hotel with its unique structure, management system and
overall service giving procedure will be a good input for this research. Detail comparisons in
between each hotel types will highly help this research paper to generate trustful and valid
information from across the users.
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1.7 Limitations of the study
The study will take place on randomly selected star rated hotels which are believed to have a
good customer flow as the feedback and comments of customers is a must to get a relevant
data from users. At the current stage of the research, I personally believe that some
challenges will be there while conducting the research. From those challenges, giving
appropriate responses for the questions raised will be the first one. AS a trustful and real
response is needed to generate the results, if such kind of responses occurs, it will be difficult
to generalize the results and provide an appropriate outcome from the research. Due to this
reason, I personally will try to convenience respondents to fill my questionnaires in an
attentive way. Additionally as there are only few hotels being included in this research, final
results might have a tendency to generalize the overall industry. It will be very difficult to
cover all star rated hotels in Addis Ababa in this single research. The fact that the selected
hotels might not represent the whole hotels found in Addis Ababa, such results might create
bias among others which are not selected under this research paper.
1.8 Definition of key terms
1. Customer: a person who is somehow in connection with an organization and receives

it’s goods or services
2. Customer satisfaction: Is a state when the customer feels a product or a service meets
his/her expectation
3. Service: A series of intangible activities throughout interaction between customers
and employees which are presented as a solution for their problems (Gronross, 1990)
4. Expected service: It is the same ideal service which is desired by a customer
(Parasuraman, et,al:1991)
5. Quality: A collection of specifications of a product or a service which meets
expectations of a customer.
6. Service quality: The difference between customer’s expectations and that of his
perceived concept of real performance of service. (Zeithmal and Bitner, 1996)
7. Expectations: The same ideal service which is desired by a customer before his
entering to an organization.
8. A ‘hotel customer’): An individual, who is a temporary visitor, has stayed overnight
at a hotel, is involved in any service he gets.
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9. Customer satisfaction: A person’s feeling of pleasure or disappointment that results
from comparing a product’s perceived performance or outcome with their
expectations. (WTO, 1985)
1.9 Organization of the paper

This research proposal is organized in five chapters. Chapter One covers the introduction,
including the background, statement of the problem, research questions, objectives,
significance of the study, scope/delimitation of the study, limitations of the study, and
definition of key terms. Chapter Two provides a literature review on the effect of service
quality on customer satisfaction. Chapter Three discusses the research methodology,
including data collection and analysis procedures. Chapter Four presents the results of the
research. Finally, Chapter Five provides a discussion of the findings, conclusions, and
recommendations for future research.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE

2.1 Introduction
This chapter discusses the theoretical framework and empirical studies related to service
quality and customer satisfaction. Finally, literature relating to the relationship between
service quality dimension and customer satisfaction was reviewed and hypothesis were
formulated accordingly as well as the conceptual framework of the study was developed.
2.2 Review of Theories

The term “service” has been defined in different ways by different scholars. Those
different definitions arise from the term has such variety of meanings accordingly with its
use in widespread areas of activities. According to kotler, Armstrong, Sanders and Wong,
1992). Service is defined as “any activity or benefit that one party can offer to another,
which is essentially intangible and doesn’t result in the ownership of anything. Its
production may or may not be tied to a physical product. On the other hand Christopher
lovelock, 2003, defined services as “economic activities that create value and provide
benefits for customers at specific times and places as a result of bringing about a desired
change on behalf of the recipient of the service.
Due to the “Acts- based” definition given for service by Rathmell 1966; Hill 1972 and
Zeithmal 2008, Hoffmann and Bateson 2011, shows that the acts of services are
performed after buyers and seller finalize the deal, acts are performed by sellers and they
are physical in nature. On the other hand, “ownership-based” definition of service
according to Judd (1964), services is defined as market transactions “where the object of
market transaction is other than the transfer of ownership” (and title, if any, of a tangible
commodity).
There are several definitions given for service as mentioned above. By the fact that
services and consumers (users) are inseparable, most definitions of service show the term
with deep interaction of both parties (the service provider and consumer). Quinn and
Gagnon (1986) define services as “All economic activities in which the primary output is
neither a product nor a construction. Critics are there as a short coming of this definition
as it doesn’t explain why construction activities cannot be services. Groross (2007),
defines a service as “ a process consisting of a series of more or less intangible activities
that normally, but not necessarily always take place in interactions between the customer
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and service employee and/or physical resources or goods and/or systems of the service
provider, which are provided as solutions to customer problems.
In another definition of service, kotler (2009) defines service by combining the acts based
and ownership based definitions. According to them, a service is any act or performance one
party can offer to another that is essentially intangible and does not result in the ownership of
anything. This definition combines the two definitions in such a way that it will classify
fewer kinds of exchanges as services than will be classified by each of the definitions.
2.2.1 SERVICE QUALITY

A hotel service quality is a hotel administration term used to describe performance in
service quality of hotels and customer satisfaction. Thus, hotel service quality performance
needs to be improved continually with management techniques and quality standards (pine &
Philips, 2005). On the other hand (Dawkins & Richheld, 1990), described service quality as
an essential for the success and survival in a competitive environment. And thus this
definition shows that service quality highly influence consumer buying behavior and the
overall decision making process. In addition to that, it will have a great impact in building a
log lasting relationship between customers and service providers.
Quality can also be defined as the totality of features and characteristics of a product or
services that bear on its ability to satisfy stated or implied needs (Kotler, 2002). It is evident
that quality is also related to the value of an offer, which could evoke satisfaction or
dissatisfaction on the part of the user. Service quality in the management and marketing
literature is the extent to which customer’s perceptions of service meet and/or exceed their
expectations as defined by Zeithmal (1990). Thus, service quality can intend to be the way in
which customers are served in an organization which could be good or poor. Parasuraman,
1988 defines service quality as “the differences between customer expectation and perception
of service”.
Service quality has been defined differently by different authors. Crossby (1984), defines it
as “conformance to requirements”. Eaglier and Langeard (1987), defines it as “one that
satisfies the customer”. According to them, service quality presents the customers overall
impression of the relative superiority/inferiority of the organization and its services.
Therefore, service quality is a key of survival to all serving companies. Service quality is
viewed as a form of attitude representing a long run overall evaluation.
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Service quality has become a significant differentiator and most powerful
competitive weapon that organizations want to posses (Berry 1988). Therefore companies
try to get another advantage by assuring quality in their services in order to be more
competitive in the market place. In addition to the above definitions and explanations
about service, Parasuraman, Zeithmal and Berry (1988) introduced five dimensions of
service quality which are tangibility, reliability, responsiveness, assurance and empathy
as key influencers in providing a quality service.
2.2.2 CUSTOMER SATISFACTION

Satisfaction is an overall customer attitude towards a service provider, or an emotional
reaction to the difference between what customers anticipate and what they receive, regarding
the fulfillment of some need, goal and desire (Hansmark & Albinsoon 2004). Philip Kotler, a
well known figure and expert at the area of marketing defines customer satisfaction as a
person’s feeling of pleasure or disappointment, which resulted from comparing a products
perceived performance or outcome against his/her expectations.
Olivier (1997) identified the concept of satisfaction as a products performance represents

another point of reference in the traditional paradigm against which consumer’s satisfaction is
measured, the latter being determined in light of the results obtained from the
product/service. According to Fournier and Mick (1990), “satisfaction has not been
considered thoroughly as it is experienced and expressed through the consumers own voice.
In order to achieve customer satisfaction, organizations must be able to satisfy their
customers’ needs and wants (Le Barbara & Mazursky, 1983). Customers needs state the left
deprivation of a customer (Kotler, 2000).
When we see the term customer satisfaction in the case of hotel industry, the term
is defined using different perspectives that consumers expect to get from the service
provider. Those perspectives include expectations, deliver on promise, loyalty, and ethics,
on time service are some of the perspectives that customers look for their satisfaction.
Once consumers are satisfied with a service and its associated products, they become
more likely to repurchase or use the service again which then increases the company
profiles (Gupta Et,Al 2007 & Heskett 2004). Service quality, personnel response, prices
for the service what customers get and convenience directly influence customer
satisfaction (Robson 1999 & Hensley 2004). In the hotel industry, quality of service and
customer satisfaction is critical factors for success of any business (Gronos, 1990).
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According to Parasuraman(1988(, service quality and customer satisfaction are key
factors in the battle to obtain competitive advantage and customer retention. In order to
achieve customer satisfaction, it is important to recognize and anticipate customers needs,
make greater profits than those which fail to understand and satisfy them (Barkley &
Nash 2003)
Nowadays, one of the biggest challenges for mangers in the hotel industry is to
provide and sustain customer satisfaction. Customer requirements for quality products
and service, the hotel industry has become increasingly evident to professionals (Lam &
Zhang 1999). Guest relationships and satisfaction is strategic asset of the organization
(guere et.2000)
2.2.3. Service quality & Customer satisfaction in hotel Industry

