CHAPTER 1

INTRODUCTION

1.1. Background

The tourist industry, without a doubt, is an important sector that give a huge
contributes to the country's socioeconomic growth, especially Indonesia. The
importance of the national tourism industry is growing in tandem with the sector's
growth and contribution in terms of foreign currency earnings, regional revenue,
regional development, as well as the absorption of investment, labor, and company
development throughout Indonesia's different regions. According to data from the
ministry of tourism (2020), although there was a dip in 2016, the national tourist sector
saw continuous and considerable growth between 2015 and 2019. The tourist sector's
contribution to national GDP increased and eventually met the objective, making
tourism the biggest foreign exchange provider after the palm oil industry. The successes
of domestic tourists (wisnus), who continue to surpass the established objectives,
maintain the constancy of the foreign exchange targets that have been set.

Figure 1.1 Highest Foreign Exchange Earner by Commodity

Source: Indonesian Economic Report 2019, Bank Indonesia

 According to the data from Bank Indonesia in their Indonesian Economic Report
2019, tourist foreign currency profits from travel and transportation were 18.4 billion
US dollars in 2019, an increase from the previous year. Tourism foreign currency
revenues have increased steadily over the past five years, averaging $14.5 billion each
year. Tourism has the largest foreign exchange share of all service exports, accounting
for 54 percent of all service exports. This percentage is also on the rise since 2014,
when it was 44 percent of total service exports. The tourist service balance surplus
remained stable, owing to a steady rise in tourism foreign exchange. Furthermore,
despite recent declines in major commodity exports, increased tourist performance has
pushed the tourism sector's foreign currency worth to second position after coal
exports. The potential of the tourism sector can be developed into a new source of
economic growth. This is reflected in the performance of the tourism sector which was
maintained in 2019 amidst the slowdown in global economic growth.

On the other hand, the tourist sector is very susceptible to catastrophes,

pandemics, and other crisis circumstances (Yozcu & Cetin, 2020; Kour, Jasrotia &
Gupta, 2020). Starting in 2020, tourism performance not only in Indonesia, but also in
the world must experience a very sharp decline because of the crisis that created by the
Pandemic Covid19 Outbreak. According to the UNWTO, the number of international
tourists and tourism revenue in Asia Pacific fell by 82 percent in 2020 as a result of
Covid 19, which included Indonesia. Despite the fact that travel is the lifeblood of
tourism, this pandemic necessitates travel limitations. According to the performance
data from Ministry of Tourism and Creative Economy of Indonesia, the tourist foreign
exchange value indicator in 2020 achieved 66.12 percent of the highest target (4.9
billion USD) and 98.3 percent of the lowest target (3.3 billion USD) specified in the
Ministry of Tourism and Creative Economy's Strategic Plan for the Years 2020-2024.
 Performance of Tourism Foreign Exchange
Value and Number of Tourist Indonesia
2016-2020
250,00

200,00

150,00

100,00

50,00

-
2016 2017 2018 2019 2020

Foreign Exchange Value (Mill ion USD) Tourist Number (million)

Figure 1.2 Performance of Tourism Foreign Exchange Value and Number of

Tourist Indonesia 2016-2020

Source: Ministry of Tourism and Creative Economic of the Republic of Indonesia, 2021, processed data

When compared to the realization of foreign exchange earnings in 2019 of 16.91

billion USD, there was a decrease of 80.84 percent. The amount of foreign exchange
earnings from the tourism sector is highly dependent on the number of foreign tourist
visits and the quality of spending from incoming tourists. If we look at the development
of the tourism sector's foreign exchange earnings in the last 5 years in the figure 1.2
above, the increase has continued since 2016 which amounted to 176.23 trillion rupiah
(number of foreign tourists 11.52 million foreign tourists), in 2017 amounted to 202.13
trillion rupiah (number of foreign tourists 14, 04 million foreign tourists), in 2018 it
was 224 trillion rupiah (15.81 million foreign tourists), and in 2019 it was 239.24
trillion rupiah = 16.91 billion USD (16.1 million foreign tourists), but in 2020 foreign
exchange earnings the tourism sector fell drastically by 80.84 percent to 3.24 Billion
USD.

