The Strategic Impact of Service Quality and Environmental Sustainability on Financial Performance: A Case Study of 5-Star Hotels in Athens

Abstract

This study explores the impact of guest satisfaction on the financial performance of 5-star hotels, with a focus on both service quality and environmental sustainability. The purpose of the research is to understand how improvements in key satisfaction dimensions influence hotel profitability, as measured by EBITDA, ROA, and ROE. Satisfaction was measured across SERVQAUL dimensions and the dimension of environmental sustainability. The data were analyzed using the Multicriteria Satisfaction Analysis (MUSA) method and linear regression models to determine the effect of satisfaction on financial performance. Results indicate that responsiveness is the most important factor for guests, while environmental sustainability ranks high in importance but shows lower satisfaction scores. The findings suggest that investing in both service quality and sustainability can significantly enhance a hotel’s financial returns. The study concludes that hotel managers should prioritize improvements in environmental sustainability and responsiveness to optimize guest satisfaction and financial performance.

1. Introduction

Hotels often invest significant funds to ensure customer satisfaction (Ali et al. 2021). As customer satisfaction is a critical barometer for evaluating hotel performance, an in-depth assessment of the factors contributing to both satisfied and dissatisfied customers is of paramount importance for hotel management (Kim and Chung 2022). The alignment between customers’ perceptions of service quality and their overall satisfaction is undeniable, as it is the perceived quality of service that ultimately determines their level of contentment (Zehir and Zehir 2023). Customer satisfaction is a psychological concept that includes the feeling of well-being, and pleasure derives from obtaining what one hopes and expects from an attractive product or service (Oliver 2014).

All the research conducted over the years has developed different theories of customer satisfaction, with the most widely used being the one proposed by Oliver (1980), who proposed the theory of disconfirming expectations. According to this theory, which has been tested and confirmed in various studies (Oliver and DeSarbo 1988; Piercy and Ellinger 2015; Tong and Walther 2015; Lankton and McKnight 2012; Hsu 2003), customers buy goods and services by “prepaying” for the expectations they have about them. Once the product or service is purchased and used, the results are compared with expectations, and if the result meets expectations, confirmation is given. Refutation occurs when there are differences between expectations and results. Negative refutation occurs when the performance of the product or service is less than expected. A positive refutation occurs when the performance of the product or service is better than expected. Satisfaction is caused by the confirmation or positive disconfirmation of consumers’ expectations, while dissatisfaction is caused by the negative disconfirmation of consumers’ expectations.

Several researchers have attempted to apply the customer satisfaction theories developed in the hotel industry (Ekinci et al. 2003; Bilgihan et al. 2014; Zehrer et al. 2014; Song et al. 2022; Moreno Brito et al. 2024) to explore the applicability of customer satisfaction in the hospitality and tourism industries.

Unlike physical products or services, most hospitality experiences are a combination of products and services (Mercan et al. 2021). Therefore, satisfaction with a hospitality experience, such as accommodation in a hotel or a meal in a restaurant, is the sum of satisfaction with the individual elements or characteristics of all the products and services that make up the experience (Cetin 2020; Ali et al. 2021). On the one hand, highly satisfied customers are more likely to return and recommend a hotel. On the other hand, dissatisfied customers are likely to spread a negative reputation that not only negatively affects the hotel’s image and reputation but also reduces the hotel’s revenue by deterring potential customers. Indeed, it has been documented by relevant research that a negative review from a dissatisfied customer has the potential to result in a subsequent loss of 30 customers (Olsen 2010). Poor performance in room quality or service has a strong effect on guest disappointment, regardless of the hotel’s star ratings.

Previous studies have shown that the determinants of customers’ enjoyment differ from those that cause their frustration (Albayrak and Caber 2013; Alegre and Garau 2011). For example, while hotel customers may not care about the presence of a clean towel, they are likely to be annoyed by the presence of a dirty towel. Conversely, offering a welcome chocolate in the room may excite customers, although customers are unlikely to be dissatisfied by the lack of such services (Füller and Matzler 2008).

In their research, McMullan and O’Neill (2010) took a unique approach to customer satisfaction by examining its effect on tourists’ future intentions. They developed six scales to assess various aspects of satisfaction with a tourist destination, including cognitive dissonance, product and service satisfaction, emotional satisfaction, future behavioral intentions, and overall visitor satisfaction. These scales provide a comprehensive framework for understanding how different elements of a tourist’s experience contribute to their overall satisfaction and future behaviors.

