AN ANALYSIS OF HOTEL RATING AND ITS IMPLICATION ON FINANCIAL TURNOVER OF RATED HOTELS IN KENYA

ABSTRACT
Hotel service quality has long been a concern for scholars and practitioners. Previous researches indicate that the service quality of hotels in Kenya is yet to match international standards. It has been argued that one reason why hotels do not deliver quality service is due to the substantial gap of the living standards of Kenyans and international tourists and the lack of proper investment in the sector due to fluctuations in growth in the past. With the recent growth in the economy, specifically the tourism sector, there has been renewed urgency by stakeholders to put local hospitality industry at par with other major tourism circuits or countries in the world. This may be attributed to the fact that tourism is identified as one of the key pillars for achieving Vision 2030. The main objective of this study was to examine the financial implications of rating of hotels. The study was conducted in tourism establishments in Nairobi and parts of Rift valley. The scope of the study focused on rated hotels in Kenya. The research design used a sociological survey targeting 50 hotel establishments. The researcher relied on primary and secondary data for information from which an analysis was conducted and conclusions generated. The primary data was collected through face-to-face interviews among tourists and hotel managers using a structured questionnaire. The quantitative data from the questionnaires was analysed using Statistical Package for the Social Sciences (SPSS) and Ms Excel, after which it was presented using graphs and pie charts to illustrate the findings for better understanding. The next step was interpretation which entailed generating recommendations and conclusions based on the results or findings on how the hotel rating impacted performance of hotel establishments. Findings from the study pointed out a strong relationship between hotel rating and hotel revenues. This was evidence that for hotels to increase earnings they also needed to improve their ratings. Further to this, rating of establishments eased the decision making of tourists since they would easily differentiate service level of hotels. Overall, it was evident that hotel rating was vital in the hotel business as it aided establishments effectively compete in the market place. Findings from the study will therefore offer an unobtrusive and economic way of examining hotel service quality. In addition, it will also help in understanding the quality service of the star rated hotels perceived by the domestic tourists and financial implication to hotel establishments.

CHAPTER ONE
INTRODUCTION
Research background
Kenya’s biological resources are diverse, with an estimated 35,000 known species of animals, plants and micro-organisms. As the country gears itself towards industrial development, the importance of its biological resources cannot be overemphasized. Whether in the provision of food, industrial inputs, wood, construction materials, medicines, ecosystem functions, or aesthetics, the conservation and sustainable utilization of biodiversity is a key factor in the country's stated goal of industrializing early in this century. These resources form the basic source of livelihood for the country's population especially in view of the fact that about 80% of the country's population directly or indirectly relies on biodiversity for survival. Further, in developing industrial sectors in the country, ranging from agro-based industries to service industries such as tourism, relies on the same resources (Akama, 2002).

The management of Kenya's biodiversity resources is characterized by some weaknesses. More often than not, people are unable to make informed decisions regarding biodiversity management as they lack adequate information on the non-consumptive values of the resources. While direct use values are well understood, the same may not apply for indirect use values (ecosystem functions, maintaining water cycles, production and protection of soil, storage and cycling of essential nutrients, absorption and breakdown of pollutants). Infrastructure is inadequate to enhance better utilization and management of biodiversity. As a result, the tourism sector has declined marginally over the last ten years, although it still remains a key foreign exchange earner. The overall development of local and international markets for biodiversity products has also not been satisfactory. The opportunity the country has for improving the people's living conditions using biodiversity resources are many and includes: tourism, promotion and use of high nutrition indigenous foods, application of biotechnology, and the development of medicinal products for health and commercial purposes.

According to Valle and Yobesia (2009), tourism is one of the key drivers of Kenya’s socioeconomic development. At independence in 1963, Kenya depended mainly on its exports of agricultural products such as coffee and tea for foreign exchange. However, with the decline in world market prices of these primary products, the country has turned to tourism as an alternative. In spite of the growing importance of tourism as a key industry, little information is available on the holistic economic impacts and the pathways through which these impacts are affected in the Kenyan economy.

The Ministry of East African Affairs, Commerce and Tourism (MEACT) through the Department of Tourism is charged with making Kenya a destination of choice and to facilitate sustainable tourism development as part of our national heritage and for posterity. The core functions of the Department of Tourism include: planning and policy-making, overall coordination, resource mobilization and facilitation, tourism promotion and marketing, product development and diversification, capacity development, research and development and tourism relations (GoK, 2005). In addition, the ministry regulates hotels and restaurants, maintains standards in all tourist facilities and also does classification of hotels and restaurants. Classification is done by Hotels and Restaurants Authority (HRA) which is a semi-autonomous body under the department of tourism.