The tourism sector is the industry most affected by the COVID-19 pandemic,
however, it has the opportunity to rise and grow. The Indonesian government through
the Ministry of Tourism and Creative Economy remains committed to developing and
restoring Indonesia's tourism conditions, which is a major government program in
2021, especially in 5 super priority destinations. One of the efforts to restore tourism is
the continuation of infrastructure development, to support accessibility, especially in 5
super priority destinations. In terms of infrastructure, according to data from the World
Economic Forum in Figure 1.3 below, Indonesia placed 40th in 2019 in terms of
national tourism competitiveness as evaluated by the Travel and Tourism
Competitiveness Index (TTCI), and the item that has to be enhanced is infrastructure.

Figure 1.3 Travel and Tourism Competitiveness Index Indonesia 2019

Source: The Travel & Tourism Competitiveness Report 2019 – World Economic Forum

Air travel facilitates increased destination access and allows for the launch of
wholly new routes (Graham et al., 2008; Koo et al., 2017), hence broadening the scope
of the tourism industry. Airports, according to Halpern and Graham (2015), are a
critical component of the transportation system because they offer travellers with
important infrastructure and services for transferring from surface to air modes of
transportation, as well as facilitating airline arrivals and departures. Therefore,
nowadays airport becoming major component in the tourism industry, which will
become a part of tourism experience. What is also visible is how Indonesia, through
Ministry of State Owned Enterprises is changing the management of SOEs owned as
development agents by forming clusters, one of which is the Tourism and Support
cluster, which includes tourism state owned enterprises as well as aviation and airport
state owned enterprises, demonstrating that tourism and aviation development can
coexist.
 Airports have broadened their aeronautical role and are now seen as tourism
destination ambassadors, incorporating distinctive qualities and slogans of the host city
(the city where the airport is located) into the fabric of their passenger-driven
campaigns to promote the destination (Wattanacharoensil et al., 2017). The tourist's
transportation experience is an important part of their overall experience (Volo, 2009).
As a result, airports have become critical components of the tourism services chain, as
they can serve as the visitor's first and last impression (Voltes-Dorta, Rodrguez-Déniz,
& Suau-Sanchez, 2017; Wattanacharoensil, Schuckert, & Graham, 2016). In this light,
airport performance has the potential to have a significant impact on regional
development and tourism attraction (Dimitriou, 2018). As a result, tourism flows
should be taken into account when building and managing airports, as well as when
establishing tourism promotion and regional development strategies (Fernández, Coto-
Millán, & Daz-Medina, 2018).

Thus, for the airport service provider company, it is important to maintain the
service quality which served to the passengers or travellers. As since airports serve as
an interpretive location for the tourism/destination image and tagline, travellers tend to
see the airport through the lens of their mental perceptions of the destination's features,
and vice versa (Wattanacharoensil, Schuckert, Graham, & Dean, 2017). To put it
another way, customer happiness with the level of service received at the airport has an
impact on travelers' contentment with the location. It would also have an impact on
passengers' desire to return to these locations. According to the Airport Council
International (ACI), airport service quality (ASQ) is the optimum route to enhance
customer satisfaction. Airport studies indicate that service quality perceptions affect
passengers’ satisfaction (ACI, 2016; Ali et al., 2016; Ansari and Agarwal, 2015;
Bezerra and Gomes, 2015; Mikulić and Prebežac, 2008; Subha and Archana, 2013) and
are critical to generate favourable behavioural intentions (Kim et al., 2016; Park et al.,
2004).

Several researchers have conducted many studies to find out how much impact
airport service quality has on destination choice or the desire to make a return visit to a
destination. (Prentice & Kadan, 2019) conducted a study to determine the role of airport
service quality on destination choice, where they first conducted an analysis of
passenger satisfaction with the services provided by the airport. They found that
Passenger satisfaction with the airport is significantly related to both intentions to reuse
the airport and revisit the destination city. In line with previous studies (Bitner and
Hubbert, 1992; Grönroos, 1984; Oliver, 1980; Parasuraman et al., 1988), satisfied
passengers (emotional pleasure) with the overall airport experience will display positive
behavioural intentions to revisit/reuse. Cronin and Taylor (1992) and Baker and
Crompton (2000) state satisfaction is in fact a better predictor of purchase intentions
than service quality. This is in line with the satisfaction-loyalty theory proposed by (Jen
et al., 2011). It was created to investigate the factors that influence consumer loyalty to
a particular service, and it has since been widely used and adapted in a variety of fields.

