MODERATING EFFECT OF CUSTOMER SATISFACTION ON THE RELATIONSHIP BETWEEN SERVICE QUALITY DIMENSIONS AND PERFORMANCE OF STAR-RATED HOTELS IN NORTH RIFT REGION, KENYA

Abstract

The performance of firms in the hospitality sector is crucial for competitiveness and sustainability, particularly in star-rated hotels. This study focused on the North Rift Region of Kenya. The main objective was to assess the moderating effect of customer satisfaction on the relationship between service quality dimensions; assurance, empathy, reliability, responsiveness, and tangibility and performance of star-rated hotels in North Rift region, Kenya. Guided by the Service Quality (SERVQUAL) Model, Resource Based View theory, and Customer Satisfaction theory, the study employed an explanatory research design targeting a population of 1,813 individuals, including 1,377 hotel customers and 436 hotel staff across 9 star-rated hotels in North Rift region. Purposive and stratified sampling techniques were used for hotels selection, simple random for staff, and systematic for customers. Data collection was conducted through structured questionnaires. The analysis was performed using SPSS Version 25, with reliability measured via Cronbach's Alpha set at 0.7. The study utilized multiple regression and hierarchical regression analyses to test the hypotheses. Study findings indicated that all service quality dimensions positively and significantly affect hotel performance. Specifically, the coefficients were: assurance (β1=0.156, p<0.05), empathy (β2=0.220, p<0.05), reliability (β3=0.193, p<0.05), responsiveness (β4=0.294, p<0.05), and tangibility (β5=0.098, p<0.05). Customer satisfaction positively moderated the relationship between assurance and performance (β=0.024; p=0.000) and significantly affected reliability (β=-0.020; p=0.045) and tangibility (β=0.030; p=0.023). However, it did not significantly impact the relationship between empathy and performance (β=-0.007; p=0.445) and had a negative effect on responsiveness (β=-0.026; p=0.008). The study concludes that dimensions of service quality enhance hotel performance and that customer satisfaction moderates the relationships between assurance, reliability, responsiveness and tangibility dimensions and performance. This implies that customer satisfaction influences how the dimensions of assurance, reliability, responsiveness, and tangibility affect the performance of star-rated hotels. Specifically, it suggests that the level of customer satisfaction can strengthen the impact these service quality dimensions have on hotel performance. However, customer satisfaction has no significant relationship between empathy dimension and performance of star rated hotels. This means that customer satisfaction does not have a meaningful or quantifiable effect on how the empathy dimension of service quality influences the performance of star-rated hotels. The study recommends improving staff professionalism, attentiveness, and flexibility to meet customer expectations. Additionally, enhancing physical aspects such as modern furniture, cleanliness, and overall ambiance is suggested to boost hotel performance. Overall, focus on both service quality and customer satisfaction is essential for the success of star-rated hotels in the region.