According to the World Tourism Organization (WTO) and the International Hotel and Restaurant Association (IH&RA), hotel rating is the classification of accommodation establishments denoting a system, duly published, in which accommodation establishments of the same type (such as hotels, motels, and inns) have been conventionally broken down into classes, categories, or grades according to their common physical and service characteristics and established at government, industry or other private levels (WTO & IH&RA, 2004). The European Standardization Committee (CEN, the Comite´ Europe´en de Normalisation) clarifies the term ‘‘accommodation rating or classification scheme’’ as ‘‘a system providing an assessment of the quality standards and provision of facility and/or service of tourist accommodation, typically within five categories, often indicated by one to five symbols’’ (WTO & IH&RA, 2004).

Initially, the distinction between hotel availability and quality is often blurred (Callan, 1989). Early hotels and inns were little more than an available bed and something barely palatable to eat. The emergence of tourism in the latter half of the 19th century brought with it an improvement of the standards of the early inns (Callan, 1989). Some pressure was placed on these facilities to offer some minimum standards where the consumer was able to identify a property with specific amenities. The rating system emerged out of efforts by the Automobile and cycling clubs in Europe, who in their tour books displayed hotels, which they recommended to their membership, based on the guaranteed facilities which these hotels/inns offered. This led to the establishment of rating systems such as the Automobile Association (AA) and its American counterpart the (American Automobile Association – AAA) and the Michellin tyre company’s – Michellin Red Guide and other mobile guides (Vines, 1981).

After World War II, National Tourist Boards began to consider some form of hotel classification system. By 1970 only five European countries had national classification systems, by 1980 this number increased to 22 European countries and 60 countries worldwide. The criteria applied by the classification systems were, and still are not uniform. There were various meanings attached to registration, classification and grading. While it’s seen as a norm in other countries, most African countries, Kenya included, do not have a methodical classification system. Furthermore, there is little or no evidence from literature in Kenya on the link between hotel rating and financial turnover.

Statement of the Problem
Scholars and business writers have for long recognized the need of the importance of hotel rating in influencing performance and earnings of hotels. All over the world hotel rating is used for maintaining standards in the hospitality industry. Kenya has over 3000 registered hotels but very few have been classified. There has been slow implementation by HRA and the last classification was done in 2009. There is little or no empirical evidence showing the link between hotel rating and financial turnover in Kenya. This study therefore seeks to show how with rating, hotels have the potential to earn more revenue and attract more tourists.

Study Objectives
Broad Objective
The broad objective of this study was to examine the financial implications of rating of hotels in Kenya.

Specific Objectives
The specific objectives of this study were:-

1. To examine the relationship between hotel revenue and hotel rating.

2. To examine the relationship between hotel service quality and hotel rating status

3. To compare hotel charges and different hotel rating status.

Hypotheses of the Study
1. There is significant increase in the hotel revenues with higher hotel rating.

2. There is significant increase in the levels of quality of service with higher hotel rating.

3. There is significant increase in the amount of hotel charges with higher level of hotel ratings.

Justification of the Study
The study is important and valuable to the following persons and institutions. Persons in academia such as college students and lecturers will find the results of this study useful as learning materials and for research reference. Entrepreneurs or the investors in the hotel industry will find the results of this study useful, as it will highlight financial implication of rating hotels. The government as the central governing body in the country will use the results of this study to develop policies, programs and legal framework that aid investors in the hotel sector. These include enterprises or ventures interested in having a stake in the tourism industry. They will use results of this study to make informed decisions when in preparation for hotel rating. Marketing intermediaries such as advertising and research agencies will find the results of this study useful as they carry out their activities based on a wider knowledge platform.

Scope of the Study
This study was carried out in Nairobi and South Rift tourism circuit specifically targeting the rated hotels in this region. In Nairobi, the study targeted rated hotels within the central business district and its outskirts and in the South Rift tourism circuit the study targeted rated hotels in Nakuru, Naivasha and Masai Mara. These hotels mainly target local and foreign tourists and have a variety of amenities and facilities targeting different clientele.

Limitations of the Study
The study was limited by a number of factors which included skewed distribution of rated hotels in specific tourism circuits, lack of manpower and resources need to undertake the study, unwillingness by managers to provide all their financial data and the limited time available. The researcher attempted to address these issues through use of hotel charges to approximate revenue, through research assistants in data collection who helped address the problem of skewed distribution of rated hotels and through mobilizing of other resources to enhance data collection and also through minimizing of operational costs.

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Item Type: Kenyan Material  |  Attribute: 54 pages  |  Chapters: 1-5
Format: MS Word  |  Price: KSh900  |  Delivery: Within 30Mins.
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