Faculty & Research
Cornell Study Confirms the Connection Between Guest Satisfaction and Financial Success: When guests say they plan to return to a hotel, its revenues will rise
Contact: Glenn Withiam, 607-255-3025, grw4@cornell.edu; Cydney Peters, 607-255-8698, chp4@cornell.edu
FOR IMMEDIATE RELEASE:
Cornell Study Confirms the Connection Between Guest Satisfaction and Financial Success:
When guests say they plan to return to a hotel, its revenues will rise
Ithaca, NY, October 27, 2005 -- The hotel industry has targeted guest satisfaction as a key factor in its success, but a long-standing question has been how exactly to measure that satisfaction. Moreover, little research has been done to confirm any connection between nonfinancial measures such as guest satisfaction and financial performance.
Now a new study demonstrates the financial effects of two customer-satisfaction measurements—namely, intent to return and number of complaints. The article, “Association of Nonfinancial Performance Measures with the Financial Performance of a Lodging Chain,” was published in the November 2005 issue of the Cornell Hotel and Restaurant Administration Quarterly and is is available at no charge from the Quarterly's publisher, The Center for Hospitality Research, at www.thecenterforhospitalityresearch.org.
The study, written by Rajiv D. Banker, Gordon Potter, and Dhinu Srinivasan, confirms the connection between nonfinancial measurements and revenue per available room and gross operating profit at one large, full-service hotel chain in the United States . “We found a six-month lag in the measures,” says Potter, an associate professor at the Cornell University School of Hotel Administration. “For this chain, an increase in likelihood to return and a decline in complaints translated to a RevPAR increase six months later.”
The study data indicated that the main driver increasing RevPAR was more-frequent return visits, rather than any price premiums paid by returning guests.
Potter added that during the study the chain implemented an incentive plan for management based on those two nonfinancial measurements. As a result, both intent to return and complaint measures improved. “This shows the importance of paying attention to nonfinancial operational measures, as well as financial measures,” he concluded.
Other articles in the November 2005 Cornell Quarterly are available only to subscribers and are also available from Sage Journals Online. Those articles include the following:
“The Use of Fixed-rate and Floating-rate Debt for Hotels.” In this study, Professors Jack Corgel and Scott Gibson analyzed various types of financing and outlined the benefits of using floating-rate debt for hotel developers.
“Independent Meeting Planners: Roles, Compensation, and Potential Conflicts.” Authors Rox Toh, Frederick DeKay, and Barbara Yates examined the nature of the meeting planner’s job, with a particular focus on how hotel managers can work most effectively with these increasingly important clients.
“Impact of Information on Customer Fairness Perceptions of Hotel Revenue Management.” Most hotel managers are sold on the use of revenue management, but authors Sunmee Choi and Anna Mattila considered how to present revenue management to customers so that they will view it as a fair system. They discovered that a key factor is the information that the hotel shares with its customers.
“Managing Tourism Crises.” How does a tourism promoter shake off the effects of such disastrous events as the breakout of a dread disease? Longtime industry consultant Stanley Plog interviews Lily Shum, who explains how she handled the Hong Kong handover and the SARS scare while promoting Hong Kong ’s tourism industry.
The article, which is now posted at www.hotelschool.cornell.edu/research/chr, was published in the November 2005 issue of the Cornell Quarterly, the premier journal of applied research serving hospitality practitioners and scholars. The award-winning CQ is published by The Center for Hospitality Research at the Cornell Hotel School and is available by subscription from Sage Publishing (sagepublications.com). For more information on the CQ, see: http://www.hotelschool.cornell.edu/research/chr/pubs/quarterly.
About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the Center’s 40 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The Center also publishes the award-winning hospitality journal, the Cornell Hotel and Restaurant Administration Quarterly. To learn more about the CHR and its projects, visit http://www.hotelschool.cornell.edu/research/chr.
CHR Partners and sponsors: AIG Global Real Estate Investment Corp., Cendant Corporation, Four Seasons Hotels and Resorts, HVS International, JohnsonDiversey, Inc., Kohinoor Group, Marsh’s Hospitality Practice, Nestlé, Smith Travel Research, Southern Wine and Spirits of America, Inc., Taj Hotels Resorts and Palaces, and Thayer Group of Companies.
CHR friends: ARAMARK • DK Shifflet & Associates • ehotelier.com • Estrela Marketing Solutions • Gerencia de Hoteles & Restaurantes • Global Hospitality Resources • hospitalitynet.org • Hotel Asia Pacific • Hotel China • Hospitality Initiatives India • Hotel Interactive • Hotel Resource • International CHRIE • International Hotel and Restaurant Association • KPMG Japan/Global Management Directions • Lodging Hospitality • Lodging Magazine • Mobile MoneySaver • National Hotel Executive Magazine • PKF Hospitality Research • Resort+Recreation • The Resort Trades • RestaurantEdge.com • Shibata Publishing Co. • The Lodging Conference • Taste & Travel • TravelCLICK • UniFocus • WageWatch, Inc. • WiredHotelier.com
