Journal of Quality Assurance in Hospitality & Tourism

ISSN: 1528-008X (Print) 1528-0098 (Online) Journal homepage: http://www.tandfonline.com/loi/wqah20

Experience quality and hotel boutique customer

loyalty: Mediating role of hotel image and
perceived value

Ananda Sabil Hussein, Raditha Dwi Vata Hapsari & Ida Yulianti

To cite this article: Ananda Sabil Hussein, Raditha Dwi Vata Hapsari & Ida Yulianti
(2018): Experience quality and hotel boutique customer loyalty: Mediating role of hotel
image and perceived value, Journal of Quality Assurance in Hospitality & Tourism, DOI:
10.1080/1528008X.2018.1429981

To link to this article: https://doi.org/10.1080/1528008X.2018.1429981

Published online: 31 Jan 2018.

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JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM
https://doi.org/10.1080/1528008X.2018.1429981

Experience quality and hotel boutique customer loyalty:

Mediating role of hotel image and perceived value
a
Ananda Sabil Hussein , Raditha Dwi Vata Hapsaria, and Ida Yuliantib
a
Department of Management, Faculty of Economics and Business, Universitas Brawijaya, Malang,
Indonesia; bDepartment Agribusiness and Markets, Faculty of Agribusiness and Commerce, Lincoln
University Canterbury, Christchurch, New Zealand

ABSTRACT KEYWORDS
This study aims to examine the relationships among experience Experience quality; hotel
quality, hotel image, perceived value, and customer loyalty in the image; perceived value;
area of Indonesia boutique hotel industry. Partial least squares customer loyalty; boutique
hotel
analysis was employed to analyze the data. Two hundred and five
respondents participated in this study. The finding of this study
contributes to both theoretical and practical standpoints. For
theoretical perspective this study provided a comprehensive
model explaining the relationships among experience quality,
hotel image, perceived value, and customer loyalty in the setting
of boutique hotel. For practical contribution, this study will be the
guideline for boutique hotel managers in formulating market-
oriented strategies to retain the customers based on the increase
of customer experience quality, hotel image, and perceived value.

Introduction
Previous studies have identified the significance of customer loyalty. Scholars
(Hallowell, 1996; Heskett, 2002) explained that by having loyal customers, a
business organization will increase its sales which lastly rise the profitability.
In terms of spending the marketing cost, Rundle-Thiele (2005) suggested that
all marketing activity costs in retaining customers are lower than costs to
attract new customers. Due to that reason, there is a need for a business
organization to enhance the customer loyalty.
In the relationship-marketing paradigm, scholars have identified the
important of service quality in creating customer loyalty (Hapsari, Clemes,
& Dean, 2017; Hussein & Hapsari, 2015; Ladhari, 2009). However, Cole and
Scott (2004) and Lemke, Clark, and Wilson (2011) contended that in the
context of hospitality industry, service quality alone is not enough to affect
customer loyalty as it is only about the performance of service in the level of
attribute. To have more understanding, scholars proposed the notion of
experience quality as an antecedent of customer loyalty (Jin, Lee, & Lee,
2015; Lemke et al., 2011; Wu, Li, & Li, 2016). Customer experience is about

CONTACT Ananda Sabil Hussein sabil@ub.ac.id Department of Management, Faculty of Economics and
Business, Universitas Brawijaya, JL. MT Haryono No. 165, Malang 65142, Indonesia.
© 2018 Taylor & Francis Group, LLC
2 A. S. HUSSEIN ET AL.

customer’s subjective response toward their direct and indirect encounter

with service providers (Wu & Ai, 2016). Hence, experience quality is the
superior performance of customer experience.
The effect of experience quality on customer loyalty in the context of
hotel industry was conceptually proposed by Bill Xu and Chan (2010) and
empirically revealed by Cetin and Dincer (2013). This research explained
that experience quality formed by physical environment and social inter-
action significantly affects hotel customer loyalty. However, these previous
studies did not explain clearly the process on how hotel experience quality
affects customer loyalty. These studies only evaluated the direct effect of
experience quality on customer loyalty. For that reason, there remains a
gap in the literature. To address this issue, this study builds a compre-
hensive model by integrating the notion of hotel image and perceived
value.
Earlier studies recognized the significant of hotel image and perceived
value in the area of hospitality study. Hotel image is considered an important
construct in the area of hotel industry as it affects customers’ overall evalua-
tion about the hotel (Kandampully & Hu, 2007). Some studies have revealed
the importance of hotel image in retaining customers (Ali et al., 2013;
Kandampully & Hu, 2007; Kandampully & Suhartanto, 2000). These studies
indicated that customers tend to be more loyal to a hotel having positive
image. Also, hotel image cannot be separated into customer experience
quality. Kennedy (1977) contended that brand image grows based on sets
of customer experiences. It means to have positive image, a hotel must be
able to provide good experience quality for customers. Apart from the hotel
image, perceived value is also discerned as an importance construct. It is
acknowledged as the key for business organizations to enhance the long-term
success (Sweeney & Soutar, 2001). Studies in hotel industry discovered the
importance of perceived value in affecting customer loyalty (Gould-Williams,
1999; Suhartanto, Clemes, & Dean, 2013). These studies found that hotel
visitors tend to be more loyal when they perceive high value. Thus, it is
expected that inserting hotel image and perceived value into a conceptual
would explain the effect of hotel boutique experience quality on customer
loyalty.
In accord on the development of Indonesia tourism, hotel industry has
also shown a significant growth. Data published by Indonesian Statistics
(Sulistiyani & Iryani, 2015) showed that in 2015 there were around 18.353
short-stay accommodations in Indonesia. This figure increased 4.9% com-
pared to the year of 2014 when there were around 17.484 short-stay
accommodations. In accord on the increase of short-stay accommoda-
tions, Poerwanto (2016) discovered that the hotel occupancy rate in
Indonesia, especially star hotels, reached 57.25% average per month in
2015. This occupancy rate was higher than the year of 2014 which was
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 3

