YARDSTICK INTERNATIONAL COLLEGE

SCHOOL OF POSTGRADUATE STUDIES

EFFECT OF CRM
ON HOTEL PERFORMANCE
BY
Abere Amsalu

Advisor: Dr. TarekegnTamiru

1. Background of the Study

The hotel industry is a business establishment which deals with accommodation, meals, entertainment, and health club
for any potential guests within the particular location without time limitation. The hotel industry is a business
establishment which deals with accommodation, meals, entertainment, and health club for any potential guests within
the particular location without time limitation.

The aim of CRM systems is to help improve and/or handle sales development, customer retention and interactions with
customers more efficiently. The performance of a hotel highly depends up on the understanding of its customers. Hotels
with better information about their customers are in a better position than those that lack information about their
customers. Acquiring new customers is important.

Customer relationship management is more important to hotels as they need to get detailed information and
understanding regarding their customers. This information allows them for developing and improving their services
better than their competitors as per needs and wants of their customers.
2. Statement of the Problem

The importance of customers has been highlighted by lots of researchers and academicians all around the world. Most
hotels believe that customers are the purpose of what they do and they very much depend on them.

Addis Ababa is well known for its lovely Meskel festivities and other attractions like: Addis Ababa Museum, Africa Hall,
Selassie (Trinity), Cathedral, Beata Mariam church, IES, Ethnographic Museum, National Museum of Ethiopia, St. George's
Cathedral , the city's main commercial hub Merkato, and Oromia cultural center are major ones. Addis Ababa is also a
seat of International Embassies, ECA (economic commission for Africa) and AU (African Union).

There is high competition among star hotels in Ethiopia in attracting the customers of one another, hotel is facing a high
difficulties in handling and retaining the customers switching to other, lack of providing quality service to service-seekers
and gives less emphasis to customer relationship management in relation to marketing performance in order to pursue
high competitive advantages relative to other. Therefore, this problem motivates the researcher to undertake the
selected four and five star hotels in Addis Ababa for the study to address the observed problems in relation with effects
of CRM on hotel performance.
3. Research Objective and Hypothesis

Research Objective
• To examine the effect of CRM on customer satisfaction level
• To determine if customer orientation has significant effect on customer and financial performance
• To determine if Technology based CRM has significant effect on customer and financial performance
• To determine if knowledge management has significant effect on customer and financial performance
• To determine I CRM organization has significant effect on customer and financial performance

Research Hypothesis
Hypothesis (H1): Customer Orientation has a positive effect on Financial Performance
Hypothesis (H1): Customer Orientation has a positive effect on Customer Performance
Hypothesis (H2): Knowledge Management has a positive effect on Financial Performance
Hypothesis (H2): Knowledge Management has a positive effect on Customer Performance
Hypothesis (H3): CRM Organization has a positive effect on Financial Performance
Hypothesis (H3): CRM Organization has a positive effect on Customer Performance
Hypothesis (H4): Technology Bases CRM has a positive effect on Financial Performance
Hypothesis (H4): Technology Bases CRM has a positive effect on Customer Performance
4. Scope of the Study

The overall scope of this study is to find the effect of CRM on hotel performance and the direct effect it has on customer
and financial performance. The study included selected four and five star hotels in Addis Ababa. The study included
selected five star hotels.

The study employed descriptive and explanatory survey design and in the course of researching both primary and
secondary data was employed. With regard to the secondary sources various publications, books, and journals articles
regarding the subject matter were included. Population of the study were managers, directors and supervisors of the
selected hotels in Addis Ababa.

The study formulated CRM dimensions as Independent variable (Customer Orientation, Technology Based CRM,
Knowledge management and CRM organization) and Dependent variable (Financial and Customer Performance)
4. Conceptual Framework

Customer Orientation

Financial Performance

Technology Based CRM

Knowledge management Customer Performance

CRM organization
4. Research Design and Methodology

• The researcher used both descriptive and econometric research design methods. The research used mixed research
approach (quantitative and qualitative data)

• The target populations of the study are five hotels located in Addis Ababa, The selected hotels for this study are
Sapphire Addis Hotel, Getfam Hotel, Magnolia Hotel, and Radisson Blu and Inter Luxury Hotel.

• The study used both primary and secondary data. In order to collect primary data, the researcher used questionnaire
method. Each question have five scale Likers scale used. To obtain the relevant information the researcher used
questionnaire to collect data from the hotel customers from the selected hotel.

• A five (5) point Likert scale ranging from strongly disagrees, to strongly agree, was used to measure the practice of
CRM. The questions sought to establish whether there was a change in the hotel performance as a result of the
application of CRM.

