An examination of brand loyalty in the Indonesian hotel industry

Abstract

The hotel industry has become increasingly competitive as it reaches life-cycle maturity and the world economy falters. In this environment, creating and maintaining customers’ brand loyalty is an important strategy to maintain a competitive advantage. Despite the notable impact that brand loyalty has on business performance, research appears to be divided in understanding brand loyalty. The purpose of this study is to gain an understanding of the dimensionality and determinants of brand loyalty. Further, this study examines the effect of brand of origin (international and domestic brands) on brand loyalty and its determinants in the Indonesian hotel industry context. This study proposes that brand loyalty consists of a single dimension of behavioural loyalty and a single dimension of attitudinal loyalty including sub-dimensions of cognitive loyalty, affective loyalty, and conative loyalty. Further, this study proposes that service quality, perceived value, customer satisfaction, and brand image directly and indirectly affect brand loyalty. It is also proposed that international and domestic hotel guests will perceive brand loyalty and its determinants differently. Based on the research model, two hypotheses were developed regarding the dimensionality structure of brand loyalty, 13 hypotheses were developed to test the relationships among brand loyalty determinants as well as between attitudinal loyalty and its determinants, and five hypotheses were developed to test differences between international and domestic hotels. The questionnaire data from 444 customer respondents was collected from a sample of three-star and four-star, domestic and international hotels in Indonesia. Two-stage Structural Equation Modelling (SEM) was used to test the hypotheses on the brand loyalty model and means comparison method were used to test the differences between international and domestic hotels. The proposed dimensional structure of brand loyalty was not supported due to problems with construct reliability and validity. A modified model resulted in two dimensions of brand loyalty- a single behavioural loyalty and a single attitudinal loyalty consisting of cognitive loyalty, affective loyalty, and conative loyalty indicators. This structure could be viewed as a synthesis of the traditional view of a two dimensional brand loyalty and a multi-dimensional view of brand loyalty. When expanded to include antecedents, the model indicated that service quality, perceived value, customer satisfaction, and brand image are important determinants of brand loyalty. When brand of origin was examined, the results showed that guests of international hotels perceived higher levels of service quality, perceived value, customer satisfaction, brand image, and brand loyalty compared to guests of domestic hotels. The results contribute to the services marketing theory by providing an empirically based insight into the dimensional structure of brand loyalty and the relationship between service quality, perceived value, customer satisfaction, brand image, and brand loyalty in the hotel industry. Further, this study extends our understanding on the effect of brand of origin on consumer evaluation in the service context. These findings will assist the hotel management to develop and implement brand loyalty and competitive strategies for both international and domestic hotels.