Exploring the Ways of Providing High Service Quality at Low Cost in the Economy Hotel Sector

2020 dissertation for MSc. Industry experts uniformly agree that economy hotel sector can be competitive and profitable only if it provides high-quality service at low operating costs. Several researchers, however, believe that this is not possible because constraint models state that low cost always results in low quality and that high quality always requires high investment. A solution would benefit both customers and operators, but most of the existing studies in this field are decades old and often contradict each other. This limitation in the academic literature supports the need for new, up-to-date research. The aim of this study is to find out whether it is possible to provide high service quality at low cost in the economy hotel sector, and if so, how. The secondary data source for the quantitative analysis is Booking.com's extensive database, which contains live data of 712,322 hotels and their more than 100 million guest reviews. This study has revealed that it is possible to provide high quality at low cost while respecting the statements of the constraint models: The hotels need to provide core services at high quality to achieve high perceived quality and reduce or eliminate all non-core services to achieve low-cost operation. The study discusses in detail what the target customers consider core services. Although this analysis resulted in several obvious findings (for example, free Wi-Fi is a core service), it also provides some surprising conclusions.