Service quality evaluation and the

mediating role of perceived value and

customer satisfaction in customer loyalty

Yousef Keshavarz and Dariyoush Jamshidi

Yousef Keshavarz is based at Abstract

the Department of Marketing Purpose – Loyalty has become the most important strategic aim in the hotel industry. The purpose of this
and Management, Islamic Azad paper is to obtain an empirical understanding of loyalty in the Kuala Lumpur hotel sector.
University, Neyriz, Iran. Design/methodology/approach – The dimensions of service quality as perceived by hotel customers were
Dariyoush Jamshidi is based at identified through the literature review. Hypotheses were formulated and tested to: examine the effects of
the Department of Marketing process quality and outcome quality on perceived value, tourist satisfaction, and tourist loyalty; and to
and Management, Islamic Azad determine if perceived value and tourist satisfaction play a mediating role in the effect of process quality and
outcome quality on tourist loyalty. In this study, the sample was 417 respondents from the international
University, Khonj Branch, Iran.
tourists who stay at least one night in four- or five stars hotels in Kuala Lumpur. Collected data were analyzed
by structural equation modeling.
Findings – The statistical findings supported a relationship between process quality and outcome quality
with perceived value and tourist satisfaction, and tourist loyalty with perceived value and tourist satisfaction.
The results also indicated that process quality and outcome quality did not have a direct effect on tourist
loyalty. Perceived value and tourist satisfaction mediated the relationship between process quality and
outcome quality with tourist loyalty.
Originality/value – The finding of this study proposed that the hoteliers targeting international tourists with
service quality including process and outcome quality should focus more on these factors to build loyalty. For
instance, the tangible, responsiveness, reliability, empathy, assurance, and convenience as the dimensions
of process quality and valence, waiting time, and sociability as the dimensions of outcome quality should
meet the needs of the international tourists, therefore increasing tourist loyalty through perceived value and
tourist satisfaction.
Keywords Service quality, Perceived value
Paper type Research paper

Introduction
Services are considered to be primarily experiential as they are intangible, hence, difficult to
measure. The hotel is accommodation and a part of the service industry and hoteliers are
required to be aware of the principles of service marketing (Lee and Cheng, 2018; Razalli, 2008).
Hotels pursue customer loyalty by providing service quality and meeting their expectations and
anticipations. Therefore, hoteliers need to know about their customers’ expectations and try to
meet their needs (Han and Hyun, 2017). According to Wu and Ko (2013), the hotel industry has
problems in measuring and improving their service performances from a customer’s viewpoint
due to the lack of an integrative conceptual model and measurement scale. Based on Lin (2005),
hotels which fail to perceive and meet their customers’ expectations would be out of the market
Received 10 September 2017 between seven and nine years.
Revised 20 November 2017
21 January 2018 Poor service quality contributes to losing an average of 12 percent of the customers
Accepted 23 February 2018
(Riscinto-Kozub, 2008). Service quality is the key to a hotel’s ability to differentiate itself from
© International Tourism Studies
Association its competitors and gain customer loyalty (Kim et al., 2008; Choi and Kim, 2013). Loyalty has

PAGE 220 j INTERNATIONAL JOURNAL OF TOURISM CITIES j VOL. 4 NO. 2 2018, pp. 220-244, Emerald Publishing Limited, ISSN 2056-5607 DOI 10.1108/IJTC-09-2017-0044
become the most important strategic aim in today’s competitive business environment
(Chai et al., 2015; Gursoy et al., 2014; Oliver, 1999). Reichheld and Sasser (1989) argued that an
increase of 2 percent of customers who purchase again can help an organization to decrease its
costs by 10 percent, because 60 percent of new customers are attracted by word-of-mouth.
A loyal customer in luxury hotels, for example, both returns and spreads positive words-of-mouth
recommendation about the hotel to a median of ten people having a net present value of more
than $100,000 (Kotler et al., 1999). However, Berezina et al. (2012) declared that the customers
might not like to revisit the hotel because of the following reasons: first, the customer did not enjoy
the trip to this destination and preferred to look for a new area. Second, the customer is
interested to try new events from the other hotels. Third, they are affected by the price and service
quality from the other hotels.
One of the important sources of income in Malaysia is the tourism industry (Salleh et al., 2016).
The hotel industry is one of the important parts of the tourism industry. The occupancy rate of the
hotels in Singapore and Asia was 88.1 and 78.7 percent (Millenniumhotels, 2013), while in
Malaysia this rate was 62.4 (MTSA, 2013). Furthermore, the occupancy rate of four- and five-star
hotels in Malaysia was less than three-star hotels (Awang et al., 2008), while the occupancy rate
of four- and five-star hotels in comparison to all kinds of hotels was less than the neighboring
countries (ETP, 2010).
Furthermore, from an interview with two sale managers of four- and five-star hotels in Malaysia,
it was found that the loyalty rate was low. For example, the sales manager of the Marriot hotel
believed that increasing loyalty affects the occupancy rate. The IOI resort’s sales manager argued
that the loyalty rate was low (3 percent) while the ideal loyalty rate for a hotel should be 10 percent.
Therefore, it is assumed that loyalty is an important factor affecting four- and five-star hotels in
Malaysia to attract more international customers and increase the occupancy rate.
What is the cause of such low loyalty rates? Service quality is a vital determinant of attracting
frequent customers to a hotel (Akbaba, 2006; Lovelock, 1983; Rodger et al., 2015; Saleh and
Ryan, 1991; So et al., 2013). Yet, the traditional scales of service quality provided in SERVQUAL,
LODGSERV and HOLSERV might not be used suitably to evaluate service quality in the hotel
industry (Ekinci et al., 1998; Mei et al., 1999; Wilkins et al., 2007). Convenience is one of the
important dimensions of service quality in the hotel industry, which is not considered in the
LODGSERV scale (Akbaba, 2006; Ferreira et al., 2014). In several empirical studies, the effect of
convenience as a dimension of process quality on customer satisfaction has been supported
(Chan and Wong, 2006; Kim et al., 2006; Siu and Cheung, 2001; Yang et al., 2003). Therefore,
the issue is whether or not the convenience as a dimension of process quality is in synch with the
LODGSERV scale of measuring customer satisfaction.
Moreover, researches on service quality have mainly focused on the importance of service quality,
which is mentioned as the process quality (Ekinci et al., 2003; Mei et al., 1999; Mey et al., 2006;
Mola and Jusoh, 2011; Poon and Low, 2005; Razalli, 2008). However, scholars have criticized
that most of the previous studies had a focus on process quality, while none of them highlighted
whether or not the outcome quality was as important as the process quality (Akbaba, 2006;
Dabholkar and Overby, 2005; Luk and Layton, 2004). Nonetheless, according to Powpaka
(1996), the outcome quality in some industries was more important than the process quality.
Therefore, there is a dearth of research to recognize that service quality, including process and
outcome quality, simultaneously affects customer satisfaction, perceived value, and loyalty in
four- and five-star hotels, where the guests are more sensitive to the quality of service.
Consequently, this study endeavors to cover this gap in the literature by introducing how the
process quality and outcome quality affect the customer loyalty in four- and five-star hotels.
Understanding the customer’s perception of loyalty and its determinants will help the hotel
managers to develop an appropriate competitive strategy. In Malaysia, as the tourism industry is
important in the country, the hotel industry plays a vital role in attracting more international
customers (ETP, 2010). By providing quality service including process and outcome quality,
hotels in Malaysia can raise international customers’ loyalty. This study has tried to provide a
better understanding of the international customer loyalty in four- and five-star hotels in Malaysia.
Furthermore, this study has investigated the effects of service quality (including process and

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 outcome quality) on customer loyalty in the hotel industry. The results of this study are expected
to reduce the ambiguity surrounding the dimensions and determinants of service quality as well
as the effect of service quality on customer loyalty.
In this study, customer loyalty was operationally defined as the answer of the respondents to six
items developed by Deng et al. (2013) and So et al. (2013). The customer satisfaction scale which
was used in this study consisted four items developed by Deng et al. (2013) and Back (2001).
Perceived value scales consisted of 12 items, supported by Walls (2013). Moreover, the
LODGSERV scale developed by Knutson et al. (1990) with one dimension (convenience)
developed by Akbaba (2006) was used to determine the responses of the customers to “process
quality.” The scale developed by Wu and Ko (2013) was used to measure outcome quality.

