Service Guarantee prospect in signalling Service Quality towards Customer Loyalty

Doctoral Thesis / Dissertation, 2020

378 Pages












1.1 Background of Study
1.2 Study Context
1.3 Motivation of Study
1.4 Problem Statement
1.5 Research Gaps
1.6 Research Questions
1.7 Research Objectives
1.8 Significance of Study
1.8.1 Theoretical Contributions
1.8.2 Practical Implications
1.9 Scope of Study
1.10 Overview of the Research Methodology
1.11 Outline of Study
1.12 Operational Definition of Terms
1.13 Summary of the Chapter

2.1 Introduction
2.2 Customer loyalty
2.3 Loyalty Studies in the Services Sector
2.4 Relationship between Loyalty and its Determinants in the Resort Industry
2.5 Applying a SEM Integrated Second Order Latent Modeling of Loyalty
2.6 Theoretical Background
2.6.1 The Signaling Theory
2.6.2 Significance of Signalling Theory as Opposed to Justice Theory
2.6.3 The Prospect Theory
2.7 Review of Relevant Theoretical Models
2.7.1 Integrative Loyalty Model for Chinese Telco
2.8 Service Quality Models
2.8.1 The Nordic Model
2.8.2 The SERVQUAL Model
2.8.3 The Three-Component Model
2.8.4 The Integrated Hierarchical Model
2.9 Measuring Service Quality
2.9.1 The SERVQUAL Scale
2.10 Criticism of SERVQUAL
2.11 Performance-Based Measures (SERVPERF)
2.12 Service Quality Instruments in the Hotel Industry
2.13 Service Quality Dimensions for Resorts
2.13.1 Hotel Ambience and Staff Courtesy
2.13.2 Food and Beverage Product and Service Quality
2.13.3 Staff Presentation and Knowledge
2.13.4 Reservation Services
2.13.5 Overall Value for Money
2.14 Service Quality
2.15 Service Guarantee
2.15.1 The Prospect of Service Guarantee
2.16 Theories Related to Service Guarantee
2.16.1 Signaling Theory
2.16.2 Prospect Theory
2.16.3 Justice Theory
2.17 Antecedents of Customer Loyalty in the Malaysian Hotel Industry
2.18 Customer Satisfaction
2.19 Perceived Value
2.20 Corporate Image
2.21 Summary of the Chapter

3.1 Introduction
3.2 Research Design
3.3 Survey Instrument Development
3.4 Hypotheses Development
3.4.1 The Relationships between Construct Variables
3.4.2 Multiple Mediation Effect
3.4.3 Effect of Service Guarantee on Multiple Mediators
3.5 Customer Loyalty
3.6 Service Quality
3.7 Service Guarantee
3.8 Perceived Value
3.9 Customer Satisfaction
3.10 Corporate Image
3.11 Demographic Characteristics
3.12 Measurement Scale
3.13 Questionnaire Development
3.14 Questionnaire Design
3.15 Reliability Analysis
3.16 Pre-Testing
3.17 Sampling
3.17.1 Sample Size
3.18 Sampling Design
3.19 Five Star Resorts in Malaysia
3.20 Survey Procedure
3.21 Data Analysis Procedures
3.22 Data Collection
3.23 Preliminary Data Analysis
3.24 Factor Analysis
3.25 Structural Equation Modelling (SEM)
3.26 SEM Assumptions
3.27 Reliability and Validity
3.28 Evaluating the Fit of the Model
3.29 The Mediation Effect
3.30 Ethical Consideration
3.31 Proposed Theoretical / Conceptual Framework
3.32 Proposed Theoretical / Conceptual Framework
3.33 Summary of the Chapter

4.1 Introduction
4.2 Data Coding and Treatment of Missing Values
4.3 Non-Response Bias Test
4.4 Outliers Test
4.5 Testing for Normality and Multicollinearity
4.5.1 Normality Test
4.5.2 Multicollinearity Test
4.6 Reliability Analysis
4.7 Respondents’ Demographic Profile
4.8 Nationality Demographics
4.9 Descriptive Statistics of the Research Variables
4.9.1 Service Quality
4.9.2 Service Guarantee
4.9.3 Perceived Value
4.9.4 Corporate Image
4.9.5 Customer Satisfaction
4.9.6 Customer Loyalty
4.10 Confirmatory Factor Analysis
4.10.1 Confirmation of Second Order Variables for Service Quality
4.10.2 CFA of Service Guarantee
4.10.3 CFA of Perceived Value
4.10.4 CFA of Corporate Image
4.10.5 CFA of Customer Satisfaction
4.10.6 CFA of Customer Loyalty
4.11 Construct Validity and Reliability of the Measurement
4.12 Correlations Among Latent Variables
4.13 Analysis of the Baseline Structural Model
4.14 Results of Hypothesis Testing
4.15 Chapter Summary

5.1 Introduction
5.2 Summary of the Study
5.3 The multiple mediator effects of constructs
5.4 The direct and multiple mediator effect of service guarantee
5.5 Theoretical Contributions
5.6 Practical Implications
5.7 Limitations of the Study
5.8 Directions for Future Research
5.9 Summary of the Chapter
5.10 Conclusion







To my wonderful family.


This study provides empirical evidence to clarion calls for insights on the lack of work on resorts specifically the five-star resorts sector which is referred to works by Line and Runyan in identifying the deficiency in empirical evidence towards literature on resorts. Further Cheng and Lew, Jin, He and Yuang and Nunkoo, Thiruvengodam, Thomas and Leonard identified service quality, perceived value, satisfaction and corporate image, service guarantee, in identifying a contemporary second order model of customer loyalty which originates from studies from Dick and Basu (1994). Further studies by Jin, He and Yuang on employing service guarantee as a relevant marketing tool and marketing strategy to arrest the decline of dwindling tourist’s loyalty patronizing higher yielding products such as five-star resorts have also been examined. In pursuant, the loyalty studies within the country has been scarce and very few studies has attempted to identify a relevant marketing strategy or a loyalty model towards the provisions of a mediation models as highlighted by Gremler, Hogreve and Meyer to serve as a signaling effect towards service quality and as Jin, He and Yuang suggested the prospect of enhancing loyalty in the tourism sector has provided major impetus for study to be conducted. The Malaysian government through the Ministry of Tourism and Culture (MOTAC) has also provided some direction for this research to be positioned the market.

This study provides new evidence into the formation of loyalty determinants in the five-star resorts, specifically in the Malaysian tourism industry. Although various studies have been conducted by scholars to identify such a phenomenon, very few has identified salient marketing strategies to be of value to practitioners, in overcoming the lack of loyal customers. This study frames the current problems faced by academia, the industry and the government to produce a cogent discussion on how to solve these problems by providing a strong and tested strategy, the service guarantee, to enhance customer loyalty in the resort sector. Problems associated with the industry and marketing gaps in literature are mainly based on a lack of strategy and factors in determining loyalty from the customers’ perspective. Based on gaps in literature related to the hospitality industry as a whole a lack of a structural modelling and is identified.

The second order latent modelling that this study envisions, would provide clearer directions to the industry and other stakeholders to develop and mitigate customer centric marketing strategies to acquire and retain their target markets.

The data was collected from a cross sectional survey of international and domestic tourists (n=328) from 34 countries with Malaysia, Singapore, United Kingdom and Australia providing the largest respondents. The unit of analysis which are five-star resorts are scattered across seven location within the peninsular, Sabah and Sarawak, which provides a more holistic understanding of the problem compared to previous studies, which has been mainly focused on two main locations, namely: Langkawi and Penang. Statistical tests were performed by employing SPSS version 23 and SEM (i.e., AMOS) programs. Thirteen hypotheses were developed and tested with service guarantee as one of the main factors in determining loyalty. No study thus far, as far as the researchers’ knowledge permits, has attempted to test customer loyalty determinants in a single study lead by service guarantee as a single predictor variable with service quality as a second order construct and four mediators, measuring customer loyalty underpinned by Signaling and Prospect theories. This is rationalized as this study measured the attitude of customers towards a service guarantee in predicting their loyalty towards five-star resorts. Service guarantee being the most widely used construct in reversing service failure presents a viable avenue in predicting positive behavioral outcomes. This is exacerbated by the fact that service quality which is the most widely measured construct in the services marketing literature is highly susceptible to failure and this has been a grey area in literature with regards to strategy implication in reversing the effect. Therefore, based on extant service marketing literature, the predictive validity of guarantees in determining loyalty in other service sectors, provides a significant gap in the resort marketing literature which is unknown.

The study found the relevance of service guarantee implementation in the resorts industry through service quality dimensions, perceived value, customer satisfaction and corporate image as determinants in achieving customer loyalty. As hypothesized, the causality paths of service guarantee and service quality has been tested with a total of eleven hypotheses proving to be significant whereas two has been rendered insignificant.