Othman et.al (2019), and Fida et. Al (2020), emphasize the fact that “service quality’ is a
precursor to ‘customer satisfaction’. Ideally, this factor implies that an organization should
improve its services before earning for customer satisfaction and positive feedback. Based on
these arguments, it is stipulated that there exist a direct correlation between service quality
and customer satisfaction (Albert 2015). Despite that, Danish (2018) argues that service
quality impacts customer satisfaction but is not directly related to it. On the other hand,
Zamer et.al (20150 propose that a maximum perception of standard of service results in a
direct maximization of customer satisfaction.
Murairanwa (2010), the hospitality has been facing increased number of competitors and a
pressure environment, as a consequence of the combined effect of the current worldwide
economic situation, technological advancement and globalization. According to a study by
Hanan (2014), on measuring service quality and customer satisfaction of hotel guests in
Bangladesh, customer’s state that their perception of service quality provided by the hotel
industry was lower than their expectations. Likewise, Kariu (2014) has made a research on
customers perceptions and expectations of service quality in hotels in Kenya, indicated that
the hotels have room to improve their service quality and adapt to customer expectations.
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2.2.4. Measurement of service quality in the hotel industry
Scholars have shown that developing models of measurement of service quality highly helps
hotels to determine the extent to which their organization is performing and how effective
they are. Measuring of service quality is an important aspect in the quality improvement
process because it provides feedback about the type of service provided and the extent to
which it meets customers needs (Mwagi,2009). According to Mukhles (2017), several
instruments or measurements have been developed such as SERVQUAL, SERVPERF,
INTEVQUAL and INSQUPLUS. As the hospitality industry is very wide and includes a
number of sectors, the hotel industry uses specifically HOLSERV, SERVQUAL and alike
which directly focuses on hotels.
The SERVQUAL scale has become the most popular instrument for measuring
service quality according to Mukhles (2017). The model has been applied in various
service industries, and mainly in tourism and hotel. The SERVQUAL model consists of
five dimensions, namely: empathy, reliability, assurance, responsiveness and tangibility.
It evaluates customer’s perceptions of service quality and that based on the gap between
customers expectations and their perceptions. Getty (2002) describes that the perception
of customers is the main factor that plays an important role for providing a quality
service. It is very crucial to know and understand what customers are really looking for.
Identifying customer’s expectations, understanding the dimensions of service quality and
their importance to customers will highly help the sector to manage difficulties and
provide a quality service for customers.
Studies in the hotel industry specifically shows what the main attributes are there
perceived by clients. (Akkaba, 2006) shows that the average significance and satisfaction
in all aspects of SERVQUAL scale indicates a big gap between the expectations and
perceptions of customers. There is a significant difference between the extent of service
between other service giving sectors and the hotel industry with regard to the kind of
activities involved.
2.2.5 Types of service quality Models
Different scholars have shown variety of methods used to measure service quality
under specific circumstances. In this literature, we will try to see some of the service
quality models depending on the purpose of outcome. Among the different service quality
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models, in this literature, we will see the following service quality models which are
SERVQUAL, SERVPERF and HOLSERV.
2.2.5.1 SERVQUAL
Measuring services by a given quality model was first introduced and such a
research was conducted by parasurman et.al (1985 aiming to define and evaluate quality.
He introduced a number of dimensions to evaluate quality at first. Later after three years,
the original dimensions were reduced to five namely (tangibility, reliability,
responsiveness, assurance and empathy) which then become one of the most widely used
instrument known as SERVQUAL. After that a number of hotel service quality studies
applied the five dimensions of SERVQUAL instrument to assess service quality.
Another study shows that the model of service quality popularly known as the gaps
model was developed by a group of American authors, (Parasurman, Valerie, A.Zeithmal
and Len berry 1983 – 1988), in a systematic research program. The model identifies the
principal dimensions of service quality: proposes a scale for measuring service quality.
Mittal and Lassar’s SERVQUAL –P model reduces the original five dimensions
down to four: Reliability, Responsiveness, Personalization and Tangibles. Importantly
SERVQUAL – P includes the personalization dimension, which refers to the social
content of interaction between service employees and their customer (Bougoure & Lee
2009 P,73). Cornin and Taylor 1992, shows that the SERVQUAL model is important in
grouping customers of a company into different quality ranks by determining their
SERVQUAL score which is of course very important to know how to target the various
ranks.
2.2.5.2 SERVPERF MODEL

The SERVPERF model was developed by Cornin and Taylor (1992), which was derived
from the SERVQUAL model by dropping the expectations and measuring service quality
perceptions just by evaluating the customers overall feeling towards the service. In their
study, they identified four important equations.
SERVQUAL = Performance – Expectations
Weighted SERVQUAL = Importance * (Performance – expectations)
13
SERVPERF = Performance
Weighted SERVPERF = Importance 8 (performance)
SERVPERF evaluates the six dimensions of service quality reliability, empathy, assurance,
tangibility, responsiveness (Parasurman 1985). According to Parasurman, the quality of
service determines the key factors of internal organizational costs and profitability. Leveling
maximum criticism against SERVQUAL scale, Cornin and Taylor (1992), provided empirical
evidences across four sectors to support the superiority of their performance only scale over
SERVQUAL scale retaining the same items as had been proposed by Parasurman, Zeithmal
and Berry (1988).
SERVPERF (Cornin and Taylor 1992), shows that this model is purely a performance based
approach to the measurement of service quality, where as SERVQUAL (Parasurman 1988), is
a multi dimensional instrument to capture customer expectations and perceptions. Cornin and
Taylor (1992) identified service quality as an attitude and termed this view as the
“performance based model”. They argued that SERVPERF measure should explain more of
the variance in an overall measure of service quality than SERVQUAL instrument. In a
conversely argued idea Hussain (2005), suggested that SERVPERF model failed it’s time
dimensions when it comes to the hotel industry. Robeldo (2001) also tries to indicate that
SERVPERF was not an efficient measurement scale compared to SERVQUAL
2.2.5.3 HOLSERV
HOLSERV is a new format of SERVQUAL. HOLSERV is the column format
questionnaire that has produced a reliable instrument specifically for the hotel industry. Dean
and White CJ (1999), HOLSERV is applied in the hospitality industry and is created for
measuring and assessment of a hotel service. According to (WU and KO 2013), HOLSERV
scale is more user friendly than SERVQUAL. Moreover, consideration of the type of hotel
and the range of facilities available, the HOLSERV model is suitable for the hospitality
industry. Mei at (1999), HOLSERV model was used to identify and analyze service gaps
among the perceptions of tourists, employees and hotel managers. She recommended that
hotel managers should supplement the HOLSERV measure with additional qualitative
research.
From the various services quality models on hotel industry, the research made by Mei.
Et al (1999) to measure service quality in the hotel industry is believed to be more efficient
14
because of its ease of use, user-friendly instrument and mainly a model focusing at the area of
hospitality. The model mainly used by Mei et (1999), identified gaps in service quality
measured using the 27 items of the HOLSERV, with a 9 point scale.
HOLSERV uses rating a five point scale (1= Very poor and %= Excellent), which is an easy
way for respondents to answer a questionnaire. This is useful to identify the best predictor of
overall service.
Table 1: An example of one column format questionnaire
Criteria Level of satisfaction
Hotel X provides the service that it promises 1 2 3 4 5
Hotel X shows consistency in handling complaints 1 2 3 4 5

and problems
1= Very poor, 5 = Excellent
Table 2: Dimensions of service quality in Hotel industry
Factor Elements from SERVQUAL Main Emphasis
Prompt service, willingness to help,

confident in the delivery of service,
Responsiveness
polite, knowledgeable, skillful,
Employees Assurance caring, understanding, sincere, neat
and professional employees.
Empathy
Tangibles
15
Modern-looking equipment, fixtures
and fittings, appealing facilities and
materials, comfort, cleanliness, user-
Tangibles Tangibles friendly equipment and facilities,
variety in food and beverages,
operation of services at a convenient
time.
Responsiveness Keeping promises, accurate and

timely service, safe and secure stay.
Reliability Reliability
Assurance
2.3 EMPIRICAL REVIEW

Fornell (1992) found that as a general psychological phenomenon, satisfaction was primarily
a function of a customer’s quality experience with a product or service. So, overall it was
expected that the greater the perceived quality, the higher the level of customer satisfaction.
Robert Johnston (1995) demonstrated that some determinants of quality predominate over
others. The study found that for the personal customers of service, the main source of
satisfaction were attentiveness, responsiveness, care and friendliness.
By using a HOLSERV model Ross (2003), he found that an overall evaluation of service
quality in hotels was determined largely by firstly safety and security concerns. Apart from
that effective handling of complaints and problems by employees takes the lions share for
customer satisfaction. Secondly “Reliability factors’, such as hotels performing tasks that
have been promised to guests and resolving problems encountered by guests. By focusing on
these factors, hotels would be able to achieve high levels of satisfaction and service quality.
Parasurman (et,al. 1991) on his research on service quality identified five determinants of
service quality which are reliability, assurance, empathy, and tangibles. From the studies he
made on service giving companies by using SERVQUAL model, reliability becomes the
most influential dimension when measuring the importance of the five dimensions followed
by responsiveness, assurance, empathy and tangibles (Parasurman et,al. 1991). Rao and Sahu
16
(2013), concluded that service providers have to strengthen their communication skills, and
training should be provided for them to achieve customer satisfaction (Eshete ET, al 2016).
As service providers possess skills to manage customer’s requests, they can be a predictor for
assurance of service quality (Minh 2015). Jan & Han (2014), stated that having well qualified
service providers is the way to achieve customer satisfaction.
A great value and tool for enhancing service quality is essential in a competitive market.
Hotels service quality is the service providing to guest expectations and almost all hotels are
able to gain customers satisfaction through providing a high quality of service.. Accordingly,
the subject of service quality is substantial for any study, since almost all companies are
trying to enhance its service quality to increase satisfied customers (kumar ET, al. 2019)
Gavin Eccles and Philip Durand (1997), reviewed recent practice undertaken to improve
customer service by the hotel sector in the UK. The study found that at the time of increasing
competition, hotel firms were aiming to use service enhancement as a means to gain
competitive advantage and customer retention and therefore adopted and developed a range
of techniques like SERVQUAL to measure levels of service quality improvement. Abraham
(2015), an Ethiopian researcher on the area of service quality and customer satisfaction,
indicated that the combination effect of tangibility, reliability, responsiveness, confidence and
communication is very high on three star hotels in Addis Ababa, Ethiopia. The overall results
generated from the study shows that the perceptions of service quality provided by the hotel
industry were lower than their expectations.
There are a number of empirical studies conducted in different service industries, including
hospitality industry. Showing the relationships ad dimensions of service qualities direct
impact on customer satisfaction, little research has been conducted on the selected area,
especially focusing on star rated hotels in Addis Ababa, showing that there is still a big gap
that needs to be filled with this research.
2.4 Research Gap