Literature review and hypothesis development

Several studies have adopted the loyalty model regarding the process quality, outcome quality,
perceived value, satisfaction and loyalty in the hotel industry. In proposing the relationships
between the process quality, the outcome quality, the perceived value, the customer satisfaction
and loyalty, this study applied the comprehensive approach as proposed by Choi and
Kim (2013), Cronin et al. (2000), and Kim (2011). Choi and Kim (2013) developed a model in
which the influence of the outcome quality on customer satisfaction was investigated, revealing
that the outcome quality had a direct effect on customer satisfaction. It was also concluded that
customer satisfaction was a mediator variable between the outcome quality and the customer
loyalty. Liat and Abdul-Rashid (2013) provided a model of customer loyalty in the hotel industry in
which the loyalty was affected by satisfaction, while satisfaction was influenced by the process
and outcome quality. Liat and Abdul-Rashid (2011) found that customer satisfaction mediated
the relationship between the process and outcome quality with customer loyalty.
Cronin et al. (2000) carried out a study wherein the service quality, customer satisfaction, and
perceived value were proposed to directly affect the behavioral loyalty. The service quality and the
perceived value also influenced the behavioral loyalty indirectly via customer satisfaction. The reason
for adopting this approach was that this model had been successfully tested in a variety of industries
(Brady and Cronin, 2001; Cronin et al., 2000; Hutchinson et al., 2009; Lai et al., 2009). Moreover,
this comprehensive model was more robust compared to the other models which were focusing on
customer satisfaction or perceived value as a mediator variable in the relationship between loyalty
and its determinants (Brady et al., 2005; Cronin et al., 2000). However, this model had to be tested
in the hotel industry.
A conceptual model was introduced and validated by Kim (2011). Indeed, the relationships between
the service orientation, the service quality, the customer satisfaction, and the customer loyalty were
integrated into this model (Kim, 2011). However, no model has been developed to simultaneously
investigate the influences of the process quality and the outcome quality on the customer loyalty by
the mediating effect of the perceived value and customer satisfaction in the hotel industry. Therefore,
there was a need to conduct a research to integrate a model of the customer loyalty in the hotel
industry by specifying the process quality and outcome quality as well as the perceived value and
customer satisfaction as mediators to fulfill the critical gaps reported in the literature.
From the previous reviews of the literature, the theoretical model of the customer loyalty in the hotel
industry in Malaysia involved the process quality, outcome quality, perceived value, customer
satisfaction, and loyalty. The conceptual model showing the effects of the process and outcome
quality on customer loyalty through the mediating role of the perceived value and customer
satisfaction is provided in Figure 1. To design this model and test it based on the international
guests’ opinions staying in four- and five-star hotels in Kuala Lumpur, five dimensions of the
process quality were derived from the LODGSERV scale provided by Knutson et al. (1990) which
included tangible, responsiveness, assurance, reliability, and empathy. This scale was tested in the
hotel industry, and all the LODGSERV dimensions were supported in affecting the perceived
service quality by the guests. The convenience dimension of the service quality was supported by
Akbaba (2006). In this dimension, the evaluations on the guests’ attitudes toward the easiness to
access, reaching information, and resolving the guests’ complaints were not mentioned in the
LODGSERV scale.

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Figure 1 Conceptual framework of the study

Process Quality
Perceived
- Tangible Value
- Responsiveness
- Reliability
- Assurance
- Empathy
- Convenience Customer
Loyalty

Outcome Quality

- Valence
- Waiting time
- Sociability Customer
Satisfaction

Although the service quality with different dimensions was evaluated to affect the customer
satisfaction and loyalty in several studies, the outcome quality was ignored. However, few studies
found that the outcome quality was important in evaluating the service quality by the customers
as well as the process quality (Cronin and Taylor, 1992; Powpaka, 1996). Grönroos (1984)
believed that the service quality was divided into two main components, namely, technical and
functional quality. The process quality represented functional quality, and outcome quality
connoted technical quality. Therefore, the outcome quality was provided as a variable with three
dimensions affecting the customer satisfaction alongside the process quality.
It needs to be accentuated that the perceived value has been investigated in several studies
(Ekinci et al., 2003; Oh, 1999; Nasution and Mavondo, 2008; Zeleti et al., 2016; Sabiote-Ortiz
et al., 2016; Joung et al., 2016). Walls (2013) developed a model in which the effects of perceived
value and loyalty were investigated in addition to reporting no relationship between service quality
and perceived value. Moreover, this model was tested in the hotel sector. Finally, customer loyalty
was provided in this research model as the dependent variable which was affected by the service
quality (process and outcome quality), perceived value, and customer satisfaction. It is of note
that most researches checked one component of loyalty such as attitudinal loyalty (Cronin et al.,
2000; Chitty et al., 2007), or behavioral loyalty (Back, 2005).
To support the model, two theories were provided from the literature. The first theory related to
the model was the expectancy-disconfirmation theory provided by Oliver (1980). Based on this
theory, customer responses to the service quality were affected by the comparison between real
services with expectation. Therefore, customer satisfaction occurred if they perceived service
quality more than their expectations. The second theory provided in this study to support the
relationship between the customer loyalty and its antecedents in the model was the comparison-
level theory (Skogland and Siguaw, 2004). The foundation of this theory is the standard by which
someone determines his or her satisfaction with a service that contributes to determine whether
that person changes the company or remains in that relationship (Skogland and Siguaw, 2004).
Finally, to support the composite component of the customer loyalty in the model, the theory of
reasoned action expanded by Fishbein and Ajzen (1975) was provided in this study. According to
this theory, the attitude toward the behavior and the subjective norm are the two factors which
form the behavioral intention. The attitude denotes to the person’s own performance of the
behavior, rather than the performance. The subjective norm is the customer’s set of beliefs.
The normative beliefs are concerned with the likelihood that important referent individuals or
groups would approve or disapprove performing the behavior (Meskaran et al., 2013).
According to Fishbein and Ajzen (1975), the behavior is assumed to be consistent or inconsistent
with a person’s attitude on the basis of largely intuitive considerations. They argued that attitudinal
and behavioral entities may be viewed as consisting of four different elements: the action, the target

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 at which the action is directed, the context in which the action is performed, and the time at which it
is performed. The behavioral criteria based on a single observation always involve four specific
elements. An attitudinal predictor is said to correspond to the behavioral criterion to the extent that
the attitudinal entity is identical in all four elements with the behavioral entity. They are not based on
direct comparisons of the effects produced by variations in the degree of correspondence.
According to McCain et al. (2005), loyalty is generated through a three-path process, including the
belief about the quality of service, affect (satisfaction), and loyalty. Therefore, these three phases are
provided in the model.

Conceptualization and hypotheses

Process quality
The links between the process quality and customer satisfaction have been supported by several
studies (Ariffin and Maghzi, 2012; Hwang and Lambert, 2008; Lloyd et al., 2011; Riscinto-Kozub,
2008; Yang et al., 2003). It has been found that all the scales of service quality emphasized on the
process quality (Ekinci et al., 2003; Mei et al., 1999; Mey et al., 2006; Mola and Jusoh, 2011;
Poon and Low, 2005; Razalli, 2008). Based on Poon and Low (2005), customer satisfaction is a
whole assessment of the performance, consistent with prior experiences with a firm.
Ariffin and Maghzi (2012) argued that customer satisfaction depends on the degree to which the
customers receive the services that match with their expectations. According to Kim et al. (2008)
and Zeithaml et al. (2002), providing a service by new facilities and convenient ways can lead to an
increase in the service quality of the hotel, and it enhances customer satisfaction. This discussion
contributes to the development of the hypothesis in which the relationship between process
quality and customer satisfaction in the hotel industry is examined as follow:
H1. Process quality has a direct positive effect on customer satisfaction.
To date, there have been numerous reports confirming the relationship between the service
quality as a process, customer satisfaction, the perceived value, as well as loyalty. It is clear that
out of the many issues, the amount of the customers’ satisfaction of the quality of the product or
services along with their perceived values would determine the level of their being loyal to a certain
entity (Anderson and Sullivan, 1993; Back, 2005; Brodie et al., 2009; Cronin et al., 2000;
Mohaidin et al., 2017). The hotel guests would show satisfaction once distinguishing that the
quality of the received service surpassed what they needed, or wanted, or expected. A high
perceived value will be prompted by a superior quality of service in consort with a rational
customer sacrifice, giving rise to the loyalty behavior. Such service consumption experience at
the hotels denotes that there is a direct association between the process quality and loyalty, and
that there is an indirect relationship between customer satisfaction and the perceived value.
As confirmed by the relevant literature (Zeithaml et al., 2006), both the customer perceived benefit
and the perceived sacrifice customer would specify the perceived value. Guided, by this
conclusion, the hypothesis on the relationships between process quality and the perceived value
is formulated as follows:
H2. Process quality has a direct positive effect on perceived value.
At this point, it is indispensable to declare that there are contradictory results reported by the
surveys evaluating the service quality as the process quality and its effects on customer loyalty. As
demonstrated by Zeithaml et al. (1996), a direct association exists between the service quality and
behavioral intentions. It is evidently approved through testing in contexts such as manufacturing
and trading settings, and the services where the service quality as a process quality affects loyalty;
nonetheless, it is stated that the effect level differs from one context to another.
Once again, it needs to be underlined that there are inconsistencies in relation to the results of
the empirical researches in the hotel setting investigating the relationships between the process
quality and loyalty. While it was concluded by Kandampully et al. (2011) and Kim et al. (2008)
that no significant correlation exists between the service quality as a process quality and loyalty,
several studies supported the relationship between service quality as a process quality
and customer loyalty (Choi and Kim, 2013; Cronin et al., 2000; Hapsari et al., 2017;

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Siu and Cheung, 2001). Accordingly, the hypothesis on the association between process
quality and customer loyalty is formulated as follows:
H3. Process quality has a direct positive effect on customer loyalty.