Fernández and Bedia (2005) applied SERVQUAL to diagnose the hotel sector in a tourist destination. In their study, it was evident that the SERVQUAL scale, adapted specifically for the hotel industry, proved to be both a reliable and valid tool for assessing service quality. Additionally, it was particularly effective for conducting a strategic analysis of the sector due to its ability to separately measure customer expectations and perceptions.

Nowadays, the need for environmental sustainability has become increasingly important in the hotel industry, driven by growing concerns about climate change and resource depletion (Skordoulis et al. 2020; Skordoulis et al. 2022a; Delegkos et al. 2022; Xanthopoulou et al. 2024). As consumers become more eco-conscious, they expect businesses, including hotels, to adopt sustainable practices (Drosos and Skordoulis 2018; Skordoulis et al. 2022b). Hotels that prioritize environmental sustainability by adopting measures such as reducing energy consumption, minimizing waste, and using eco-friendly products, are now more likely to satisfy their guests. This is because customers increasingly value corporate responsibility and align their choices with their personal environmental beliefs (Chuah et al. 2020; Sivapalan et al. 2021). Studies have shown that guests who perceive a hotel as environmentally responsible are more likely to report higher satisfaction, as sustainable practices are often associated with enhanced service quality and ethical business behavior (Filimonau et al. 2022). By addressing environmental sustainability, hotels can not only reduce their ecological footprint but also improve guest experiences, resulting in higher customer satisfaction and loyalty (Moreno Brito et al. 2024).

Based on the above analysis, it becomes obvious that customer satisfaction serves as a crucial metric for evaluating service quality (Hallencreutz and Parmler 2021), since it is a measure that gauges how content customers are with a firm’s products, services, and capabilities. It also reflects the extent to which a business meets or exceeds customer expectations (Klink et al. 2021), and encompasses both emotional and rational reactions to a product or service, as well as behavioral intentions such as likelihood to recommend or repurchase (Yang et al. 2021).

At the same time, the relationship between customer satisfaction and profitability is in the spotlight of researchers worldwide. Several studies (Gronroos 1990; Bernhardt et al. 2000; Banker and Mashruwala 2007; Otto et al. 2020; Eklof et al. 2020) have shown that customer satisfaction and firm profitability are positively correlated. Sun and Kim (2013) examined the hospitality and tourism industries to find out if customer satisfaction increases firm performance. Findings revealed that the impact of customer satisfaction is reflected in the profit margin, return on assets (ROA), return on equity (ROE), proxies of a firm’s profitability, and in the market value added. The results indicate that customer satisfaction positively affects a firm’s profitability and value in the hospitality and tourism industries. Demydyuk and Carlbäck (2024) explored the connection between revenue and profit drivers and long-term financial performance in the hotel industry, analyzing data from 2004 to 2020 for six U.S. hotel chains. Their study revealed that customer satisfaction holds greater importance than pricing for achieving sustained financial success. Additionally, the number of room nights sold was identified as a key positive factor influencing performance across all metrics. Halim and Halim (2013) studied guest satisfaction and hotel profitability in Egypt, and the results indicated that the constituents of guest satisfaction significantly impact the determinants of hotel profitability.

Environmental sustainability can significantly impact a firm’s financial performance through cost reductions, operational efficiency, and enhanced brand reputation (Baah et al. 2021). Sustainable practices can lower both capital and operational costs, and improve profitability. For instance, a study by Eccles et al. (2014) shows that firms with robust sustainability strategies often experience reduced capital costs due to improved risk profiles, leading to lower borrowing rates and better financing conditions. Moreover, firms with strong environmental, social, and governance (ESG) scores often enjoy lower costs of capital, including lower interest rates on loans and better terms on equity financing (El Ghoul et al. 2018). This is because environmentally sustainable firms are perceived as lower risk by investors and lenders, which reduces their financing costs (Friede et al. 2015; Xanthopoulou et al. 2024).

Referring to operational costs, including energy consumption, water usage, and waste management, it is reported that they can be significantly lowered through sustainable practices, increasing a firm’s profitability. For instance, resource efficiency often reduces input costs, leading to lower operational expense (Dreyer et al. 2019; Yenidogan et al. 2021).

