Perceptions of Service Quality, Corporate Image, and

Customer Loyalty in the Hotel Industry of Malaysia

Cham Tat Huei and Yalini Easvaralingam

Faculty of Business and Accountancy, INTI International University, Malaysia.
Abstract - The rapid growth of the hotel industry in the first decade of the 21st century forced
hotel operators to critically acknowledge the importance of service improvement in order to gain
competitive advantage. Therefore, identifying the factors that influence the quality of service for
hotels is critical for the success of the hotels. Corporate image and customer loyalty should also
be emphasized to ensure the sustainability of the hotels in this competitive industry. Hence, this
study is conducted to discover the factors influencing perceived service quality of Malaysian
hotels, as well as exploring the relationship between perceived service quality with customer
loyalty and corporate image.
Keywords: service quality, customer loyalty, corporate image, quality certifications, cultural
differences

INTRODUCTION
Nowadays, economic development, advancement of technology and improved standards of living
have created a well informed society with international and domestic markets becoming increasingly
demanding in the services that they engage in (Atilgan et al., 2003). Thus, in order for a service firm to
stay competitive, emphasis should be placed on improving service quality. By doing so, firms can
anticipate an increase in customer satisfaction and loyalty (Seth et al., 2005). Facing intense
competition, the hotel industry too, has recognised this need to create strategies to improve their
service quality. Due to the increasing importance placed on service quality, many studies have
embarked on examining how guests perceive the quality of services and the impact that improved
service quality has on the hotel industry (Ladhari, 2009; Kadampully & Hu, 2007). These studies have
detailed further the understanding of perceived service quality by showing how these perceptions can
be translated into an improved hotel (corporate) image and customer loyalty. Understanding the aspect
of loyalty is important as loyalty helps hotels to increase their market share (Tepeci, 1999) and profits
(Kadampully & Suhartanto, 2000).
Intense competition in the Malaysian hotel environment has called upon many studies to be
conducted on service quality in the Malaysian hotel industry (e.g. Lau et al., 2005; Sidin et al., 2001).
These studies in the Malaysian context however have failed to examine the mediation effect of hotel
image. Hotel image is deemed important as firms with a superior image are likely to be noticeable in
the marketplace because they are able to attract both trial users and repeat customers (Kadampully &
Suhartanto, 2000). It is also found that quality certification on hotels, as in ISO and non-ISO
certification, is deemed to have an impact on the services provided by hotels. Nevertheless, only few
studies have incorporated the influence of quality certification on service quality (e,g. Laura & Jose,
2009). Moreover, none of these studies have been conducted in the Malaysian context and these
studies too had focused only on the supply perspective by only eliciting the opinions from industry
experts and managers. The studies had neglected the demand aspect of customer perspective.
Thus, this scenario shows that there is a major drawback as service quality is essentially based
on the perceptions of consumers and it is these consumers who eventually decide on the benefits of
service quality in the respective hotels.

Corresponding author
e-mail address: jaysoncham@gmail.com
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The present study therefore addresses the gap in quality certification studies by comparing the
perceived service quality rating of ISO and non-ISO hotels. As it is also hypothesized that Asian
customers tend to give a lower rating as compared to non-Asian customers, ratings that result in
cultural differences will also be compared. Finally the study will examine the relationship between
service quality and customer loyalty which is hypothesized to be mediated by corporate image.