Outcome quality
To date, most studies have emphasized service quality as a key determinant of customer
satisfaction and loyalty (Ekinci et al., 2003; Mei et al., 1999; Mey et al., 2006; Mola and Jusoh,
2011; Poon and Low, 2005; Razalli, 2008). These studies have shown service quality as a
process quality attribute to explain and/or predict the customers’ satisfaction and loyalty.
Regrettably, the importance of the outcome quality as a key determinant of satisfaction and
loyalty has been sidelined (Akbaba, 2006; Luk and Layton, 2004). However, Kang (2006) and
Wu (2009) noted that addressing the outcome quality in the service quality instruments seemed
to be a daunting task.
According to Grönroos (1990), the outcome quality is concerned with what the customer
receives from the service, whereas the process quality is related to the service approach or the
manner in which the customer receives the service. It had been reported that “the inclusion of
the outcome quality component into the model/measurement scale significantly improved the
explanatory power and predictive validity” (Powpaka, 1996, p. 5). Not much research on
hospitality service had recognized the importance of the outcome attributes to guest evaluation at
the service quality (Luk and Layton, 2004).
Hsieh and Hiang (2004) argued that the customer’s perception of the outcome quality is a critical
factor in evaluating the service quality; hence, it affects customer satisfaction. Zhao et al. (2012)
indicated that the outcome quality has significant and positive effects on the cumulative
satisfaction, while it does not exert any effects on the transaction-specific satisfaction. Indeed, the
relationship between outcome quality and customer satisfaction has been supported by several
studies (Alexandris et al., 2004; Choi and Kim, 2013; Liat and Abdul-Rashid, 2011). Thus, the
hypothesis in which the link between the outcome qualities with customer satisfaction was
examined and formulated as follows:
H4. Outcome quality has a significant effect on customer satisfaction.
The perceived value has also been assessed in association with the service outcome (Brodie
et al., 2009; Chang, 2008; Clemes et al., 2009; Walls, 2013). Rust and Oliver (1994) assumed
that the qualified service perception could lead to the value and enhance the satisfaction. Chang
(2008) stated that value is dependent on the customer’s needs. Patterson and Spreng (1997)
found that the expected perceived value is a customer’s expectation related to the outcome of
buying a product or service based on their sacrifices and future benefits. Thus, product and
service quality factors identified at the time of purchase influence the perceived value. However,
customers also consider the potential of longer term losses when evaluating the value relative to
the purchase price. Consumers consider the consequences of the performance of the services
when developing the perceptions of value (Sweeney and Soutar, 2001).
Sweeney and Soutar (2001) regarded perceived value as an outcome of the perceived product or
service quality. Service quality has been shown to be an antecedent of the perceived value
(Bolton and Drew, 1991). However, it is unclear how the two dimensions of service quality, including
functional and technical, relate to consumers’ perceptions of the value. Sweeney and Soutar (2001)
found that technical service quality, which is considered as the outcome quality by Grönroos
(1984), had a significant direct influence on perceived value. Accordingly, the hypothesis of the
relationship between the outcome quality and perceived value is formulated as follows:
H5. Outcome quality has a direct positive effect on perceived value.
According to Liat and Abdul-Rashid (2011), the outcome quality had a positive impact on
customer loyalty through customer satisfaction. Recently, Choi and Kim (2013) found that the
outcome quality had a significant influence on the customer satisfaction and customer loyalty.
It was demonstrated that the outcome quality should be considered as the pivotal elements in
creating customer satisfaction and that customer satisfaction should be treated as a strategic
variable to enhance customer loyalty. Moreover, Gallarza and Gil (2006) found that outcome

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 quality is an antecedent of perceived value and satisfaction is the behavioral consequence of
the perceived value, with loyalty attitude being the final outcome. Consequently, the hypothesis
of the relationship between outcome quality and customer loyalty is expressed as follows:
H6. Outcome quality has a direct positive effect on customer loyalty.

Perceived value, customer satisfaction and customer loyalty

A high customer value leads to high levels of customer retention (Naumann, 1995). Customer
satisfaction and customer loyalty can be empirically acknowledged as the results of the perceived
value (Brodie et al., 2009; Gallarza and Gil, 2006; Hutchinson et al., 2009). Chong (2017) found
that Malaysian customers are loyal to the hotel since they find that the loyalty programs of the
hotel were useful and would provide an advantage to them. As a whole, the mentioned surveys
have agreeably underlined the perceived value as an imperative determining factor of loyalty (Gill
et al., 2007; Kim et al., 2008; Poon and Low, 2005; Nasution and Mavondo, 2008; Oh, 1999).
Cronin et al. (2000) found that the perceived value had a significant direct effect on the behavioral
intention that was considered as an attitudinal concept of loyalty. Accordingly, the hypothesis on
the association between the perceived value with customer loyalty is expressed as follows:
H7. Perceived value has a direct positive effect on customer loyalty.
There exists a paradigm known as the disconfirmation-of-expectation which asserts that
satisfaction contributes to loyalty (Oliver, 1980). In detail, being satisfied by making use of a
product or service grows and gives rise to the customer’s belief in the quality of the product or
service. This ends up with a tendency to repurchase. As proved through the results reported by
various studies in a variety of industries, there is an established correlation between customer
satisfaction and loyalty (Lai et al., 2009; Ali et al., 2016). Similarly, it is shown by the surveys of the
hotel industry that there is a positive relationship between guest satisfaction and loyalty (Chitty
et al., 2007; Kim et al., 2008; Yoon and Uysal, 2005). Yet, the majority of such researches have
merely explored the correlation between customer satisfaction and conative (Chitty et al., 2007;
Oh, 1999), cognitive (Back, 2005), or the overall loyalty (Han et al., 2008). However, Heskett et al.
(1997) maintained that the relationship between customer satisfaction and customer loyalty was
the weakest link. In fact, it was concluded that less than 40 percent of the hotel guests who rated
a particular service as satisfactory were more likely to return, while 90 percent of them who rated
a high rank of satisfaction intended to come back. Guided by this conclusion, the hypothesis on
the relationships between customer satisfaction and customer loyalty is formulated as follows:
H8. Customer satisfaction has a direct positive effect on customer loyalty.

Mediating effect of customer satisfaction and perceived value

Yet, indirect relationships between service quality and loyalty through the perceived value have
been announced by several studies (Chitty et al., 2007; Kim et al., 2008; Hapsari et al., 2016).
As confirmed by Lai et al. (2009), there was an indirect correlation between the service quality and
loyalty via the perceived value. Moreover, the importance of the perceived value as a variable
which mediates the relationship between loyalty and its determinants such as service quality has
been supported by several studies (Athanassopoulos, 2000; Brady et al., 2005; Cronin et al.,
2000; Fornell et al., 1996). In line with the model and the related literature review, the hypotheses
related to the perceived value as a mediator between process and outcome quality and customer
loyalty are formulated as follows:
H9. Perceived value has a mediating role in the relationship between process quality and
customer loyalty.
H10. Perceived value has a mediating role in the relationship between outcome quality and
customer loyalty.
The relationship between service quality and customer loyalty through customer satisfaction has
been supported by several studies (Chitty et al., 2007; Ekinci et al., 2003; Oh, 1999). Brady and
Cronin (2001) postulated that there were associations between service quality, satisfaction,
perceived value, and behavioral intention. It was concluded that the service quality exerted a direct
impact on the perceived value, satisfaction, and behavioral intention. Brady and Cronin also

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revealed that service quality had an indirect impact on behavioral intentions via the perceived value
and satisfaction. Furthermore, Cronin et al. (2000) highlighted that there existed an indirect
association between service quality and behavior intention in numerous service settings.
A significant indirect association was also reported between service quality and the behavior intention
through the perceived value and customer satisfaction (Cronin et al., 2000; Kim, 2011; Oh, 1999).
The service quality had a significant effect only toward the cognitive loyalty in the hotel, as affirmed
by Han et al. (2008). Nonetheless, in the mentioned study conducted in two hotels in China, no
significant relationships were observed among the other loyalty dimensions. It was approved
through the findings that there existed indirect associations between the service quality and
customer loyalty through the perceived value and customer satisfaction. Furthermore, the
relationship between process quality and outcome quality with loyalty by the mediating role of
customer satisfaction was supported by Liat and Abdul-Rashid (2011), Choi and Kim (2013) and
Subrahmanyam (2017). In line with the review of literature, the hypotheses on customer
perception on service quality including the process and outcome quality and customer loyalty by
the mediating role of customer satisfaction are formulated as follows:
H11. Customer satisfaction has a mediating role in the relationship between process quality and
customer loyalty.
H12. Customer satisfaction has a mediating role in the relationship between outcome quality and
customer loyalty.

Mediating effect of customer satisfaction

The concept of the customer value should be an important element in the design and
implementation of corporate strategies (Naumann, 1995). According to Naumann (1995), a good
value contributes to higher customer loyalty and retention. The indirect influence of the value on
the behavioral intention via satisfaction was supported by service marketing researchers and
postulated the value as a direct and indirect predictor of loyalty (Chen and Chen, 2010;
Kim et al., 2013). Moreover, it was supported that customer satisfaction plays a mediating role
between the perceived value and loyalty in several industries (Cronin et al., 2000; Lai et al., 2009;
Yang and Peterson, 2004). Accordingly, the hypothesis on the mediating role of customer
satisfaction between perceived value and customer loyalty is formulated as follows:
H13. Customer satisfaction has a mediating role in the relationship between the perceived value
and customer loyalty.