Additionally, sustainability efforts attract environmentally conscious consumers and investors who prioritize environmental, social, and governance (ESG) factors, leading to increased sales and investment opportunities (Friede et al. 2015; Shi et al. 2022). Moreover, firms that embrace sustainability are better positioned to manage risks related to regulatory compliance and potential environmental liabilities, further securing long-term financial stability. More specifically, in the existing literature, it is demonstrated that firms adopting sustainable practices are more resilient in the face of regulatory changes and environmental liabilities. Firms that proactively implement environmental management systems are often ahead of regulatory requirements, allowing them to adapt more efficiently to new environmental laws and avoid costly penalties (Skordoulis et al. 2020; Skordoulis et al. 2022a). Moreover, it has been found that firms integrating sustainability into their operations are often perceived as less risky by investors and stakeholders, which reduces the overall cost of capital and bolsters financial stability (El Ghoul et al. 2018).

Based on data from the Ministry of Tourism of Greece, there are 10,887 hotels in operation, including 744 five-star establishments (Ministry of Tourism 2024). In other words, in Greece, 23% of rooms and 24% of beds belong to 5-star hotels. Moreover, based on the above data, 292 hotels operate in Athens, of which 28 are 5-star hotels. It is worth mentioning that 55% of the 5-star hotels in Attica are in Athens. For the financial year 2021, the turnover of the 2-, 3-, 4-, and 5-star hotels exceeded EUR 5.2 billion in aggregate, while the total invested equity amounted to approximately EUR 13.1 billion and the Long-Term Debt amounted to EUR 12.0 billion. The value of fixed assets after depreciation (net fixed assets) amounted to approximately EUR 17.2 billion. Although 5-star hotels have a smaller total number of rooms than 3- and 4-star hotels, they have a significantly higher economic importance in terms of operating cycle, profitability, invested assets, and invested capital, both in equity and loans. Also, 5-star hotels have a better profitability ratio compared to other hotel categories (General Commercial Register 2024). The high concentration of 5-star hotels in Athens and their high profitability, compared to others, makes it interesting to investigate customer satisfaction and its impact on profitability (Ministry of Tourism 2024).

Based on the above analysis, the aim of this research is to provide evidence of the relationship between service quality—measured by customer satisfaction, including factors related to environmental sustainability—and financial performance. The objectives of this study concern the measurement of customers’ satisfaction, the analysis of hotels’ profitability, and a thorough analysis of the relationship between them. Consequently, the following research questions have been developed:

• What is the key driver of guest satisfaction?
• Do improvements in guest satisfaction, particularly in areas such as environmental sustainability, positively influence hotel financial performance?
• Do increases in guest satisfaction lead to significant improvements in financial performance indicators such as EBITDA, ROA, and ROE?

The results of this study highlight the significant impact of both service quality and environmental sustainability on guest satisfaction and the financial performance of 5-star hotels. Responsiveness emerged as the most critical factor driving guest satisfaction, consistent with prior research emphasizing the importance of prompt and attentive service in the hospitality sector. Additionally, while environmental sustainability was also highly valued by guests, a moderate satisfaction score indicates that many hotels have room to improve in this area, which could enhance both guest satisfaction and financial returns.

2. Materials and Methods

2.1. Data and Research Tool

This study belongs to the category of empirical studies. The data used in the study are both primary and secondary data. The primary data refer to the customer satisfaction measurement. These data were collected using a structured questionnaire, which was developed for the purpose of this research. The sample of the questionnaire was targeted at people who had visited 5-star hotels in Athens. It was promoted in hotels, after permission was granted, and after providing an informed consent statement including the purpose of the research, its exclusive academic use, the assurance of participants’ personal data privacy, and their ability to leave the research with no restrictions. The data were collected between 20 July 2023 and 5 September 2023. In total, 403 valid questionnaires were analyzed.