There are not sufficient studies observed at the area of hotel industry in the context of our
country, which makes if a bit difficult to generate some secondary sources of data for this
research. Most service quality researches focus on other private sectors and production sector
only. As a developing industry, the hotel industry should be more researched and findings
should be addressed well. So this research paper will try to fill the gaps observed at the area
of hospitality.
17
2.5 CONCEPTUA L FRAME WORK
The conceptual frame work indicates the crucial process which is useful to show the
direction of the study. As the study will try to show the relationship between service quality
and customer satisfaction, HOLSERV model, which is the extended version of SERVQUAL
model is used. HOLSERV model shows that service quality in the hospitality industry was
represented by three dimensions. These three dimensions are related to employee behavior,
tangibles and reliability. The dimensions are depicted as follows.
Figure1: Dimensions of customer satisfaction
S Employee behavior
E
E
Customer
Q
Satisfaction
U Tangibility
A
L
I
T
Y
Reliability
18
2.6 HYPOTHESIS FORMULATION
Offering a high standard of service quality can result in high level of customer satisfaction
(suki, 2013) and the modified model based on the widely common service quality
measurement model SERVQUAL called HOLSERV (Cornin and Taylor, 1992) and it’s three
dimensions including tangibility, reliability and employee behavior and appearance has been
conceptualized the hypothesis of this research which aim to identify the relationship of those
three dimensions with customer satisfaction.
2.6.1EMPLOYEE BEHAVIOR AND CUSTOMER SATISFACTION

Results of current studies revealed that all employees behaviors either negative or positive,
are highly correlated to the customers overall satisfaction. Zeithmal (et,1996), shows that the
employees of an organization are therefore vital for ensuring success in customers
perceptions and satisfactions, as they are the persons ultimately responsible for providing a
quality service that meets the expectations of customers. In any hospitality organization, there
is a wide variety of employee behaviors that can occur within the work place. Employee
behaviors are defined as various sequences of actions carried out by employees within the
organization (hanna et,al. 2004). Some of this behaviors may be positive and refer to the
constructive actions of employees on behalf of the organization, employees and customers
(Bowen 1998), while further behaviors may be negative and may destroy a productive work
environment.
Employee’s behaviors are important in a service company as they connect the organization
with its customers and they represent a critical factor in developing effective working
relationships with customers (Groons, 1990 & Winner et,al 1998). They can also maintain
customer satisfaction by fulfilling the promises made to the customer.
According to Zeithmal, Parasuraman and Malhorata (2006), the role of employees in service
organizations is comparable to the role of the service itself. Their importance to the firm is
critical to both service delivery and service production. Zeithmal (2006), further explained
that the people factor in services is very important element in the evaluation of the service.
An important study that linked friendly employee behaviors to customer satisfaction was the
one developed by Lemminck and Mattson (1988). They demonstrated that the degree of
personal warmth displayed by service employees toward customer was related significantly
and positively to service quality perceptions and customer satisfaction
19
H1: Employee behavior has a positive and significant effect on customer
satisfaction at star rated hotels.
2.6.2 TANGIBILITY AND CUSTOMER SATISFACTION

Tangibility refers to the appearance of physical facilities, equipment, personnel and
communication materials. Customers tend to expect clean and professional facilities and
shops, employees who look well groomed and neat are some aspects of tangibility.
Macdougall and snetsinger (1990), differentiated between tangibility and intangibility by
defining tangibility as the degree to which a product or service portrays its clear concrete
image and intangibility as lack of physical evidence. Thus, tangibilizing services acts a
critical success path for service industry and customer satisfaction (Reddy et,al. 1993)
By adding more tangibility to services, the customer will be able to evaluate the offering
before and after delivery (Rutchson and Carson, 1989). Tangibles on other findings include
private areas such as customer’s hotel room and the facilities related to it such as equipments,
machines, deign, procedures (Mei, et, al 1998). (Parasurman 1988), shows that tangibles have
a direct impact on customer satisfaction. Based on this, the following hypothesis is proposed.
H2: Tangibles have a positive and significant effect on customer satisfaction on star rated
hotel.
2.6.3 RELIABLITY AND CUSTOMER SATISFACTION

Reliability refers to the service being delivered to customers as per the expectations of the
customers. Those expectations arise from the promises that are already made from the service
provider. Providing the same service in a timely sequence and the right kind of service given
for customers to fulfill their expectation is referred to as a reliable service (Parasurman et,al,
1998).
When it comes to the hotel industry, reliability might relate to how the company is giving
(Providing) the promised services, quality and accuracy. Reliability is such an important
factor for customers just the same as the first impression of a service. Customers want to
make sure if their supplier (service provider) is reliable and fulfill the set of requirements
with satisfaction (Delgado and Ballester, 1998). In a research conducted earlier, (Parasurman
et,al 1988) found that reliability is one of the most important aspect of service quality
perception and that reliability has a positive impact on customer satisfaction. Accordingly
with the above mentioned studies and findings the following hypothesis is formulated.
20
H2: Reliability has a positive and significant effect on customer satisfaction.
2.7QUALITYDIFFERENCE
In the context of service, quality can be defined as “the customer’s perception of how well
our service meets his/her expectations”. (Parasurman, Zeithmal and Berry, 1985) defined
service quality in terms of customer satisfaction, that is the extent to which customers
“expectations and perception of service” fit.
In every organization quality plays a vital role for every customer (Bombacher,2000).
Customer is the main person who defines the quality (Berry, 1993). For providing good
quality service to customers, it is necessary for hotel managers to understand the expectation
of its customers (Shi and su, 2007). Customers demand and expectations continue to change
according to the market and that is why hotel managers must timely know those expectations
and improve their service quality accordingly (Chen, 2008). Besides this, different customers
have different perceptions of service quality, so there is a need to cater this problem also (Shi
and su, 2007). When service quality is improved, then it will lead to customer satisfaction
that will result in good business results (Johnson and gustatsson 2010).
(Parasurman et,at.,1988), defined quality as “a global judgment or attitude relating to

the overall excellence or superiority of the service” and they conceptualized a customer’s
evaluation of overall service quality by adopting Olivier’s (1980) disconfirmation model, as
the gap between expectations and perceptions of service performance levels.
H3: There is a slight quality difference between star rated hotels
H4: There is a huge gap/difference between locally owned and international brand hotels.
21
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY

3.1Introduction
This chapter focuses on the selection of the appropriate methodology and methods used in
order to reach the goal aimed and what is desired to achieve at the end of the study. The
topics related mainly at the methodology of the study are the following ones. Research
design, Approach, data type and source, target population, sampling procedures and sample
size, data collection techniques, methods of data presentation and analysis, issues of
reliability and validity and ethical concerns in performing the research are included.
3.2 RESEARCH DESIGN

As the goal of this research is to assess the effect of service quality on customer satisfaction
in star rated hotels in Addis Ababa, The study was employed both mixed types of research
design such as descriptive and explanatory. Because According to Mugenda and Mugenda,
(2003), the first research design is used to get data regarding this standing of the
phenomena to explain what exists, with relation to variables or conditions in an
exceedingly scenario. And the second research design helps the researcher to collect data
easily and timely by way of interviews and administering of questionnaires to the selected
sample as well it attempts to clarify why and how relationship between two aspects of a
situation or phenomenon existed (Ranjit Kumar, 2011). On the other hands, Explanatory
research design helps the researcher in testing a theory or theories. This means that, you need
to define the theories you wish to test as relationships between variables prior to designing
questionnaire (Ghauri and Gronhaug, 2005).
3.3 Research Approach

This paper was included mixed types of research approach such as quantitative and
Qualitative. This was because to have better information and gain a richer understanding, the
quantitative method has been supplemented by the qualitative method of inquiry. In addition
to this according to Creswell, (1994), Qualitative research is basically helps the researcher to
make row data interpretive; meaning that the researcher makes an interpretation of the data.
This includes making a description of an individual data, analyzing data for themes or
categories, and finally making an interpretation or drawing conclusions. On the other hands,
the use of the qualitative approach is to identify a theory that explains the variable in the
study.
22
3.4 Sampling Design
3.4. Target Population, Sampling unit & Sample frame