While the prospect of gains and losses of employing a service, guarantee remains a potential to increase loyalty, the moderation effect using Multiple Group Analysis (MGA) warrants further investigation across different locations. The revised structural model supported the positive effect of all variables towards loyalty and shows newer insights into employing service guarantee in the Malaysian resort industry however more rigorous examination is needed to replicate the current study into the South East Asian region where it suffers from a lack of valid and reliable marketing strategies in the five star resort industry. The main theoretical contribution of this study is the validation of the specific determinants for service guarantee and each dimension of serviced quality respectively towards customer loyalty. Thus, managerial implications are offered to guide the resort management to design and implement a strong marketing strategy to arrest the decline of customer loyalty in the sector.


Table 1.1: Malaysian Tourism Targets for 2018-2020 (MOTAC, 2018)

Table 2.1:Loyalty Studies in Service Sectors

Table 2.2: Comparison between the Nordic and American School Model

Table 2.3: Review of Service Quality Literature on Resorts

Table 2.4: Key Studies on Service Guarantees

Table 3.1: Customer Loyalty Scale Items

Table 3.2: Service Quality Scale Items

Table 3.3: Service Guarantee Scale Item

Table 3.4: Perceived Value Scale Item

Table 3.5: Perceived Value Scale Item

Table 3.6: Corporate Image Scale Item

Table 3.7: Distribution of Five Star Resorts by Location

Table 3.8: Steps in Data Analysis

Table 3.9: Sample of Tourism Studies Utilising SEM Modelling

Table 3.10: Goodness-of-Fit Index

Table 4.1: Independent Samples Test for Non-Response Bias

Table 4.2: Normality test for service quality using Skewness and Kurtosis (N=328)

Table 4.3: Normality test for service guarantee using Skewness and Kurtosis (N=328)

Table 4.4: Normality test for perceived value using Skewness and Kurtosis (N=328)

Table 4.5: Normality test for customer satisfaction using Skewness and Kurtosis

Table 4.6: Normality test for corporate image using Skewness and Kurtosis

Table 4.7: Normality test for customer loyalty using Skewness and Kurtosis

Table 4.8: Analysis for multicollinearity test

Table 4.9: Reliability analysis of the research variables

Table 4.10: Respondents’ demographic profile of the sample

Table 4.11: Nationality demographics of the sample

Table 4.12: Descriptive statistics for service quality

Table 4.13: Descriptive statistics for service guarantee

Table 4.14: Descriptive statistics for perceived value

Table 4.15: Descriptive statistics for corporate image

Table 4.16: Descriptive statistics for customer satisfaction

Table 4.17: Descriptive statistics for customer loyalty

Table 4.18: Results of Confirmatory Factor Analysis

Table 4.19: Measurement Model CFA Results for Reliability and Validity

Table 4.20: Correlations between variables in the study

Table 4.21: Output for Full Structural Model

Table 4.22: Overall Mediation Effect

Table 4.23: Specific Indirect Effects – Serial Multiple Mediator Analysis

Table 4.24: Outcomes of Hypotheses Testing for Overall Effect


Figure 1.1: Tourist Arrival Projections (2013 -2020)

Figure 1.2: Malaysia Tourist Arrivals 2017-2018, (MOTAC, 2018)

Figure 2.1: Integrative Loyalty Model for Chinese Telco (Source: Lai, Griffin & Babin, 2009)

Figure 2.2: Antecedents of Customer Loyalty in the Malaysian Hotel Industry

Figure 2.3: Service Quality Model for Malaysian Resorts

Figure 2.4: A Service Guarantee Model by Hays et al. (2000)

Figure 2.5: Perceived Service Quality Model

Figure 2.6: The Integrated Hierarchical Model (Brady & Cronin, 2001)

Figure 2.7: SERVQUAL Model, Source: Parasuraman et al., (1985)

Figure 3.1: Proposed Conceptual Model Developed for the Study

Figure 4.1: Normal P-Plots for all research variables

Figure 4.2: Confirmatory factor analysis for second order model of service quality

Figure 4.3: Confirmatory factor analysis for service guarantee

Figure 4.4: Confirmatory factor analysis for perceived value

Figure 4.5: Confirmatory factor analysis for corporate image

Figure 4.6: Confirmatory factor analysis for customer satisfaction

Figure 4.7: Confirmatory factor analysis for customer loyalty

Figure 4.8: Measurement model of the study

Figure 4.9: Baseline Structural Equation Modelling

Figure 4.10: Types of Mediation


ECSI - European Customer Satisfaction Index

EPP - Entry Point Projects

ETP -Economic Transformation Plan

KLIA - Kuala Lumpur International Airport

MOTAC - Ministry of Tourism and Culture

MyTQA - Malaysia Tourism Quality Assurance

NBOS - National Blue Ocean Strategy

NKEA - National Key Economic Area

P -Plots- Probability Plots

SEM - Structural Equation Modelling

UNWTO - United Nations World Tourism Organisation

VMY 2020-Visit Malaysia Year 2020


1.1 Background of Study

The competitive rivalry in the tourism industry, specifically the accommodation sectors has solidified the importance of recognizing factors that will give the industry a competitive advantage (Lean, 2017). Resorts which are classified as a tourism product, is one of the most significant components of the tourism industry and its activities serves the unmeasured needs of tourists (Nguyen, 2017). Resorts have shaped to be one of the fastest growing segments of the hospitality industry and are rapidly growing (Ali, et al., 2014; Ali, Amin & Omar, 2013). The United Nations World Tourism Organization (UNWTO) concurs the importance of resorts in the tourism industry (UNWTO, 2014), however, it is surprising to note that this sector has not gained much scholarly attention in literature (Ali & Amin, 2014). According to Line and Runyan, (2012), resorts are the least researched component in the tourism industry, comprising of only 0.7% of total studies done.

By definition, Gee (2000, p.22) states that, "the core principle of the resort concept is the creation of an environment that will promote and enhance a feeling of well-being and enjoyment". Furthermore, Gee (2000) identified two characteristics of resorts: (i) sufficient indoor amenities including quality services, pleasant physical surroundings, convenient entertainment and other facilities; and (ii) unique location in terms of climate, scenery and recreational attractions. This definition of resorts is also supported by other scholars and practitioners (Ali & Amin, 2014; Gonzalez, Comesana & Brea, 2007; Meng, Tepanon & Uysal, 2008; Prideaux, 2000). According to (Kapferer and Bastien, 2009), five-star resorts are also known as luxury resorts since most companies want their products to be luxurious. Five-star resorts are generally described as having higher quality and higher priced offerings with very high customer evaluations with regards to standards of products and services (Lee, Toh and Kim, 2016).

According to Ministry of Tourism and Culture’s (MOTAC) official 2019 portal ( there are 139 five-star properties in the country, and only 57 are five-star resorts. The ministry provides some clarity to the term five star resorts which are classified as “A premise with a room size of 36sqm, a staff to guest ratio of 1:1, coupled with excellent quality and condition of luxurious standards for its façade, housekeeping, front office, food and beverages, kitchen, human resources, guests facilities, information and communication technology, security, resort special features and environmental best practices”. This provides a preliminary understanding of the Malaysian five-star resorts.

According to MOTAC (2019) Malaysia Tourism Quality Assurance (MyTQA) is an initiative by the ministry to improve the quality of tourism services and products. This is an initiative for the tourism industry to provide exposure to focus on service quality. Under the National Blue Ocean Strategy (NBOS), MyTQA is therefore seen as a program that is tourist centric or placing tourist first based on wants and needs. The main thrust of the MyTQA is to increase tourists’ confidence towards tourism products. The second thrust is classification according to high quality standards to satisfy domestic and international tourists. The third thrust is prioritizing high quality products and service culture in the tourism industry. The final thrust is to increase the quality of products and services in the tourism sector. This study will provide major insights, both from domestic and international tourist, thus strengthening and fulfilling the major thrust of MyTQA.

Based on the four major thrust, literature also finds that the market share and financial success of hospitality businesses is directly proportional to the level of service quality (Chen, 2013; Ren et al., 2016; Sari et al., 2016). A high level of service allows hospitality organizations towards customer retention and maintain a competitive advantage in the market (Nunkoo et al., 2017). Customer retention is closely associated to loyalty, which is defined as “a deeply held commitment to rebuy or patronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior” (Oliver, 1997, p. 392).

Ensuring customer loyalty is an important goal of any organization (García de Leaniz and Rodríguez Del Bosque Rodríguez, 2015; Kandampully et al., 2015; Tanford 2016). Loyalty behaviours include repeat purchases, positive word-of-mouth and the propensity to pay more (Su et al., 2016). In the hospitality and related literature, loyalty has been found to be influenced by customer satisfaction (Chang,2013;Deng et al.,2013 ; Gregory et al.,2016;Liu and Jang, 2009; Su et al., 2016), perceived value of the products or service (Chen and Chen 2010; Gregory et al., 2016; Oh, 1999; Suh and Ahn, 2012) and corporate image (Kandampully and Suhartanto, 2000, 2003; Park and Nunkoo, 2013; Ryu et al.,2008). These gaps provide the urgency for this study to be undertaken.

