Customers’ reaction to overbooking failures in hospitality industry - Framework of actions to remedy capacity management failures
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School of Business |
Bachelor's thesis
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Authors
Date
2018
Department
Major/Subject
Mcode
Degree programme
Tieto- ja palvelujohtaminen
Language
en
Pages
30 + 6
Series
Abstract
This literature review discusses customers’ reaction to capacity management failures that result from overbooking. Even though not all hospitality businesses overbook, overbooking is widely used in the hospitality industry. However, research on overbooking effects is not yet thorough. Overbooking practices affect companies’ long-term profitability. For these reasons there is need for study on customers’ reaction to overbooking failures. This study shows that negative overbooking failures have effect on customers’ word-of-mouth behaviour and repurchasing intentions, while upgrading has no significant influence on customers purchasing behaviour. Customers’ reaction is influenced by customer specific reasons and how customers to face the failure are chosen are informed. Customers’ reaction can be improved by remedying three areas of perceived fairness: interactional fairness, procedural fairness and distributive fairness. These areas are interrelated and therefore successful remedy requires succeeding in all three. The cause for the failure affects customers’ reaction and this study suggests how the reasons behind the failures should be framed. It is also found that compensation’s type, amount and speed affect customers’ satisfaction. According to the findings encouraging complaining behaviour should be practised. To provide a tool for hospital management, this study introduces a framework of actions in managing customers’ reaction in capacity management failures. The framework brings together all relevant components that are needed to understand and enhance actions in capacity management failure situations.Description
Thesis advisor
Kauppi, KatriKeywords
overbooking, revenue management, yield management, oversales, service failure, customer reaction, perceived fairness, capacity management