However, it is suggested that customers' decision-making is a complex and

complete process, emphasizing the need for a more systematic approach to loyalty
(Cronin et al., 2000). Expectation-Confirmation Theory (ECT) stands out among a vast
variety of applicable theories for predicting repurchase behavior and recommendation
intention in marketing research (Oliver, 1981), both of which are aligned with the need
of attract traveller to revisit the destination. Within ECT, two emotional elements are
utilized to describe customer satisfaction: expectation (i.e., consumers' ex-ante views
about a product/service itself or its performance) and confirmation (i.e., the amount to
which one's actual experience matches his or her original expectation) (Hossain and
Quaddus, 2012; Olson and Dover, 1979; Hossain and Quaddus, 2012). In contrast,
Satisfaction-Loyalty Theory components such as perceived service quality and
perceived value are purely cognitive (Lierop et al., 2017). More crucially, the two ECT
categories and explanatory elements from Satisfaction-Loyalty Theory have been
clearly argued to have separate foundations and are founded on a diverse set of
antecedent variables (Lee, 2010). Each one gives a partial explanation of the
passenger's desire to return to the same location.

Given the foregoing, it is predicted that combining Satisfaction-Loyalty Theory

with ECT would give a more holistic perspective on the impact of airport passenger
satisfaction as part of the overall travel experience on the intention to return to the
location. This is also consistent with a gap identified in earlier research on the impact of
airport service quality on repeat visit intentions, which focused solely on service
quality, satisfaction, and behavioral intentions, with further research incorporating other
factors proposed, because it can give a more detailed and important understanding of
 the subject. Thus in this study, in order to give more valuable insight to the Indonesian
Government in developing tourism industry in the aspect of air transportation
infrastructure, researcher aim to understand the perception and conception of revisit
destination intention from the perspective of airport passenger satisfaction in Indonesia
Area by looking at their satisfaction by using modified ECT that combine with
satisfaction-loyalty theory to get holistic perspective that will strengthen the result.

1.2. Research Gap and Novelty

Some studies have been conducted on the intention to revisit destinations that
were directly affected by the quality of service in the airport. However, with the context
that the destination and airport are an integral part of the journey experience of a
passenger, it becomes very important to be able to conduct research starting from
passenger expectations which will then lead to the discovery of deeper satisfaction to
find out the real impact of airport quality service on intention to revisit destination.

Table 1.1 List of Previous Related Research

No Author & Title Context Theory / Variable of Findings

of Research Model Interest
1 The role of Australian Airport Service The study shows that
airport service Airport with Quality, although overall airport
quality in airport Australia service quality is
Passenger
and destination Destination significantly related to
Satisfaction,
choice by passenger satisfaction,
Airport Reuse,
(Prentice & only airport facilities and
Destination services cape made
Kadan, 2019)
Revisit unique significant
contribution to passenger
satisfaction. The
relationship between
ASQ and intentions to
reuse the airport is
significant. Passenger
satisfaction with the
airport is significantly
related to both intentions
to reuse the airport and
revisit the destination
 city.
2 Destination Airport Satisfaction the satisfaction of tourists
satisfaction and Quality effect with airport with airport services
revisit intention on Mauritius services, (AIR) significantly
of tourists: Does tourism increases the probability
Other
the quality of destination of tourists revisiting the
destination
airport services destination,
satisfaction
matter? By
attributes,
(Seetanah et al.,
Revisit
2020) Intention
3 The spillover Service Spillover Passengers’ Overall airport service
effect of airport quality of effect airport service quality had a significant
service Airport in theory experiences, effect on passenger
experience on India and satisfaction. Ambience in
Complexity Passenger
destination Australia to airport is the only factor
Effect satisfaction
revisit intention Passenger that significantly
Theory with the
(Prentice et al., intention to influences travellers’
airport,
revisit intention to revisit the
2021)
destination intention to host city as their future
revisit the host travel destination.
city Passenger satisfaction
with their airport
experiences is
significantly related to
their intention to visit the
host city in Australian
sample, but not in the
case of Indian sample.
4 The impact of South African Servicecap, Conative destination
airport Airport Traveller image and traveller
experience on Challenge to perceived intention to revisit was
international attract value, observed to have the
tourists’ revisit international strongest relationship.
cognitive
intention: a south tourist Cognitive destination
destination
african case image and traveller
image,
(Chuchu, 2020) intention to revisit in
affective
addition to being the only
destination
hypothesis not supported
image,
was also the weakest of
 conative all proposed hypotheses.
destination airport servicescape
image, positively and directly
influenced traveller
traveller
perceived value.
intention to
Traveller perceived value
revisit
was found to have a
positive and direct impact
on cognitive image