Extant literature suggest that mass tourism tends to be a newer occurrence in parts of the Asia Pacific region such as South East Asia, reflected in the shortage of research studies, which is now being addressed where perceived value and customer loyalty in resorts are not yet investigated (Ali and Amin,2014; Ali,2015).The preceding discussion demonstrates the significance and contribution of this study to the global services marketing literature towards providing newer insights into what is not yet known. Customer loyalty in the Malaysian lodging industry is seeing a downward trend. Malaysia recorded 25.95 million arrivals in 2017 which is a 3% decline year on year (The Edge, 2018). This has spurred the Malaysian government to promote Malaysia as one the leading destinations for hedonic tourism (Tourism Malaysia, 2014). Tourism Malaysia will also be receiving an additional allocation for Visit Malaysia Year 2020 (VMY 2020) but the amount has yet to be finalized (Tourism Malaysia, 2018). Although MOTAC has introduced promotions such as VMY 2020, a clear marketing strategy to arrest the decline has not been put forth by the ministry.

This effect has a direct correlation to customer loyalty towards the Malaysian lodging industry and determines the lack of quality signals and prospect of customer loyalty in the Malaysian five-star resorts. Lee, Toh and Kim (2016) finds that resort management should look into service quality, standard of service providers, and also their added value services. The above figure shows the decline in arrivals of tourist to the country. Malaysia has forecasted a revenue of RM 92.2 billion in tourism receipts for 2019, which is less compared to earlier estimates set at targets set at RM151 billion. The biggest drop in terms of the number of tourists was from Singapore - down 6.3% to 12.44 million (The Edge,2018).

Abbildung in dieser Leseprobe nicht enthalten

Figure 1.1: Tourist Arrival Projections (2013 -2020) (Ministry of Tourism and Culture, Malaysia , 2018)

Abbildung in dieser Leseprobe nicht enthalten

Table 1.1: Malaysian Tourism Targets for 2018-2020 (MOTAC, 2018)

The targets appear on table 1.1 above. As per Bouranta et al. (2017) inbound visitor has declined because of rising degree of rivalry from neighbouring nations giving better services and administrations. The resorts need to concentrate on the commitment of unique services that is totally differentiated in relation to the current administrations in the nation (Saeidi, Sofian, Saeidi, Saeidi and Saaeidi, 2015). In spite of the fact that service quality assumes a significant role in tempting visitors in bound, the heterogeneity and instability of value gives direction for it to be ensured.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1.2: Malaysia Tourist Arrivals 2017-2018, (MOTAC, 2018)

The enhancement of better service quality helps to meet the demand of consumers with the unique products quality (Lean, 2017). Guest are paying higher rates and expecting higher standards of service, rooms, dining and everything that are offered (Lee, Toh and Kim, 2016). This research provides further significant insights as previous studies of resorts was only conducted in two Malaysian locations namely, Langkawi & Penang and no studies has been conducted on five star resorts (Ali, Hussein and Ragavan, 2014; Ali and Omar, 2014; Ali, 2015; Ali, Hussain and Omar, 2016). The subject of this research is the underlying dynamics, consequences and management of resorts with particular reference to five-star resorts located at Langkawi, Penang, Port Dickson, Johor, Terengganu, Sabah and Sarawak.

Liat, Mansori, Chuan and Imrie (2017) found that service failure has an impact on image and satisfaction of Malaysian resort guests. However, there are very limited studies on strategies to address the need of guaranteeing services in the Malaysian resort context. A review of previous studies (e.g., Ali, Omar and Amin, 2013; Cheng, Mansori and Cham, 2014; Jani and Hanb, 2014) revealed that among the factors that could lead to customer loyalty in the hotel industry are: loyalty program, word-of-mouth, perceived service quality, perceived value, corporate image, customer satisfaction and trust. However, Cheng and Lew (2015) found that only perceive value, corporate image and customer satisfaction are the determinants to customer loyalty in the Malaysian hotel industry. Based on the preceding discussion, the current research aims to examine the impacts of service quality, perceived value, customer satisfaction, corporate image and service guarantee on customer loyalty in the Malaysian resort industry, which has not been investigated to date. According to Cheng and Lew (2015), a firm can benefit from reduced marketing costs, increased sales and reduced operating costs if its customers are loyal. Hence, in the resort industry, one of the main thrusts to becoming a successful operator is to build customer loyalty through retention (Edwin and Sheryl, 2013). The findings of this research enable resort operators to gain long-term customer loyalty with implementation of effective resort services strategies (Cheng and Lew, 2015).

Extensive research has been carried out on customer loyalty in the hospitality industry (Kang and James 2004; Wilkins et al. 2010). Effective strategies are essential to develop loyalty and enhancing visitors’ interest to revisit Malaysia (Poon and Low, 2005). Findings show that customers display various degrees of loyalty, allegiance or commitment towards a particular service provider (Cheng and Rashid, 2013).Thus, it is important that resort operators understand the most influential factors in customer loyalty when devising and implementing strategies to make sure that existing guests remain loyal while prospective guests develop new loyalty towards them (Chitty et al. 2007; Kandampully and Suhartano 2000; Wilkins et al. 2010). One of the benchmarks for measuring the performance of a marketing strategy for a specific product is the degree of consumer loyalty (Yusof, Rahman and Iranmanesh, 2015). Resort services can also be considered as a product, and tourists may stay longer, revisit, or promote the hotel to their families or colleagues (Skogland & Siguaw, 2004). Studies on the drivers of tourist loyalty are numerous (e.g. Kandampully, Juwaheer, & Hu, 2011; Leaniz & Rodríguez, 2015; Wilkins, Merrilees, & Herington, 2009), since loyalty has been considered one of the main drivers of the competitive market (Yoon & Uysal, 2005). Moreover, the concept of loyalty is especially important to the hospitality industry, whose service is inseparable between production and consumption and has thus been described as “heterogeneous” and “intangible” (Wilkins et al., 2009).One of the marketing strategy employed is the service guarantees which is are extrinsic cues considered by (potential) customers as ‘signals’ of quality (Erevelles et al., 2001). These signals could have an impact on perceived service quality (Kandampully and Butler, 2001; Ostrom and Iacobucci, 1998; Wirtz and Kum, 2001).

Recently, studies suggest that customer loyalty has become a major problem in the industry, thus it is extremely necessary for resorts to adopt strategies which are effective in retaining customer loyalty (Lean, 2017). Moreover, Thomassen (2018) findings on service guarantees shows that from a signaling perspective, explicitly promising to compensate makes sense, as it has positive effects on corporate image. He further argues that in-service recovery situations after a service failure, it has no effects on perceived justice and post-recovery satisfaction, in these situations it makes no sense. Therefore, signaling theory is employed in this study as opposed to applying justice theory in service recovery settings as justice theory only employs monetary types of compensation (Wirtz and Kum, 2001) whereas the signaling theory has remained non-committal on compensations. In view of the strong growth of tourism in Malaysia, many researches have been conducted to better understand the customer loyalty in the hotel industry (e.g., Cheng, Mansori and Cham, 2014; Maria and Kamarulzaman, 2012). In addition to the previous studies in this topic, this research proposes a conceptual model to examine the influences of service quality, perceived value, customer satisfaction, corporate image and service guarantee on customer loyalty in the Malaysian resort industry as very limited empirical studies has tested to show value, image and satisfaction as antecedents that leads to loyalty, directly or indirectly, through service quality and service guarantee. Thus, a dedicated focus on customer loyalty is necessary for the future survival of resorts (Cheng, Mansori and Cham, 2014; Kandampully and Suhartanto, 2000). A review of the literature shows that limited studies has examined the influences on significant marketing constructs, such as, customer satisfaction, loyalty, service quality, image, and customer perceived value (Abu-Alhaija et al., 2017) and service guarantee in five-star resorts. Service guarantees act as a tool to service quality.

Extant marketing literature suggests that five-star hotels and customer satisfaction are highly correlated and contributes to the success on hospitality business (Suki, 2012; Li & Krit, 2012; Guzzo, 2010). The most important concern in providing quality service is to meet the customer expectation (Lee, Toh and Kim, 2016). Service guarantee is viewed as a signal to service quality (Wirtz, Kum, & Lee, 2000). Therefore, higher level of hotel ranking has a positive relationship with customer satisfaction. Five-star hotels has a better strategy through service guarantees in signaling high service quality as hotel star rating has a significant value on service guarantees (Sharil et al., 2015). However, no studies have investigated these relationships in a five-star context. Therefore, this study proposes to narrow the marketing literature gap by proposing a loyalty model with antecedents to customer loyalty with service guarantee as a determinant to service quality, signaling the prospect of loyalty in the Malaysian five-star resorts. The subject of this research is the underlying dynamics, consequences and management of resorts with particular reference to five-star resorts located at Langkawi, Penang, Port Dickson, Johor, Terengganu, Sabah and Sarawak. Some research into the state of its tourism has already been conducted, which acts as a useful foundation, but the Malaysian five-star resorts seems to have very limited empirical evidence. The aim of this research is to better understand the factors that influence customer loyalty in the resort industry in Malaysia.