Methodology
Research instrument
A questionnaire was designed in this study to collect the data from the international tourists who
stayed at four- or five-star hotels in Kuala Lumpur. The questionnaire was divided into four sections.
The first section was designed to collect the data dealing with international tourists’ perceptions
about the hotel’s service quality (process and outcome quality). There were 39 questions in this
part, and out of these, 25 items of the first five dimensions of service quality (tangible, reliability,
responsiveness, assurance, and empathy) were concluded from the LODGSERV scale developed
by Knutson et al. (1990). Some items of the LODGSERV scale modified by Ekinci et al. (1998) and
Keith and Simmers (2013) were adopted in this study. Three items were related to the convenience
dimension of the process quality developed by Akbaba (2006). The outcome quality had three
dimensions (valence, waiting time, sociability) with 11 items developed by Wu and Ko (2013).
In the second section, four questions evaluate customer satisfaction, derived from Deng et al.
(2013). The perceived value was divided into three parts, including emotive (six questions),
cognitive (three questions), and social/self-concept (three questions), adopted from Walls (2013).
The customer loyalty construct was evaluated by six questions that were originally designed by
So et al. (2013) and Deng et al. (2013).
In the third section, the questions related to customer experience were provided including the star
ranking of hotel where the tourists stayed, the purpose of the trip, the number of nights stayed at

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 the hotel, and the previous stay at the hotel. The demographic information was provided in the last
section of the questionnaire which covered the demographic variables, including gender, age,
nationality, marital status, income, education level, and occupation. In this study, in order to improve
the survey’s content validity, these items were reviewed twice by a group of professionals in the
service industry and hospitality to ensure its adaptability to the local cultural context.

Population and sample method

In this study, international tourists who stayed at least one night at four- or five-star hotels in Kuala
Lumpur were the target population. There were 125 hotels and 26,751 rooms in Kuala Lumpur in
2013, which were more than all the other States in Malaysia. Moreover, 18,007 of all the rooms
belonged to four- and five-star hotels, which were 67.3 percent of the total. Therefore, four- and
five-star hotels constituted the majority of rooms in Kuala Lumpur, and were selected for this
research. Furthermore, more than 9,260,000 international tourists stayed at these hotels which
included 66 percent of all the guests (MTSA, 2013). Therefore, the international tourists who
stayed at four- or five-star hotels were considered as the research population in this study.

Data collection
To collect the data, several steps were undertaken as follows: first, the list of four- and five-star
hotels was obtained from the Malaysian Association Hotel. Second, the hotels were contacted to
collect the e-mail addresses of the human resource managers. Third, the e-mails were sent to the
human resource managers of all the hotels and the permission for data collection was sought.
Since it was found that the human resource managers were responsible for researches in the
hotel, the permission for research in the hotel was under the authority of the human resource
managers. None of them allowed data collection in the hotel place. Therefore, the questionnaires
were distributed in the top public areas and places of interest introduced by the Ministry of
Tourism Malaysia, including the Petronas Twin towers, Aquaria, Jamek Mosque, Centeral
market, Putrajaya Mosque, and Times Square in Kuala Lumpur during August and September
2014. These places were selected randomly and 480 questionnaires were distributed based on a
1.25 rate, suggested by Fincham (2008).
The sample size was 384. Since it was mentioned in the previous studies that the response rates
of the tourists from public places such as malls and airport were around 80 percent (Ariffin and
Maghzi, 2012; Poon and Low, 2005; Liat and Abdul-Rashid, 2011), the distributed rate of the
questionnaire was selected as 1.25 and 480 (384 × 1.25) questionnaires were distributed to
collect at least 384 valid questionnaires.
Out of a total of 480 distributed survey questionnaires, 445 were collected. 28 of the returned
questionnaires were removed in the data coding phase because they were only partially
completed, returned blank, or had outliers data. Having eliminated the unusable questionnaires,
417 (87 percent) questionnaires were used for analyzing, which was larger than 384 that was
mentioned as the sample size. The data were analyzed by structural equation modeling via AMOS
statistical software.
To collect the data from the international tourists, three questions were provided as the screening
question by the researcher, including: Are you an international tourist? Have you stayed at a
four- or five-star hotel in Kuala Lumpur in your current trip? and Are you interested to answer
this questionnaire? If the answers to all three questions from the respondents were yes, the
questionnaires were provided to them.

Results
Sample characteristics
Table I illustrates the demographic characteristics of the respondents. Of the 417 respondents
who provided their gender information, 291 (69.8 percent) were male, and 126 (30.2 percent)
were female. The largest age group of the respondents was 25 to 34 years (34.3 percent).
Around 50.8 percent of the respondents were from Asian countries, followed by Middle East

PAGE 228 j INTERNATIONAL JOURNAL OF TOURISM CITIES j VOL. 4 NO. 2 2018

Table I Demographics

Respondents Frequency Percent

Sex
Male 291 69.8
Female 126 30.2
Age
18-24 65 15.6
25-34 143 34.3
35-44 106 25.4
45-54 72 17.3
55-64 27 6.5
65 and more 4 1
Nationality
Asian countries 212 50.8
Middle East countries 86 20.6
European countries 76 18.2
Others 43 10.3
Marital status
Married 268 64.3
Single 140 33.6
Divorced 8 1.9
Separated 1 0.2
Earning
Less than $20,000 152 36.5
$20,001-$40,000 93 22.3
$40,001-$60,000 57 13.7
$60,001-$80,000 45 10.8
$80,001-$100,000 25 6
More than $1,000,000 45 10.8
Education level
High school degree 108 25.9
Junior college graduate 60 14.4
Bachelor degree 107 24.7
Master degree 83 19.9
PhD 46 11
Others 13 3.1
Occupation
Student 77 18.5
Retired 32 7.7
Housewife 10 2.4
Business owner 98 23.5
Government officer 107 25.7
Others 93 22.3

(20.6 percent), Europe countries (18.2 percent), and respondents from other countries were
the least (10.3 percent). The majority of the respondents reported that they were married
(64.3 percent). In terms of the level of education, 25.9 percent of the respondents held a high
school degree, 39.1 percent had college or university degrees, and 30.9 percent of the
respondents had post- graduate education, while only 3.1 percent of the respondents were in
other education levels. Concerning the respondents’ annual household income, 36.5 percent
reported to have an annual household income of $20,000 or less, whereas only 10.8 percent of
the respondents had an annual household income of $100,000 or more. In terms of
occupation, the majority of the respondents were governmental officers or business owners
(49.2 percent), followed by others (22.3 percent), students (18.5 percent), retired (7.7 percent),
and housewives (2.4 percent).
In terms of hotel ranking, most of the respondents were staying at four-star hotels (53.7 percent),
while below than half were staying at five-star ones (46.3 percent). Most respondents (80.8 percent)

VOL. 4 NO. 2 2018 j INTERNATIONAL JOURNAL OF TOURISM CITIES j PAGE 229

 traveled to Malaysia with the purpose of leisure, followed by business (12.7 percent) and
other (6.5 percent). The largest group of the respondents were staying at the hotels for three to four
nights (29.3 percent), followed by seven nights and more (27.1 percent), five to six nights
(24.5 percent), and one to two nights (19.2 percent). The vast majority of the respondents had
never stayed before at the hotel where they were staying at the time of the data collection
(65.9 percent) (Table II).

Assessment of the measurement model

According to the results of the MI, one indicator of reliability (Rel2), one indicator of tangible (Tanl),
two indicators of empathy (Emp4, Emp8), one indicator of waiting time (Wit2), and two indicators
of loyalty (Loy4 and Loy5) were deleted because of the highest MI between these items. The fit
indices exhibited that the data fit the model successfully.
All the constructs have the standardized factor loading which was more than 0.60.
The composite reliability (CR) ranged from 0.818 to 0.959, exceeding the recommended
threshold level of 0.70. The average variance extracted (AVE) values exceeded the recommended
level of 0.5. and all the squared root of the AVEs were larger than the correlation coefficients
between the constructs, indicating that the construct was more strongly correlated with its own
items rather than with items of the other constructs in the model. The results signify sufficient
discriminant validity at the construct level (Table III).