LITERATURE REVIEW
Perceived Service Quality
Due to the rising importance of service quality, many scholars have tried to develop frameworks and
scales to measure the perception of service quality (Seth et al., 2005; Ladhari, 2009). One of the most
well-known models is the SERVQUAL model (Parasuraman et al. 1988). The SERVQUAL model
constitutes five service quality dimensions which are tangibles, reliability, responsiveness, assurance
and empathy. Tangibles represent the equipment, appearance of personnel and physical facilities.
Reliability refers to the ability of a firm to exercise the promised service dependably and accurately.
Responsiveness is defined as the willingness to assist participants and provide prompt attention.
Assurance represents courteous and knowledgeable employees and lastly, the empathy dimension
includes the caring and individual attention provided to users.
Service quality is further conceptualised and the definition utilised in hospitality studies such as
Asubonteng et al. (1996), as the difference between the customers perceptions and their expectations.
However, the preset definition above will not be used for this study. This is because the reliability and
validity of the disparity between performance and expectations has been persistently questioned and
several researchers have strongly suggested that perception scores alone propose a better indication of
service quality (Strandvik, 1994).
Since the inception of the SERVQUAL model, it has been found by studies like Shahin (2005) to
be the most reliable option of service quality measurement for three reasons 1) the location of the
quality related problems can be identified, 2) organizations can establish clear standards for service
delivery and 3) the perception of customers on service quality can be identified. Hence, the
SERVQUAL model has been widely cited in both service quality and hotel literature (e.g. Claver et.
al., 2006; Kandampully & Hu, 2007).

Factors Influencing Perceived Service Quality

Quality certifications
Due to the importance of service quality in the hotel platform, a large number of hotels have engaged
in obtaining quality certification (Brown & Van der Wiele, 1995). The most popular quality
certification is the award by the International Organization for Standardization (ISO) 9000 and 14000
series which is the main focus for all hospitality companies. The significant reason for obtaining
certification is to improve the quality image projected to the market (Claver & Pareira, 2006).
Moreover, Quazi and Padibjo (1998) noted that ISO-certified organizations in countries such as
Singapore gained various advantages and benefits such as increase in customer preference and
customer satisfaction and an enhancement of the firms image. Thus, it can be hypothesized that:
H1: The perceived service quality of ISOcertified hotels is higher than the non-certified hotels.

Cultural differences
Cultural differences play an important role in understanding differences between customers and are at
times perceived as one of the main factors affecting the preferences and values of consumers in opting
for products or services (Manrai & Manrai, 2009). Studies such as Hsu and Kang (2003) and Tsang
and Ap (2007) reveal that Asian tourists have higher expectations and evaluated perceived service
quality more unfavourably compared to the non-Asian tourists due to their concern on the amount of
money spent on the services. This is plausible since most of the Asian countries are developing
countries and the income per capita is relatively low, hence the need to ensure they get their moneys
worth. Therefore, it can be hypothesized that:
H2: Asian consumers tend to give more unfavourable ratings compared to Non-Asian consumers

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Service Quality, Corporate Image and Customer Loyalty

Customer loyalty in this study will be defined as the willingness to continue engaging in the services
of a hotel despite differences in prices and other factors. It will also be conceptualized as the
behavioral intention to recommend the services to others. This study will therefore adapt the indicators
of customer loyalty developed by Skogland and Siguaw (2004) which has partitioned loyalty into
three dimensions which are price insensitivity, repeat-patronage and positive word of mouth. A
positive relationship was found to exist between service quality and customer loyalty by studies such
as Kandampully and Suhartanto (2000) and Nguyen and LeBlanc (1998). It will be determined in this
study too whether service quality has an impact on customer loyalty.
Corporate image is defined as something that comes to the customers mind when they hear the
name of a business (Nguyen, 2006). Although there seems to be lack of consensus in the literature on
how to define and operationalize the image construct, this study borrowed from the research of
Kandampully and Suhartanto (2000) in developing the indicators for image. This operationalization is
deemed the most suitable as Kandampully and Suhartanto (2000)s study was also on the hotel
industry. Based on Kandampully and Suhartanto (2000)s study, image will be partitioned into two
dimensions which are image attributes and image holistic.
The impact of perceive service quality on loyalty is found to be enhanced with the presence of
corporate image. This is due to the fact that service quality is found to have a positive influence on the
hotel image (Kadampully & Suhartanto, 2000; Ngugen & LeBlanc, 1998) and image is then found to
have an impact on loyalty. Image influences loyalty as with a superior image a firm is likely to be
noticeable in the marketplace because it is able to attract both trial users and repeat customers
(Andreassen & Lindestad, 1998). Hence, we can infer that perceive service quality has a direct and
indirect influence on loyalty, whereby the indirect influence of service quality is mediated by
perception towards the hotel (corporate) image. The mediating influence of corporate image seems to
be very prominent as Nguyen and Leblanc (1998) confirm in their findings on financial services. They
claimed that once a consumer is a member of a financial institution, their sense of belonging to an
institution that has a strong image will become the main factor influencing loyalty, and the role of
perceived service quality as an influencing factor on loyalty will no longer exist. In this study, it will
be determined whether the same scenario applies to the hotel industry. The following hypotheses are
thus developed:
H3: There is a positive relationship between perceived service quality and corporate image. H 4:
There is a positive relationship between perceived service quality and customer loyalty. H 5:
There is a positive relationship between corporate image and customer loyalty.
H6: Corporate Image serves as a mediator in the relationship between perceived service quality and
customer loyalty