Previous studies has not investigated resort industry as a whole, it does not investigate the effect of the different resort ratings (one to five stars) on the guests and the antecedents, or issues that influence the relationships between customer satisfaction, service quality, and customer loyalty (Cheng, Mansori and Huei,2014). Cheng and Lew (2015) calls for studies in different class of resorts of the perception of service quality between those who stay at five-star resorts and lower ranking resorts. This variance has so far not been addressed in extant literature. Thus, closer examination is thus valuable in helping to fill the gap in knowledge about customer loyalty in a country with considerable tourism potential as yet, not fully realized. The findings of the managerial implications showed that value for money, customer satisfaction and corporate image influence customer loyalty. Research on customer loyalty in the Malaysian resort industry are severely limited and requires urgent investigation (Cheng and Lew, 2015). Marketing scholars have presented several loyalty models to enhance customer’s loyalty and hence integrating relevant loyalty antecedents, mediators, into the existing models would be considered a valuable research in order to provide a better and further understanding on customer’s loyalty and review of the literature shows that researchers have presented several loyalty models and factors based on the research objectives and context (Alhaijja, Yusof, Hashim and Jaharusddin, 2018). This direction is in line with the view of Dick and Basu (1994). Previous studies are severely limited as there are only one study on five star resorts on Sunway Resorts, thus a larger number of studies with a larger sample size in more location across Malaysia is urgently needed to for better investigation on customers’ satisfaction levels (Lee, Toh and Kim, 2016) .Therefore this provides a significant gap to investigate the effect of more five star resorts’ on customer loyalty in Peninsular Malaysia.

1.2 Study Context

Resorts are becoming one of the fastest growing segments of tourism attractions globally. A report published by Ibisworld (2013) stated that the global resorts industry has rebounded from a recession-induced decline and experienced positive growth in each of the past four years. In pursuant, resorts have become one of the dominant segments of the accommodation industry (Inkabaran et al., 2004) and have shaped to be one of the fastest growing segments of leisure attractions and are rapidly growing in quantity, diversity and popularity, and their focus is centered primarily on the customers and the pursuit of superior customer perceived quality, value, and image in order to ensure customers’ loyalty (Hu et al., 2009). Liat and Chiau (2015) found that service quality, perceived value, customer satisfaction and corporate image are significant factors in predicting customer loyalty in the Malaysian resort industry. Nunkoo et al., (2016) found four main determinants of customer loyalty in Mauritius resorts namely, image, customer satisfaction, perceived value and service quality. Nunkoo et al (2016) also found that the better the image tourists have about hotels in Mauritius, the more loyal they will be, the more satisfied tourists are with Mauritian five star hotels, the more loyal they will be, the better tourists perceive the quality of the services they receive from the hotels in Mauritius the loyal they will be the higher level of perceived value they have towards the hotel services the more loyal the tourists will be. Therefore, it has shown that five-star hotels are getting very popular in the market and most of the guest enjoyed the product and services during their stay at five-star hotels which would give them greater satisfaction (Lee, Toh and Kim, 2016). However limited studies have made an attempt to investigate customer loyalty in the Malaysian context of five-star resorts.

This growth was also seen in Malaysian hotels and resort industry. However previous studies have found a severe service quality problem within the resorts caused by inexperienced, unprofessional and misbehaving staff and clearly indicate significant differences between guests’ expectations and their actual experiences (Ekiz et al.2012). Recently, Lee, Toh and Kim (2106) on a study on Sunway’s five-star resort found negative responses, both from international and local guests about quality of services and the products offered in five-star resorts such as rooms and food and beverages. They found the overall service quality on rooms and food and beverage are bad. They also found the lack of value-added services are also one of the negative comments from the customers. This presents a clear and significant obstacle to the government’s aspiration to increase revenues through tourism in higher yielding sectors such as five-star resorts.

The Tourism National Key Economic Area (NKEA) through the Economic Transformation Plan (ETP) focusses on high-yield tourism, targeting leisure and business tourism to grow tourist arrivals and receipts (ETP, 2013). In order to realise such an aspiration, a clear marketing strategy such as a service guarantee need to be implemented. Some hotels known for its service guarantees are Hampton Inn and Four Seasons. Sharil et. al., (2015) Malaysian five-star resorts has a better strategy through service guarantees. A service guarantee is viewed as the company signaling to service quality (Wirtz, Kum, & Lee, 2000). Practitioners should integrate relevant loyalty factors into the strategies and tactics of their companies to have genuine loyal customers in order to eventually achieve the market success (Alhaijja,Yusof, Hashim and Jaharusddin, 2018). Understanding customer’s loyalty is absolutely important and researchers need to identify its determining factors (Kim et al., 2016). In this regard, marketing researchers keep presenting loyalty models to effectively understand the formation of customer’s loyalty (Alhaijja, Yusof, Hashim and Jaharusddin, 2018). A recent review of loyalty studies shows that researchers have been advised to investigate specific variables as important determining factors, such as, customer’s satisfaction(Akroush et al., 2016; Bilgihan et al., 2016; Chen et al., 2016; El-Adly and Eid, 2016; Izogo, 2016; Thaichon and Jebarajakirthy, 2016), service quality (Izogo, 2016; Rubio et al., 2016), perceived value (Calisir et al., 2016; Chen et al., 2016; El-Adly and Eid, 2016; Lee and Wong, 2016), corporate image (Kandampully et al. (2015. More importantly, scholars have been advised to integrate these loyalty antecedents into future proposed models to examine their impacts. The results of these studies could help practitioners by providing reliable conclusions and implications in developing and enhancing customer’s loyalty (Alhaijja,Yusof, Hashim and Jaharusddin, 2018). The extant loyalty literature has identified factors of customer perceived value, and corporate image (Kandampully et al. 2015) and satisfaction (Cheng and Lew, 2015) as possible loyalty determinants. Kandampully, Bilighan and Zhang (2015) has called for research on customers’ impact on loyalty in the hospitality industry. However, these factors have not been tested in the context of five-star resorts’ customer loyalty and hence provides a significant gap in the global marketing literature. This research crafts a conceptual framework for customer loyalty and identifies those factors that influence its development in the service industry with a special focus on the Malaysian five-star resorts industry.

Theorists have proposed service guarantees from multi-approach dimension since its scope is broad (Kashyap, 2001). Some researchers view it as policy, and some say that it is a firm promise. Hotels are often associated with guarantees as it covers the essence of service offerings and the courtesy of service employees during the service consumption (McDougall, Levesque, & Plaat, 1998). Effective guarantee should be meaningful and value to customers, easy to invoke and easy to understand (Hart, 1988). Further, hotel guarantees do not specify on certain attributes, but it covers the whole service performance (McDougall et al., 1998). Some hotels known for its guarantees are Hampton Inn and Four Seasons Hotels. Five-star hotels are believed to have higher commitment to maintain long-term guest relationship and are committed for customer satisfaction (Kim, Kim, & Kim, 2009). The genteel client values impeccable service and willing to pay for the comfort provided by this type of hotel thus meaningful service guarantees are very much appreciated by the customers. In hotel sector, appropriate relationship marketing such as offering a meaningful service guarantees are important to form, improve and maintain a sound business relationship with customers. Once the hotel has gain customer trust to service provider, it will give confidence to customer and increase their satisfaction (Kim et al., 2009).

Some hotels known for its guarantees are Hampton Inn and Four Seasons. Five-star resorts has a better strategy through service guarantees to signaling firm commitment to deliver high standard of service (Sharil et al., 2015) however, limited studies have attempted to follow that path. Marketing literature also draws attention to service guarantees as an effective marketing strategy for services marketers to signal their service quality and calls for further studies. While marketers have long considered the usefulness of service guarantees, it is still under-studied and there remain key questions to be addressed (Ostrom and Iacobucci, 2016). The implementation of service guarantee in Malaysia remains a novelty and remains a significant gap for this research to be of any significance to the body of service marketing literature. Endorsed by practitioners and academics alike, service guarantees have become an increasingly attractive tools to spear-head efforts to increase customer loyalty and ultimately the financial performance of companies. While past research has focused on recommending certain criteria in the design of service guarantees, advocating the benefits of guarantees that fulfil those criteria and documenting success stories, extant literature provides little rigorous and methodical empirical research on the relationships between service guarantees and customer loyalty. Moreover, past research has seldom examined an integrated service guarantee mediation model measuring loyalty (Meyer, Gremler and Hogreve, 2014).