Table II Characteristics of the respondents’ recent experiences

Variables Frequency (n ¼ 417) Percent

Raking the hotel

4-star 224 53.7
5-star 193 46.3
Main purpose
Leisure/vacation 337 80.8
Business/convention 53 12.7
Other 27 6.5
Stay at hotel
1-2 nights 80 19.2
3-4 nights 122 29.3
5-6 nights 102 24.5
7 nights and more 113 27.1
Stay before
Never 275 65.9
Less than 3 68 16.3
3-5 times 40 9.6
6-10 times 15 3.6
More 10 times 19 4.6

Table III Means, standards deviations and correlation matrix

M SD α CR AVE 1 2 3 4 5

1. PQ 3.15 0.714 0.971 0.865 0.640 0.80

2. OQ 3.35 0.691 0.921 0.873 0.687 0.447 0.829
3. PV 3.54 0.953 0.965 0.937 0.804 0.626 0.398 0.897
4. TS 3.74 0.919 0.933 0.924 0.752 0.560 0.592 0.485 0.867
5. TL 2.83 0.844 0.941 0.895 0.685 0.601 0.525 0.727 0.716 0.828
Notes: PQ, process quality; OQ, outcome quality consists of three dimensions; PV, perceived value;
TS, customer satisfaction; TL, customer loyalty; α, Cronbach’s α; CR, composite reliability; AVE,
average variance extracted. Values at the diagonal line are squared root of AVE

PAGE 230 j INTERNATIONAL JOURNAL OF TOURISM CITIES j VOL. 4 NO. 2 2018

Assessment of the structural model
The structural model was developed to investigate the effect of exogenous/independent variables
of the process quality (including the six dimensions of reliability, assurance, responsiveness,
tangible, empathy, and convenience) and the outcome quality (including the three dimensions of
valence, waiting time, and sociability) on the endogenous/dependent variables of perceived
value, customer satisfaction, as well as customer loyalty, and the influence of the perceived value
and customer satisfaction on customer loyalty.
The results demonstrated that based on the fit indices, the relative χ2/df (2.105, po 0.001)
was less than the recommended value of five. The incremental fit indices, TLI, IFI, and CFI, had a
value more than the recommended value of 0.9 (0.937, 0.921, and 0.937, respectively).
Furthermore, the RMSEA and RMR values (0.048 and 0.066, respectively) were less than the
recommended range of 0.08, therefore, the model fitted the data perfectly, supporting the perfect
level of the model fit.
Moreover, multicollinearity is the situation in which two or more independent variables are highly
correlated. Highly multicollinearity represents the same underlying construct. The criterion for
determining multicollinearity is a correlation of more than 0.85. As research models show,
outcome quality and process quality had a correlation of 0.51 which was less than 0.85, as
recommended by Awang (2012) (Figure 2).
Each influential effect is discussed as follows under a specific hypothesis. The results indicated
that the exogenous construct of process quality was significantly and positively associated with
customer satisfaction ( β ¼ 0.315, CR ¼ 6.568, p o 0.001). Therefore, the first hypothesis was
supported. That is, the international tourists who highly perceived process quality were
more likely to be satisfied. This result was consistent with the previous findings where a
positive relationship existed between process quality and customer satisfaction (Ariffin and
Maghzi, 2012; Fornell, 1992; Hwang and Lambert, 2008; Lloyd et al., 2011; Riscinto-Kozub,
2008; Yang et al., 2003).
It was shown from the results that since β ¼ 0.497, critical ratio (CR) ¼ 8.761, and po 0.001, the
second hypothesis was supported and process quality significantly and positively affected
the perceived value. The international tourists who perceived highly process quality were more
likely to perceive that the services provided by the hotel were valuable. This result was consistent
with the previous findings, confirming that a positive relationship existed between process quality
and perceived value (Chang, 2008; Walls, 2013; Zeithaml et al., 2006).
The results proved that the construct of process quality did not have a significant influence on
customer loyalty directly ( β ¼ 0.028, CR ¼ 0.645, pW 0.5). Therefore, hypothesis three was not
supported. However, the result was not consistent with the previously reported findings, implying
that there was not any significant relationship between service quality and customer loyalty
(Choi and Kim, 2013; Cronin et al., 2000; Liat and Abdul-Rashid, 2011; Siu and Cheung, 2001;
Wilkins et al., 2007). Although the cited surveys supported the relationship between service
qualities and customer loyalty, they did not divide service quality into two categories, process and
outcome quality. Therefore, dividing service quality into process and outcome quality may affect
them not to influence customer loyalty directly.
On the other hand, this finding was consistent with the results reported by Kandampully et al.
(2011) and Kim et al. (2008), in which no significant correlation existed between the service quality
and the loyalty. The result of this study supported Ariffin’s and Maghzi’s (2012) findings, in which
the customers were not interested in rebooking the same hotel for the second time because of
variety-seeking behaviors.
It was illustrated from the result that the standardized regression coefficient ( β) between the
outcome quality and customer satisfaction was 0.54, the CR was 9.699, and the p-value was
less than 0.001. Therefore, outcome quality had a significant and positive effect on customer
satisfaction, and hypothesis four was supported. That is, the international tourists who perceived
highly outcome quality were more likely to be satisfied. The result was consistent with the results
reported by the Luk and Layton (2004) reporting that outcome quality was recognized as an
important part of the service providers in the hotel industry.

VOL. 4 NO. 2 2018 j INTERNATIONAL JOURNAL OF TOURISM CITIES j PAGE 231

 Figure 2 The structural model of process and outcome quality toward customer loyalty

0.70
0.83 0.87
e1 Rel1
0.64 0.80 e54 e53 e52 e51 e50
F1 e30 e62 e61 e60 e49 e58 e57 e56
e3 Rel3
0.69 0.83 0.93
e4 Rel4 0.87 0.81 0.76 0.82 0.86 0.85 0.86 0.81 0.58 0.84 0.84 0.72
0.69 0.83 e31 Vlu12 Vlu11 Vlu10 Vlu6 Vlu5 Vlu4 Vlu3 Vlu2 Vlu1 Vlu9 Vlu8 Vlu7
e5 Asu1
0.72 0.85 0.87 0.90 0.93 0.92 0.93 0.90
e6 Asu2 0.93 0.90 0.87 0.76
0.80 F2 0.92 0.91 0.85
0.64
e7 Asu3
0.73
0.54
e8 Asu4 e32 e59
0.68 0.83 0.85 e55 F10
e9 0.94 0.68
Res1 0.90 e63 F12 0.91 F11
0.68 0.82 0.96
e10 Res2 F3 0.92 0.82
0.61 0.78
e11 Res3 0.46
0.65 0.81
e26 Con1 e33 Perceived
e73
0.66 0.81 Value
e27 Con2 0.73 0.95
0.60 0.78
e28 Con3 F6 0.50
0.72 0.85 0.27
e18 Emp1 e34 0.39
0.56 0.53 0.62
0.75 0.85 e74 Loy6
e19 Emp2 Process e72
0.66 0.81
e20 Emp3 Quality 0.79
0.58 0.76 F5 0.97 0.03
e22 Emp5 0.75 0.70
Tourist 0.84
0.57 0.95 Loy3 e70
e23 Emp6 Loyalty
0.38 0.61 0.01 0.93
e29 Emp7 0.86
0.50 0.70 e35 0.51 Loy2
e13 Tan2 e69
0.76 0.87
0.73 0.85 0.90
e14 Tan3 0.80
0.66 0.81 F4 0.47 Loy1 e68
e15 Tan4
0.80
0.64
e16 Tan5 Outcome
0.83
0.68 Quality
e17 Tan6 0.31
e44 0.92 0.54
0.72 0.85
e41 Val1 0.85
0.85 0.92 0.57
e42 Val2 F7 0.80 Tourist
0.57 0.76 Satisfaction e75
e43 Val3
0.51 0.71 2(df) = 2,636.817 (1,356);
e40 0.75
e36 Wlt1 0.69 0.90 0.92 0.89 P value (0.05) = 0.000;
0.71 0.63
e37
0.84 Relative 2 (5) =1.945;
Wlt3
0.83 0.91 F8 Sat4 Sat3 Sat2 Sat1 AGFI (0.9) = 0.784;
e38 Wlt4 0.56 0.82 0.84 0.78 GFI (0.9) = 0.803;
0.65 0.80 CFI (0.9) = 0.937;
e39 Wlt5
0.69 e48 e67 e66 e65 e64 IFI (0.9) = 0.937;
0.83
e45 Soc1 0.47
RMSEA (0.08) = 0.048;
0.84
0.92
RMR (0.08) = 0.066;
e46 Soc2 F9 (Standardized estimates)
0.49 0.70
e47 Soc3

Notes: F1= reliability, F2 = assurance, F3 = responsiveness, F4 = tangible, F5 = empathy,

F6 = convenience, F7 = valence, F8 = waiting time, F9 = sociability, F10 = emotive,
F11= cognitive, F11= social/self-concept

The results revealed that the exogenous construct of outcome quality was significantly and
positively associated with the perceived value ( β ¼ 0.269, CR ¼ 4.997, po 0.001) to support the
fifth hypothesis. In other words, the international tourists who perceived highly outcome quality
were more likely to identify that these services had a high value. This result was consistent with
the previous findings which showed that a positive and significant relationship existed between
outcome quality and the perceived value (Brodie et al., 2009; Clemes et al., 2009; Kim et al.,
2008). The result of this study showed that it was important for the international tourists to have
services provided on time, although the favorability of the services delivered in the hotel played an
important role. Furthermore, sociability was another factor that affected the international tourists
to find services that were more valuable. However, the majority of the international tourists could
not create any social contact in the hotels.
The results revealed that the exogenous construct of the outcome quality was not significantly
associated with the customer loyalty ( β ¼ 0.012, CR ¼ 0.251, pW0.05). Therefore, hypothesis six
was not supported. That is, the international tourists who perceived highly outcome quality were
not loyal to the hotel directly. The result was consistent with the previous findings (Choi and
Kim, 2013; Liat and Abdul-Rashid, 2011). Since the loyalty in this study was considered as both the
aspects of attitudinal and behavioral, it may affect the result of this hypothesis to not support the