Quality Certifications

Corporate Image

Perceived Service
Quality

Customer Loyalty

Cultural Differences

Figure 1. Research model

METHODOLOGY
Sampling Method
This survey was conducted in two areas in Malaysia which are Kuala Lumpur and Penang. Kuala
Lumpur being the capital of Malaysia and Penang being an island frequented by tourists are two areas

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that are deemed to have a wider spectrum of people from different nationalities staying at hotels there.
These areas have a myriad of hotels including a number of ISO status hotels. This will enable the
study to capture the aspect of cultural differences and quality certification differences in service
quality ratings. Questionnaires were administered outside an ISO status hotel and a non-ISO status
hotel for both areas respectively. All four hotels were rated as five star hotels. For all hotels, an
attempt was made to obtain a sufficient number of respondents of Asian and non-Asian origin.
A sample size of 200 was chosen to facilitate the ability to conduct statistical tests such as factor
analysis whereby Hair et al. (2010) suggests a ratio of respondent to variable of 10:1 to be suitable. As
the highest number of items for a construct is 22 for the perceived service quality construct, the
sample size of 200 is quite suitable. In addition to this, according to the findings from Tabachnick and
Fidell (2001), 200 respondents for this study are suitable as the factor loadings for all the variables are
relatively high. The sample size of 200 also helps to ensure an equal number of customers from ISO
and non-ISO hotels. Of the 200, not all were usable questionnaires. Of the usable questionnaires, 94
questionnaires, distributed to ISO hotels and an equal number to non-ISO hotels, were taken as
samples. The non-Asian respondents for ISO hotels were higher (66%) compared to Asian
respondents and for non-ISO hotels, the Asian respondents were higher (69%).

Measurement
Customer and hotel characteristics are measured in terms of cultural differences (Asian and non-Asian
customers) and quality certification of hotels (ISO and non-ISO). The construct of perceived service
quality for this study will be based on the widely accepted SERVQUAL model which embodies 22
items, of which 4 items were used to measure the attribute of tangibility, 5 items for reliability, 4 items
for responsiveness, 4 items for assurance and 5 items for empathy.
The image construct can be divided into 6 items to measure the hotel image attributes and 4 items
for the holistic attributes. The 10 items are: The hotel is conveniently located; The hotel has up-todate physical facilities; The hotel has attractive interior design; The hotel is worth the price paid;
The hotel provides excellent quality of goods and services; The hotel has employees with excellent
performance; The hotel has distinctive atmosphere; The hotel has excellent reputation; The
hotel has attractive external appearance and The hotel has attractive layout.
The customer loyalty construct contains a battery of seven items on price insensitivity (2 items),
repeat-patronage intention (3 items) and propensity to spread positive word-of-mouth (2 items). The
items are: I consider myself to be a loyal guest of the hotel; If the hotel were to raise the price of
my stay, I would still continue to be a guest of the hotel; If a competing hotel were to offer a better
rate or discount on their service I would switch; In the near future, I intend to use this hotel more
often; As long as I travel to this area, I do not foresee myself switching to a different hotel; I
would highly recommend the hotel to my friends and family; and I am likely to make positive
comments about the hotel to my friends and relatives.
All constructs were measured on a 7-point Likert scale with a higher value indicating a stronger
agreement towards the statements in the scale. Hence a higher value would indicate a higher rating
towards quality, a stronger perception towards the image of the hotel and a higher loyalty towards the
hotel.

