Determinants of Repeat Buy in the Hospitality Industry: Evidence from Hotel Business in Lagos State

Ogunlusi Gbenga^{1, *}, Kehinde Osotimehin²

¹Department of Administration and Management, Crawford University, Faith City, Igbesa, Ogun State Nigeria

²Department of Management and Accounting, Obafemi Awolowo University, Ile Ife, Nigeria

Abstract

The study investigated the determinants of repeat buy and its relationship with service perception with a view to improving customer base in hotel business in Lagos state. Primary data were used for the study. Eight local government areas (LGAs) were purposively selected out of the twenty (20) LGAs, representing 40 percent of the LGAs in Lagos State. Two of the biggest hotel in terms of room capacity, were chosen from each LGA. Twenty respondents (20) were sampled from each hotel totaled 320 using simple random technique. The data were collected with the aid of questionnaire and analyzed using both descriptive and inferential statistics. Applying factor analysis to the ten constructs in the study, the resulting component scores were used to fit a regression line. The result shows that service of the hotel (t= 2.028, p<0.05), friendly staff t(=6.924, p=0.05), food quality (t = 2.221, p<0.05 ) and price (t= -.3645 p= 0.05) had significant impacted on repeat buy. It was also discovered that perception of this factors by the customers has a positive significant relationship (r=0.66, N= 286, p<0.05) on repeat buy of hotel services. Finally, the study concluded that for a hotel to have competitive edge over its competitors and remain in business as well as to improves its customer’s base; it must be customer friendly, deliver quality room services, offer quality food, and charge reasonable price. This is because the way customers perceive these factors collectively dictates whether they will come back or not.

Keywords

Determinant, Repeat Buy, Hotel, Customer Base, Perception

Received:May 14, 2015
Accepted: May 27, 2015
Published online: July 2, 2015

@ 2015 The Authors. Published by American Institute of Science. This Open Access article is under the CC BY-NC license. http://creativecommons.org/licenses/by-nc/4.0/

1. Introduction

With the global growth in the hospitality industry (ILO, 2010) and the swelling of the Nigeria economy, owing to economic prosperity, hotel business is fast becoming increasingly important in Nigeria. This may be attributed to increasing urbanization, affluence, and change in life style. Other reasons include working very far from home, while others keep more than one job.

Kandampully (2007:14) described hospitality services as a generic term comprised of three main functional areas; accommodation, food and beverage, and entertainment. These functions can be offered separately, or combined together as found in most hotels. A hotel is an establishment of a permanent nature, which consists of four or more bedrooms, and offers bed and breakfast on a short term contract and provides certain minimum standards. Put differently, Omogunloye and Ayeni (2012) defined hotel as an establishment that provides paid lodgings on ashort term basis.

A hotel may be described in term of the following classification; for promotion purposes, location, form of ownership, facilities, types of clients and standard. Others are star rating and size. For this study, star rating is employed.

by the customers. Customers are the very essence of the existence of a business organization. Thus, firms craft different strategies to win more customers from their competitors. In hospitality business, competition is very stiff because the product offerings are similar. For instance, nearly all the marketing strategies in the industry can be easily benchmarked hence hotel managers need to keenly observe the market place. Unfortunately, rapid social and technological changes are shrinking the period of time for which existing understandings and predictions about the market place are valid (Alving, 2004). On average, business spends six times more to acquire customer than to retain them( Gruen, 1997). A loyal customer is not only willing to patronize the company again but also profitable to the firm and difficult to be won away by the competitor. Realizing this, firms spend huge amount of money on customer service to ensure that customers are turned to a long term partners that are profitable to both parties. Hospitality industry is not an exception to this marketing warfare; to have a competitive edge over their competitors. This can only be achieved by offering a superior quality services that is apropos to repeat purchase.

Several studies have been undertaken in hospitality industry; they include,( retention practices of small and medium and large hotels, Peters, Steyn and Mostert, 2009; Lodgers perception of hotel facilities, Otegbulu and Odu, 2011);Hotels managers perception towards relationships marketing, Nevbarhar,1995; service quality, corporate image and customer loyalty in hotel, tat  huei and Easvara L, 2011); Analysis of Hostels in Lagos State with Respect to other spatial Data, Omogunloye and Ayeni, 2012; Understanding and Defining the Hospitality Business, Nigel,  2007). These studies however proved insufficient to gain insight into factors that determine repeat purchase of hotel offerings in Lagos state. To this end, this study attempted to answer the following questions; (i) what is the relationship between repeat purchase and customers’ perception of hotel services in Lagos state? (ii) What are the factors influencing repeat purchase of hotel offerings in Lagos state? The major objective of the study is to investigate determinant factors of repeat purchase in hotel firms in Lagos State. To achieve this objective, the study focused on the following specific objectives: (i)To determine the factors that influence repeat purchase by hotel customers in Lagos state. (ii) To examine the relationship between repeat purchase and customer’s perception of hotel offerings. To advance the course of this study, a null hypothesis was proposed and tested. H_o = there is no significant relationship between repeat purchase and customer’ perception.

