The Impact of Service Recovery on Satisfaction and Word of Mouth of International Tourists Towards Homestays: An Empirical Study in Vietnam

Abstract

Service failures are fairly common these days, and recovering from them is difficult. If service failures are not addressed quickly, the service provider may lose revenue and customers. A good service recovery strategy will positively impact the business results of the service provider. The study aims to demonstrate the impact of service recovery on the satisfaction and word of mouth of international visitors towards homestays in the Mekong Delta, Vietnam. The research data was collected from 320 international visitors who have used services at homestays and experienced service failures in the Mekong Delta, Vietnam. Structural equation modeling was applied to analyze the data. The result shows that 3 dimensions constitute service recovery which are distributive justice, interactional justice, and procedural justice. Most importantly, the study has proved the positive impact of service recovery on both satisfaction and word of mouth of overseas tourists towards homestays in the Mekong Delta, Vietnam. The results have stressed the importance of service recovery to tourists' perceptions of service quality and service image. In addition to this, the study suggests that homestay owners should develop risk handling and risk prevention plans for their services.

1. Introduction

 All service providers are eager to provide a service without any failure, but service failures are unavoidable (Ennew & Schoefer, 2004; Gursoy et al., 2007), especially for tourism agencies. Eliminating all service failures is impossible in the tourism industry because service provision is a process with the participation of many stakeholders, thereby increasing failures (Ennew & Schoefer, 2004). If a service failure occurs, the customer will complain and it leaves a bad impression on him or her. This may result in his or her negative word of mouth (Seiders & Berry, 1998). Service failures may occur at any time, hence, service managers need to consider and develop appropriate service recovery strategies.

 In 2019, the Vietnamese tourism industry achieved many important goals. Vietnam has welcomed more than 18 million overseas tourists (an increase of 16.2% compared to 2018) and 85 million domestic visitors. The total revenue was about 720.000 billion VND. As a result, Vietnam was rated as one of the top 10 countries with the world’s fastest tourism growth. The Mekong Delta plays an important role in the above achievements. The interlaced systems of rivers and canals intersecting with mountains, forests, and islands have formed a diverse and unique ecological area called the “Mekong Delta”. It borders both the East Sea and the West Sea and is raised with fertile alluvium by two main branches of the Mekong River (Tien Giang and Hau Giang). The Mekong Delta seems to carry all the majestic natural beauty. In recent years, with significant growth in the number of international visitors, homestay tourism in the Mekong Delta has developed very strongly. The image and quality of homestay tourism are increasingly improved to meet the needs of international tourists. However, service failures still frequently occur and sometimes at a severe level. To improve this situation, homestay owners always pay attention to fixing service failures to gain customers’ satisfaction and positive word of mouth. Therefore, this study was conducted to indicate the influence of service recovery on international visitors’ satisfaction and word of mouth towards homestays in the Mekong Delta, Vietnam.

2. Theoretical Framework and Research Hypotheses

2.1. Theoretical Framework

2.1.1. Service Failure

 Service failure, simply defined, is service performance that fails to meet a customer’s expectations (Hoffman & Bateson, 1997). Service failure is any error, omission, or incident that occurs during the service delivery process. Service failure may result from the characteristics of the service or psychological factors of individuals engaged in providing services (Lewis & Spyrakopoulos, 2001). Service failure is a very common scenario, but recovering from such failures is one of the most challenging tasks that management faces. There is always a hidden opportunity in a service failure, it just depends on the management whether it worsens or can set an example of recovery. Therefore, effectively managing service failures is very necessary to improve service quality.

 Service failures can lead to customer dissatisfaction or even threaten the survival and development of service providers (Weber & Sparks, 2009; Koc, 2017). Service failures encourage negative emotions and behavioral intentions of customers (Wen & Chi, 2013). These emotions and behaviors include dissatisfaction (Koc, 2017), negative word of mouth, switching services, increasing costs (Armistead et al., 1995), and low productivity of employees (Bitner et al., 1990).