DATA ANALYSIS
Perceived Service Quality, Cultural Differences and Quality Certification
Exploratory Factor Analysis (EFA) was conducted to determine whether all the items of the service
quality dimensions fall into their respective dimensions. One item from the assurance dimension and
another from the empathy dimension were removed from the EFA results due to cross-loadings with
other dimensions. The final EFA results for the service quality dimensions are shows in Table 1. The
assumptions of the EFA are all met with a significant Bartlett test, a cumulative percentage of variance
extracted of 70.4%, an overall Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) of 0.717
and the communalities of all items are above 0.5. The reliability of all dimensions also meets the
acceptable standard of having a Cronbach Alpha of more than 0.7. These are all criteria stated as
acceptable by Hair et al. (2010).

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Cluster analysis was performed on the dimensions and also on the individual variables (the
variable that loads the highest on each factor). Two to four clusters were explored as indicated by the
agglomeration schedule. It was found that the most interpretable is the two cluster solution derived
from the factors.
Table 2 shows no significant cluster differences in ratings for the dimensions of tangibles and
responsiveness. Differences however are observed for reliability, assurance and empathy whereby
cluster 2 was given a higher rating (average values close to 6) compared to cluster 1 (average values
closer to 4 except for assurance). Cluster 2 is therefore labelled as people with highly positive ratings
and cluster 1 as people with less positive ratings.
There seems to be a strong relationship between hotels quality certification and perceived service
quality as shown by the Lambda value of 0.525 in Table 3. ISO hotels mainly fall into cluster 2
(87.2%) and those of non-ISO hotels mainly fall into cluster 1 (72.3%). Cultural differences in ratings
is not as prominent but the Lambda value of close to 0.3 also indicates a moderate differences
whereby a higher proportion of non-Asians fall into cluster 2 (78%) and a higher proportion of Asians
fall into cluster 1 (62%).
Exploratory analyses using Mann Whitney and Kruskal Wallis tests were used to determine the
differences in terms of the perceive service quality ratings of the dimensions and factors such as
cultural differences and quality certification. It was found that for quality certification, there is no
significant difference in terms of the tangible dimension but for all other dimensions the rating for ISO
hotels were significantly higher. For cultural differences, there is no significant differences for the
tangible and responsiveness dimension but significant differences were found for other dimensions
with non-Asians providing a much higher rating compared to Asians.
All the findings above seem to indicate that quality certification followed by cultural differences
seem to have a strong influence on perceive service quality. Findings also show that differences are all
mainly for the dimensions of reliability, assurance and empathy and no significant differences (or not
much of difference) for tangibility and responsiveness. The consensus in the results of Tables 2 and 3
and the exploratory analysis on the factors using non-parametric tests all validate the fact that the
cluster solution chosen and labelling of clusters are appropriate.