2. Conceptual Framework and Literature Review

2.1. Meaning of Consumer Behaviour

According to American Marketing Association (AMA) consumer behavior is defined as the dynamic interaction of affective and cognition, behavior, and the environment by which human beings conduct the exchange aspect of their lives.

Paul and Jerry (2005) stated that consumer behaviour involves the thoughts and feelings people experience and the actions they perform in consumption processes. They added further that it also includes all the things in the environment that influence these thoughts, feelings, and actions. These environmental influences could be in form of influence from a fellow customer, promotion information, packaging, product appearance and price information. A close examination of these definitions shows that consumer behavior is not static; it is a product of interaction and exchange. It is explained in turn below:

2.1.1. Consumer Behavior is not Static

Consumer behavior is constantly changing because the domain where individual consumer finds himself or herself is not static. Both social and technological forces are constantly changing, these constraint individual consumers to remain dynamic subject to these forces. Most importantly, feelings, thoughts and actions of consumers, and the society at large cannot remain permanently the same because of the cognitive nature of man. This insight propels managers to craft marketing strategy from time to time to forestall any unseemly circumstances.

Consumer Behaviour as a product of interactions involves interactions among people’s thinking, feelings, and actions, and the environment (Ibid). These interactions are very crucial to understand what prompt consumer to buy a particular brand. Besides, it affords marketers to gain insights into how the interactions influence the individual consumers, or the society at large.

2.1.2. Consumer Behaviour is a Product of an Exchange

Strictly speaking, exchange involves two or more individuals giving up something of value to each others in return. Consumer behaviour involves exchange i.e people giving up money and other valuable to obtain product or service in return. This is the principal function of marketing.

2.2. Attitudes Formation

Generally speaking, attitudes to, and assessment of a brand or product depends on past and current information, and experiences about it. The attitude that customers have formed over the time and stored in their memories dictates the type of products/services acceptable to them. One of the popular models of attitude formation that has gained widely acceptance in marketing is fishbein’s multi-attribute attitude models. This model states that, customers first generate a set of salient beliefs about a product/service based on stimuli in both external and internal environment. Giving this model, customer’s decision process involves assigning probability value to each belief statement which reflects the degree of certainty of an organization’s offering that customer has preference for. Finally, the belief and evaluation are multiplied together. The belief - evaluation outcomes for each attribute are then totaled to form the attitude. This model is important because it has high predictive capability. Besides, it is relevant in gaining insight into how attitudes are formed as well as how customers’ attitude may be influenced. The model is mathematically stated below:

Ao

Where:

A. = attitude toward the object

bi = belief strength assigned to a particular attribute

ei = evaluation assigned to a particular attribute

 Summations of the entire product attribute (1-n)

2.3. Attitude Towards Behaviour

Literature on consumer attitude abounds, however, marketing strategy requires consumer’s overt behaviour, especially those that translates to purchase decision. Therefore marketers need a model that can unravel the attitudinal factors that influence a specific behavior.  One model that has gained popularity in this area is the Theory of Reasoned action propounded by Ajzen and Fishbein (1969,1980).

This model finds its root in social psychology. It is the cognitive representation of a person’s readiness to perform a given behavior. The model advanced further that intention to behave is a function of attitude, subjective norms, and perceived control. In summary, the theory means that intention is the underlying factor for any reasonably complex behavior such as buying a shirt. The theory is elaborated graphically below;

Figure i. The Theory of Reasoned Action (TRA).

Source: culled from Martin Fishben, An overview of the Attitude Construct, in A Look Back, A Look Ahead, ed. G. B. Hafer (Chicago: American Marketing Association, 1980), p. 8, as cited in Paul and Jerry( 2005).