PAGE 232 j INTERNATIONAL JOURNAL OF TOURISM CITIES j VOL. 4 NO. 2 2018

findings reported by Gallarza and Gil (2006), in which the outcome quality influenced the loyalty
attitude. Moreover, in this study, the service quality was divided into two categories, namely, the
process quality and outcome quality. Therefore, it may not affect the customer loyalty directly.
It is demonstrated from the outcomes that since the standardized regression coefficient ( β)
between the perceived value (with three dimensions of emotive, cognitive, and social/self-concept)
and customer loyalty was 0.525, CR ¼ 10.634, and the p-value was less than 0.001, H7 was
supported. The result of this hypothesis was consistent with the previous findings (Gill et al., 2007;
Kim et al., 2008; Poon and Low, 2005; Nasution and Mavondo, 2008; Oh, 1999).
The results showed that the construct of customer satisfaction significantly and positively
affected customer loyalty ( β ¼ 0.471, CR ¼ 9.300, po 0.001). Therefore, H8 was supported.
That is, the international tourists who were satisfied with the high-quality services provided by the
hotel were more likely to be loyal to the hotel. The mentioned result was consistent with the
previous findings highlighting that a positive relationship existed between satisfaction and loyalty
(Back, 2005; Chitty et al., 2007; Ekinci et al., 2003; Han et al., 2008), but it was against the results
of a few studies such as Heskett et al. (1997) in the hotel industry.

Assessment of the mediation model

The mediation model was used in this survey to analyze the mediating roles of the perceived value
and customer satisfaction in the effect of process quality and outcome quality on customer
loyalty. Although both full mediation and indirect models fitted the data adequately, the full
mediation model had a smaller Akaike Information Criterion (AIC) compared to the indirect model
(2,894.817 and 3,610.623, respectively). Moreover, the parsimony normed fit index (PNFI) value
for the full mediation model (0.832) was greater than the PNFI value for the indirect model (0.804).
Based on Hooper et al. (2008), the smaller value of AIC and a greater value of PNFI suggest a
good-fitting model. Therefore, the full mediation model was preferred to be compared with the
direct model.
In the direct model, process quality and outcome quality as independent variables explained 53
percent of the variance of customer loyalty, while in the full mediation model, the variance of
customer loyalty was 79 percent. This indicated that the perceived value and customer
satisfaction had key roles in mediating the relationships between process quality and outcome
quality with customer loyalty (Figure 3).
The results are explained as follows: there was a significant relationship between process quality
and customer loyalty ( β ¼ 0.417, po 0.001); however, in the full mediation model, this path was
not significant ( β ¼ 0.001, pW 0.05). Hence, the perceived value fully mediated the relationship
between process qualities with customer loyalty. This might be because in the hotel industry, a
guest would expect to be loyal if he/she believed that the tangible, reliability, assurance,
responsiveness, empathy, and convenience dimensions of process quality affected his/her
perceived value. This matched with the findings of past research works (Athanassopoulos, 2000;
Brady et al., 2005; Cronin et al., 2000).
It can be inferred from the results that there was a significant relationship between outcome quality
and customer loyalty in the direct model ( β ¼ 0.430, po0.001). However, in the full mediation
model, this path was not significant ( β ¼ 0.031, pW0.05). Hence, the perceived value fully
mediated the relationship between outcome quality and customer loyalty. This might be because, in
the hotel industry, a guest would expect to be loyal if he/she believed that valence, waiting time, and
sociability as the dimensions of outcome quality affected his/her perceived value. The result was
consistent with the previous findings (Cronin et al., 2000; Fornell et al., 1996).
The results revealed that there was a significant relationship between process quality and
customer loyalty in the direct model ( β ¼ 0.417, po 0.001). Nevertheless, in the full mediation
model, this path was not significant ( β ¼ 0.001, p W 0.05). Hence, customer satisfaction fully
mediated the effect of process quality on customer loyalty, implying that the international
tourists who perceived highly process quality were more likely be satisfied; hence, they were loyal
to the hotel. The current result was consistent with the previous findings (Chitty et al., 2007;
Ekinci et al., 2003; Kim, 2011; Oh, 1999).

VOL. 4 NO. 2 2018 j INTERNATIONAL JOURNAL OF TOURISM CITIES j PAGE 233

 Figure 3 Direct model of customer satisfaction and perceived value

0.70 e30
0.83
e1 Rel1 0.88
0.64
0.80 e62 e61 e60 e54 e53 e52 e51 e50 e49 e58 e57 e56
e3 Rel3 F1
0.70 0.83 0.88 0.81 0.76 0.82 0.86 0.85 0.86 0.82 0.58 0.84 0.83 0.72
e4 Rel4
0.69 0.83 e31 Vlu12 Vlu11 Vlu10 Vlu6 Vlu5 Vlu4 Vlu3 Vlu2 Vlu1 Vlu9 Vlu8 Vlu7
e5 Asu1
0.72 0.85 0.88
0.94 0.93 0.92 0.93 0.90 0.91 0.85
e6 0.90 0.87 0.90 0.76 0.92
Asu2
0.64 0.80 F2
e7 Asu3 0.87 0.68
0.54 0.73 e59 F11
e63 F12 e55 F10 0.90
e8 Asu4 e32
0.69 0.83 0.82
e9 Res1 0.91 0.93 0.95
0.67 0.82 0.94
e10 Res2
0.78 F3
0.61
e11 Res3 0.94
0.65 0.81
e26 Con1 e33 Perceived e73
0.66 0.81 Value
e27 Con2 0.95 0.00
0.60 0.78
F6
e28 Con3 0.00
0.72 0.85
e18 Emp1 0.73 0.38
0.85 0.00
0.56 e34 0.00
e19 Emp2
Process e74 Loy6 e72
0.75 0.97
0.66 Quality
0.81 0.62
e20 Emp3
0.76
0.58
0.75
F5
0.87
0.43
e22 Emp5 0.69
0.56 0.94 Tourist 0.83
e23 Emp6 Loy3 e70
0.61 Loyalty 0.93
0.38 0.86
e29 Emp7 0.41
0.70 e35 0.53 Loy2 e69
e13
0.50
Tan2
0.51
0.81
0.73 0.85 0.00 0.90
e14 Tan3 Loy1 e68
0.66 0.81 F4
e15 Tan4 0.80
0.64 0.75
e16 Tan5
0.68
e17 Tan6 0.83 e44 0.00
0.73 0.85
e41 Val1 0.85
0.83 0.91 0.92 Outcome
e42 Val2 Quality
0.00
F7
0.00
0.58
0.76
2(df) = 3,364.623 (1,362);
e43 Val3 Tourist
0.79 e75 P value (0.05) = 0.000;
0.51 0.71 e40 Satisfaction
e36 Wlt1 Relative 2 (5) =2.470;
0.71 0.84 0.62
0.75 AGFI (0.9) = 0.750;
e37 Wlt3 0.70 0.90 0.93 0.88
0.83 0.91 F8 GFI (0.9) = 0.771;
e36 Wlt4 Sat4 Sat3 Sat2 Sat1 CFI (0.9) = 0.901;
0.80
0.65
e39 Wlt5 e48 0.56 0.81 0.86 0.78 IFI (0.9) = 0.901;
0.69 0.83
0.49
RMSEA (0.08) = 0.059;
e45 Soc1
0.85 0.92
e67 e66 e65 e64 RMR (0.08) = 0.318;
e46 Soc2 F9 (Standardized estimates)
0.49 0.70
e47 Soc3

Notes: F1= reliability, F2 = assurance, F3 = responsiveness, F4 = tangible, F5 = empathy,

F6 =convenience, F7 = valence, F8 = waiting time, F9 = sociability, F10 = emotive, F11= cognitive,
F11= social/self-concept

The results publicized that there was a significant relationship between outcome quality and
customer loyalty in the direct model ( β ¼ 0.430, po 0.001). However, in the full mediation model,
this path was not significant ( β ¼ 0.031, p W0.05). Hence, customer satisfaction fully mediated
the relationship between process quality and customer loyalty. That is, the international tourists
who perceived high outcome quality were more likely to be satisfied; therefore, they preferred to
be loyal to the hotel. The obtained result was in accordance with the earlier findings (Choi and
Kim, 2013; Liat and Abdul-Rashid, 2011).
The new mediation model was developed to investigate the mediating role of customer satisfaction
in the relationship between the perceived value and customer loyalty (Figures 4 and 5).
The results showed that there was a significant relationship between the perceived value and
customer loyalty in the direct model ( β ¼ 0.797, po 0.001). However, in the full mediation model,
this path was significant, but there was a decline in the regression weight for the direct
relationship between perceived value and customer loyalty ( β ¼ 0.555, po 0.05). Hence,
customer satisfaction partially mediated the effect of perceived value on customer loyalty. That is,
the international tourists who perceived valued services were more likely to be satisfied; therefore,
they preferred to be loyal to the hotel, although they would be loyal to the hotel directly if they
perceived the services as valuable. The result was consistent with the previous findings
(Cronin et al., 2000; Kim et al., 2013; Lai et al., 2009; Yang and Peterson, 2004).

