INFLUENCE OF ENTREPRENEURIAL SERVICE RECOVERY ON CUSTOMER LOYALTY IN THE HOSPITALITY INDUSTRY IN KENYA

Abstract

The purpose of this study was to investigate the influence of entrepreneurial service recovery on customer loyalty in the hospitality industry in Kenya. The increased competition in the hospitality industry has forced proprietors to continuously search for competitive advantages, with service quality being the single most important differentiating factor in the hospitality industry. In Kenya the hospitality industry has been characterized by poor service quality which threatens their long-term survival. This study used a survey approach guided by cross-sectional research design. The study was guided by service recovery as the independent variable, perceived justice as the mediating variable, and customer loyalty as the dependent variable. The population of the study was 25, 585 customers who were patronizing the 17 five star hotels during the period of study. A sample size of 384 respondents was obtained using Fischer’s (1988) formula. The sampled customers were selected randomly from all the five star hotels. Data was analyzed using Statistical Package of Social Sciences (SPSS) with AMOS version 21. The study found out that service recovery influences customer loyalty. Compensation was found to have a positive influence on customer loyalty and thus important in addressing service failure. Organizations should therefore assign tangible resources to correct service failure problems and restore the trust of an aggrieved customer. Employee empowerment was found to have a positive influence on customer loyalty. The power to make prompt decisions in an organization is important in the provision of high levels of service quality. Hotels should empower their employees with skills, knowledge and ability to deal with service recovery. The study also found out that employee behaviours have a positive influence on customer loyalty, thus a need for employees being able to address to the emotions of aggrieved customers through positive employee behaviours. Hospitality industry should provide their employees with training necessary to develop strategic thinking skills, thus able to create a positive customer experience. The study also found out that communication in service recovery had a positive influence on customer loyalty. Organizations in hospitality industry should use the communication process in collecting service failure information that will be used for organization learning. The study also found out that the perceived justice dimensions partially mediated the relationship between service recovery and customer loyalty. This implies that service recovery and customer loyalty can be enhanced by increasing perceived justice. The results of this study are important for practitioners in the hospitality industry who will have an understanding of entrepreneurial strategies that organizations in hospitality industry can use to remedy for service failure.