2.4. The Theory of Planned Behaviour (TPB)

This theory is an extension of model of reasoned action. It stipulates that only specific attitudes towards the behavior in question can be expected to predict that behaviour (Ajzen and Fishbein, 1991). In other words, it is not only the attitude that determines intention to behave but also include people’s subjective norms (people’s beliefs about the view of their love ones concerning the behavior). The theory is expatiated further diagrammatically as follow;

Source: Ajzen, 1991 (as stated in Gregory, 2011)

Figure ii. Theory of Planned Behaviour (TPB).

The two models described above have been appraised to have higher predictive capability and applicability in most of human activities. However, the models suffered criticism that it is not suitable in organizational context because of the dynamic intricate, multiphase, multi-person, multi-department and multi-objective nature of the organization (Gregory, 2011). This criticism however, cannot weaken the models’s applicability in customer’s willingness to repurchase in hospitality firm because customer’s repurchase is a function of a single individual consumer.

2.5. Brief History of Hotel Business in Nigeria

Hospitality activities dates back to colonial era Nigeria in 1920s, Oforuku (2013). Their major activities then were performed by the government. What can be referred as modern hotel began in Nigeria in the year 1942, with the establishment of the Lagos airport hotel. Thirteen years later, two hotels were added, they were Bristol and the federal palace hotel. After the independent, many more hotels were established. Among them were, Hotel presidential in Portharcourt in 1963, Eko holding in 1976, and the Festac hotel in 1979. Today there are many hotels from 5-star 1-star across the country. There is no state capital where hotel cannot be found in Nigeria today.

2.6. Characteristics of Hospital Offerings

2.6.1. Intangibility of Offering/Product

This is one of the unique feature of the offerings. Hospitality services are intangible performances as opposed to tangible objects-they cannot be seen, felt, tested, or touched as goods can be. Although the effects of services might be for sometimes, the services themselves essentially go out of existence at the very moment that they are rendered (Kandampully, 2007). Unlike tangible goods, hospitality products/offering cannot be physically examined or tested yet it is a function of both tangibility and intangible elements-the key product offering is intangible (Ibid).

2.6.2. Inseparability of Production and Consumption

Hotel products are characterized by simultaneous production and consumption. The implication of this is that both the service provider and the customer are physically present when consumption is taking place. Unlike tangible good like electronics, they could be manufactured in Japan or China and consumed in Nigeria. The fact that consumption cannot be separated from the production calls for caution in the manner in which customers are treated in the process of service delivery because first impression last for a long time. Employees of Hotels have to be very careful at this stage and ensure that there interactions with customers is good enough to translate into good impression about their product in the mind of customers.

2.6.3. Heterogeneity of Hospitality Offerings

There is heterogeneity of service delivery in hospitality business. This is because a large human component is involved. Hotel Services are human based; from the security man at the gate to receptionists, bar man, concierge, etc, it will be difficult to have a standardized and uniformed output since numerous people are involved. It is therefore not unusual to have some variations in the services received by the consumers.

2.6.4. Perishability of Hotel Offering/Product

Hotel offerings cannot be stored unlike tangible products. The peculiarity of hotel product is that when services are not sold, the products are lost for life. For instance, if a room in hotel or a seat in a restaurant is not used, it constitutes a loss revenue for the management for the day in question.

2.7. Customers of Hospitality Services

Customers are individuals and organizations who buy organizations goods and services to satisfy their needs and want and serve as a revenue stream to the organization. Customer is the essence of any business; it is what actually describes whom a company is, in term of whom they serve. Drucker (1954), long time acknowledged that customer is the foundation of business and keeps it in existences. The centrality of customer and its cardinality in marketing role cannot be over emphasized. A company that refuses to design its product offering in term of needs of its target market is bound to go under especially in present trend that is characterized with rapid change in technology and social environment. There are two classes of customer in hospitality firms. They include; internal and external customer. Internal customers are employees of the organization who are saddled with the task of delivering services to the company’s client. In hotel settings for instance, a waiter or a barman is an example of internal customers. External customers on the hand are those individuals and organizations who purchase hotel offerings and hence serve as a source of revenue to the organization. Continuous demand for improvement in quality by customers requires that hospitality firms must keep on researching into customer satisfaction to forestall any customer churn. No wonder, Kotler (2009), remarked that marketing is totally about customers, hence the mission of marketer is to provide the solution to customers’ needs and wants by identifying and meeting them.

3. Methodology

The study was conducted in Lagos state, south western Nigeria. The state occupies a total land area of 3,577 square kilometres part of which consists of 787 square kilometer of lagoons and creeks. Many foreign embassies are located in this state and it is regarded as the commercial nerve of the country, with small, medium, and large scale industry distributed all over the state. It is the pillar of hotel business in Nigeria, with forty- five hotels out of the three hundred hotels in the country (hotel watch, 2008).