The population of this study will rely on the customers of star rated hotels in Addis Ababa,
which are going to be chose accordingly with their star rates. The sampling unit will be 9
different hotels from each star type and the sampling frame will also be those star rated hotels
found in Addis Ababa.
3.4.1 Method of sampling

A “Non-probability” convenience sampling will be implemented on this research for several
reasons. The main reason for using this technique is to selects samples on the basis of
personal judgment and convenience. To avoid a non-response bias on the selected star rated
hotels, probability sampling technique will be implemented. Therefore, both non probability
and probability sampling techniques was used in this paper.
3.4.2 Sampling procedure

The researcher will first try to list out local and international brand star rated hotels located in
Addis Ababa. From those star rated hotels, 9 of them will be chosen from each star type
accordingly with the reputation of customers and their good image regarding with a high
customer flow so as to select hotels used frequently by customers. Questionnaires will be
distributed to collect data from customers of those hotels and this is how the procedure will
take place.
3.4.3 Sample size determination

Sample size is the appropriate number of respondents chosen for the study, and it was taken
from the total out local and international brand star rated hotels located in Addis Ababa. ;
considering the fact that studying a subset of the population would be manageable size
relative to study the entire population due to time, cost and accessibility and given the nature
of the study in this paper such as unavailability of sampling frame of hotels ‟ customers or
infinite population, a different author has recommended to use the following formula two
draw the final sample size from unknown population size of the given area .This equation is
for an unknown population size or a very large population size (Scott M. Smith, Ph.D, 2020).
Necessary Sample Size (n) = (Z-score) 2 * StdDev*(1-StdDev) / (margin of error)2
Where, n is desired sample size for the study, Z –score from normal distribution table @1.96,
Std is standard deviation @ 5% and margin of error @5%.
23
Therefore, n= ((1.96)2 x .5(.5)) / (0.05)2
= (3.8416 x .25) / 0.05
=0.9604 / 0.0025=384.16
n=384 is respondents are needed for this study
3.5 Data type and Source

Aiming to generate and gather relevant data for the study, both primary and secondary data
sources will be used. Primary data’s of this research will be those collected from respondents
by means of questionnaire which gives an exact and real response from the customers
themselves. On the other hand, secondary data’s include data’s which are collected from any
other sources or documents. Those sources of information include past studies, manuals and
books, previous findings, etc.
3.6 Research instrument and Measurements

The research instrument used in this study was structured questionnaires on guest’s
perceptions of service quality in those selected star rated hotels. Scales with 5 levels of
relative agreement will also be applied to see customers satisfaction and to rate them
accordingly with those scales. The survey questionnaire of this study incorporated thee
parts. The first one focuses on the demographic profiles of respondents. The second one
focusing on hotel industry service dimension ad final on focusing on a general attitude of
customer towards that specific hotel.
3.7 Methods of data collection

The necessary data for this research will be collected from primary sources. Structured
questionnaires will be constructed for the respondents of the representatives from the target
population. The structured self-administered questionnaires are believed to be more
appropriate for this research.
3.8 Methods of Data analysis

The data’s collected through questionnaires would be analyzed using the Statistical Package
for Social Sciences (SPSS) software. Statistics, like Frequency, percentage, mean standard
deviation and cross tabular presentation to analysis the demographic profile of the
respondents will be applied. Furthermore inferential statistics (correlation, regression and t-
test) will be used to analyze the data. To ensure completeness and logical consistency of
responses, data editing, mistakes and data gaps were carried out. The data was analyzed using
24
qualitative and quantitative techniques. The qualitative techniques include descriptive
statistics such as frequencies and percent’s and mean and standard deviation. The quantitative
techniques includes inferential statistics like Pearson’s correlation and multiple linear
regressions using Statistical Package for Social Sciences (SPSS version 25), and the
correlation analysis will be employed to conduct analysis of the association between the
variables. The regression analysis is used to establish the effect of independent variables
3.9 Model Specification

In order to examine the effect of independent variables on the dependent variable, there is an
estimated equation which is reflected as a function of the following variables
CS = (TA, EB, RE............................................................... (1)
Where,
CS= customer service
TA= service tangibility,
EB=employee behavior,
RE= service reliability.
3.10 Model Equation

The above equation number (1) can be re written in the following econometric model with its
functional forms.
CS= 0 + 𝛽1RE+ 𝛽2EB + 𝛽3TA +ɛ ………………. (2)
Whereas; β0 is the intercept and βi (i=1, 2, 3,) represents the coefficient for each of the
independent variables
3.11 Validity and reliability
3.11.1 Validity
The data collection instrument and questionnaire was checked for validity and internal
consistency and establishes reliability. The performance of the questionnaire was evaluated
by examining feasibility during questionnaire pre-testing. Feasibility of the questions is
evaluated by examining the presence of missing item responses, study participant
acceptability, and the time and ease of administration. George & Mallery, (2003) note that
25
Validity refers how sound is the research design and method therefore if there is no missing
item in responses then the responded data has fit the requirement of validity.
3.11.2. Reliability
According to Leontitsis & Pagge, (2007) Reliability of instruments measures the consistency
of the instruments. Most common measure of internal consistency is "Cronbach'salph" which
is used to estimate reliability of homogeneous test (test that measures one construct). To
determine reliability empirically, value of 0 on reliability coefficient means no reliability and
1 means perfect reliability. It has high value when the items on the test are correlated with
one another. The minimum acceptable coefficient in literature is 0.70. The measures can be
viewed as an extension of the Kuder-Richardson Formula (SPSS) version25. Accordingly,
reliably analysis has been checked to check the reliability of the instrument employed in this
research as follows:
Table 3.1 Coefficient of Reliability
Case Processing Summary
N %
Cases Valid 351 100.0
Excludeda 0 .0
Total 351 100.0
a. Listwise deletion based on all variables in the procedure.
Reliability Statistics
Cronbach's Alpha N of Items

.758 27
Source: (survey study, spss output 2023)

As portrayed in the above table (table3.1), the reliability score for the data collection
instrument for all 27 items is 0.758. In this regard, as noted by Zikmund, et al. (2009) scales
with a coefficient alpha greater than 0.7 are considered to have a very good reliability.
Therefore, based on the above test results, this instrument scored acceptable and the
instrument is found reliable.
3.12 Ethical Considerations

The following ethics will be remarked in the research field:
26
 Informed consent: Participants should be given the choice to participate or not to
participate, and furthermore be informed in advance about the nature of the study.
 Right to privacy: The nature and quality of participants‟ performance must be
kept strictly confidential.
 Honesty with professional colleagues: Findings must be reported with a complete
and honest fashion, without misrepresenting what has been done or intentionally
misleading others as to the nature of it. Data may not be fabricated to support a
particular conclusion.
 Confidentiality/Anonymity: It is good research practice to offer confidentiality or
anonymity, as this will lead to participants giving more open and honest
responses.
27
CHAPTER FOUR
4. Data presentation, analysis and interpretation

4.1 Introduction
This chapter shows presentation, analysis and interpretation of the collected data. Hence then,
it consists of two sections. The first section presents the characteristics of respondents in
terms of sex, age, educational Qualification, purpose of customer to visit hotel and the hotels
stars category in which the customer get the service and occupation of the respondents. The
second section discusses the main part of the study, the analysis and interpretation of data
those were collected through Questionnaire collected in the form of likert scale.
4.2 Response Rate

In order to achieve the ultimate objectives of the study, 384 survey questionnaires were
prepared and circulated by researcher. However, among distributed questionnaires, 351 of
them were successfully filled and returned that accounts 91 % response rate. But, 33 of the
respondents were not filled and returned the questionnaires because of different reasons of
the respondents and they were not accessible. Thus, the response rate or this study was 91%.
According to Mugenda, (2009), a response rate of 50% is adequate for analysis and reporting;
a rate of 60% is good and a response rate of 70% and over is excellent. This means that the
response rate for this study was excellent and therefore, it was enough for data analysis,
interpretation and reporting.
4.3 Characteristics of Respondents

In this section all variables and for the responses of all respondents were computed in the
form of frequency and percent.
4.3.1 Gender distribution of the respondents

As shown below figure (4.1) it could be said that Significant part of the customer who were
answered the survey questionnaire were male 58%) and (42%) of them were female
customer. This indicated that, male respondents were the major respondent’s for this study
28
Figure 4.1 Gender Distributions of Respondents
4.3.2 Age distribution of the respondents

Figure 4.2 age distribution of the respondents
29
As depicted on the above figure 4.2 the majority of the guests are 30-40 years old, accounts
for 37%. Among them the total respondents the next largest respondents were between the
ages from 40-50 accounts for 32%followed by above 50 years accounts for 19% and 18-29
years accounts for 12%. Therefore, as per the above result, we can conclude that most users
of hotel service were adult people.
4.3.3 Educational background of the respondents

Figure 4.3 educational backgrounds of the respondents

According to the above figure 4.3 it is clear that the highest numbers hotel customers are
master and above degree holders with consists of 42 % followed by holders of degree 37% as
well as diploma 18% and the lowest level of education was the high school with a percentage
of 3%. Thus, Ethiopian star holes are more likely visited by professionals and literate guests.
4.3.4 Purpose for visiting the hotels