PAGE 234 j INTERNATIONAL JOURNAL OF TOURISM CITIES j VOL. 4 NO. 2 2018

Figure 4 Full mediation model of customer satisfaction

0.69 0.83 e30

e1 Rel1 0.87
0.64
0.80 e61
e62 e60 e54 e53 e52 e51 e58 e57 e56
e3 Rel3 F1 e50 e49
0.70 0.84 0.87 0.82 0.76 0.82 0.85 0.86 0.72
0.86 0.81 0.58 0.84 0.84
e4 Rel4
0.69 0.83 e31 Vlu12 Vlu11 Vlu10 Vlu6 Vlu5 Vlu4 Vlu3 Vlu2 Vlu1 Vlu9 Vlu8 Vlu7
e5 Asu1 0.76
0.72 0.88 0.93 0.90 0.87 0.93 0.90 0.92 0.91 0.85
0.85 0.90 0.92 0.93
e6 Asu2
0.64 0.80
F2
e7 Asu3 0.84 0.67
0.54 0.73 e59 F11
e63 F12 e55 F10 0.91
e8 Asu4 e32
0.68 0.83
e9 Res1 0.89 0.92 0.95 0.82
0.68 0.82 0.93
e10 Res2 F3
0.61 0.78
e11 Res3 0.94
0.65 0.81
e26 Con1 e33 0.49 Perceived e73
0.66 0.81 Value
Con2 0.95
e27
0.60 0.78
e28 Con3
F6 0.51
0.71 0.84 0.74 0.86
e18 Emp1
e34 0.56
Process 0.39
e74
0.64 0.98 Quality
0.80 Loy6 e72
e20 Emp3 0.79 0.63
0.58 0.76 F5
0.00
e22 Emp5 0.70
0.56 0.75 0.97 0.84
0.87 Tourist e70
e23 Emp6 Loy3
0.61 Loyalty 0.93
0.38 0.86
e29 Emp7 Loy2 e69
0.50 0.70 e35 0.00
0.51 0.80
e13 Tan2 0.46 0.90
0.73 0.85 Loy1 e66
e14 Tan3
0.66 0.81 F4
e15 Tan4
0.64 0.80 0.76
e16 Tan5 0.28
0.68 0.83
e17 Tan6 0.44 0.53
0.72 0.85
e41 Val1 0.81
0.83 0.91 0.90 Outcome
e42 Val2 F7 Quality
0.58 0.76 0.28
e43 Val3 0.81 Tourist
0.51 0.71 e40 Satisfaction
e75 2(df) = 2,683.992 (1,307);
e36 Wlt1 P value (0.05) = 0.000;
0.71 0.66
e37 Wlt3
0.84
0.72
0.75
0.91 0.92
0.88
Relative 2 (5) = 2.054;
0.83 0.91 F8 CFI (0.9) = 0.930;
e38 Wlt4
0.80 Sat4 Sat3 Sat2 Sat1 IFI (0.9) = 0.931;
0.65
e39 Wlt5 e48 0.57 0.82 0.84 0.78 RMSEA (0.08) = 0.050;
0.69 0.83
e45
RMR (0.08) = 0.099;
Soc1 e67 e66 e65 e64
0.85 0.92 (Standardized estimates)
e46 Soc2 F9 0.51
0.49 0.70
e47 Soc3

Notes: F1= reliability, F2 = assurance, F3 = responsiveness, F4 = tangible, F5 = empathy,

F6 = convenience, F7 = valence, F8 = waiting time, F9 = sociability, F10 = emotive, F11= cognitive,
F11= social/self-concept

Results
Five constructs including process quality, outcome quality, perceived value, customer satisfaction,
and customer loyalty were discussed in this study with the purpose of generating a more
comprehensive perception on the effect of service quality, namely, the process and outcome
quality on customer loyalty. Numerous contributions can be drawn by elaborating on the objectives
established in this study with the ultimate goal of boosting the theoretical understanding of the hotel
industry. The premier contribution was a clamor for further scrutiny for reviewing the dimensions of
service quality in the hotel industry, having accomplished research objective one which per se had
provided support for Luk and Layton’s (2004) study. Indeed, the current study can be considered
as a more thoroughgoing examination of customer perceptions of the hotel industry which
introduced supplementary information to the current hotel literature. Moreover, accomplishing the
research objectives could support Chitty et al.’s (2007) and Kim et al.’s (2008) recommendations to
appraise the relationship between perceived value, satisfaction, and loyalty.
Third, the results of study could support the recommendations of a number of hotel researchers
(Alexandris et al., 2004; Ekinci et al., 2003; Oh, 1999; Skogland and Siguaw, 2004) to investigate
whether the perceived value and customer satisfaction mediated the effect of service quality
(process and outcome) on customer loyalty.

VOL. 4 NO. 2 2018 j INTERNATIONAL JOURNAL OF TOURISM CITIES j PAGE 235

 Figure 5 Direct model of customer satisfaction

0.69 0.83 e30

e1 Rel1 0.87
0.64
0.80 e61
e62 e60 e54 e53 e52 e51 e58 e57 e56
e3 Rel3 F1 e50 e49
0.70 0.83
0.87 0.82 0.76 0.82 0.86 0.85 0.86 0.81 0.58 0.84 0.84 0.72
e4 Rel4
0.69 0.83 e31 Vlu12 Vlu11 Vlu10 Vlu6 Vlu5 Vlu4 Vlu3 Vlu2 Vlu1 Vlu9 Vlu8 Vlu7
e5 Asu1 0.76
0.72 0.88 0.93 0.90 0.87 0.93 0.90 0.92 0.91 0.85
0.85 0.90 0.92 0.93
e6 Asu2
0.64 0.80
F2
e7 Asu3 0.84 0.67
0.54 0.73 e59 F11
e63 F12 e55 F10 0.91
e8 Asu4 e32
0.68 0.83
e9 Res1 0.89 0.92 0.95 0.82
0.69 0.82 0.93
e10 Res2
0.61 0.78 F3
e11 Res3 0.94
0.65 0.81
e26 Con1 e33 0.49 Perceived e73
0.66 0.81 Value
Con2 0.95
e27
0.60 0.78
e28 Con3
F6 0.51
0.71 0.84 0.74 0.86
e18 Emp1
e34 0.80
Process 0.39
e74
0.64 0.98 Quality
0.80 Loy6 e72
e20 Emp3 0.64 0.62
0.58 0.76 F5
0.00
e22 Emp5 0.69
0.56 0.75 0.97 0.83
0.87 Tourist
e23 Emp6 Loy3 e70
0.61 Loyalty 0.93
0.38 0.87
e29 Emp7 Loy2 e69
0.50 0.70 e35 0.00
0.51 0.80
e13 Tan2 0.00 0.89
0.73 0.85 Loy1 e68
e14 Tan3
0.66 0.81 F4
e15 Tan4
0.64 0.80 0.76
e16 Tan5 0.28
0.68 0.83
e17 Tan6 0.44 0.00
0.72 0.85
e41 Val1 0.81
0.83 0.91 0.90 Outcome
e42 Val2 F7 Quality
0.58 0.76 0.00
e43 Val3 0.81 Tourist
0.51 e40
e75 2(df) = 2,967.298 (1,309);
0.71 Satisfaction
e36 Wlt1 P value (0.05) = 0.000;
0.71 0.66
e37 Wlt3
0.84
0.72
0.75
0.93
0.88 Relative 2 (5) = 2.267;
0.90
0.83 0.91 F8 CFI (0.9) = 0.916;
e38 Wlt4
0.65 0.80 Sat4 Sat3 Sat2 Sat1 IFI (0.9) = 0.917;
e39 Wlt5 e48 0.56 0.81 0.86 0.78 RMSEA (0.08) = 0.055;
0.69 0.83 RMR (0.08) = 0.184;
e45 Soc1 e66 e65 e64
0.85 0.92
e67 (Standardized estimates)
e46 Soc2 F9 0.51
0.49 0.70
e47 Soc3

Notes: F1= reliability, F2 = assurance, F3 = responsiveness, F4 = tangible, F5 = empathy,

F6 = convenience, F7 = valence, F8 = waiting time, F9 = sociability, F10 = emotive, F11= cognitive,
F11= social/self-concept

Finally, the results of this study supported several scholars’ (Cronin et al., 2000; Lai et al., 2009;
Yang and Peterson, 2004) calls for analyzing the mediating role of satisfaction in the influence of the
perceived value on customer loyalty. Moreover, the model introduced for the hotel industry in a
Malaysian context could yield a cherished framework for the hotel management to recognize the
variables essential for the international tourists once they assessed their experiences in a hotel.

Implications
Theoretical implications
The findings in this study advocated the exploitation of a multi-level structure like the models
developed by Choi and Kim (2013) and Liat and Abdul-Rashid (2011) to conceptualize and
evaluate service quality and its influence on customer loyalty by mediating the role of the
perceived value and customer satisfaction. However, the six dimensions of process quality and
three dimensions of outcome quality acknowledged in this research might fail to generalize the
whole service industries. The dimensions recognized in this research were to be substantiated for
other service industries by employing proper surveys due to the fact that such dimensions might
vary in other industries.