Typically, literature classifies customer loyalty in two facets, behavioural and attitudinal. A particular purchase frequency and purchase possibility are proposed as a means to measure behavioral loyalty (Yi and Jeon, 2003). Such definitions have been criticized for their limitations in distinguishing between commitment and convenience (Kandampully, Bilgihan and Zhang, 2015). Causal relationships are classified them as direct or indirect antecedents based on their most common treatment in the literature. As noted earlier, these variables have been treated in a variety of ways, serving as mediators, moderators, or direct predictors of loyalty. Most of the effects are based on self-report measures, which could be subject to biases. This limitation is inherent in the survey methodology required to evaluate how customer attitudes relate to outcomes; however, asking both on the same questionnaire could inflate their relationship. There are other variables and relationships, which could contribute to the loyalty process. There is still a need for individual studies to uncover the complexities of hospitality industry. There is a need to know more about how indirect antecedents affect loyalty other than through customer satisfaction and insight into the antecedents of lifetime loyalty (Tanford, 2016). Based on the current limitations in literature and research, the present study expands the understanding of customer loyalty and its antecedents in examining how local and international guests evaluate the service quality with multiple dimensions of their experience at resorts to develop loyalty. This calls for a broader theoretical perspective on the loyalty process (Tanford, 2016). The current research specifically focuses on service guarantee as a direct and indirect antecedent of customer loyalty in five-star resorts. Although, many service qualities studies have been conducted in tourism sectors, very few has been on customer loyalty of resorts. Topics making up marketing strategy and other related areas accounted for only 35.3% in literature, indicates that the true value of literature is only 17.6%. This decrease can primarily be attributed to decreases in the loyalty literature (−6.7%). Although researchers have investigated implementing a service guarantee strategy and their effect on loyalty in certain contexts, it is rather ironic that very little empirical evidence points towards the existence of a mediation model to test customer loyalty, although Meyer, Gremler and Hogreve (2014) has called for such new guarantee models to be constructed.

The concept of customer loyalty is central to marketing scholarship (Toufaily et al., 2013); from a practitioner’s perspective, it also is among the most enduring assets possessed by a company (Kandampully, Bilgihan and Zhang,2015) and is vital for hospitality businesses (Tanford,2016). Loyal guests can impact the growth of tourist arrivals and the stability of the tourism industry. Moreover, an increase in market share can have a domino effect on the Malaysian economy by reducing unemployment and strengthening the high yielding service industry sector such as the five-star resorts. However, the resort industry should not only satisfy the needs of the guests since a satisfied guest does not guarantee loyalty. Employing a robust marketing strategy can reinforce the efforts in customer loyalty. Hence, having a marketing strategy plays an important role to create loyalty. Given the many tourism challenges, it is surprising that very little is known on the implementation of a marketing strategy specifically on high yielding products such as five-star resorts and its customers. Malaysia’s capacity to accommodate a higher number of tourists compromising on the quality of its offerings should not be ignored as customer loyalty is a salient factor towards the success of resorts. This study will investigate these issues to ascertain the quality signaling effect towards loyalty. The benefits of this understanding can manifest themselves both in the planning and execution of the physical and service features, and in the way the resort communicates about itself to the customer.

When a service fails, the guarantee policy of the firm can be employed as a recovery strategy. The guarantee can, therefore, influence customer perceptions of the recovery prospects and signals the resort’s firm’s intentions to provide a gainful recovery and averts losses. These unfavorable ratings by visitors will require tourism authorities such as the Malaysian Ministry of Tourism and Culture to review accommodation premises in terms of licensing. This will be crucial if Malaysia wants to position itself as a leading tourist destination in the region as suggested by the Government in its tourism development plans. This may require greater control/regulation on behalf of the government as well as public participation in order to determine the types of tourism development that will maintain the Malaysian appeal.

Therefore, the purpose of this research is to examine the impact of guarantee on customer prospect of loss aversion perceptions of gainfulness, and customer loyalty intentions with the presence of a guarantee. The change in customer loyalty intention under varying circumstances, specifically in the absence or presence of a service guarantee is not a highly debated topic among researchers, specifically in the empirical context of Malaysian five-star resort industry. Hence, this research attempts to investigate the signaling and loss aversion effect between service guarantee and service quality as well as to examine the causalities on customer loyalty in the context of five-star resorts in Malaysia.

1.3 Motivation of Study

The interest of studying customer perception toward tourism facilities, especially in five-star properties has also witnessed an increase (Lee, Toh and Kim, 2016). This study employs a Structural Equation Modelling (SEM) on how customer loyalty in the Malaysian five-star resorts, are formed. This study encompasses seven locations within the peninsular and east Malaysia eliciting response from local and international tourist encompassing 32 nationalities. This chapter states the research problem and is focused on theorizing and investigating customer loyalty’s direct and indirect antecedents in the Malaysian five-star resorts through service quality acting as a latent variable and service guarantee as its determinant. This research theories and reflects customer loyalty through Signaling and Prospect theories respectively.

The lack of new customer loyalty models in the resort sector and specifically service guarantee mediation models in the literature as indicated by Meyer, Hogreve and Gremler (2014) is the basis of this study. Therefore, this research will provide sufficient contextual background on the context of the Malaysian five-star resorts. The aim of this dissertation is to gain insights into, and to offer academicians and practitioners clear guidance on the content and the implementation of a service guarantee in five-star resorts.

This study will also explain the signaling and prospect theories and its effect on loyalty research. Heo and Lee (2016) recommend scholars to examine additional loyalty antecedents. Practical significance and importance of the research substantiated with evidence will be discussed. Therefore, this study calls into questions and objectives proposed, grounded in the assumptions that customer loyalty has multiple relationships with various antecedents that leads and signals loss aversions and this can be explained by the signaling and prospect theories. This chapter will also identify gaps in previous research that the current study aims to address and clearly state the research questions and objectives which is consistent in the use of terms and concepts thereof.

Based on the preceding discussion, which is a significant literature gap, this research conceptualizes service quality as a second-order factor and service guarantee acting as its determinant. This study analyses its mediation influence of customer satisfaction, perceived value and corporate image on customer loyalty indirectly and directly through service quality and service guarantee, by testing a structural equation model. Adopting a previous study of South African resorts by Nunkoo, Teerovengadum, Thomas and Leonard (2017) who also confirms that the second-order factor model is acceptable both empirically as well as conceptually and performs better than other competing models of service quality, this study provides empirical evidence in the Malaysian five star resorts sector. (2010), a service guarantee mediation model as a gap suggested by Meyer, Gremler and Hogreve (2014).

This study proposes a second-order service quality model, which is integrated in a structural equation model theorizing customer loyalty on data collected from accommodation guests in the Malaysian five-star resorts. Structural equation modeling allows us to analyze processes for building and maintaining loyalty in the industry (Tanford, 2016). Moreoever this study provides valuable direction for future studies as Nunkoo, Teerovengadum, Thomas and Leonard (2017) finds that a second-order factor does not allow for an understanding of the influence of each first-order factor on outcome variables such as customer loyalty. Thus, this study provides valuable insights as it attempts to test such relationships not only directly but also indirectly to uncover those dimensions of service quality that matter most for customer loyalty and to determine their explanatory power. This research is also highly significant for future studies as it will provide theoretical and empirical support for an integrated second-order factor mediation model of service quality and customer loyalty which has the potential for a more parsimonious structural model. This is in line with concerns by Tanford (2016) who argues that customer loyalty is paramount for hospitality businesses. She argues further that there is lack of coherence around the loyalty literature in terms of the most important loyalty determinants, outcomes that are most strongly affected by these antecedents, effects that are inconclusive and need further investigation and how practitioners are expected to sift through these findings and glean information that is beneficial for their business. The current research provides some significant answers to the services marketing literature in closing the gaps. Limited empirical evidence are available to show an enlarged second order and integrated structural loyalty model that includes perceived value, corporate image, satisfaction, service guarantee and service quality in a single study. This study provides a pioneering attempt towards that direction.

1.4 Problem Statement

First, based on a recent study of Malaysian five star resorts by found that both international and local customers have negative experience with service quality, image, value and overall satisfaction of the room division and food and beverage services with regards to rooms, facilities and services at food and beverage outlets (Erdogan, Lattimore,& Memarzadeh, 2012). They indicated that the service quality is bad and also the lack of value-added services which has caused a negative image to guests.