As portrayed on the below figure 4.3.4, majority of the customer 47% of them reasons that
stay in the hotel is for pleasure and business. The second one is for conference purpose 26%.,
the other groups of the hotel guest were stay in the hotel for purpose of study 13% followed
by others and visiting relatives 9% and 5%.
30
Figure 4.4 purpose of visiting the hotels
4.3.5 Hotels star category

Figure 4.5 hotels star category
31
As depicted on the above in figure 4.5 above the majority of the customers who responded
this questioner were (53%) of the select 5 star rated hotels followed by 4 stars and 3 stars
27% and 20 % respectively.
4.4 Descriptive statistics for study variable
4.4.1 Mean distribution of Customer Satisfaction

Customer satisfaction involves the fulfillment of customers’ anticipation of the goods and
services. Accordingly identifying the satisfaction level of customers is one interest of this
study. The satisfaction level in this study is also categorized and it ranges from strongly
dissatisfied, Dissatisfied, Neutral, Satisfied and strongly Satisfied. The table 4.1 below
presents the overall level of customer satisfaction.
Table 4.1 mean distribution of overall customer satisfaction
No Item
.
Mean
SD
n
1. What is your level of satisfaction with the reliability of the service 4.01 1.030 351
provided by the hotel
2. What is your level of satisfaction with the employee behavior and 3.90 .873 351
appearance of the hotel
3. What is your level of satisfaction with the tangibility of the hotel 3.97 .948 351
4. What is your overall level satisfaction with the service provided 4.10 .960 351
by the hotel
Average mean 3.99 .610 351

As portrayed on the above table 4.1 the mean score of overall hotel customer satisfaction
such as satisfaction with regard to reliability of service, employee behavior, tangibility of
hotels and over all service provided counted for 3.99 and its standard deviation is 0.610. This
implied that Therefore, even if the highest percentage of respondents are somehow satisfied
with the service provided in star hotel, from these one can infer that the hotels needs to work
more to change this result and highly satisfy its customers because customers are key drivers
of the industry survival in today’s environment.
32
4.4.2 Descriptive Analysis of Service Quality Measurement
To measure the customers’ perception of the service quality provided by three and four star
hotels in Addis Ababa, the modified SERVQUAL model customized only for hospitality
industry which is called HOLSERV used in this study. HOLSERV directly measures the
customer’s perception of service performance and assumes that respondents automatically
compare their perceptions of the service quality levels with their expectations of those
services. The model contains 27 questions and a five point Likert scale is used to measure the
performance. For all the service, quality dimensions (Reliability, employee behavior and
Tangibility), the mean score has been computed. The implications of these results are
discussed below.
4.4.2.1 Reliability of service

Table 4.2 mean distribution of reliability
Item
Mean
SD
N
The hotel promises to provide a service and does so. 4.10 .960 351
The hotel performs the service right the first time. 4.00 .750 351
Employees of the hotel tells you exactly when the services will 4.04 .873 351
be
Performed.
The hotel provides services at the time it promises to do so. 4.28 .720 351
You feel secure and secure in your stay in the hotel. 4.32 .729 351
You feel safe in the delivery of services of the hotel. 4.05 1.098 351

Reliability is connected to the consistency of performance and dependability, Grönroos
(1983). This dimension includes keeping promises, showing a sincere interest in solving the
problem, give right service the first time, providing the service at the time the hotel promise
to do so and trying to keep an error free record. Reliability of service designates the hotel
capability to provide the promised service at the stated level. Accordingly as it is portrayed
33
on the above table 4.2, the mean score of customer satisfaction based on reliability counted
for 4.92 and its standard deviation is 0.568. This implied that respondents were agreed that
the hotel promises to provide a service and does so; the hotel performs the service right the
first time, Employees of the hotel tells you exactly when the services will be Performed, The
hotel provides services at the time it promises to do so, the customer feel secure and secure in
your stay in the hotel and feel safe in the delivery of services of the hotel.
4.4.2.2 Employee behavior

Table 4.3 mean distribution of Employee behavior
Item Mean SD n
The behavior of employees of the hotel in stills confidence in guests. 4.03 1.0 35
15 1
Employees of the hotel , Never too busy to respond to guests’ requests 3.91 .86 35
6 1
When you have a problem, the hotel shows dependability in handling 3.97 .94 35
Service problems. 1 1
Employees of the hotel gives prompt service. 4.10 .96 35

7 1
Employees of the hotel are always willing to help. 4.07 1.1 35

13 1
Employees of the hotel give individual attention. 4.03 1.0 35

15 1
Employees of the hotel deal with guests in a caring fashion. 3.91 .86 35
6 1
Employees of the hotel are polite and courteous to you. 3.97 .94 35
1 1
Employees of the hotel understand the guests’ specific needs. 4.10 .96 35
7 1
Employees of the hotel are neat and professional. 4.07 1.1 35
34
13 1
Employees of the hotel have the knowledge to answer questions. 4.27 .55 35
8 1
The hotel has guests ’best interests at heart. 4.36 .60 35

7 1
Employees of the hotel have the skill to perform the service. 4.15 .97 35
3 1

4 1
Employees like the mirror of an organization are the interface between the organization and
the customer, what they portray is what the customers see and use in their evaluation of the
service experience. Zeithaml et al (2006:350), defines employees‟ role in the organization to
the customers as satisfied employees make satisfied customers and vice versa, as the
customers of the organization are important to their success so also are the employees and
their relevance. Accordingly the mean value of Employee behavior is 4.07 with standard
deviation of 0.574. Thus, respondents believe that the behavior of employees of the hotel
instills confidence in guests.
4.4.2.3 Tangibility of service

Table 4.3 mean distribution of tangibility
Item Mea SD N
n
The hotel’s facility is visually appealing. 4.36 .52 351

7
The hotel’s materials are visually appealing. 4.46 .62 351

2
The hotel’s fixture and fittings are comfortable. 4.03 .89 351
9
35
The hotel’s equipment and facilities are easy to use. 4.33 .51 351
8
The hotel’s equipment and facilities are generally clean. 4.27 .86 351
5
Variety of food and beverages of the hotel meet guests’ needs. 4.37 .65 351
8
The hotel’s equipment, fixtures and fittings are modern looking 4.31 .60 351
7
Services of the hotel are operated at a convenient time. 4.37 .65 351
8
Average men 4.31 .39 351

1

Tangibility refers to the appearance of physical facilities, equipment, personnel and
communication materials. Accordingly as shown on the above table 4.4 above the mean value
of tangibility is 4.31 with standard deviation of 0.391 this shows that show that the majority
of the respondent’s agree that the hotel provide tangible service that meet guests’ needs.
In summary based on table 6 the mean and standard deviation of each service quality
dimensions is represented in the table below. The service quality dimension with the highest
mean score is Tangibility 4.31, followed by Reliability 4.09, and finally employee behavior
and appearance is 4.07. With this we can infer that the service provided by three star hotels in
Addis Ababa is somewhat satisfactory. The result can indicate the service quality dimension
had an effect on customer satisfaction on hotels under study. This gives a clue to answering
the main research question.
4.5 Inferential statistics of the Study
4.5.1 Assumptions of Multiple Linear Regression Analysis

Diagnostic test was made to make sure that the classical linear regression model assumption
violated or not. In this study an attempt is made to test linearity, Heteroscedasticity,
Autocorrelation, normality and Multi-collinearity the result of which are presented and
discussed as follows:
36
4.5.1.1 Test of linearity
This is slightly different from simple linear regression as we have multiple explanatory
variables. Multiple linear regressions can accurately estimate the relationship between
dependent and independent variables, when their relationship is linear in nature. If linearity is
violating, all the estimates of the regression including regression coefficients, standard errors,
and tests of statistical significance may be biased (Keith, 2006). This can be checked by p-p
plot residual as shown in the appendix C. When, p-p residual look at straight line, the
relationship between the dependent and independent variables is linear. Therefore, as
displayed below there is no linearity problem on the data used for this study.
Figure 4.6 plot for linearity test
4.5.1.2 Test for normality

The diagnostic test for CLRM assumption of normality assumption was tested by this study.
The assumption says that disturbances are normally distributed. Frequency distributions come
in many different shapes and sizes. It is quite important, therefore, to have some general
descriptions for common types of distributions. In an ideal world our data would be
distributed symmetrically around the center of all scores. As such, if we drew a vertical line
through the center of the distribution then it should look the same on both sides. This is
known as a normal distribution and is characterized by the bell-shaped curve. This shape
basically implies that the majority of scores lie around the center of the distribution (so the
37
largest bars on the histogram are all around the central value). The following figure shows
that there is no problem of normality in the study.
Figure 4.4 test for normality distribution
4.5.1.3 Test of heteroscedasticity (homoscedasticity) {var (ut) = σ2 <∞}:-