Initially, customers’ perceptions of service quality were measured using the SERVQUAL scale, which is a widely used tool for measuring service quality (Basfirinci and Mitra 2015) and which was developed by Parasuraman et al. (1988). With the development of the service industry, consumers have been paying more and more attention to service quality. Therefore, more and more researchers have been studying service quality through the application of the SERVQUAL model in the service industry (Shi and Shang 2020). Since its introduction in 1988, the SERVQUAL scale has been used in hundreds of studies, including numerous studies in the hospitality and tourism industries, as it is identified as the most used quality scale in this industry (Fick and Brent Ritchie 1991; Lee and Hing 1995; Fernández and Bedia 2005; Basfirinci and Mitra 2015; Altuntas et al. 2012; Setó-Pamies 2012; Hansen 2014). This scale supports organizations to identify areas where they excel and areas where improvement is needed to meet or exceed customer expectations and provide better services overall. By comparing customer perceptions and expectations, service providers can identify areas for improvement and prioritize actions to improve service quality (Liu et al. 2015). The SERVQUAL scale is designed to assess customers’ perceptions and expectations of service quality in the following five dimensions: reliability, assurance, tangibles, empathy, and responsiveness (Parasuraman et al. 1994).

In this research, the Multicriteria Satisfaction Analysis (MUSA) method was applied to measure guests’ perceptions of service quality based on SERVQUAL dimensions—adopted for the examined case—and environmental sustainability. The MUSA method utilizes satisfaction data gathered through specialized questionnaires. Respondents are asked to indicate their level of satisfaction based on a range of criteria and sub-criteria. In

Table 1. Satisfaction criteria and sub-criteria.

Satisfaction Criteria	Satisfaction Sub-Criteria
Reliability	Service delivery as promised Dependability in handling service problems Accurate service the first time Timeliness of service delivery Error-free records
Assurance	Confidence instilled in customers Customer safety in transactions Courteousness of employees Knowledgeability of employees
Tangibles	Modern equipment Visually appealing facilities Neat appearance of personnel Visually appealing materials
Empathy	Individual attention to customers Personalized service for customers Understanding of customer needs Customer-first approach Convenient business hours
Responsiveness	Information about service delivery Promptness of service Willingness to assist customers Readiness to address customer requests
Environmental sustainability	Use of eco-friendly materials Energy-efficient practices Water conservation efforts Waste management and recycling practices Environmental certifications and policies

below, the satisfaction criteria used in the present research are presented. In the present research, all the following criteria were measured using a 5-point Likert scale.

2.2. Multicriteria Satifaction Analysis

In the literature there is a significant number of actual applications of the MUSA method (Grigoroudis and Siskos 2004; Zisos et al. 2018), as well as a detailed presentation of the related software (Grigoroudis and Siskos 2003; Grigoroudis et al. 2000).

The MUSA method is based on a collective preference analysis model, which assumes a hierarchical structure governing the satisfaction criteria. According to this model, which uses regression techniques, each respondent is asked, through a specialized questionnaire, to express a satisfaction level that depends on a set of variables (Grigoroudis and Siskos 2002). Customers’ global satisfaction is denoted as a variable Y, and the set of satisfaction criteria is denoted as a vector Χ = (Χ₁, Χ₂, …, Χ_n). The MUSA method assesses global and partial satisfaction functions Υ* and X_i, respectively, given customers’ ordinal judgments Y and X_i for the i-th criterion (Manolitzas et al. 2010). The assumption of an additive utility model is the method’s main principal, and it is represented by the following ordinal regression analysis equation (Grigoroudis and Siskos 2004):

$${\tilde{\mathrm{Y}}}^{*}=\sum _{\mathrm{i}=1}^{\mathrm{n}}{\mathrm{b}}_{\mathrm{i}}{\mathrm{x}}_{\mathrm{i}}^{*}-{\mathsf{\sigma }}^{+}+{\mathsf{\sigma }}^{-}$$

(1)

where ${\tilde{\mathrm{Y}}}^{*}$ represents the estimation of the global value function, n represents the number of criteria, b_i is a positive weight of the i-th criterion, σ⁺ and σ⁻ are the overestimation and the underestimation errors, respectively, and the value functions Υ* and X_i are normalized in the interval [0, 1].