• The analyses will be performed using SPSS 22.0 package statistical program. Descriptive statistics includes mean,
frequency, standard deviation and percentages to profile sample characteristics and major patterns emerging from
the data. In addition, a multivariate regression model will be applied to determine the relative importance of each of
the four variables with respect to performance of the selected Hotel in Addis Ababa
4. Research Design and Methodology

• The sample frames from which samples drawn are all are hotel employees. A nonrandom sampling using
convenience method was used to select the hotel. A nonrandom sampling using convenience method was used to
select the hotel. A total population of 175 where selected and by using Taro Yamane’s (1967) simplified formula the
sample size was calculated as below:-

• N=N/1+N (e) 2
Where by:-
N=total population of respondent which is 171
n is number of sample (total sample estimated to be taken from the strata)
e is acceptable magnitude of error (which is 5% =0.05)
N= 171 /1+171(0.05)^2
N=121.5
N= 122
4. Research Findings and Analysis

Demographic Characteristics of Respondent

• 59% of the respondent are male and remaining 41% are female. From the respondent 29.5% are in age range of 45 –
54, 9.8% are in age range of 25 – 34 years, 29.5% are in range of 35 – 44 years, 9.8% are in range of 18 – 24 years and
remaining 19.5% are above the 55 years.
• The majority of the respondents 59% are degree holder, 41% are master’s holders. From the response 60% have 6 –
10 years’ operating period, 19.7% have 1 – 5 years, 16.7% the remaining 19.7% have 11 – 15 years of operating
period.
• According to their duties in the hotel, 19.7% of the hotel department managers, 30.3% are supervisors, 26.2% are
deputy managers, 19.7% are directors and remaining 4.1% are general managers.
• Respondent are working in five and four star hotel with 29.5% and 70.5% respectively.
4. Research Findings and Analysis

Descriptive Analysis of Customer Orientation

Customer Orientation N M SD

The Hotel objectives of an organization are 122 3.61 0.798

oriented on client pleasure
The Hotel keeps a close eye on and evaluates its 122 3.38 0.930
commitment to meeting customer needs
The goal of the Hotel business strategies is to 122 4.00 0.000
increase customer value
Customer satisfaction is routinely measured by 122 3.37 1.100
the Hotel.
For essential clients, the Hotel provides tailored 122 3.63 0.874
goods and services
Average 122 3.59 0.74
4. Research Findings and Analysis

Descriptive Analysis of Technology Based CRM

Technology Based CRM N M SD

The Hotel has the appropriate hardware 122 3.79 0.752

The Hotel has the appropriate software 122 4.18 0.772

The information systems of the Hotel are linked 122 3.39 1.094
across all functional areas
The Hotel is able to combine all client data into a 122 3.62 0.884
complete, consolidated, and up-to- date
database

Individualized information about each customer 122 3.79 0.752

is available.
Average 122 3.75 0.85
4. Research Findings and Analysis

Descriptive Analysis of Knowledge Management

Knowledge Management N M SD

Employees at the Hotel are eager to assist clients 122 4.16 0.796
in a responsible way
The Hotel has a comprehensive grasp of the 122 3.40 1.088
demands of key customers because of
knowledge learning

The Hotel provides a mechanism for key 122 3.64 0.873

customers and employees to connect in a
continual, two-way manner

Employee of the Hotel anticipate required 122 3.56 0.980

service from customers
Average 122 3.69 0.93
4. Research Findings and Analysis

Descriptive Analysis of CRM Organization

CRM Organization N M SD

The Hotel staff training programs are designed to 122 3.22 0.877
help employees learn the skills they'll need to
build and maintain strong customer connections

Employee performance is evaluated and 122 3.80 0.823

rewarded depending on how well they satisfy
customer needs and provide excellent service.

At all customer touch points, customer-centric 122 3.47 0.874

performance goals are developed and
monitored.

The Hotel structure has been developed with 122 3.78 0.710
customers in mind.
The Hotel devotes time and resources to client 122 3.57 0.971
relationship management.
Average 122 3.56 0.85
4. Research Findings and Analysis

Descriptive Analysis of Financial Performance

Financial Performance N M SD

CRM Reduces the hotel's overall cost 122 3.21 0.874

CRM Reduces the hotel unexpected losses 122 3.79 0.815

CRM Increases the hotel net profit margin 122 3.48 0.883

Average 122 3.49 0.85

Descriptive Analysis of Customer Performance

Customer Performance N M SD

CRM increase the hotel sales growth rate 122 3.78 0.710

CRM meet the needs of a diverse range of 122 4.02 0.530

customers.
CRM Increase customer satisfaction 122 3.60 0.625

Average 122 3.8 0.62

4. Research Findings and Analysis

Pearson Correlation Coefficients of CRM Dimensions, Financial and Customer Performance

1 2 3 4 5 6

Customer Pearson Correlation 1

Orientation
Sig.