One of the important assumptions in classical linear regression model is Heteroscedasticity.
As noted by brooks (2008) Heteroscedasticity assumption state that the disturbances
appearing in the population regression function are homoscedasticity; that is, they all have the
same variance. The variance of each disturbance term ui, conditional on the chosen values of
the explanatory variables, is some constant number equal to σ2. This is the assumption of
Heteroscedasticity, or equal (homo) spread (scedasticity), that is, equal variance (Gujarati,
2004). If the error term ui do not have constant variance its said to be there is
Heteroscedasticity problem. Heteroscedasticity makes our parameter estimates no longer
BLUE – they are still unbiased, but no longer have a minimum variance. Unfortunately,
SPSS does not have built in procedure to test for heteroscedasticity. The test can be done by
writing some codes. Despite not having built in procedure to test for heteroscedasticity, we
can plot standardized residuals (ZRESID) against the standardized predicted values
(ZPRED). If there is no heteroscedasticity, the plot should look random. If u sees a pattern,
38
such as a funnel shape or a curve, this indicates heteroscedasticity. A curve shape, in
particular, could indicate some non-linearity in the relation that you failed to take into
account. The following figure shows the result of heteroscedasticity of the model. The
following hypothesis is set for the heteroscedasticity test.
H0: There is no Heteroscedasticity problem in the model.
H1: There is Heteroscedasticity problem in the model.
As we can observed from the below figure, the plot the residuals have a random pattern,
which signifies that there is no sign of heteroscedasticity. So, the null hypothesis of no
heteroscedasticity should be accepted.
39
4.5.1.4 Test for assumption of autocorrelation {cov(ui,uj) = 0 for i ≠ j}:-
The diagnostic test for CLRM assumption of no autocorrelation was tested by this study.
According to Gujarati, (2004) the assumption of no autocorrelation between the disturbances
assumes that given any two X values, Xi and Xj (i≠j), the correlation between any two ui and
uj(i≠j), is zero. According to Chris Brooks (2008) it is assumed that the errors are
uncorrelated with one another. If the errors are not uncorrelated with one another, it would be
stated that they are ‘auto correlated’ or that they are ‘serially correlated.
Therefore, the hypotheses of the autocorrelation test were formulated as follows:

H0: There is no autocorrelation problem in the model
H1: There is autocorrelation in the model.
Table 4.5 Result of Auto correlation test
Sig. F Change
Durbin-Watson
1.642 0.000
As shown above table 4.5 the DW (Durbin- Watson) test statistic value for the model was
1.642 for a total observation of 351 responders with 3 independent variables. Thus, the
decision value for the test implies that there is no autocorrelation problem in the model.
According to Brooks (2008) if the DW test lies between 1.5 and 2.5 there is no issue of
autocorrelation in the model. So, the null hypothesis of no autocorrelation is accepted.
4.5.1.5 Test for multi-collinearity
If an independent variable is an exact linear combination of the other independent variables,

then we can infer that the model suffers from perfect collinearity. According to Gujarati
(2003), multicollinearity test helps to identify the correlation between explanatory variables
and to avoid double effect of independent variable from the model. When independent
variables are multicollinearity, there is overlap or sharing of predictive power. This may lead
to the paradoxical effect, whereby the regression model fits the data well, but none of the
explanatory variables (individually) has a significant impact in predicting the dependent
variable. For this purpose, variance inflation factor (VIF) and tolerance test were employed to
check whether multicollinearity problem exists in explanatory variables (bank image and
40
reputation, convenience, financial, technology, and service quality factors). If the value of
VIF is less than 10, there is no Multicollinearity between the explanatory variables. On the
other hand, VIF greater or equal to 10 is an indicator of a serious Multicollinearity problem.
In addition, tolerance is an indicator of how much of the variability of the specified
independent is not explained by the other independent variables in the model and is
calculated using the formula for each variable. If this value is very small (less than .10), it
indicates that the multiple correlation with other variables is high, suggesting the possibility
of multicollinearity (Keith, 2006; Shieh, 2010).
Table 4.6 Result of multi-collinearity test
Collinearity Statistics
Tolerance VIF
Reliability .957 1.045
Employee behavior .971 1.029
Tangibility .979 1.022
As shown in collinearity Statistics of the above table 4.6, the value of VIF of all independent
variables was found to be smaller than 10 and for similar purpose tolerance is used to test
multicollinearity by having less than 0.1. In this study, the tolerance value for each
independent variable is well above 0.1. Therefore, all the results confirm that
multicollinearity assumption is maintained.
4.5.2 Correlation Analysis
A correlation coefficient expresses quantitatively the magnitude and direction of the linear
relationship between variables ,Pearson correlation coefficient reveal magnitude and direction
of (either positive or negative) and the intensity of the relationship (-1 to +1) . In this section
a correlation analysis were done to establish whether relationship do exist between variables
conceptualized in the framework .The result would enable the researcher used to determine
the regression on the dependent variable .The researcher used one of the most commonly
used types of correlation coefficient which is Pearson correlation coefficient methods because
of the statistical accuracy that usually results from this methods.
41
Therefore To find out the relationship between service quality dimensions and customer
satisfaction, Pearson’s correlation coefficient (r) which measures the strength and direction of
a linear relationship between two variables is used. Values of Pearson’s correlation
coefficient are always between -1 and +1. A correlation coefficient of +1 indicates that two
variables are perfectly related in a positive sense; a correlation coefficient of -1 indicates that
two variables are perfectly related in a negative sense, and a correlation coefficient of 0
indicates that there is no linear relationship between the two variables. A low correlation
coefficient; 0.1-0.29 suggests that the relationship between two items is weak or non-existent.
If r is between 0.3 and 0.49 the relationship is moderate. A high correlation coefficient i.e.
>0.5 indicates a strong relationship between variables. The direction of the dependent
variable's change depends on the sign of the coefficient. If the coefficient is a positive
number, then the dependent variable will move in the same direction as the independent
variable; if the coefficient is negative, then the dependent variable will move in the opposite
direction of the independent variable Hence, in this study the level of relationship between
the dimensions of service quality and customer satisfaction is conducted using the Pearson’s
correlation coefficient. The table below presents the result of the correlation analysis made
using bivariate correlation. The strength of correlation would interpret through suggestion by
Evans (1996) as shown in the following pattern. 0.00 - 0.19 very weak, 0.2 - 0.39 weak, 0.4 -
0.59 Moderate, 0.6 - 0.79 strong, 0.8 - 1.0 very strong
Table 4.7 Pearson correlation analysis
Correlations
overall Employee
satisfaction behavior Reliability Tangibility
overall Pearson 1
satisfaction Correlation
Sig. (2-tailed)
N 351
Employee Pearson .825** 1
behavior Correlation
Sig. (2-tailed) .000
N 351 351
42
Reliability Pearson .053 .156** 1 .
Correlation
Sig. (2-tailed) .324 .003 .
N 351 351 351
Tangibility Pearson .106* .045 .130* 1
Correlation
Sig. (2-tailed) .047 .403 .015
N 351 351 351 351
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
As illustrated on the above table 4.7 the correlation coefficients of the three factors
measuring the effect of service quality on customer satisfaction each dimension were
positively related to the overall customer satisfaction within the range of 0.47 to 0.825. The
result indicates that there is a strong and positive correlation between employee behavior and
overall Satisfaction (r=0.825, p=.000 < 0.01), there is moderate and positive correlation
between reliability and overall as well as tangibility (r=0.53,p=003 and r=0.106,p=0.047)
respectively satisfaction.
4.6 Multi linear Regression analysis
Regression analysis is a statistical process for estimating the relationships among variables.
It includes many techniques for modeling and analyzing several variables, when the focus is
on the relationship between a dependent variable and one or more independent variables.
More specifically, regression analysis helps one understand how the typical value of the
dependent variable changes when any one of the independent variables is varied, while the
other independent variables are held fixed. In this study regression analysis is used to identify
the effect of service quality dimension on customer satisfaction thus it answers the main
research question.
43
4.6.1 Model summery
Table 4.8 result of model summery
Model Summary
M Change Statistics
o
d Adjust Std. Error
e R ed R of the R Square F df Sig. F Durbin-
l R Square Square Estimate Change Change df1 2 Change Watson
1.830 .690 .687 .341 .690 257.03 3 34 .000 1.642
a
7 7
a. Predictors: (Constant), tangibility, employee behavior, reliability
b. Dependent Variable: overall satisfaction
As depicted on the above table 4.8, there is a positive and statistically significant relationship
between the independent variables (employee behavior, tangibility, and reliability) and the
dependent variable (customer satisfaction). Thus, adjusted R2=0.687) on the model above
this indicate that 68.7 % variation on customer satisfaction is explained by the independent
variables ,the remaining 31.3% of the variance is explained by other variables that are not
included in the study.
44
4.6.2 ANOVA (Analysis of Variance)
Table 4.9 result of ANOVA (analysis of variance
ANOVAa
Sum of
Model Squares df Mean Square F Sig.
1 Regression 89.906 3 29.969 257.037 .000b
Residual 40.458 347 .117
Total 130.364 350
a. Dependent Variable: overall satisfaction
b. Predictors: (Constant), tangibility, employee behavior, reliability
The F- test result in the ANOVA table (4.9) and the P Value, tests whether the overall
regression model is good predictor and the probability of this result is occurred by chance or
not. In this regard, The F- test result is 257.037 with a significance of less than 0.05, this
means, the Probability of those results occurs by chance is < 0.001. Therefore, this means that
the independent variable significantly predict the dependent variable and it can be concluded
as the overall regression model is significant.
4.6.3 Result of multiple regression (coefficient of determination)

Table 4.10 result of multiple regressions
Unstandardized Standardized 95.0% Confidence Interval