On the elements of service quality, the international customers have faced communication issues with service staff. It is expected that the staff in five-star hotels should be able to speak fluent English in order to serve their guests better. The frontline staff, especially the front office staff have left a negative image to guests as they have presented to be very shy and the room is not cleaned as expected (Lee, Toh and Kim, 2016). This echoes the government’s aspiration, according to ETP (2010), the lack of high service quality in Malaysia as compared to our neighboring countries has prompted the government to provide key tourism enablers to highlight the problem, such as improving the service quality of front-line staff. To attract high yield tourists, high quality four- & five-star resorts are needed (MOTAC, 2012). The resort island of Langkawi is also seeing renewed interest, in line with the government’s focus on high-end tourism. To achieve its 2020 goal, the government has identified 12 key enablers known as entry point projects (EPPs) – in areas including hotel and resort improvements. While many of the EPPs are now described as operational, projects to improve the quality and range of resorts, however these initiatives remain as work in progress (Oxford Business Group,2019) with no clear direction from MOTAC up to now. However, no clear strategies are specifically laid out to overcome such an enormous problem to the country’s tourism revenue as compared to its peers, although the government aspires to improve the tourism environment by improving offerings and accessibility for key tourism enablers. Policy makers should continue to review, revise and remediate the environmental and social factors that drive a steadily rising tourist population in Malaysia by improving the quality of service and hospitality in key areas of tourism, which can potentially establish Malaysia as a high income nation by 2020 (Pillai,2018).

A common strategy employed by hoteliers are loyalty programs. However, the impact of such a program is questionable as it can be easily replicated providing no clear differentiation for operators. Service guarantees are rare and valuable to customers because developing and making good on a service guarantee through customer service excellence is a “difficult feat to duplicate” (McCollough, 2010). Service guarantee as marketing strategy has not received traction in South East Asian regions due to its negative perception by operators. This strategy is therefore not a norm in Malaysia. A study by Jin, Yuang and He (2016) found that such a strategy works best in a market where it is a rarity rather than the norm. These Taiwanese scholars found that it works as a signal to avert losses and gains in a market. Local scholars such as Sharil et al., (2013; 2015) has confirmed the rarity of such a strategy in the Malaysian market.

Second, according to marketing scholars, research has given inadequate attention to studies on previous loyalty models. This is to inspire future research in emerging proper and effective loyalty models and mediating effect in investigation of factors influencing customer loyalty in Malaysia hotel industry marketing scholars. Researchers are advised to go beyond the straightforward and direct relationships in studying customer’s loyalty and researchers are advised to examine further the loyalty consequences since less research has considered this gap (Abu-Alhaija et al., 2018; Ali Alsheikh et al., 2018). Based on the theoretical research, an overview of the customer loyalty models on hotel services has developed a common research model of the main influencing factors (independent variables) and indirect factor (intermediate variables) on customer loyalty which are mainly perceived quality, perceived value, image, and customer satisfaction factor, however literature on models that have different intervening variables in order to better illustrate the relationship between influence factors, remain unresolved (Nguyen,2017) . Effective strategies are vital in developing customer loyalty and building up the intention among visitors to revisit Malaysia. From the theoretical perspective, the determinants and factors that influence customer loyalty are service quality, perceived value, customer satisfaction and corporate image and research should be conducted in understanding customer loyalty in the hotel industry of Malaysia (Cheng and Lew, 2015). However, a review of the literature shows that limited studies have examined the important marketing constructs, such as, customer’s satisfaction, loyalty, perceived service quality, image, and customer’s perceived value in the context of five-star resorts.

Further marketing studies may address customer’s loyalty towards targeting marketing strategies and tactics to enhance hotel loyalty. Although other factors are frequently employed, the importance of corporate image is still limited in the hotel industry, particularly in Southeast Asia (Hussein, Hapsari and Yulianti, 2018). Previous discussions and views reveal that there is a need to propose proper loyalty models for various fields and contexts to better explain and enhance customer’s loyalty (Ahmad Saifalddin Abu-Alhaija et al., 2017). In sum, researchers have examined numerous loyalty antecedents, but the need to understand customer’s loyalty from additional perspectives is still there (Abu-Alhaija et al., 2018).

Third, Nyadzayo and Khajehzadeh (2016) finds service quality were measured as first-order factor, except for service quality which were operationalized as higher-order factors. This approach was deemed appropriate as the focus was to test a nomological network model comprised of service quality (as global constructs), customer satisfaction, customer value, image and customer loyalty. Such an approach is of limited value as Chin (1998) argued: “To postulate the existence of a second-order factor that sits in a vacuum holds little value.” Rather, it must be related to other factors in a conceptual model. Because a second-order factor is modelled as being at a higher level of abstraction and reflected by first-order factors, it needs to be related with other factors (p.645) (p.10). Therefore, it is imperative that this be demonstrated by embedding such second-order factor models within a nomological network. As Koufteros et al. (2009) argue in their research on airline service quality: The facets posited as first-order constructs are treated as reflective indicators of the second-order factor and are thus expected to be highly correlated. It is, in fact, on the basis of what they share that we put them together under the umbrella of a second-order construct. They share the more abstract construct, the second-order factor (p.645).In pursuant to the preceding discussion, Nunkoo, Teerovengadum, Thomas and Leonard, (2017) found empirical support for second-order models of service quality and noted their distinct influence on customer satisfaction and loyalty various studies suggest that service quality is multidimensional, comprising context-specific dimensions, which are strongly correlated, suggesting that it is best to consider the construct as a second order factor. Hence, very few studies have proposed an integrated second order latent mediation model using service quality and service guarantee (as a marketing strategy) as indirect factors to investigate the direct effect of perceived value, corporate image and satisfaction on customer loyalty in the empirical context of five-star resorts. Therefore, the prospects of loss aversion and signalling maybe enhanced in this research, providing support for two of the underpinning theories employed in this study, the Signaling and Prospect theories respectively.

Ali et al., (2016) calls for additional determinants of customer’s loyalty and satisfaction on the empirical context of resort sectors. Determinants of customer’s loyalty might differ by industry, country, and market stage of product life cycle (Kim et al., 2016). Therefore, this provides an impetus for the current research from an industry and customer perspective, specifically the five-star resorts industry. However, limited research thus far has examined the direct and indirect causal effects of service guarantee and service quality through the direct effects of perceived value, corporate image and satisfaction in determining customer loyalty of five-star resorts in a single second order latent variable SEM model.

1.5 Research Gaps

This study provides the groundwork for using signaling and prospect theories in service quality research and contributes significantly to the understanding of the complex relationships (both linear and non-linear) of perceived service quality, service guarantee and direct effect of value, image and satisfaction in loyalty. Creating and maintaining customer loyalty is critical for the sustainability of a resort in a competitive environment. From the theoretical perspective, the determinants and factors that influence customer loyalty are service quality, perceived value, customer satisfaction and corporate image. However research in understanding customer loyalty in the hotel or resort industry of Malaysia has been severely limited in marketing literature (Cheng and Lew, 2015). This study provides some insights into the gap above. Thus, it is paramount that resort managers understand and utilize the results of this research effectively to achieve an understanding of employing the right strategy to achieve customer loyalty.

The literature presents the following research gaps: (1) The relationships of service quality with customer loyalty and its determinants has not been fully examined, (2) The relationship of service guarantee with customer loyalty and its determinants has not been fully examined, (3) An integrated conceptual SEM framework to examine the potential relationships among loyalty determinants has not been determined. The following subsections addresses each of these research gaps. The gaps in this study are hereby discussed.

First, most of our knowledge about hospitality loyalty comes from research that measures loyalty as behavioral intentions (Tanford, 2016). Although intentions are considered valid predictors of behavior (Ajzen, 1991), precision is lost as one moves from attitudes to intentions to behavior (Armitage & Conner, 2001). Thus, the body of hospitality literature may overestimate the true relationship of loyalty determinants with actual outcomes (Tanford, 2016). However, to date limited studies has examined loyalty determinants in five-star resorts. From a practical perspective, management wants to know how to increase the loyalty of its customers. It would be very useful for them to understand the important loyalty determinants, particularly those factors they can control (Tanford, 2016). Amin et al (2013) investigated service quality and determinants of customer satisfaction of Malaysian hotels whereas Ali (2016) provided some insights into the study of Malaysian resorts and relationship of service quality and its determinants of behavioral intentions. Service quality, perceived value, customer satisfaction and corporate image are the significant factors in predicting customer loyalty. Trust, on the other hand is not significant in predicting customer loyalty in the hotel industry in Malaysia. This provides hotel operators with a better understanding on factors that could lead to customer loyalty, which subsequently will enable them to direct effective hotel services strategies to enhance their long-term business growth by building up a strong and loyal client base (Cheng and Lew, 2015). Based on this gap this research tests the relationships of loyalty determinants in the context of five-star resorts and its relationships with service quality and determinants of customer loyalty. In sum, this research aims to provide a better explanation of service quality relationships and its influence to customer satisfaction, image and perceived value, in other words, the investigation of customer loyalty determinants. In line with the argument of Blut (2016), it was found that the various dimensions of service quality are distinct and cannot be simply merged or deleted without changing the meaning of the construct. Hence, this study considers the theoretical and methodological implications of a second-order factor approach for developing measurement scales of service quality and strives to improve the understanding of the theoretical relationships between service quality and its loyalty determinants in the empirical context of Malaysian five-star resorts.