To address the issue of model stability, an optimality analysis phase is incorporated. The final solution is derived by examining the polyhedron of near-optimal solutions and is determined through a series of linear programs, with the number of programs corresponding to the number of satisfaction criteria (Drosos et al. 2019a):

$$\left\{\begin{array}{c}\left[\mathrm{m}\mathrm{a}\mathrm{x}\right]{\mathrm{F}}^{\prime }={\displaystyle \sum _{\mathrm{k}=1}^{{\mathrm{a}}_{\mathrm{i}}-1}}{\mathrm{w}}_{\mathrm{i}\mathrm{k}}\mathrm{}\mathrm{f}\mathrm{o}\mathrm{r} \mathrm{i}=1,2,\dots ,\mathrm{n}\\ \mathrm{u}\mathrm{n}\mathrm{d}\mathrm{e}\mathrm{r} \mathrm{t}\mathrm{h}\mathrm{e} \mathrm{c}\mathrm{o}\mathrm{n}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{a}\mathrm{i}\mathrm{n}\mathrm{t}\mathrm{s}:\\ \mathrm{F}\le {\mathrm{F}}^{*}+\mathsf{\epsilon }\end{array}\right.$$

(2)

where ε is a small percentage of F*. The average of the solutions given by the n LPs may be taken as the final solution. In the case of non-stability, this average solution is less representative (Drosos et al. 2019a).

The assessment of a performance norm may be very useful in customer satisfaction analysis. The average global and partial satisfaction indices are used for this purpose and can be assessed according to the following equations (Drosos et al. 2019a):

$$\mathrm{S}=\sum _{\mathrm{m}=1}^{\mathrm{a}}{\mathrm{p}}^{\mathrm{m}}{\mathrm{y}}^{*\mathrm{m}}\mathrm{a}\mathrm{n}\mathrm{d} {\mathrm{S}}_{\mathrm{i}}=\sum _{\mathrm{k}=1}^{{\mathrm{a}}_{\mathrm{i}}}{\mathrm{p}}_{\mathrm{i}}^{\mathrm{k}}{\mathrm{x}}_{\mathrm{i}}^{*\mathrm{k}}$$

(3)

where S and S_i are the average global and partial satisfaction indices, and p^m and p_i^k are the frequencies of customers belonging to the y^m and x_i^*k satisfaction levels, respectively.

The MUSA method generates a set of normalized indices that facilitate a detailed analysis of the satisfaction measurement. These include satisfaction, demanding, and improvement indices (Grigoroudis and Siskos 2002). These average demanding indices are normalized within the range [−1, 1], with the following interpretations:

• D = 1 or Di = 1: Highly demanding.
• D = 0 or Di = 0: Neutral in the level of demand.
• D = −1 or Di = −1: Minimally demanding.

By combining these indices, among others, the method generates action diagrams. Action diagrams are comparable to a SWOT analysis, visually representing the strengths, weaknesses, opportunities, and threats of an organization. These diagrams function as a form of importance–performance analysis. Despite their simplicity, action diagrams are highly beneficial as they highlight areas of strong and weak satisfaction, while also identifying the actions needed to boost satisfaction. In essence, they pinpoint the satisfaction dimensions that require improvement (Karasmanaki et al. 2023).

2.3. Financial Performance Measurement

In addition, secondary data were collected on three indices representing the profitability of the hotels under consideration. Profitability reflects firms’ ability to generate earnings relative to their expenses and other costs, directly influencing financial performance. High profitability typically leads to stronger financial stability, increased cash flow, and better returns for shareholders. In essence, profitability serves as a crucial measure of financial performance, impacting firms’ valuation, creditworthiness, and ability to attract investors. Thus, the following indicators were calculated from the published financial statements of the sampled hotels, obtained from the General Commercial Register of Greece (General Commercial Register 2024):

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
• ROA (Return on Assets).
• ROE (Return of Equity).

Profitability analysis combines the measurement of both a firm’s profit margins (e.g., net profit margin and EBIT) and performance indicators (e.g., ROA). These are indicators that measure the return on invested capital, i.e., they assess the extent to which corporate revenues exceed various cost measures. Profitability ratios are most often analyzed when conducting financial analysis because they are of great value to management. One of the most used profitability indicators is EBITDA. EBITDA shows the percentage of earnings relative to a firm’s operating income.

ROA is a widely used measure of profitability and is often used as a measure of corporate performance. ROA represents the short-term financial performance of a firm by measuring how it efficiently generates profits using its assets during a fiscal year. It is calculated by dividing net income by total assets. It reflects the ability of the firm’s management to generate profits from its assets (Athanasoglou et al. 2008). Hotel managers need to ensure higher profits to cover high assets and related fixed costs. These profits must be consistent with hotel investments. Finally, using ROA evaluates the profits of hotels generated from all services and activities provided.