Coefficients Coefficients for B
Upper
Model B Std. Error Beta t Sig. Lower Bound Bound
1 (Constan -.317 .268 -1.182 .238 -.843 .210
t)
reliabilit .074 .033 .069 2.258 .025 .010 .139
y
Employe .885 .032 .833 27.449 .000 .821 .948
e
behavior
tangibilit .094 .047 .060 1.988 .048 .001 .187
y
45
a. Dependent Variable: overall satisfaction
As shown on the above table 4.10, the regression analysis identifies the most contributing,
independent variable in the prediction of the dependent variable. Thus, the strength of each
predictor (independent variable) influencing the criterion (dependent variable) can be
investigated via standardized Beta coefficient. The regression coefficient explains the average
amount of change in the dependent variable that is caused by a unit change in the independent
variable. The independent variable that has the larger value of Beta coefficient brings more
support to the independent variable as it is more important determinant in predicting the
dependent variable. The regression analysis result indicated that among the three service
quality dimensions, Employee behavior is the first with the beta value of 0.885 followed by
Tangibility with a beta value of 0.094, and Reliability with a beta value of 0.074. Their
significance levels are 0.001, respectively, which are less than 0.05.
This indicates a significant relationship between them and the dependent variable (customer
satisfaction). In other word increase the employee behavior by one level leads to increase
over customer satisfaction of star hotels by 88.5%. On the other hands, increase in tangibility
of service in the hotels by one unit leads to 9.4% customer satisfaction as well as one unit
increase in service reliability result in 7.4 % increase customer satisfaction. Since, the
coefficients of the predictor variables are statistically significant at less than five percent;
alternative hypotheses related to Reliability, Employee behavior and appearance and
Tangibility were accepted. The result answers the main research question. Therefore, the
regression equation, in this condition, will be;-
CS= 0 + 𝛽1RE+ 𝛽2EB + 𝛽3TA +ɛ
CS=0.317+0.074RE+0.885EB+0.094TA+ ɛ
4.7 Hypothesis Test

Table 11: Summary of Research Hypotheses based on Multi linear Regression analysis
Hypothesis Reason Result
H1: Employees have a positive and significant effect on β =0. 885, p<0.05 H1: Accepted
Customer satisfaction
H2: Tangibles has a positive and significant effect on β =0. 094, p<0.05 H1: Accepted
46
Customer satisfaction
H3: Reliability has a positive and significant effect on
Customer satisfaction β =0. 074, p<0.05 H1: Accepted
4.8 Summery
This study adopted HOLSERVE approach to measure perceived service quality and its effect
on customer satisfaction in Addis Ababa star rated hotels. A framework with a
comprehensive questionnaire consists of 27 question items. The research results demonstrate
that the service quality is a strong driver for customer satisfaction in hotel service in Addis
Ababa. Among the three service quality dimensions, all dimensions represent the significant
effect on the customer satisfaction, among those employee behaviors is the best predictor of
overall service quality had a strong impact. A similar conclusion was conducted in
Australia’s three to five star hotels is that as studied by Wong et al. (1999).
According the regression result for the three independent variables, i.e. Reliability, Employee
behavior and appearance and Tangibility together has a significant and positive effect on
customer satisfaction. This related to the work of Abraham (2015) examined the service
quality and customers’ satisfaction in the hotel Industry in Addis Ababa, Ethiopia on three
star hotels stated that the combination of tangibility, reliability, responsiveness, confidence
and communication has a significant and positive effect on customer satisfaction. The results
of the regression analysis indicate that employee behavior and appearance contributes more
part towards customer satisfaction followed by Tangibles and reliability. Nevertheless, all the
dimensions were highly valued by the respondents and therefore the service industry cannot
ignore any of the proportions as they act upon customer satisfaction though at different
floors. The results obtained were also statistically significant since the p-value for employee
behavior and appearance Tangibles and reliability was <0.05. Therefore were considered to
be statistically insignificant. The outcomes of this survey are consistent with the findings of
Saleh, et al (1991), Stromgren (2007) and Christine, M. (2009) who found out that reliability
dimension has the highest effect on customer satisfaction.
47
CHAPTER FIVE
Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings
The basic interest of this study is to find out the effect of service quality on customer
satisfaction: The case of three and four star hotel in Addis Ababa. The altered form of
SERVQUAL, which is called HOLSERV model that were customized specifically for the
hotel industry consist 27 items used to investigate the relationship between the service quality
dimensions and customer satisfaction. The researcher used quantitative research design and
convenience sampling technique to collect data from 384 sample size of star rated hotel
service users. As per theoretical framework and objectives of the study 27 items were
provided in a 5 point Likert scale to the respondents. The gathered data was analyzed by
using both descriptive statistics (like mean, frequency, percentage) and inferential statistics
(correlation and multiple linear regressions) via SPSS version 25. Accordingly, based on the
gathered data this research examined the relationships that exist between the three dimensions
of service quality (employee behavior and appearance, reliability and tangibility) with the
overall customer satisfaction of the study area. The data obtained from the respondents were
analyzed using various statistical tools.
With regard to the background information of respondents indicated that the majority of the
respondents are male (58%) aged in the range of 30 to 40 (37%). Regarding to the
educational background, 42% of the respondents are master and above holder. The analysis
of descriptive results showed, the mean value of all dimensions shows that the respondents
have a positive attitude towards the service quality offered star rated hotel under this study
area. The finding from the correlation result reveals that there is a positive and significant
relationship between the service quality dimensions and customer satisfaction. The Pearson
correlation coefficients indicated that the variables have different magnitudes of correlation
with the dependent variable. Accordingly, Employee’s behavior are found to have the
strongest and positive correlation with customer satisfaction (r=0.825, p<0.01) followed by
tangibility and reliability which had got moderate correlation (r=0.53, p<0.01) and r=0.106
p<0.01 the overall satisfaction.
According to hypothesized at the commencement, the three service quality dimension had a
positive effect on customer satisfaction with the overall brand equity of the customers,
48
multiple linear regressions approved (Reliability, Employee behavior and appearance and
Tangibility are 0.074 0.885 and 0.094 respectively with significance levels of p<0.05).
5.2 Conclusion
Established in the analysis made, the following conclusions were taken out the modified
HOLSERV model service quality dimension (Reliability, Employee behavior and
Tangibility) had a positive effect on customer satisfaction, which infers that star rated hotel
service users have a confident attitude towards service quality dimension.in addition to this
There is a strong positive relationship between the service quality dimensions and the overall
customer satisfaction. From this, we can conclude that, the star rated hotel service user’s
perception about the quality of services provided by the studied star rated hotels has a strong
influence on the level of customer satisfaction.
On the other hand, there is a positive inter- correlations among the three service quality
dimensions that means strong and positive interrelationship between service quality
dimensions brings competitively and attractive service rendering presses which generate a
pleasant environment towards the customer's perception that secure client satisfaction.
Employee behavior (knowledge and courtesy of employees, willingness to help customers
and provide prompt service, confidence including competence, courtesy, credibility and
security as well as understand the needs of customers and provide individual attention)
demonstrates the strong contribution to the overall customer satisfaction in the studied star
rated hotels, indicating attention should be given primarily to this dimension while to achieve
maximum level of customer satisfaction.
5.3 Recommendation
 Depending on the findings of the study and the conclusions made, the following
possible recommendations were forwarded for the concerned body: The hotel owner
and managers recommended to allocate abundant budget to enhance its employee’s
knowledge and behavior and also realize that the improvement of all dimensions to,
which in turn results in better performance of the hotel increase customer satisfaction
at their stay in the hotels.
 Hotels are customer oriented organizations, so to provide quality services and make
customers satisfied top management or the owners recommended to hire professional,
self-motivated, passionate employees who are capable to deal with customer and
solve customer complaints and other issues in an effective manner.
49
 It is recommended that the hotel managers should have to exert their maximum efforts
to improve quality of products and services through periodical quality assessment and
evaluations. Because quality as well as customers’ needs and preferences are dynamic
in their nature.
 The hotels owner and concerned sector supervisor should have to enhance the three
dimensions of service quality due to their positive impact on customer satisfaction.
When allocating resources, employee behavior and appearance dimension should be
given more allocation since it has the highest impact on customer satisfaction.
5.4. Recommendation for future researcher

The study had the following limitations. First, the study was conducted star rated Hotels
Addis Ababa City only hence its findings might not be generalized to all hotels in Ethiopia.
Therefore, future researcher could consider the other star category as well as star rated hotel
found in Ethiopia to make the research more statistically significant and to infer
generalization from the finding accordingly. The other possible area of further investigation
could be a comparative study of the level of service expectation and perception of customers
before and after being served. In other words, the questionnaire need to be administered at the
gate to measure the real expectation of the customer about that specific hotel service and
finally, the questionnaire designed to assess the perception of the customers could be
administered after they are exactly served to value unbiased service expectation of guests.
50
References:
Abreham, G., (2015). Service quality and customer satisfaction in hotel industry: the case of
three star hotels in Addis Ababa, Ethiopia: Thesis Paper, Addis Ababa University College of
Business and Economics.
Babakus, Emin and Boller, Gregory W. (1992), “An empirical assessment of the
SERVQUAL scale”, Journal of Business Research, Vol. 24, No.2, pp. 253-68.
Bei, L. T., and Chiao, Y. C. (2006). The determinants of customer loyalty: An analysis of
intangible factors in three service industries. International Journal of Commerce and
Management, 16(3and4), 162–177
Choi, T. Y., and Chu, R. (2001). Determinants of hotel guests' satisfaction and repeat
patronage in the Hong Kong hotel industry. International Journal of Hospitality Management,
20: 277- 297.
Grönroos, C. (1990). Service management and marketing: managing the moments of truth in
service competition. USA: Lexington Books.
Saunders, M.,Lewis, P. and Thornhill, A.,(2009). Research methodology for business

students. Harlow: Pearson Education limited.
Kotler, P. and Keller, K. L. (2009) Marketing management (13th end). New Jersey: Pearson
Education Inc, Upper Saddle River,
Kotler, P.(2000), Marketing Management. 10th edition., New Jersey, Prentice-Hall.
Malhotra,N.K.,and Briks,D.F.,2009. Marketing Research: An Applied Approach. 3rded.