5 Understanding Airport Airport service Positive and in fact

the impact of Service quality, significant relation has
airport service Quality Under been observed between
tourist
quality on the COVID- Airport Service Quality
satisfaction,
passengers’ 19 pandemic and willingness to spend
Passenger
revisit intentions effect on at the airport and revisit
willingness to
amidst covid-19 revisit the airport as well the
spend at
pandemic intention destination. airline
airport,
(Vargas-Sánchez scenario in service quality has a
Indian intention to positive effect on
et al., 2020)
scenario reuse the passenger satisfaction for
airport, Indian, passenger
satisfaction only has a
intention to
positive effect on spend
revisit the
at airport retail and
destination
intention to reuse the
airport
6 Determinants of Multi airport Passenger Passenger expectation
passenger loyalty region in Expectation, shows significant effects
in multi-airport Brazil on perceived
Airport Service
regions:
Quality, value only for non-
Implications for
Perceived frequent passengers, It
tourism
Value, also shows significant
destination
effects on ASQ for non-
(Bezerra & Passenger
frequent and non-
Satisfaction
Gomes, 2019) business passengers. The
influence of perceived
value on satisfaction is
significant for all but
 non- frequent passengers.
The service quality,
which is measured using
a multidimensional scale
specifically designed for
airports influences the
loyalty of passengers to
the airport through their
satisfaction.
Source: Author (2021)

As shown in Table 1.1, some studies has been conducted to investigate about how
airport quality service affected the intention to revisit the destination. However, the
common limitations of some of these studies is that they have not delved deeper into
customer expectations, especially using expectation-confirmation theory. Hence, this
study will attempt to investigate deeper about the effect of satisfaction from Airport
Quality Service with a variable that adopt expectation-confirmation theory which
modified with model that using passenger expectation and perceived value of the
airport, to the intention of passenger to revisit the destination. Since none of these kind
of studies has been conducted in Indonesia, thus, this study will conducted in Indonesia
scenario.

1.3. Problem Statement

With the second biggest contribution to foreign exchange in 2019, the tourist
industry has become one of the best industries in Indonesia, able to employ a large
number of people. Finally, the development of the tourism industry is a top goal. The
tourist sector has the potential to become a new source of economic growth. This is
demonstrated by statistics from Bank Indonesia's Indonesian Economic Report 2019,
which shows that tourist foreign currency revenues from travel and transportation were
18.4 billion US dollars in 2019, up from 18.4 billion US dollars the previous year. Over
the last five years, tourism foreign currency revenues have continuously climbed,
averaging $14.5 billion each year. Tourism accounts for the highest share of all service
exports in terms of foreign exchange, accounting for 54 percent of all service exports.
Since 2014, when it was 44 percent of overall service exports, this percentage has risen.
The tourist service balance surplus remains stable, owing to a steady rise in tourism
foreign exchange.
 Even though the tourism industry has had to experience a very sharp decline due
to the COVID-19 pandemic, the Indonesian government still sets this tourism
development as a priority, with the hope that when the pandemic condition is over, the
tourism industry will rise quickly . However, competition in the tourism industry is of
course also quite intense with various destinations provided by various countries. It
should also be realized that according to data from the World Economic Forum,
Indonesia was placed 40th in 2019 in terms of national tourism competitiveness as
evaluated by the Travel and Tourism Competitiveness Index (TTCI), and the item that
has to be enhanced is infrastructure, especially Air Transportation Infrastructure.

As since airports serve as an interpretive location for the tourism/destination

image and tagline, travellers tend to see the airport through the lens of their mental
perceptions of the destination's features, and vice versa (Wattanacharoensil, Schuckert,
Graham, & Dean, 2017). To put it another way, customer happiness with the level of
service received at the airport has an impact on travelers' contentment with the location.
It would also have an impact on passengers' desire to return to these locations.

Previous study has been conducted to investigate how the passenger satisfaction
of airport quality service will affect passenger intention to revisit the destination in the
future. (Prentice & Kadan, 2019) conducted a study to determine the role of airport
service quality on destination choice, where they first conducted an analysis of
passenger satisfaction with the services provided by the airport. They found that
Passenger satisfaction with the airport is significantly related to both intentions to reuse
the airport and revisit the destination city. In line with previous studies (Bitner and
Hubbert, 1992; Grönroos, 1984; Oliver, 1980; Parasuraman et al., 1988), satisfied
passengers (emotional pleasure) with the overall airport experience will display positive
behavioural intentions to revisit/reuse.