Second, the relationship of service guarantee with customer loyalty and its determinants has not been fully examined. Service guarantees can provide a unifying framework that brings together the service quality literature and the loyalty fields (McCullough, 2010). Although service guarantee studies have been conducted in various service sectors (Gremler and Hogreve, 2009), it is surprising to note that very limited studies have been carried out on resorts. Service guarantee as a marketing strategy brings in a lot of benefits to both the customers and the organization and is a cue to signal quality, however the usefulness of service guarantees is still under-studied (Ostrom and Iacobucci, 2016). Taking the cue from the preceding discussion by the scholars, no study has investigated the relationship of service guarantee with customer loyalty and its determinants in a single model. Therefore, this is the second gap in this study.

Third, an integrated conceptual SEM framework to examine the potential relationships among loyalty determinants has not been determined. According to Lee and Wong (2016), existing research models might not cover all the factors that influence customer’s loyalty. Therefore, scholars are advised to carry out additional research attempts to provide a better perception and implication taking into account additional factors, perspectives, and contexts. In sum, there are various gaps in literature to marketing researchers in exploring and examining additional loyalty antecedents. Researchers are also advised to validate the proposed loyalty models based on future research opportunities and limitations (Abu-Alhaija, et al., 2018). This direction is in line with the view of Dick and Basu (1994). To date, limited loyalty models has not been developed or tested for any classification of resorts, specifically within a five-star resort context.

The dependent variable is customer loyalty taking into consideration that the fundamental goal for a resort is customer loyalty. The initial measurement model of customer loyalty will be tested with six items. This research is to find if the respondents agree with the positive statement of the customer loyalty on Malaysian five-star resort services. This is because this research is keen to understand if the clients has the willingness to pay more to be a guest at the resort rather than other resorts and if they believe that the same resort will be their first choice whenever choosing a resort in the same area. In addition, the R^2 for customer loyalty will be evaluated to determine if all the independent variables (i.e., service guarantee, perceived value, corporate image and customer satisfaction) contributed to the variance explained in customer loyalty of the Malaysian five-star resort services. This research examines the relationship between the constructs and customer loyalty to indicate if there are significant evidence of the relationship between the variables, customer loyalty in order to concur with the hypothesis established from literature. This study will also test for multicollinearity with customer loyalty as a dependent variable to reveal the tolerance values. Therefore, testing a comprehensive hierarchical model, developed for resorts, will contribute new knowledge to the service marketing literature by introducing an integrated conceptual modelling framework that may be adopted by researchers who aim to determine the complex interrelationships existing between these higher order constructs for different types of hotels, as well as for resorts located in other countries.

Limited research has been published outlining signaling and prospect theories in a single study and customer loyalty in examining the empirical evidence of the indirect and direct causal paths. This research expands the empirical base of knowledge on the effects of second order latent variable modelling of loyalty. This study models the constructs by two underlying theoretical underpinning which posits that the underlying customer loyalty will grow at an increasing rate. This is posited to shed new insights into the studies of customer loyalty within the empirical context of five-star resorts by the provision of the Signaling and Prospect theories in a single loyalty model.

1.6 Research Questions

The research questions for this study are:

1. What are the specific indirect effects through serial multiple mediator to assess the multiple mediator effect of service quality on perceived value, customer satisfaction, and corporate image on customer loyalty in the Malaysian five-star resort sector?
2. What are the specific indirect effects through serial multiple mediator to assess the multiple mediator effect of service guarantee on service quality, perceived value, customer satisfaction, and corporate image towards on customer loyalty in the Malaysian five-star resort sector?
3. Does service guarantee have a direct effect on customer loyalty in the Malaysian five-star resorts?

1.7 Research Objectives

The objective of this research is to analyze the service guarantee adoptions, with specific reference to achieving sustainable development of five-star resorts. In the context this study has following objectives: -

The research objectives are:

1. To examine the specific indirect effects through serial multiple mediator to assess service quality, perceived value, customer satisfaction, corporate image towards customer loyalty in the Malaysian five-star resort sector.
2. To examine the specific indirect effects through serial multiple mediator of service guarantee, service quality, perceived value, customer satisfaction, corporate image towards customer loyalty in the Malaysian five-star resort sector.
3. To determine the direct relationship of service guarantee towards customer loyalty in the Malaysian five-star resorts.

1.8 Significance of Study

While the benefits of incorporating service quality as a second-order factor in a structural model have been proven empirically in other fields (e.g. Bauer et al., 2006; Blut, 2016; Koufteros et al., 2009), hospitality research has yet to exploit the full potential of this technique (Nunkoo et al.,2017). This research provides evidence of the above technique in the context of five-star resorts, which has very limited empirical evidence in the services marketing literature. Two main limitations can be identified from existing studies.

First, while few hospitality researchers have rightly conceptualized service quality as a second-order factor, they did not consider the construct with other variables in a structural model (Wilkins et al., 2007). This research does not claim that the use of a second-order factor model is appropriate in all circumstances. Rather, it argues that when embedded in a nomological network, which previous studies has failed to do, a second-order model leads to a theoretically robust and a more parsimonious structural model (Koufteros et al., 2009).This is because a one-dimensional approach to conceptualizing service quality, curtails explanatory power and theoretical usefulness of the structural model conceptualizing service quality, curtails explanatory power and theoretical usefulness of the structural model (Gerbing et al.,1994; Koufteros et al.,2009). This study addresses the limitations described above by integrating service quality as a second-order factor in proposing a research model using Structural Equation Modelling (SEM) that can predict and better explain customer loyalty in the context of Malaysian five-star resorts.

1.8.1 Theoretical Contributions

This study proposes to underpin this study through two theories, namely The Signaling and Prospect theories. In terms of theoretical contribution, this study goes further than Liat’s and Chiau’s work (2015) and Nunkoo et al., (2016) by adding two constructs (i.e. service guarantee and service quality) these variables provide theoretical underpinnings in postulating the Signaling and Prospect theories towards the loyalty of tourists. Creating and maintaining customer loyalty is critical for the sustainability of a resort and service quality, perceived value, customer satisfaction and corporate image are the significant factors in predicting customer loyalty (Cheng and Liew, 2015).

There is very limited holistic empirical evidence available pertaining to customer loyalty of five-star resorts, encompassing Malaysia from both the west and east Malaysian states. Service guarantee is applied in this study, which acts as a determinant of service quality in prospecting loss aversion. According to Kahnemann and Taversky (1979) in their seminal work entitled “Prospect Theory: An Analysis of Decision under Risk” for a loss-averse individual, incurring risk is unappealing, the pain of losing far outweighs the pleasure of winning. In reflection, service guarantee acts as a hedge to reduce risk. This is evident as Meyer et al., (2014) finds that service guarantee explicitly spells out for customers what is being covered. It helps customers in making the service failure verification process efficient by providing clear standards for identifying whether a failure has occurred. Moreover, Thomassen (2018) states that explicitly promising compensation has positive signaling effects and leads to improved customers’ evaluations and from a signaling perspective on potential customers, compensation helps the organization to signal quality and show its customer engagement effectively. Therefore, service guarantees act as a reliable marketing strategy in reducing risk in decision making and hence relates to the Signaling theory which in this context signals high service quality and in general, perceived value, corporate image and customer satisfaction towards loyalty. The signaling and prospect theories are not new to marketing or psychology researchers however this finding proposes that the two theories contribute to synthesize the multi-dimensional second order latent structure of loyalty model. Particularly, the service quality dimensions illustrate the signaling and loss aversion concept of prospect theory converging into the three direct factors of customer loyalty. The customer loyalty model identified was examined through a robust methodological procedure for testing theoretical model (SEM) and validated across five-star resorts. Thus, the model identified is plausible and not only reinforces but also extends the modern conceptualization of customer loyalty.

The consequence of this finding is that the measurement of customer loyalty in competitive service industries (such as the resort industry) should focus on relative attitude. In addition, the resort indicators of the customer loyalty measurement identified in this research were deemed to be theoretically and psychometrically sound, and thus they can be used in future loyalty research. The current research extends an understanding, that in a service context (that is the resort industry) the developed country’s service quality are perceived to be better compared to that of developing country. This study makes a significant contribution to understanding competitive positioning of five-star resorts of the international and local customers in the five-star resort industry context. This contribution is significant as little attention is given to the role of marketing strategies towards influencing customer loyalty in the context of resort services. This study also provides evidence that five-star resorts are perceived to be superior as delivering service quality and has a favorable image. This can create a high perceived value, satisfy customers, and create loyal customers. This finding suggests that the five-star resorts should consistently deliver a high quality of service and keep a favorable corporate image to maintain their higher perceptual position to show positive signals towards prospects in the five-star resort industry.