ROE shows the return on equity invested by the owners, i.e., the profits made by the company using the capital invested by the ownership (Perisa et al. 2017). The ROE ratio is calculated by dividing net income (profit or loss) by equity capital. A higher value of this ratio is more favorable for a firm, as it indicates stronger earnings-generating power per unit of invested capital. In short, the ROA ratio measures profitability from the perspective of the overall efficiency of how a firm uses its total assets, while the ROE ratio captures profitability from the shareholders’ perspective (San and Heng 2013).

The relationship between satisfaction and the above-mentioned indicators was examined using linear regression models, considering the type of variables.

2.4. Research Reliability

To ensure the research reliability, Cronbach’s Alpha is used. Based on the results provided in

Table 2. Cronbach’s Alpha for the examined satisfaction criteria.

Satisfaction Criteria	Number of Items	Cronbach’s Alpha
Reliability	5	0.85
Assurance	4	0.82
Tangibles	4	0.80
Empathy	5	0.88
Responsiveness	4	0.83
Environmental sustainability	5	0.81

below, the internal consistency of the satisfaction dimensions examined is either good or very good. Thus, the reliability of the research tool is confirmed.

3. Research Results

3.1. Sample Profile

Initially, respondents’ demographics are presented in the

Table 3. Sample demographics.

		% Percent
Gender	Male	41.7
	Female	56.3
	Other	1.9
Age	18–25	12.5
	25–35	27.3
	35–45	22.1
	45–55	18.9
	55–65	19.2
Education level	High school	10.3
	Associate’s degree	17.8
	Bachelor’s degree	34.6
	Master’s degree	30.1
	Doctorate	7.2
Travelling type	Group	15.7
	Couple	35.4
	With Friends	12.8
	Individually	18.6
	Family	17.5
Annual income	Less than EUR 10,000	5.8
	EUR 10,000–EUR 15,000	10.3
	EUR 15,000–EUR 20,000	15.9
	EUR 5000–EUR 10,000	7.6
	More than EUR 20,000	60.4
Travelling frequency	Less than once a year (e.g., 1 time in 2 years)	7.8
	1–2 times a year	43.7
	3–5 times a year	31.1
	6–10 times a year	3.8
	More than 10 times a year	13.6

below. Based on the results provided, it is observed that most visitors to the examined 5-star hotels are females (56.3%) and belong primarily to millennials (49.4%). A significant portion hold either a Bachelor’s degree (34.6%) or a Master’s degree (30.1%), reflecting well-educated hotel guests. In terms of travel type, most visitors are couples (35.4%). Regarding income, a notable 60.4% earn more than EUR 20,000 annually, aligning with the premium nature of 5-star hotels. Additionally, 43.7% of the visitors travel 1–2 times a year.

3.2. Satisfaction Analysis

Satisfaction measurement is based on six dimensions. Based on

Table 4. Satisfaction criteria importance.

Satisfaction Dimension	% Level of Importance
Reliability	20.15
Assurance	18.10
Tangibles	5.11
Empathy	10.09
Responsiveness	24.46
Environmental sustainability	22.10

below, responsiveness is the most important factor (24.46%) for 5-star hotel guests, reflecting the premium placed on prompt and efficient service. Environmental sustainability, ranked second with 22.3%, highlights the growing emphasis on eco-friendly practices in the luxury hospitality sector. This distribution underscores the strategic impact of both service quality and environmental sustainability on the financial performance of 5-star hotels.

Referring to guests’ satisfaction, as presented in

Table 5. Satisfaction criteria performance.

Satisfaction Dimension	% Satisfaction Level
Reliability	84.46
Assurance	76.10
Tangibles	80.18
Empathy	81.15
Responsiveness	82.51
Environmental sustainability	70.12

, the criterion with the highest level of satisfaction is that of reliability (84.46%), followed by responsiveness (82.51%). Environmental sustainability has the lowest level of satisfaction (70.12%).

Concerning the overall satisfaction level, as indicated by Figure 1, the results are positive, with the average total satisfaction index reaching 79.08%.

Based on the MUSA method, this upward trend in the satisfaction function suggests that guests have high expectations regarding the services they are being provided. This reflects a demanding customer base that places significant value on the quality of their hotel experience.