Image and Loyality and Its Relationship With Perceived Service Quality,
Cultural Differances and Quality Certification
Confirmatory Factor Analysis was performed on image and customer loyalty and the results are shown
in Table 4. For image, no items were removed and the percentage of variance extracted was 61%. For
loyalty, one item was removed due to its low communality value and the removal of this item
increased the percentage of variance extracted from 64% to 68.5%. The image factor is hence not
explained as well as the loyalty factor but in social science studies, a value of above 60% is also
deemed acceptable (Hair et al., 2010) and furthermore both the factors have a high reliability value.
With reference to Table 4, Model (1) shows that cluster differences have an influence on rating of
image. The effect size is large with a partial eta squared more than 0.14 (Cohen, 1988 in Kinear and
2
Gray, 2011), the power of this influence is strong (more than 80%) and the adjusted R shows that the
fit of the model is also moderately strong (0.449). In terms of the influence of the clusters on loyalty,
2
although model (2) shows that cluster differences have some influence on loyalty, the adjusted R
indicates that this influence is not strong (0,288). Furthermore, when image is added to the model
(model 3), cluster differences becomes insignificant. Image however is significant with a strong effect
2
size and power of the study plus a moderately high adjusted R . This indicates that cluster differences
are for image and not loyalty but image significantly influences loyalty. Hence, we can infer that
image is a full mediator in the influence of perceived service quality on loyalty. Finally, we find that
the results of Table 5 is as expected whereby for cluster 2 (which are respondents who had given a
higher service quality rating), the ratings for image and loyalty are also higher. Ratings of ISO hotels
and ratings of non-Asians are also significantly higher for image and loyalty.

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Table 1. Factor loadings and descriptive statistics for service quality dimensions
Tangibles
Tangibles
The hotel has
visually
appealing materials
The hotel has modern
equipment
The hotel has staff with neat
appearance
The hotel has
visually
appealing facilities
Reliability
The hotel shows a genuine
interest in solving guest
problems
The hotel provides error free
services
The hotel provides
its
services at the promised time
The hotel performs
the
service right the first time
The hotel keeps its promise
of doing things on time
Responsiveness
The hotel staff are willing to
help guests
The hotel keeps customers
informed of the performance
of services
Employees at the hotel
provide prompt service to
the guests
Even if busy, hotel staff are
available to meet guests
needs
Assurance
The
hotel
staff
are
consistently courteous
The hotel
staff instill
confidence in guests
The hotel makes guests feel
safe in their transaction
Empathy
The hotel provides guests
with individual attention
The hotel staff understand
the guests specific needs
The hotel has guests best
interest at heart
% of Variance Extracted
Reliability
Coefficient
(Cronbach Alpha)
Mean
Standard deviation

nd

Reliability

Responsiveness

Assurance

Empathy

0.884
0.883
0.883
0.867

0.835

0.804
0.778
0.698
0.660

0.876
0.822

0.813

0.763

0.792
0.728
0.647

0.796
0.766
0.760
16.878
0.906

17.093
0.867

14.411
0.838

10.503
0.702

11.547
0.766

5.45
0.78

4.99
0.95

5.50
0.75

5.4
0.76

5.0
0.89

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Table 2. Description of clusters according to the mean service quality ratings

Tangibles
Reliability
Responsiven
ess
Assurance
Empathy
***

Cluster 1
(Less positive ratings)
5.35
4.17
5.41

Cluster 2
(Highly positive ratings)
5.53
5.59
5.57

4.97
4.26

5.73
5.54

p value < 0.001,

**

p value < 0.01, *p value < 0.5,

n.s.

F value
2.46n.s.

***

230.752
n.s.
2.12

***

59.61
***
191.78

Results are not significant

Table 3. Description of clusters by culture and quality certification

Cluster 1
Cultural Differences
Asians
Non-Asians
Quality Certification
ISO
Non-ISO

Note:

***

p value < 0.001,

**

Cluster 2

Lambda test value /

Chi Square value

60 (61.9%)
20 (22%)

37 (38.1%)
71 (78%)

12 (12.8%)
68 (72.3%)

82 (87.2%)
26 (27.7%)

p value < 0.01, *p value < 0.5,

0.288***
(Lambda)
***

n.s.