1.8.2 Practical Implications

Practitioners who intend to increase the level of corporate image, value and customer satisfaction need to focus on how to deliver a superior level of service quality and understand how to manage situations when service failures occur. Managers need to employ a service guarantee policy when failures happen to strengthen their resorts’ perceived value leading to an increase in corporate image of the resort.

The empirical results of this study provide practitioners with insights into how resorts customers conceptualize service quality. The second order latent variable framework in this study enables resort entrepreneurs to identify and assess the dimensions driving customers’ perceptions of service quality. Resort management are able to measure the perceptions of service quality at a global level, at the primary dimensional level, at the sub-dimension level, or at all three levels according to their strategic requirements.

For example, resort managers interested in the general attitudes of customers towards the hotel’s services, can use the three global indicators to investigate the overall perceptions of service quality. Alternatively, resort managers can investigate the indicators at the sub-dimension level to evaluate core competencies and to identify any service deficiencies. The finding of the direct effect of perceived value on satisfaction and corporate image also means that management must ensure that customers receive a high value for money spent. A high level of service quality helps achieve a higher level of perceived value, as service quality is an important component of the assessment of perceived value.

Service guarantee is a new variable identified in this study that reflects specifically, cues to quality more generally as service quality was found to be a determinant of service guarantee. Five-star resorts with high levels of quality provides a service guarantee policy as a signal of their service uniqueness in comparison to other classes of resorts. Resort management may use some unique activity to help segment and target a market and position their particular resort. A resort may position as a unique Malaysian-styled resort with warm and friendly service yet efficient and of high quality. In hotel ambience with regards to room, public areas and food and beverage outlets quality are important drivers of the total ambience of the resort.

The management of resorts must ensure that resorts has rooms that are aesthetically appealing, comfortable (bed and amenities), well sound proofed, and fitted with air condition units to control room temperatures as these factors contribute to a restful night. In particular, a restful night is important in a long duration stay when guests are involved in a high level of physical activity.

1.9 Scope of Study

This study focuses on level of service quality, service guarantee strategy and its effect on loyalty in five-star resorts based in Malaysia. The framework is constructed to facilitate this study which is tested on five-star resorts that has high quality services that requires some form of guarantee. This study aims to focus on five-star resorts and investigate the effects of various service quality dimensions on customer loyalty in the Malaysia market, as research on resorts are severely limited (Line and Runyan,2012). Adoption of service guarantees is almost non-existent in the Malaysian market although literature and empirical evidence shows the benefits of five-star resorts with high quality services having greater benefits in terms of signaling and the aversion of loss. The study focusses primarily on five-star resorts covering both the peninsular and east Malaysia as most of the five-star resorts are concentrated in these areas catering to local and international tourists supporting the national economy. The study will be administered on customers who stays at five-star resorts. The study will be in the form of a customer perspective and focuses on the role of service guarantee and quality towards customer loyalty and mediating effect of perceived value, satisfaction and corporate image which are the crucial factors that determines service guarantee adoption.

The extant marketing literature provides little rigorous and methodical empirical research on the relationships between service guarantees and service quality such as a single study by Sharil et al., (2013) which found no support for the relationship between service guarantee and service quality in Malaysian hotels. Therefore, while past research has focused on recommending certain criteria in the design of service guarantees, the impact of service guarantees on loyalty and value, satisfaction and image – all of which are important determinants of service quality has seldom been examined. Hence, this research attempts to broaden the scope of service guarantee research and investigate the relationship between service guarantee and service quality as well as to examine the direct mediation effects on loyalty in the context of the Malaysian five-star resorts.

1.10 Overview of the Research Methodology

This study was based on the cross-sectional survey of domestic and international tourist of five-star resorts within seven locations in Malaysia which are derived from Port Dickson, Langkawi, Penang, Kuala Trengganu, Johor Baru, Sabah and Sarawak. The pre-test survey was administered by the researcher at the Four Seasons Resort, Langkawi between April and May 2017 and the full survey was conducted on site from July 2017 to December 2017. Given the validity of a self-administered questionnaire which enables the researcher to distribute numerous questionnaires to many respondents at different places simultaneously. This method was deemed suitable for collecting data from various resorts at different locations in a relatively short period of time. In addition, as resort guests normally seek comfort and privacy in their stay, using this method allowed the guests to complete the questionnaire at their convenience.

With regards to data analysis, two statistical packages (i.e., statistical package for social sciences, SPSS and analysis of moment structures, AMOS) were employed. Employing the SPSS, initial works were conducted to generate the descriptive statistics, reliability and validities for the investigative variables. AMOS was employed in conducting the confirmatory assessments, based on which the measurement models were revised. Furthermore, the multivariate technique of structural equation modelling was also conducted with the aid of AMOS to generate the simultaneous estimation of path relationships among variables.

1.11 Outline of Study

The structure of this thesis is composed of five chapters. Chapter One provides a brief introduction of the topic and the summary of the intended study’s and background, past and current research on the proposed area of study, problem statement, research questions and research objectives. The framework of study also includes the description of the scope and terms.

Chapter Two provides a brief discussion of previous studies that are related to the present research which includes the discussion on the theoretical framework and the hypotheses development justification. This chapter reviews all the predictor variables, three mediating variables and one criterion variable where the literature review is presented in a thematic manner. In this chapter, hypotheses developed and concluded with explanation of underpinning theory.

Chapter Three furnishes a brief explanation on data sources; methodology used to determine adoption of open innovation through theoretical model, effectiveness of the constructs, survey instruments selection of variables and expected results. Data compilation and testing is thoroughly explored. In addition, target population, sampling method, sample size, sampling procedures and constraints as well as sampling constraints has been discussed. It also discusses questionnaire design measurement of the intended variables, validity of the questionnaire, data analysis technique and reliability test through pilot test.

Chapter 4 presents the empirical results is presented in structural equation modelling (SEM) and data is analyzed, and the findings presented. Presentation of the outcome of confirmatory as well as regression is thoroughly analyzed. It also presents the discussions of the findings which explains and discusses the objectivity of findings.

Chapter 5 concludes with summary, policy implications arising from the study. Limitations of the study and suggestions for future research were also presented in the study.

1.12 Operational Definition of Terms

Customer loyalty - Customer loyalty, is defined as “a deeply held commitment to re-buy or re-patronize a preferred product offering consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior” (Oliver, 1997).

Service quality - Service quality is the customer’s overall impression of the relative inferiority/superiority of the organization and its services (Bitner and Hubbert, 1994).

Service guarantee - Service guarantees are described as “powerful instruments that contribute to the customer-focused marketing strategy of service firms” (Hogreve and Gremler, 2009).

Customer satisfaction - Customer satisfaction can be measured as the prices or values that are important factors influencing and assisting the development of satisfaction (Getty & Thompson, 1994).

Perceived value - Zeithaml (1988) defines perceived value as “the customer’s overall assessment of the utility of product based on perceptions of what is received and what is given”.

Corporate image - Nguyen and LeBlanc (1998) state that corporate image is the result of customers’ overall consumption experiences which is a cumulative construct, updated each time the customer consumes the service.

Resorts - Gee (1981) describes resorts as a type of accommodation that creates an environment to promote and enhance a feeling of well-being and enjoyment for guests.

1.13 Summary of the Chapter

This chapter introduces the study and commences with the current tourism landscape in and the importance of resorts and the significance of five-star resorts in Malaysia. The constructs employed in this study and its direct and indirect relationship towards customer loyalty is addressed. Next the background of the study identifies the statistical data of tourist arrivals.

The chapter also identifies some aspects of the constructs employed in this study from historical data including locations of resorts across the country which shows the significance of this study to conduct the current research in more than two locations besides done in previous studies in only Langkawi and Penang chosen as a subset of Malaysia. To gain a richer and comprehensive finding this research must explore insights of five-star resorts located within the peninsular extending to Sabah and Sarawak. Previous studies lack variety in its demographic information of the respondents such as gender, age, marital status, educational background, occupation and the nationality of the respondents.

Resorts and the industry sector within the Malaysian context are examined next specifically the five-star resorts. Research gaps are identified with relevant constructs employed in this study. Next problem statement is discussed followed by research objectives and questions followed by contributions of this research from the theoretical and practical aspects towards the Malaysian resort industry. The chapter concludes with an organization of the thesis which consists of five chapters. Overall, findings of this study validate the customer loyalty scale in the context of five star resorts and enhances the theoretical progress on the concept in tourism and offer important implications for resorts marketing team.


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Service Guarantee prospect in signalling Service Quality towards Customer Loyalty
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service, guarantee, quality, customer, loyalty
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Pradeep Paraman (Author), 2020, Service Guarantee prospect in signalling Service Quality towards Customer Loyalty, Munich, GRIN Verlag,


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