Survey research design was adopted in this work because the sample elements and the variables in the study were only observed; there was no attempt to control or manipulate them. Primary data were used. Eight local government areas (LGAs) were purposively selected out of the twenty (20) LGAs, representing 40 percent of the LGAs in Lagos State. Two of the biggest hotel in term of room capacity, were chosen from each LGA. Twenty respondents (20) were sampled from each hotel totalling 320 using simple random technique. However, 286 questionnaires were returned, representing 89.4% of the respondents. The data were collected with the aid of questionnaire. The questions in these instruments were mainly close ended, and validated through face, content and construct validity. They were framed in such a way that they were easily understood and conveyed its purpose. For the relevancy and the adequacy of the questionnaire items for the study, cronbach Alpha (table1. below) was computed and the result confirmed the reliability of the instrument. Apart from simple percentages descriptive statistics used, ten variables of repeat purchase were subjected to factor analysis to obtain the principal component. Factor analysis assumes that each of the original variables is made up of a linear combination of smaller factors with the unique components for each variable written as:

X=BF,

Where X is a k dimensional column vector as (X_1, X_2,X_{3 ,...} X_k)

Similarly, F is a m dimensional column vector [F1, F2, F3, Fm], and B is a k by m matrix denoted by:

After the extraction of the factors, they are rotated to find the best distribution of the factor loadings(Azcel, 1999; charlse, M.F., 2011).The resulting component scores were used to fit a regression line of the form:

Y= α + β₁X₁+ β₂X₂+… β_kX_k

Where X₁, X_2, ,X₃,…X_k represent the k component scores of the k principal components extracted through factor analysis and α, β₁β₂ β₃, β_k are the regression constants.

Table 1. Reliability Statistics.

Source: SPSS 20.0 version output

4. Result and Discussion

Table 2. below shows that 177 of the respondents representing 61.9% were males while the remaining 103 or 36% are females. This show that more men patronized the sampled hotels and those hotels services is not restricted to a particular sex. Besides, (2.1%) of the sample didn’t report their sex. The distribution of education shows that only (2.8%) of the respondents hold secondary school education, (9.8%) were NCE/OND holders.

Meanwhile, (33.6%) were graduates and (30.1%) hold Master’s degrees. This revealed that the sampled population were literate member of the society, thus most of the customers of hotels in Lagos State were virtually literate customer as the analysis of the data revealed.

Table 2. Characteristics of the Customers in the Sample.

Source Research Data, 2014.

The section under patronage shows that (19.6%) of the customers of the hotel sampled had just been patronizing the hotels less than six months ago,(22.4%) less than a year,(21.0%)less than 2years while over(31.8%) reported that they had been patronizing the hotels for more than two years ago. Meanwhile, only(4.2%) of the sample claimed that they have been patronizing the hotels since four years. The distribution of awareness about the hotel shows that (31.8%) of the customers of the hotel became aware about the hotel through the word of mouth,(28.3%) through the travel agents,(19.6%)reported to have heard about the hotel through advertising and only(7%) claimed internet as a source of awareness. However,(12.6%) gave other reasons as the source of awareness of the hotel. Respondents across age patronized hotel for many purposes. More than thirty three percent (33.9%) of the respondents visited the hotel for business purposes while (29.7%) were in the hotel for holiday making. Ninety (32.2%) visited the hotel for some functions and only(4.2%) reported other reasons for visiting  hotel. This shows that most of the customers of the hotel sampled were businessmen followed by those that came for function. Respondents reported that they travelled some distances before they locate the hotel of their choice. Most of the customers (38.1%) of the hotel reported that they travelled less than 3miles to the hotel of their choice (30.4%) travelled for more than 5miles to the hotel. Besides(19.6%) reported that they covered the distance of about 5milesto the hotel of their choice and only (11.9%) travelled for less than 1mile to the hotel. This means that these customers do not travel far to the hotel of their choice.

4.1. Test of Hypothesis

H_o = there is no significant relationship between repeat buy and customer’s perception of  hotel Services.

H_{1 =} there exists a significant relationship between repeat buy and perception of hotel services.

The table3 below shows that there exists a positive significant relationship between repeat buy and perception of hotel services(r=0.66, N= 286, p<0.05). The null hypothesis is rejected and conclude that there is correlation between repeat buy and service perception. This means that service perception and repeat buy change in the same direction, if service perception is higher, then so is repeat buy. The implication is that the better impression formed about hotel services by the customers, the more likely repeat purchase. This achieves first objective of the study is achieved.