However, those previous study has showing the gap on how grab the better
perspective of passenger satisfaction which focused solely on service quality,
satisfaction, and behavioral intentions. Another studies needed with further research
incorporating other factors proposed, because it can give a more detailed and important
understanding of the subject. it is suggested that customers' decision-making is a
complex and complete process, emphasizing the need for a more systematic approach
to loyalty (Cronin et al., 2000). Expectation-Confirmation Theory (ECT) stands out
 among a vast variety of applicable theories for predicting repurchase behavior and
recommendation intention in marketing research (Oliver, 1981), both of which are
aligned with the need of attract traveller to revisit the destination. Thus, in this study,
Researcher will aim to understand the perception and conception of revisit destination
intention from the perspective of airport passenger satisfaction in Indonesia Area by
looking at their satisfaction by using modified ECT that combine with variable from
satisfaction-loyalty theory, which perceived value, to get holistic perspective that will
strengthen the result.

1.4. Research Questions

After studying the phenomenon and the problem states above, ultimately, this study
would like to answer these following questions:

1. How is the effect of Passenger Expectation to Airport Service Quality?

2. How is the effect of Passenger Expectation to Passenger Perceived Value?

3. How is the effect of Passenger Expectation to Passenger Satisfaction?

4. How is the effect of Airport Service Quality to Passenger Perceived Value?

5. How is the effect of Airport Service Quality to Passenger Satisfaction?

6. How is the effect of Passenger Perceived Value to Passenger Satisfaction

7. Does Passenger Satisfaction on Airport have influence the intention of Passenger to

revisit the destination?

1.5. Research Objectives

In alignment with the research questions above, the research objectives are as follows:

1. To investigate and analyse the effect of Passenger Expectation to Airport Service

Quality?

2. To investigate and analyse the effect of Passenger Expectation to Passenger

Perceived Value of the Airport?
 3. To investigate and analyse the effect of Passenger Expectation to Passenger
Satisfaction of the Airport?

4. To investigate and analyse the effect of Passenger Expectation to Passenger

Satisfaction of the Airport?

5. To investigate and analyse the effect of Airport Service Quality to Passenger

Perceived Value of the Airport?

6. To investigate and analyse the effect of Airport Service Quality to Passenger

Satisfaction of the Airport?

7. To investigate and analyse the effect of Passenger Satisfaction to the intention of

Passenger to revisit the destination?

1.6. Scope of Study

The purpose of this study is to examine the relationship between Passenger satisfaction
from airport quality service to the revisit destination intention using modified
Expectation-Confirmation Model (ECM) which include the variable from Satisfaction-
Loyalty Model (SLM), Perceived Value. This study will focus and conducted in
Indonesia. A non-probability purposive sample technique will be used to observe the
airport passenger in International Airport of Soekarno Hatta.

1.7. Significance of Study

The finding of this research will contribute to:

1. Theoretical Contribution

Improve the body of knowledge of the modified ECM by combining with the SLM
variable which the Passenger satisfaction will be examined by the expectation,
perceived value and quality services.

2. Practical Contribution

This study attempt to give insights into businesses or Indonesian government that
intent to develop their Tourism and Air Transportation Industry. This study also
 will be beneficial to existing Airport Operator Companies and Tourism Companies
to understand traveller better.

1.8. Thesis Structure

This thesis consists of six chapters as a systematic process with details as follows:

Chapter I: Introduction

This section outlines the prerequisites for an investigation. It also consists of several
parts, such as research background, problem identification, research questions, research
objectives, research scope, and research significance.

Chapter II: Literature Review

This section focused on the theoretical review to guide the investigation. It also shows
the definition, the result of previous studies. The literature sources are journals,
newspapers, and other sources of information to support research.

Chapter III: Methodology

This section explains the methods for completing the investigation. The type of
research, population and sampling technique, data analysis and hypothesis testing.

Chapter IV: Data Analysis

This section describes the details of data analysis; this is an essential part of the study.
This part shows the process of data by established procedures, then the result of the
data processors and provides an analysis of the results.

Chapter V: Conclusion and recommendations

This section is the final chapter, which summarizes the entire analysis from the
beginning to the end of this study. The recommendations are explained to help the
future researchers, academicians, marketing, and the board of management in higher
education sectors.