DETERMINANTS OF CUSTOMER RETENTION IN THE CASE OF CAPITAL HOTEL AND SPA, ADDIS ABABA

Abstract

This study investigates the determinants of customer retention at Capital Hotel and Spa in Addis Ababa. It used a quantitative research approach and employing descriptive and explanatory research designs to capture customer behavior. Data is collected through structured survey questionnaires distributed to a sample of 384 customers who have utilized accommodation and spa services at the hotel. Key variables examined include customer trust in hotel services, service competency, overall customer satisfaction, hotel reputation, and perceived risk associated with the services provided. The survey includes closed-ended questions designed on a five-point Likert scale. Descriptive statistics summarize the data, showing trends and central tendencies among customers’ perception. Multiple linear regression analysis was used to examine the determinants of customer retention, evaluating the effect of each variable while controlling for others. The analysis indicates that several predictor variables significantly affect customer retention at Capital Hotel and Spa. Trust has a significant positive effect on customer retention (β = 0.246, p < 0.001), suggesting that higher levels of trust correlate with increased customer loyalty. Competency also shows a significant positive effect on customer retention (β = 0.115, p < 0.001), indicating that perceived staff competency enhances customer loyalty. Satisfaction emerges as the most influential factor, with a strong positive effect on customer retention (β = 0.480, p < 0.001), emphasizing that greater customer satisfaction closely links to higher retention rates. Reputation further contributes positively to retention (β = 0.148, p < 0.001), highlighting that a favorable reputation encourages customers to return. Conversely, risk demonstrates a significant negative effect on customer retention (β = -0.171, p < 0.001), indicating that increased perceived risk associates with decreased customer loyalty. These findings emphasize the importance of promoting trust, competency, satisfaction, and reputation while addressing perceived risks to enhance customer retention. Addressing the identified determinants can improve customer satisfaction and loyalty, ultimately contributing to long-term success in the hospitality sector.