Table 3. Summary of pearson moment correlation showing the relationship between repeat Buy and service perception.

Sig. at .01 level

4.2. Determinant Factors of Repeat Buy in Hotel Firms

Using factor analysis, the KMO and Bartlett's Test confirmed that the ten variables are found to be capable of being subjected to factor analysis. Table 4 below shows that the KMO is 0.562 and p<0.05

Table 4. KMO and Bartlett's Test.

Four variables  were extracted with total variance explained being 62.28%. They include; X₁= denoting friendly staff, X₂=denoting reasonable price, X₃=denoting room services X₄=denoting food quality. The fitted regression model is therefore y = α+β₁X₁+β₂X²+β₃X₃+β₄X₄+e_i., where, e₁= denoting error term, and y= denoting repeat purchase by consumers. In order not to violate the assumptions underlying the application of regression analysis, co-linearity diagnostics statistics (Variance inflation factor & Tolerance, table 5iii.) were computed. The result shows that Variance Inflation Factor (VIF) ranges from 1.055 to 1.033 which are far lower than the upper limit of ten (10) and the Tolerance values range from 0.948 to 0.968 which are far higher than 0.1, indicates that the explanatory variable is not strongly correlated with the other independent variable, hence there is not a problem of multicolinearity (Douglas, Williams and Samuel, 2010; Sabine and Brian, 2004; Nicola, Richard and Rosemary, 2003). table5i, below also shows that the model is fit to predict the response variable. F (4, 281)=15.459, p<0.05). Besides, the joint effects of independent variables on repeat buy is statistically significant (F(4, 281)=15.459, p<0.05 R = .425, R² =0.18, Adjusted R² = 0.17, p<0.05). Therefore, friendly staff, room services, reasonable price and food quality jointly and independently predicted repeat purchase. About 17% of the variation was accounted for by the independent variables. The result also shows the relative contribution of each of the explanatory variables on the repeat buy (table5iii). Friendly staff (β = .384, p<0.05), Reasonable price (Room services (.188, P<0.05), and food quality (.167, p<0.05) respectively. Each of these variables has significant impacted on repeat purchase. Three of the independent variables (Friendly staff, Food quality, Room services change in the same direction with repeat buy, meaning that as they increase, so is repeat purchase and vice-versa. Reasonable price however, has inverse relationship with repeat buy. This connotes that when  price goes up, it reduces repeat buy and vice-versa.

Table 5i. Model Summary^b.

a. Predictors: (Constant), X4, X1, X3, X2

b. Dependent Variable: repeat_purchase

Table 5ii. ANOVA^a.

a. Dependent Variable: repeat_purchase

b. Predictors: (Constant), X4, X1, X3, X2

Table 5iii. Coefficients^a.

a. Dependent Variable: repeat_purchase

5. Conclusion and Recommendation

This paper examined the determinant factors of repeat buy in hotel firms in Lagos State, using an adapted instrument of ten statements of important factors in selecting a hotel. The study found that there exist a strong positive correlation between repeat purchase and perception of hotel services. This means that a better perception about hotel services can translate to more repeat purchase. It was also discovered that friendly staff, food quality, room services and price were factors that determine repeat purchase in hotel firms in Lagos state. Three of these four factors (friendly staff, room services and food quality) have positive relationship with repeat purchase that is, as the management improves on them, so is repeat purchase increases. Price however (fourth factor), is inversely related to repeat purchase. In order word, if the price charged (outrageous price) is not reasonable to the customers, it will lead to decrease in repeat buy.

The paper therefore recommends that hotel managers must ensure that their employees cultivate a good marketing relationship skills that can stimulate repeat purchase. Hotel managers must ensure that their employees are indoctrinated with mission of the organization so that the business objectives can be achieved. In this context, the employees need to be kept happy and enthusiastic about their jobs in order to wear a friendly face at the customer. Besides the physical aspect of service promo mix must also be given priority. In this connection, programs should be designed to train and retrain hotel staff to enable them learn how to relate with customers in a friendly way that can yield a long time good impression about their offerings. Finally, the study concludes that for a hotel to remain in business and improves its customer’s base; it must not only be customer friendly, offer quality room services, deliver quality food, and charge reasonable price but must also understand and satisfy the needs of their customers in such a way that the customers’ expectation are not only met but also exceeded. This is because the way customers perceive these factors collectively dictates whether they will come back or not.

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