 Service failures in the tourism industry are unavoidable. It can occur at any time due to the participation of different parties such as organizations, individuals, and customers (Ennew & Schoefer, 2003). In the tourism industry, service failure is costly because the customer tends to switch services after encountering a service failure (Bernardo et al., 2013; Roschk & Gelbrich, 2014). The consequences caused by service failures are serious and are reflected when customers complain about the service. Potential customers tend not to use the service due to the negative word-of-mouth effect by unsatisfied customers.

2.1.2. Service Recovery

 Service recovery refers to the action taken by a service provider in an attempt to resolve a problem caused by a service failure. When service failures occur, companies have an opportunity to recover and make amends for unmet customer expectations. Service recovery includes the activities associated with resolving service errors and improving service quality and customer satisfaction (Miller et al., 2000). Service failures are likely to occur in the tourism industry, so troubleshooting should be taken into consideration. Service providers should find out what to resolve to improve failed services. According to Tax and Brown (1998), a good service recovery strategy has a positive impact on the business performance of the service provider.

2.1.3. Awareness of Justice

 Adams (1963) e claimed that in every exchange taking place, people tend to consider the inputs and outputs, then compare them with others in similar situations. In case there is a balance between them, the exchange is considered justice, but if the result does not meet the expectation then it is said unequal. Awareness of justice refers to the level of fairness or rationality of service recovery. Awareness of justice is appropriate to be a basis for analyzing service recovery processes (Blodgett et al., 1997; Tax et al., 1998; Smith et al., 1999; Knox & Oest, 2014). The 3 important criteria of justice are Distributive justice (DJ), Procedural justice (PJ), and Interactional justice (IJ).

 Distributive justice: In the context of service failures, distributive justice refers to customers’ perceptions of fairness in service recovery results (Holloway & Wang, 2015). Distributive justice indicates the allocation of tangible assets of organizations to improve and compensate for the failed services (Del Río-Lanza, 2009). Previous studies related to service recovery have measured justice by criteria such as fairness, demand, value, and reward of results (Smith et al., 1999; Chebat & Slusarczyk, 2005).

 Procedural justice: In the context of service recovery, procedural justice is customers’ perceptions of fairness in some stages of the service recovery process. Procedural justice refers to the methods that the service provider uses to fix errors that arise in the service delivery process (Del Río- Lanza, 2009). Previous studies related to service recovery have evaluated justice by the following factor, flexibility, accessibility, process control, decision control, reaction rate, and acceptance of responsibilities (Blodgett et al., 1997; Tax et al., 1998; Del Río-Lanza et al., 2009).

 Interactional justice: In the context of service recovery, interactional justice is the level of customer experience on the fairness in the interaction between customers and service providers in the process of service recovery (Sparks & McColl -Kennedy, 2001). Previous studies related to this topic have assessed interactional justice through courtesy, integrity, explanation, empathy, effort, and apology (Tax et al., 1998; McColl-Kennedy & Sparks, 2003; Del Río-Lanza et al., 2009).

2.1.4. Satisfaction

 Customer satisfaction is a customer’s evaluation of a product or service that meets his or her needs and expectations (Zeithaml & Bitner, 2000; Kotler & Keller, 2006). According to Baker and Crompton (2000), satisfaction is the emotional state of travelers after experiencing the trip. Customer satisfaction a measurement used to quantify the degree to which a customer is satisfied with a product, service, or experience (Hansemark & Albinsson, 2004). Satisfaction is related to the subjective assessment of emotion. Thus, satisfaction can be considered as a customer’s evaluation of a product or service.

2.1.5. Word of Mouth

 Word of Mouth (WOM) is direct verbal communication between a receiver and a sender related to a brand, product, or service. The receiver is aware that messages from the sender are non-commercial (Arndt, 1967). WOM is a form of informal communication between two parties involved in evaluating a certain product or service (Anderson, 1998). Harrison-Walker (2001) suggested that WOM is an informal human activity to contact and non-commercially communicate. Besides, it is a perception related to a brand, a product, or a service. WOM does not include official communication between customers and organizations (in the form of complaints or suggestions) and from organizations to customers (through promotional activities (Mazzaol et al., 2007).