Lastly, Figure 2 is the action diagram of the MUSA method, providing the strong and weak points of the examined hotels. The satisfaction criteria concerning empathy and tangibles are in the so-called status quo area of the action diagram, meaning that generally no actions are required. Assurance and reliability are in the transfer resources areas, meaning that the hotels must invest elsewhere. Responsiveness is in the leverage opportunity area of the action diagram, meaning that it has high levels of both satisfaction and importance, and it can be considered as an advantage. Lastly, environmental sustainability is in the action opportunity area of the diagram. This means that environmental sustainability has low satisfaction and high importance, meaning that immediate actions are needed. If the level of satisfaction increases, this criterion will be moved to the leverage opportunity area of the action diagram.

3.3. Financial Performance

As previously mentioned, the financial performance of the examined hotels was assessed using EBITDA (in millions of Euros), ROA, and ROE. In alignment with the existing literature (Drosos et al. 2019b), a linear regression analysis was conducted using the above-mentioned financial performance indicators as the dependent variables, with the satisfaction level serving as the independent variable.

Based on the results provided in

Table 6. Multiple linear regression models.

		Unstandardized Coefficients		Standardized Coefficients	Sig.	ANOVA		R-Squared Coefficients
		B	Beta	Std. Error		F	Sig.	R2	Adj. R2
Model 1: EBITDA	(Constant)	10.5			0.000	65.3	0.000	0.22	0.20
	Satisfaction	0.25	0.52	0.05	0.000
Model 2: ROA	(Constant)	1.5			0.000	63.1	0.000	0.21	0.19
	Satisfaction	0.35	0.50	0.02	0.000
Model 3: ROE	(Constant)	5.0			0.000	89.7	0.000	0.26	0.21
	Satisfaction	0.22	0.64	0.03	0.000

, it is observed that customer satisfaction plays a statistically significant role in hotels’ financial performance. More specifically, Model 1 shows that, as guest satisfaction improves, hotels’ EBITDA increases by EUR 0.25 million for every 1% rise in satisfaction. However, the adjusted R-squared value of 0.20 indicates that satisfaction explains a relatively small portion of EBITDA, suggesting that other factors also heavily influence profitability.

Referring to Model 2, it is observed that, for every 1% increase in guest satisfaction, hotels’ ROA increases by 0.35 percentage points. With an adjusted R-squared of 0.19, satisfaction plays a moderate role in explaining the variability of ROA, indicating that there are other significant contributors to hotels’ asset efficiency.

Lastly, Model 3 indicates that, for each 1% rise in satisfaction, hotels’ ROE increases by 0.22 percentage points. With an adjusted R-squared of 0.21, satisfaction has a more pronounced impact on ROE than on EBITDA or ROA, suggesting that satisfaction is more closely tied to the financial returns for shareholders.

All three models show a positive relationship between guest satisfaction and the examined financial performance indicators. ROE is the most sensitive to satisfaction changes, as shown by the higher Beta and adjusted R-squared values. Although satisfaction explains some variability in the financial outcomes, the relatively low adjusted R-squared values indicate that other factors also play significant roles in hotel performance.

4. Discussion

The results of this study demonstrate the critical importance of both service quality and environmental sustainability in shaping guest satisfaction and influencing the financial performance of 5-star hotels. Responsiveness emerged as the most important criterion for guests, aligning with previous research that emphasizes the value of efficient and attentive service in the hospitality industry (Oliveras-Villanueva et al. 2020). This addresses the research question of identifying the key driver of guests’ satisfaction, which has been widely recognized as a determinant of positive hotel experiences.

The high importance placed on environmental sustainability by hotel guests also aligns with prior studies that suggest a growing demand for eco-friendly practices in the luxury hospitality sector (Pereira et al. 2021).

However, the relatively moderate satisfaction score for sustainability (70.12%) suggests a gap between guest expectations and actual hotel practices. This finding supports the notion that, while sustainability is a critical factor, many hotels are still in the early stages of fully integrating these practices into their operations, leaving room for improvement. Hotels should therefore invest in improving their sustainable practices, as these efforts are likely to yield both increased satisfaction and enhanced financial performance, as suggested by the regression analysis.