0.525
(Lambda)

Results are not significant

Table 4. ANOVA and ANCOVA results of perceived service qualitys influence on image and loyalty
Dependent
Variable
(Model)

Image
(1)
F value

Independent
variable
Cluster
Covariate
Image
2
Adjusted R
***

153.649

***

Effect
Size
(Partial
Eta
Squared)
0.452

Loyalty
(2)
Power
of the
Study

F
value

0.452 76.511

***

Effect
Power F value
Size
of the
(Partial
Study
Eta
Squared)
0.291

0.449

p value < 0.001,

**

p value < 0.01, *p value < 0.5,

Loyalty
(3)

n.s.

3.93
0.021
***
68.83
0.271

0.288

0.288
n.s.

Effect
Size
(Partial
Eta
Squared)

Power
of the
Study

0.505
1.000

0.478

results are not significant

Table 5. Mean image and loyalty by service quality clusters, cultural difference and quality
certification
Image
Clusters

Cluster 1
(Less positive ratings)

4.61

153.65

Loyalty
Mean

Mean

***

4.18

F
76.511
***

Cluster 2
(Highly positive ratings)
Cultural
Differences

nd

5.63

Asian

4.94

Non-Asian

5.46

5.31
26.5

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29.5

***

5.23

132

Table 5. Mean image and loyalty by service quality clusters, cultural difference and quality
certification (continued)
Image
Quality
Certification

ISO

Mean
5.63

F
94.09

***

Loyalty
Mean
F
**
5.32
53.31
*

Non-ISO
4.76
Total
5.19
Results of Confirmatory Factor Analysis and Reliability Analysis
% of Variance Extracted
61%
Reliability Value (Cronbach Alpha)
0.902

4.34
4.83
68.5%
0.929

CONCLUSION AND MANAGERIAL IMPLICATIONS

In conclusion, we deduce that guests have a positive view about hotels in Malaysia based on the
relatively high overall mean values for perceived service quality, corporate image and customer
loyalty. Quality certifications and cultural differences pose a significant influence on perceived service
quality with quality certifications demonstrating the strongest influence. Hotels with ISO quality
certification are portrayed to be of high quality. This is as expected as standardization of the services
layout and delivery of promised services by hotels, as required by quality certificates, would most
likely lead to greater customer satisfaction (Claver & Pareira, 2006). Hence, this research suggests a
need for more hotels in Malaysia to adopt quality certification.
Asian customers are found to have lower ratings compared to Non-Asian customers. This supports
claims made by studies such as Hsu and Kang (2003) and Tsang and Ap (2007). Asians are more
concerned about the hotel service quality as they want to make sure that they get their moneys worth.
Thus, hotel operators must consistently ensure that their services are relevant to their customers
requirements. This can be achieved through customer feedback programs from time to time. Reisinger
and Turner (2003) suggest that cultural training of hotel employees is needed to upgrade the delivery
of quality services to hotel guests with various cultural backgrounds. This move will also allow the
employees to improve in terms of communication and service productivity in the workplace. Although
quality certification and cultural differences in the clusters were detected, the findings show that the
clusters are mainly defined by the aspect of reliability, assurance and empathy and not by factors such
as responsiveness and tangibility.
Finally, this study reveals that corporate image is a full mediator in the relationship between service
quality and loyalty. This relationship is also supported by Nguyen and LeBlanc (1998). This shows
that although initially service quality plays an important role in creating a positive image, once the
customer has decided to frequent a hotel due to the positive image they have of the hotel, they will no
longer pay that much attention to the quality of the services when considering whether to revisit or to
recommend the hotel to others. The influence of service quality on customer loyalty via corporate
image provides a clear message to hotels that it is important to shift away from the old paradigm of
marketing strategies because the corporate image of a hotel can no longer be improved through
marketing and advertisement, but should be effectively managed via the provision of a superior and
outstanding service (Kandampully & Suhartanto, 2007). Managers of hotels are advised to develop
long term service oriented strategies that will help to orchestrate a positive hotel image. Therefore,
from a strategic management perspective of service quality, in-house training programs should be
conscientious and improve employee helpfulness, language skills, check-in/check-out efficiency,
appearance, and courtesy.

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