Effect Of Revenue Management Practice On Customer Relationship In 5- Star Hotels In Nairobi’s Central Business District In Kenya

Abstract

Revenue management, the practice of controlling customer demand through the use of dynamic pricing and capacity management is required by hotels. The practice enhances profitable operations and prohibits collapse in organizations with perishable products. The study was specifically aimed at determining the effect of price dynamism on customer relationship, investigate the effect of credit facility by an organization towards customer relationship, and assess managerial implication on customer relationship. The study equally wanted to establish the mediating effect of trust and commitment on customer relationship in relation to revenue management practice. This research was focused on the hospitality industry with a survey of four (4) five (5)-star hotels in Nairobi located within the Central Business District, which are, Intercontinental, Sarova Stanley, Nairobi Safari Club and Serena Hotels. The study adopted exploratory approach and used descriptive survey design. In order to collect the relevant data, a semi-structured questionnaire and a structured interview schedule was developed. To ascertain the validity and reliability of the research instruments, a pre-test and pilot survey was conducted. A qualitative research approach was adopted for the investigation through indepth interviews with respective managers from the selected 5-star hotels within NCBD. Qualitative and quantitative techniques were used to analyze both descriptive and inferential statistics. The findings were presented using tables and charts, percentages, tabulations, means and other measures of central tendency. The study found that a customer is motivated to come back to a hotel when the hotel minimizes offering prices that are justified to products/services, when low season prices do not meet value expectations, when there is an increase in discounts on low season prices, when there is an increase of high season prices meeting value expectations; when there is an increase in the attractive packages the hotel offers to enhance relationship and loyalty of customers, and when there is an increase of the prices that increases customers purchasing powers. The study also found that hotels offer temporary or permanent credit facility to customers. Majority (72.13%) of respondents used credit to pay for a portion of up to 80% of their total spending in hotels. The convenience offered by credit facility and the amount of spending paid by credit affected the extent to which credit facility enhances loyalty. Managerial commitment to enhance customer relationship increases when a hotel increases its offering of quality services to customers compared to competitors, when the hotel‟s managers‟ establish good relationship with customers, when the hotel increases contact points for customer-employee interactions, and when employees demonstrate courtesy and professionalism when handling customers. The study also found that majority (84.8%) customers agreed that the positive relationship they had with their hotels had influenced their trust and commitment to those hotels. The study recommends that managers of five star hotels offer products and services whose quality match the price attached to them, that managers raise the value of products and services sold during low season to match their prices so as to encourage customer purchase of these products, that managers design a pricing strategy based on customer needs and preference for value. Managers should offer credit facility that gives customers longer time of payment so as to allow enhanced trust, relationship and loyalty to the hotel. Managers should also increase the amount of credit financing they offer to their customers to enhance xvi relationship their loyalty. Managers of five star hotels should be active in their management as well as responsive to all happenings in the hotel environment. They should be able to make good strategies that will affect the quality of the hotels products and services to outdo competitors, as well as influence good professionalism in employees.