The financial implications of guest satisfaction are particularly evident in the regression models, where all three financial indicators EBITDA, ROA, and ROE show positive correlations with satisfaction. The ROE model showed the strongest relationship, indicating that satisfaction has a particularly pronounced impact on shareholder value. This finding responds to the research question of whether improvements in guest satisfaction, particularly in areas such as environmental sustainability, can lead to better financial returns for hotel owners, a finding consistent with earlier studies on the financial benefits of sustainable hospitality practices (Duric and Potočnik Topler 2021).

These results suggest that focusing on guest satisfaction across key service dimensions, especially in responsiveness and sustainability, can significantly enhance a hotel’s financial outcomes. This finding responds to the research question of whether increases in guest satisfaction lead to significant improvements in financial performance indicators. The low R-squared values, however, suggest that other factors, such as market trends and operational efficiency, likely play significant roles in financial performance. This indicates a need for a more holistic approach to understanding hotel profitability, one that incorporates multiple variables beyond customer satisfaction alone.

From a managerial perspective, the findings suggest that managers should prioritize integrating environmental sustainability into both the strategic and operational aspects of hotels. Immediate steps can include adopting energy-efficient technologies such as LED lighting, installing smart thermostats, and utilizing water-saving systems in guest rooms and common areas. These measures not only reduce operational costs but also address guests’ growing demand for eco-friendly accommodations, which the study shows is a critical driver of satisfaction. Moreover, comprehensive waste management programs that promote recycling, minimize food waste, and reduce single-use plastics can further enhance the hotel’s environmental credentials, which can positively influence both guest perceptions and regulatory compliance (Bihari Singh et al. 2024).

Additionally, hotel managers should strategically reallocate resources to focus on sustainability (Rubio-Mozos et al. 2020). For example, resources currently used for reliability and assurance (the areas that are already performing well and have low importance for total satisfaction) can be redirected to improving environmental practices. This can be done by training staff to follow green protocols, offering sustainability certifications, and marketing these efforts effectively to guests. By doing so, hotels can turn sustainability into a competitive advantage, as suggested by the study, while still maintaining high levels of service responsiveness, another key factor in guest satisfaction. Moreover, linking sustainability efforts with responsiveness, such as offering guests the option to opt-in for environmentally friendly services, can enhance both service quality and eco-friendliness.

Lastly, given the strong correlation between guest satisfaction and financial performance, especially ROE, hotels should view sustainability not just as an operational change but as a strategic investment. By consistently improving guest satisfaction through sustainable practices, hotels can secure long-term profitability while meeting the evolving expectations of eco-conscious consumers.

While the study provides valuable insights, several limitations should be acknowledged. First the analysis is based on 5-star hotels in a specific geographical area, which may limit the generalizability of the results to other hotel segments or regions. Moreover, satisfaction was measured based on specific dimensions that may not capture the full scope of guest experiences or preferences, particularly those related to digital services or new forms of hospitality. Lastly, the relatively low adjusted R-squared values in the regression models suggest that other external factors, such as market conditions or economic trends, also play significant roles in hotel financial performance but were not captured in this study.

Future studies could expand on this research by incorporating a broader range of variables, such as digital service innovations and loyalty programs, which are becoming increasingly important in shaping the guest experience. Additionally, a longitudinal study tracking satisfaction and financial performance over time would provide deeper insights into the long-term effects of guest satisfaction improvements. Finally, exploring the role of external factors, such as economic conditions or competitor activity, in influencing hotel profitability would provide a more comprehensive understanding of how satisfaction impacts financial performance in different market contexts.

By addressing these areas, future research can contribute to a more nuanced understanding of the relationship between guest satisfaction, sustainability, and hotel financial success.

5. Conclusions

In conclusion, this study demonstrates that guest satisfaction, particularly in the areas of responsiveness and environmental sustainability, plays a vital role in the financial success of 5-star hotels. While the results indicate that hotels are generally meeting guest expectations in terms of reliability and responsiveness, there remains significant room for improvement in environmental sustainability, an area that is becoming increasingly important to guests.

By addressing the satisfaction gaps in sustainability practices, hotels can not only improve guest experiences but also drive financial performance, particularly in terms of ROE. This emphasizes the strategic value of investing in both service quality and sustainability initiatives, positioning hotels to meet the evolving demands of their guests while also enhancing their financial outcomes.