2.2. Research Hypotheses

2.2.1. Service Recovery Impacts Customers’ Satisfaction and Word of Mouth

 Service recovery is the action taken by the service provider in an attempt to resolve the problem causing the service failure. Customer anger or discomfort will be reduced as employers act politely, sympathize, and show a strong effort to solve the problem (Tax et al., 1998). A successful service recovery helps increase customer awareness of service quality, thereby leading to positive word of mouth, improving their satisfaction and loyalty (Bitner et al., 1990; Boshoff, 1999; Michel, 2001). If customers understand the organization’s efforts in recovering services, they will believe in the organization and leave the positive word of mouth (Miller et al., 2000). Therefore, the study proposes the following hypotheses.

H1: Service recovery positively impacts international tourists’ satisfaction with homestays;

H2: Service recovery positively influences international tourists’ word of mouth towards homestays.

2.2.2. Satisfaction Impacts Word of Mouth

 Customer satisfaction with remedied services has a positive effect on their word-of-mouth intentions (Kau & Loh, 2006). According to Hui and Wan (2007), if customers are satisfied with the service experience, they intend to recommend that service to many others. When the service recovery reaches a high level, it increases customer satisfaction (Zaid et al., 2021). The relationship between customers and service providers is greatly improved after successful service recoveries, thereby creating customer trust and positive word-of-mouth behavior on the service (DeWitt & Brady, 2003). Hence, the research hypothesis is stated,

H3: Satisfaction with service recovery positively affects international tourists’ word of mouth towards homestay destinations.

 Based on the literature review and research hypotheses above, the study used a group discussion (qualitative research) with 7 international visitors who have used the services and experienced service failures at homestays in the Mekong Delta. The results of the discussion help identify appropriate scales for the research model (Table 1). Thus, the proposed research model is as follows (Figure 1).

Table 1: Interpretation of Observed Variables in the Research Model

Figure 1: Proposed Research Model

3. Methodology

 To test the research hypotheses, the analyses include assessing the reliability of the scales by Cronbach’s Alpha, Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), and Structural Equation Modeling (SEM). Hence, the sample size has to meet the requirements of these methods. According to Hair et al. (1998), in EFA, the sample size should be at least 50, preferably 100. The observation rate on each measured variable should be maximized to 5:1, which means that every measured variable requires at least 5 observations. The SEM method requires a large sample size because it is based on the Large-Sample Distribution Theory (Raykov & Widaman, 1995). To ensure reliability in testing the appropriateness of SEM, the sample size from 100 to 200 is satisfactory (Hoyle, 1995). Also, Hoelter (1983) suggested that the sample size limit in SEM is 200.

 Quota sampling was applied to collect the data. Demographic criteria (nationality, gender, age, occupation, education level) were used to survey the data. The study collected 320 observations through direct interviews. Participants are international tourists who have used services and encountered service failures at homestays in the Mekong Delta. It can be concluded that the sample size meets the requirements and ensure reliability for model testing.

4. Results and Discussion

4.1. Reliability of the Scales

 In this study, the Cronbach’s Alpha coefficient was used to test the reliability of the scales. The test result in Table 2 shows that all scales’ Cronbach’s Alpha coefficients are greater than 0.6. The item-total correlation of observed variables in all scales is higher than 0.3, so no variable is excluded from the research model (Peterson, 1994; Slater, 1995). Therefore, all observations are satisfactory and can be used for the next EFA stage.

Table 2: Scale Reliability Test Result

4.2. Exploratory Factor Analysis (EFA)

 After Cronbach’s Alpha, the EFA analysis was used to verify the convergent and discriminant validity of the scales (Table 3). The analysis result is achieved as follows: (1) Reliability of observations with Factor loading > 0.5; (2) Suitability of the model with 0.5 < KMO = 0.927 < 1.0; (3) Bartlett’s test on correlation of observations with Sig. = 0.00 < 0.05; (4) Cumulative variance test reaches 64.03% > 50% (Anderson & Gerbing, 1988). Besides, 5 factors are formed with Eigenvalue = 1.122 and there is no disturbance of observations among factors so that the names of factors remain the same.