Edinburg Gate: Pearson Education limited.
Zeithaml, V. A., Berry, L. L. and Parasuraman, A., (1996). The behavioral consequences of
service quality. Journal of Marketing, 60(4), pp. 31-46
Zeithaml, V. A., Bitner, M. J. and Gremler, D. D., (2006). Service marketing: Integrating
customer focus across the firm. 4th Edition ed. New York: McGraw Hill.
51
Appendix I
YOM POSTGRADUATE INSTITUTE
School of Postgraduate studies
Department of Business Administration
Dear Participant,
My name is Estifanos Abera postgraduate student in the field of MBA at YOM

POSTGRADUATE INSTITUTE. For this purpose, currently I am conducting a study
entitled “The effect of service quality on customer satisfaction in star rated hotels in
Addis Ababa: In the case of selected hotels in Addis Ababa”. The major purpose of this
survey is to collect data regarding to the above title. As this study is intended only for
academic purpose, the information you provide in this questionnaire will be kept confidential
and will be utilized only for the purpose of this study. Since your genuine response is highly
valuable for the achievement of the objectives of this research, I kindly requesting you to fill
your response in space provided freely. Finally, I would like to express my great
acknowledgement in advance for your kind cooperation in providing me prompt responses by
filling this questionnaire. For any clarification or comment please don’t hesitate to contact me
through the following address:-
Mobile number: - or mail
Part-1: General information

Direction: Please put a tick mark (√) on the appropriate box
1. Gender Male Female
2. Age 18-29 30-40 40-50

above50
3. Educational level High school Diploma

Degree
52
Masters and above
4. Purpose of visit Pleasure or Business Visiting

Relatives
Conference Study Others
5. Star category of the hotel you are getting hotel service 3 star
4star 5 star
53
PartII
The following statements are related to your feelings about the Hotel.
Please show the
extenttowhichyoubelievetheHotelhasthefeaturedescribedbythestatement
.Indicating ticking (√) to ‘1’ means strongly disagree, ‘2’ disagree, ‘3’
neutral, ‘4’ Agree and
‘5’stronglyagree.Therearenorightorwronganswers;alltheresearcherinter
estedinisa number that best shows your perception about the Hotel.
QUESTIONNAIREITEMS
disagree
disagree
strongly
neutral,
Agree
The hotel promises to provide a service and does so. 1 2 3 4
The hotel performs the service right the first time. 1 2 3 4
Employees of the hotel tells you exactly when the services will be 1 2 3 4
RELIABILITY
performed.
The hotel provides services at the time it promises to do so. 1 2 3 4
You feel secure and secure in your stay in the hotel. 1 2 3 4
You feel safe in the delivery of services of the hotel. 1 2 3 4
The behavior of employees of the hotel in stills confidence in guests. 1 2 3 4
Employees of the hotel , Never too busy to respond to guests’ requests 1 2 3 4
When you have a problem, the hotel shows dependability in handling 1 2 3 4
Service problems.
Employees of the hotel gives prompt service. 1 2 3 4
Employees of the hotel are always willing to help. 1 2 3 4
BEHAVIOR
Employees of the hotel give individual attention. 1 2 3 4

Employees of the hotel deal with guests in a caring fashion. 1 2 3 4
Employees of the hotel are polite and courteous to you. 1 2 3 4
Employees of the hotel understand the guests’ specific needs. 1 2 3 4
EMPLOYEE
Employees of the hotel are neat and professional. 1 2 3 4

Employees of the hotel have the knowledge to answer questions. 1 2 3 4
2
The hotel has guests ’best interests at heart. 1 2 3 4
Employees of the hotel have the skill to perform the service. 1 2 3 4
The hotel’s facility is visually appealing. 1 2 3 4
The hotel’s materials are visually appealing. 1 2 3 4
The hotel’s fixture and fittings are comfortable. 1 2 3 4
The hotel’s equipment and facilities are easy to use. 1 2 3 4
TANGIBLES
The hotel’s equipment and facilities are generally clean. 1 2 3 4

Variety of food and beverages of the hotel meet guests’ needs. 1 2 3 4
The hotel’s equipment, fixtures and fittings are modern looking 1 2 3 4
Services of the hotel are operated at a convenient time. 1 2 3 4
2
PARTIII
OVERALLCUSTOMERSATISFACTION
The following statements are related to your feelings about the Hotel.
Please show the extent to which you believe the Hotel has the feature
described by the statement. Once again ticking (√) to ‘1’ means strongly
dissatisfied, ‘2’ dissatisfied, ‘3’ neutral ‘4’ satisfied l, ‘5’ strongly
satisfied.
There is no right or wrong answers; the researcher interested in is a
number that best shows your perception about the Hotel
No. QUESTIONNAIREITEMS
dissatisfied
dissatisfied
Satisfied
strongly
satisfied
strongly
neutral,
1. What is your level of satisfaction with the reliability of the service 1 2 3 4 5
provided by the hotel
2. What is your level of satisfaction with the employee behavior and 1 2 3 4 5
appearance of the hotel
3. What is your level of satisfaction with the tangibility of the hotel 1 2 3 4 5
4. What is your overall level satisfaction with the service provided 1 2 3 4 5
by the hotel
Part IV
1. Would you recommend the Hotel to a

friend? YES NO
2. Did you experience any problem during your
stay?
YES NO
3. If yes, was it handled satisfactorily?
YES NO
2
2

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YOM POSTGRADUATE INSTITUTE

School of Postgraduate studies

Department of Business Administration

By- Estifanos Abera

By: Estifanos Abera

Advisor name: Dr. Berihun Muche

Submitted by- Estifanos Abera

Advisor- Dr. Berihun Muche

1.1back ground of the study................................................................................................1

1.2 statement of the problem...............................................................................................2

1.3.1main research question................................................................................................3

1.3.2 specific research questions.........................................................................................4

1.4 objectives of the study..................................................................................................4

1.4.1 general objective........................................................................................................4

1.4.2 specific objectives......................................................................................................4

1.5 significance of the study...............................................................................................4

1.6 scope of the study.........................................................................................................5

1.7 limitations of the study.................................................................................................6

1.8 definition of key terms..................................................................................................6

1.9 organization of the paper..............................................................................................7

review of related literature...................................................................................................8

2.2 review of theories..........................................................................................................8

2.2.1 service quality............................................................................................................9

2.2.2 customer satisfaction................................................................................................10

2.2.3. Service quality & customer satisfaction in hotel industry......................................11

2.2.5 types of service quality models................................................................................12

2.2.5.2 servperf model......................................................................................................13

2.3 empirical review.........................................................................................................16

2.4 research gap................................................................................................................17

2.5 conceptua l frame work...............................................................................................18

2.6 hypothesis formulation...............................................................................................19

2.6.1employee behavior and customer satisfaction..........................................................19

2.6.2 tangibility and customer satisfaction.......................................................................20

2.6.3 reliablity and customer satisfaction.........................................................................20

research design and methodology........................................................................................22

3.2 research design............................................................................................................22

3.3 research approach....................................................................................................22

3.4. Target population, sampling unit & sample frame..................................................23

3.4.1 Method of sampling...............................................................................................23

3.4.2 Sampling procedure.................................................................................................23

3.4.3 Sample size determination.......................................................................................23

3.5 Data type and Source..................................................................................................24

3.6 Research instrument and Measurements.....................................................................24

3.7 Methods of data collection..........................................................................................24

3.8 Methods of Data analysis............................................................................................24

3.9 Model Specification....................................................................................................25

3.11 Validity and reliability..............................................................................................25

3.12 Ethical Considerations..............................................................................................26

4. Data presentation, analysis and interpretation..................................................................28

4.2 Response Rate.............................................................................................................28

4.3 Characteristics of Respondents...................................................................................28

4.3.1 Gender distribution of the respondents....................................................................28

4.3.2 Age distribution of the respondents.........................................................................29

4.3.3 Educational background of the respondents............................................................30

4.3.4 Purpose for visiting the hotels.................................................................................30

4.3.5 Hotels star category.................................................................................................31

4.4 Descriptive statistics for study variable......................................................................32

4.4.1 Mean distribution of Customer Satisfaction............................................................32

4.4.2 Descriptive Analysis of Service Quality Measurement...........................................33

4.4.2.1 Reliability of service.............................................................................................33