PAGE 236 j INTERNATIONAL JOURNAL OF TOURISM CITIES j VOL. 4 NO. 2 2018

The study was also valuable in its ability to compare the importance of the 32 items of nine
dimensions of the service quality constructs in the hotels recognized in the current research with the
significance of these dimensions acknowledged in other surveys. Process quality with six
dimensions (tangible, reliability, assurance, responsiveness, empathy, and convenience) and
outcome quality with three dimensions (valence, waiting time, and sociability) were two variables of
service quality identified in this research. Nonetheless, these two variables did not exert a significant
direct effect on customer loyalty. This result may have been obtained since service quality in this
research was divided into two categories, including process quality and outcome quality, in addition
to providing a new dimension to the process quality presented in the LOGSERV scale.
This study yielded a framework to better understand the mediating effect of the perceived value
and customer satisfaction on the relationship between service quality (including process and
outcome) and customer loyalty. Cronin et al. (2000), Kim (2011), Oh (1999), and Pizam et al.
(2016) postulated that there were correlations between the service quality and loyalty through
satisfaction and perceived value. In addition, this study also provided a model for understanding
the influence of the perceived value on customer loyalty by the mediating role of customer
satisfaction, supporting the finding of Cronin et al. (2000), Lai et al. (2009), and Yang and
Peterson (2004).
The findings of this study supported the theory of reasoned action expanded by Fishbein and
Ajzen (1975). According to Fishbein and Ajzen (1975), attitudinal and behavioral entities may be
viewed as consisting four different elements: the action, the target at which the action is directed,
the context in which the action is performed, and the time at which it is performed. Behavioral
criteria based on single observations always involve four specific elements. An attitudinal
predictor is said to correspond to the behavioral criterion to the extent that the attitudinal entity is
identical in all four elements with the behavioral entity. They were not based on direct
comparisons of the effects produced by variations in the degree of correspondence. Therefore,
the attitudes of the international tourists from the quality of service in four- and five-star hotels in
Kuala Lumpur affected them indirectly to revisit the hotel and suggest this hotel to the others.

Managerial implications
The results approved that customer loyalty depended on the satisfied customers, the perceived
value and the process and outcome quality. The outcomes would then assist the hoteliers to
devise more competitive tourism service schemes. For escalating the level of customer loyalty,
the customer’s perception toward service quality including process and outcome quality were
critical practical criteria for assessment. All the dimensions of the process quality influenced
customer perception, however, empathy had more impacts than the other dimensions. Valence
is one of the dimensions of outcome quality which had more effects. Therefore, hotel managers
must pay attention to all the dimensions of the process quality and the outcome quality, especially
the empathy and valence.
All factors of service quality and outcome quality, such as qualified equipment, on time services,
high quality of food, beverages, lobbies, buildings, public areas, and rooms, reduced
bureaucracy, and social interaction opportunity affects customers to perceived service quality.
However, good experience of international visitors who stay in four- and five-star hotels is one of
the most important factors of valence. Moreover, employees sympathetic and reassuring are the
important factors of empathy. Therefore, hotel managers must know that qualified employees
who understand the customers’ needs and programs which contribute to a good experience in
the hotel affect customers to perceived valuable services, hence affect to their loyalty to the hotel
by word of mouth and revisit intention.
Moreover, the loyalty of the customers to the hotel increased when they felt that the provided
services were valuable or they were satisfied with the quality of those services. In other words, the
international tourists should be able to experience the qualified services, which affected their
perception of value and satisfaction, hence improving their loyalty. Emotive had more effects on
the customer perception of the value. Factors such as pleasurable, feeling relaxed, enjoyment,
feeling positive, and comfortable experience were the important items of emotive, considered as
the important factors by the customers.

VOL. 4 NO. 2 2018 j INTERNATIONAL JOURNAL OF TOURISM CITIES j PAGE 237

 The findings of this study proposed that the hoteliers targeting the international tourists with
service quality including process and outcome quality should focus more on these factors to build
loyalty. For instance, the tangible, responsiveness, reliability, empathy, assurance, and
convenience as the dimensions of process quality and valence, waiting time, and sociability as
the dimensions of outcome quality should meet the needs of the international tourists, therefore
increasing customer loyalty through perceived value and customer satisfaction.
The results of this study concluded that the service quality, including process quality with six
dimensions and process quality with three dimensions affected customer loyalty. Although in the
previous studies, the effects of service quality on customer loyalty had been found, the different
dimensions of service quality such as convenience with five other dimensions of LODGSERV
were not considered together. Therefore, the hotel managers must know all the dimensions of the
service quality. The results of this research specified that the outcome quality was the most
important factor affecting customer satisfaction, while the process quality was the most important
factor affecting the perceived value. Moreover, the perceived value exerted more influences on
customer loyalty; consequently, the results observed in this study were helpful for policymakers in
the tourism industry to understand that both aspects of the service quality including the process
quality and outcome quality affected the international tourists in having valuable experiences in
the hotel and being satisfied, hence becoming loyal to the hotel as one of the important parts of
the tourism industry.

Limitations of the research

The current research introduced several noticeable contributions to the marketing theory as well
as hotel management and the tourism industry which could exploit the findings with respect to
particular strategic decisions; nevertheless, it seemed indispensable to take into account the
diverse features of the study which might restrict its applicability. According to So et al. (2013),
there were other variables which also affected the customer loyalty (e.g. customer identification,
and trust). It was likely that not all of the factors that influenced the customer loyalty had been
included into the conceptual model of this research.
Second, this study was limited to evaluating service quality by two constructs, including process
quality and outcome quality. However, Wu and Ko (2013) and Zhao et al. (2012) suggested that
there were other constructs which were also considered as substantial factors in service quality
(such as the environment quality and interaction quality). Third, in this study, the participants were
limited to the international tourists who were staying at least one night at a four- or five-star hotel in
Kuala Lumpur. Fourth, this research was conducted in four- and five-star hotels in Kuala Lumpur
using convenience sampling. Therefore, the results of this study may only be generalized to a
similar hotel industry, with similar stars, customer characteristics, and services.
Fifth, there were no equal numbers of males and females who responded to the survey. Since
most international tourists who stayed in four- and five-star hotel were families, most of the
questionnaires were answered only by males (69.8 percent). Therefore, the sex demographic
characteristics may limit to how applicable the results were to the other sex groups. Finally, this
study focused only on the perceptions of the international tourists who were staying in four- and
five-star hotels in Kuala Lumpur and did not evaluate the perceptions of the staff and managers
regarding customer loyalty and the relevant constructs.

Recommendations for future research

Some additional study areas of interest are proposed. Future research could explore process
quality and outcome quality in various hotel ratings as well as other regions. This might bring
about a chance to establish a comparison between the quality of service consistent and diverse
hotel ratings (e.g. three-star hotels) as well as other regions. Besides, the conceptual model
acknowledged in this study could be employed in different groups of accommodation, among
which are hostel, caravan parks, bed and breakfast motels, backpacker hostels, inns, resorts,
and lodges. Second, future scholars can analyze the importance of the dimensions of process
quality and outcome quality. For example, longitudinal research should emphasize the hotel
guests from check-in to check-out, which may ultimately represent more information about their

PAGE 238 j INTERNATIONAL JOURNAL OF TOURISM CITIES j VOL. 4 NO. 2 2018

levels of loyalty and the importance of the related variables over time. As mentioned by
Victorino et al. (2005), new services have an important effect on a customer’s hotel choice.
Third, since hotels in Kuala Lumpur did not allow the researcher to collect the data from their
customers in the hotel, this study made use of convenience sampling which was considered as a
non-probability sampling method and should not generalize the results on all international four-
and five-star hotel guests. Consequently, a future study could employ the probability sampling
methods with the aim of making the sample more representative of the population. Fourth,
because of the statistical limitations, in this study the mediating role of perceived value in the
relationship between process quality and outcome quality was not examined. Future study can
use a conceptual model to recognize the mediating effect of the perceived value on the
relationship between process quality and outcome quality with customer satisfaction. Fifth, this
study calculated the differences between leisure and business tourists while taking into account
the demographic characteristics; nevertheless, dissimilarities between domestic and international
tourists and their effects on the perceptual measure of service quality in hotels were not
recognized. Future studies may concentrate more thoroughly on the differences between
domestic and international tourists. Additionally, the effects of these differences on the
perceptions of service quality, satisfaction, perceived value, and loyalty may also vary.
Since it is valuable to compare the customer perception regarding four- and five-star hotel
services, it is suggested to future research works to have comparative analyses by conducting
the separate testing to recognize customer perceptions of service quality, satisfaction, and loyalty
in four- and five-star hotels separately.
Finally, future studies can consider the association between customer loyalty and other factors
which might direct the customers to use services at a hotel, like the hotel’s reputation, special
services, promotion, and location.

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Further reading
Kline, R.B. (2011), Principles and Practice of Structural Equation Modeling, 3rd ed., Guilford Press, New York, NY.
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relationships”, International Journal of Bank Marketing, Vol. 34 No. 2, pp. 136-50.

Corresponding author
Dariyoush Jamshidi can be contacted at: darioush1986@yahoo.com

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