Table 3: Factors Formed from The Exploratory Factor Analysis (EFA)

4.3. Confirmatory Factor Analysis (CFA)

 After the EFA stage, the 5 above factors continue to be included in CFA. The analysis result confirms that the model is suitable for market data since it is guaranteed as follows (Table 4): Chi-square = 356.653; P-value = 0.000 with 220 degrees of freedom and Chi-square follows the degree of CMIN/df = 1.621 < 2 (Carmines & McIver, 1981). Besides, TLI = 0.954 and CFI = 0.960 are greater than 0.9 and RMSEA = 0.044 ≤ 0.08 (Bentler and Bonett, 1980). Base on the result, the correlation values are all less than 1, so the model achieves unidimensionality. The standardized regression weights are greater than 0.5 and the unstandardized regression weights are statistically significant, so the model reaches convergent validity. Besides, the correlation coefficient and standard deviation are <0.9 so the model gains discriminant validity. The result of Composite Reliability (Pc) and Average Variance Extracted (Pvc) presented in Table 4 shows that Pc is satisfactory, while the Pvc values of “Satisfaction” and “Word of mouth” scale are quite low (<0.5). However, the Pvc still accepts the value of 0.4 or higher provided that the Pc values must be greater than 0.6 (Fornell & Larcker, 1981). Thus, all the scales in the model meet the requirements as well as ensure reliability. They are used for the next SEM analysis.

Table 4: Reliability Test Result

4.4. Structural Equation Modeling (SEM)

 After the CFA stage, the Structural Equation Modeling (SEM) was used to examine the hypothesis of the study. The analytical result is presented in Table 5.

Table 5: Test the Relationships among Factors in the Model

Note: ***Significant at a level of 1%.

 Table 5 shows that distributive justice, interactional justice, and procedural justice all have statistical significance at 1% and have positive standardized regression weights. This proves that service recovery is explained by distributive justice, interactional justice, and procedural justice. The result is consistent with the Equity Theory (Adams, 1963) and is similar to findings of Blodgett et al. (1997), Tax et al. (1998), Smith et al. (1999), and Knox and Oest (2014). It can be implied that when service failures occur, international visitors expect to have an appropriate service recovery and compensate for both mental and physical losses they suffered. Moreover, the service recovery has to follow a fast and proper process and should be done based on the relationship between staff and tourists with friendliness, courtesy, and professionalism.

 Based on the result in Table 5, service recovery positively affects the satisfaction and positive word of mouth of international visitors to homestay destinations. This result is similar to studies by Bitner et al. (1990), Boshoff (1999), Michel (2001), and Miller et al. (2000). This means when visitors feel the efforts to handle service failures of homestay owners or staff, they will better evaluate the service quality, increase their trust and positive word-of-mouth intentions. Also, the study found that satisfaction with service recovery positively affects the word of mouth of international visitors. This finding is similar to DeWitt and Brady (2003), Kau and Loh, 2006, and Hui and Wan (2007). As a result, if the service recovery is at a high level and increases tourist satisfaction, the positive word of mouth will be improved. This implies that service recovery is not only a way to ensure the quality of services as committed to customers, but also a strategy to promote the brand image in a genuine, honest, and cost-free manner.

5. Conclusion

 The study has pointed out that the dimensions included in service recovery at homestays in the Mekong Delta are distributive justice, interactional justice, and procedural justice. Mos   t importantly, the study has shown the positive impact of service recovery on the satisfaction and positive word of mouth of international visitors towards homestays in the Mekong Delta. The results have stressed the importance of service recovery to tourists’ perceptions of service quality and service image. In addition to this, the study suggests that homestay owners should develop risk handling and risk prevention plans for their services.