Technology Pearson Correlation 0.729** 1

CRM
Sig. 0.000

Knowledge Pearson Correlation 0.037 0.121 1

Management
Sig. 0.689 0.186

CRM Pearson Correlation 0.420** 0.502** 0.208** 1

Organization
Sig. 0.000 0.000 0.021

Financial Pearson Correlation 0.426** 0.613** 0.037 .746** 1

Performance
Sig. 0.000 0.000 0.682 0.000

Customer Pearson Correlation 0.316** 0.509* 0.166 0.679** 0.524** 1

Performance
Sig. 0.000 0.000 0.067 0.000 0.000
4. Research Findings and Analysis

Data Reliability

Reliability Statistics

Cronbach’s Alpha Cronbach’s Alpha based on N of Items

Standardized Items
.792 .801 6

Dimension Cronbach’s Alpha

Customer Orientation .766

Technology Based CRM .721

Knowledge Management .852

CRM Organization .716

Financial Performance .729

Customer Performance .748

Data Validity
The questionnaire was distributed to eight experts to identify questions that might be unclear or ambiguous to the
respondents. These hotel specialists looked at every question in the questionnaire and do their own analysis to ascertain
that the questions answer research objectives of the area understudy.
4. Research Findings and Analysis

Multiple Regression of Financial Performance

Model R R Square Adjusted R Std. Error of the

Square Estimate
1 .810 .657 .654 .39586

Model Un-Standardized Standardized t Sig.

Coefficients Coefficients
B Std. Error Beta

(Constant) .366 .412 .890 .375

Customer -.217 .131 -.132 -1.651 .101

Orientation
Technology Based .422 .085 .413 4.936 .000
CRM
Knowledge -.159 .064 -.137 -2.466 .015
Management
CRM Organization .816 .084 .623 9.734 .000
4. Research Findings and Analysis

Multiple Regression of Customer Performance

Model R R Square Adjusted R Std. Error of the

Square Estimate
1 .717 .514 .498 .32367

Model Un-Standardized Standardized t Sig.

Coefficients Coefficients
B Std. Error Beta

(Constant) 1.730 .337 5.138 .000

Customer -.205 .108 -.181 -1.911 .058

Orientation
Technology Based .24 .070 .350 3.519 .001
CRM
Knowledge -.008 .053 -.010 .158 .874
Management
CRM Organization .520 .069 .577 7.586 .000
4. Research Findings and Analysis

Multiple Regression Model

Y = a + b1X1 + b2X2 + b3X3 + b4X4 + e Y = a + b1X1 + b2X2 + b3X3 + b4X4 + e

Where; Where;
Y: Financial Performance Y: Customer Performance
X1: Customer Orientation X1: Customer Orientation
X2: Technology Based CRM X2: Technology Based CRM
X3: Knowledge Management X3: Knowledge Management
X4: Customer Organization X4: Customer Organization

As per the model for financial performance regression: As per the model for customer performance regression:
Y= .366 + -.132X1 +.413X2 + -.137X3 + .623X4+ e (error Y= 1.730 + -.181X1 +.350X2 + -.010X3 + .577X4 + e (error
term). The model suggests that Customer Organization has term). The model suggests that Customer Organization has
the strongest effect on financial performance (0.623) the strongest effect on customer performance (0.577)
followed by Technology Based CRM (0.413) followed by Technology Based CRM (0.350)
4. Research Findings and Analysis

Hypothesis Testing and Result

Hypothesis Result Reason

H1: Customer Orientation has a significant effect on Financial Rejected β1= -0.132,
Performance p<0.05
H1: Customer Orientation has a significant effect on Customer Rejected β1= -0.181,
Performance p<0.05
H2: Technology Based CRM has a significant effect on Financial Accepted β1=0.413,
Performance p>0.05
H2: Technology Based CRM has a significant effect on Customer Accepted β1=0.350,
Performance p>0.05
H3: Knowledge Management has a significant effect on Financial Rejected β1= -0.137,
Performance p<0.05
H3: Knowledge Management has a significant effect on Customer Rejected β1=0.010,
Performance p<0.05
H4: Customer Organization has a significant effect on Financial Accepted β1=-0.623,
Performance p>0.05
H4: Customer Organization has a significant effect on Customer Accepted β1=0.577,
Performance p>0.05
5. Conclusion and Recommendation

Conclusion
Considering the perception towards CRM dimension (independent Variables) on the selected hotel, all the descriptive
result came in a similar conclusion where all result in agree stage. In other words, in terms of customer relationship
management, hotel employees stated that they are willing to help their customers, they produce solutions for the special
needs of customers using technology, and they establish a two-way communication between the customer and the hotel
management.

The Study also concludes through more investigation by regression analysis that Technology Based CRM and CRM
organization has significant effect on both dependent variables. the study also revealed that there is no significant
relationship between Customer Orientation and Knowledge Management with both dependent variables.

Recommendation
The researcher recommends that as a result extra consideration must be given to Technology Based CRM and CRM
organization to preserve outcomes by working with the appropriate organs to deliver consistency and high service
quality.
The hotels should focus on providing Knowledge Management or use the best ability out of this dimension that
knowledge management can create a repetitive customer for the hotel.