only 50.1%. While some indicators show a positive trend for the devel-
opment of Indonesian hotel industry, there is an oversupply threat in the
future regarding the number of offered rooms (Dinisari, 2016). By reflect-
ing the potency of Indonesian hotel sector, it is reasonable to conduct a
research about experience quality in the perspective of boutique hotel in
Indonesia.
Based on the background of study, this research aims to answer the
theoretical gap by building and testing a conceptual framework explaining
the relationship among experience quality, hotel image, perceived value, and
customer loyalty. Particularly, this study focuses on how two dimensions of
hotel customer experience quality (physical environment and social interac-
tion) are related with hotel image, perceived value, and customer loyalty. For
that reason, two research objectives were addressed in this study. First, this
study aims to examine the effect of experience quality on customer loyalty
and the second one is to scrutinize the mediating effect of hotel image and
perceived value in the relationship between experience quality and customer
loyalty. Upon the accomplishment of the study, this study provides both
theoretical and practical contributions. For academic standpoint, this study
forms a comprehensive framework to describe the interrelationships among
experience quality, hotel image, perceived value, and customer loyalty. For
practical standpoint, this study provides an insight for hotel managers or
practitioners to enhance experience quality, image and value to increase the
loyalty of customers.

Literature review
Experience quality and customer loyalty
Since the notion of service quality is not enough to explain customer loyalty,
scholars (C.-F. Chen & Chen, 2010; Wu & Ai, 2016) suggested the notion of
experience quality in affecting customer loyalty. Experience quality is about
the subjective response from customers toward the direct and indirect meet-
ings with service provider (Lemke et al., 2011). Some elements are involved
in experience as they are parts of consumer behavior such as emotion,
fantasies, and other customer perceptions (Holbrook & Hirschman, 1982;
Lemke et al., 2011).
Currently, there is no consensus among scholars about dimensions of
customer experience quality. Scholars explained that the customer experience
quality consists of some elements. For example Wu and Ai (2016) in the area
of golf industry explained that interaction, physical, outcome and access are
important elements in experience quality. In the context of restaurant indus-
try, Andersson and Mossberg (2004) suggested that cuisine, other guests,
service, company and interior are aspects of restaurant experience.
4 A. S. HUSSEIN ET AL.

Interaction quality, physical quality, outcome quality, administrative quality,

and perceived enjoyment are dimensions of hospital experience quality
revealed by Wu et al. (2016).
Carbone and Haeckel (1994) suggested that organizations could generate
customer experience by creating mechanic (physical environment) and
humanic (social interaction) encounters with service providers. The study
of customer experience quality in hotel industry showed that physical
environment and social interaction are dimensions of hotel experience
quality (Cetin & Dincer, 2013). Specifically, it explained that physical
environment is about physical aspects of a hotel indicated by service
scape, aesthetic, atmospheric, and tangibles; and social interaction is
about the social interaction between customers and service providers indi-
cated by service encounters, service profit chain, hospitality, and
intangibles.
Previous studies in the area of hospitality management found that physical
environment plays an important role in affecting customer loyalty. For
example, the study of Ryu, Lee, and Gon Kim (2012) revealed the positive
significant effect of physical environment on restaurant customer loyalty.
Moreover, the effect of physical environment on customer loyalty was found
in the study of Bed and Breakfast sector (Chen, Chen, & Lee, 2013). In the
study of ski resort, Alexandris, Kouthouris, and Meligdis (2006) showed the
effect of physical environment on ski place attachment. Accordingly, these
studies suggested that to have loyal customers, there is a need to provide
good physical environment.
Social interaction is also recognized to have an important role in affecting
customer loyalty in the domain of hospitality industry. In addition to finding
the importance of physical environment in creating customer loyalty,
Alexandris et al. (2006) showed the effect of social interaction in ski place
attachment. The effect of social interaction on customer loyalty was also
found by Cetin and Dincer (2013) who did a study in the area of hotel
industry. These two studies indicated that the better the interaction quality is,
the higher the loyalty of customers will be.
Based on these literatures, this study proposes:

H1: Physical environment positively affects customer loyalty

H2: Social interaction positively affects customer loyalty

The mediating roles of perceived value

The notion of perceived value has been discussed widely in the perspective
of hospitality industry (Hapsari et al., 2017; Ryu et al., 2012; Wu et al.,
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 5

2016). Theoretically, perceived values are defined as customer overall

evaluations based on the perception of what is given and what is received
(Zeithaml, 1988). Although the values are about the gap between what is
given and what is perceived, Sweeney and Soutar (2001) suggested that
they are different with satisfaction as values occur at any stages of pur-
chase rather satisfaction which occurs only after experiencing the pur-
chase. Gallarza and Saura (2006) explained that values are multi
dimensions consisting of social value, emotional value, value for money,
and performance quality.
Studies in tourism and hospitality industry have found the importance of
perceived value in influencing customer loyalty. The study of five star hotel
industry in Indonesia showed that perceived values positively affect custo-
mer loyalty (Suhartanto et al., 2013). In accord with this study, Hapsari
et al. (2017) discovered the importance of perceived value increasing
Indonesian airlines passenger loyalty to fly with full service airlines. In
restaurant study, perceived value is also recognized as the predictor of
behavioral intention (Ryu, Han, & Kim, 2008). These studies revealed that
the more positive value perceived by customer is, the higher the loyalty
will be.
In hospitality industry, studies indicated that the good experience per-
ceived by customers increases customer value perception. For example, the
study of Yu and Fang (2009) in Taiwan coffee shop showed that customer
contextual experience quality significantly affects customer perceived value.
In accord with this study, Wu et al. (2016) found that medical tourist
experience quality significantly affects patient perceived value. As a part of
experience quality, physical dimension is identified of having a direct sig-
nificant effect on customer loyalty (Ali et al., 2013; Ryu et al., 2008). These
studies showed that the loyalty of customers are higher when they perceive a
positive experience. Apart from physical environment, previous studies
recognized social interaction—a dimension of experience quality, as the
determinant of perceived value. The study of Zhang, Li, Wu, and Li (2017)
empirically found that social interaction significantly affects dimensions of
value such as emotional value, social value, information value, and hedonic
value. The effect of interaction between service providers and customer on
perceived value was also found in the study of restaurant industry (Ryu et al.,
2012). This study indicated that the quality of service as part of the interac-
tion between service providers and customers positively effects perceived
value.
Hence, this study proposed:

H3: Perceived value mediates the effect of physical environment on customer

loyalty
6 A. S. HUSSEIN ET AL.

H4: Perceived value mediates the effect of social environment on custo-

mer loyalty

The mediating roles of hotel image

The notion of hotel image was adapted from the idea of brand image. Park,
Jaworski, and Maclnnis (1986) suggested that brand image is not only about
the customer’s perception affected by marketing communication activities.
It is customer’s understanding about brand-related strategies engaged by
business organization. Mudambi, Doyle, and Wong (1997) explained that
brand image plays an important role to differentiate products or service
when it is hard to identify the features’ quality. In business management, a
brand is acknowledged as an intangible valuable asset which is hard to copy
(De Chernatony, 1999). It is important for business organizations to have a
positive brand image as it takes an important role in communicating
expectations, affecting customer’s perceptions as well as employees
(Grönroos, 2000). For financial perspective, having positive brand image
would maintain superior financial performance (Dennis, King, &
Martenson, 2007).
Recent studies found that hotel image has an important role to create
customer loyalty. The study of hotel customers in Indonesia found that hotel
image has a positive significant effect on customer loyalty (Kandampully &
Suhartanto, 2000). In accord with this study, Channoi, Clemes, and Dean
(2013) indicated that the loyalty of resort visitors in Thailand was affected by
the value perception. The direct positive significant effect of perceived value
on loyalty was also revealed by Ali and Amin (2014) who did a study in
China resorts. In sum, these studies showed that the higher value perceived
by the customers is, the higher the loyalty will be.
As an important construct in affecting customer loyalty, some studies have
been oriented to investigate the predictors of brand image. Both physical
environment and social interaction have been recognized as the antecedents
of brand image. The study on the restaurant industry in America found that
physical environment and the interaction between service provider and
customers significantly affect restaurant image (Ryu et al., 2012). In accord
with this study, Nguyen and Leblanc (2002) suggested that corporate physical
environment and personnel interaction play an important role in affecting
corporate image.
Previous studies showed that both physical and social interactions play
importance role in affecting image and image is found to have a significant
effect on customer loyalty. Hence, this study proposed:
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 7

Figure 1. Conceptual model.

H5: Hotel image mediates the effect of physical environment on customer

loyalty

H6: Hotel image mediates the effect of social environment on customer

loyalty

Research methods
Figure 1 shows the conceptual model proposed in this study.The respondents
of this study were customers of boutique hotels in Magelang and Malang City
Indonesia these two cities are considered as the tourism destination. 250 self-
administered questionnaires were distributed while only 205 questionnaires
were useable for the further analysis yielding 82% response rate. The data
from these 205 questionnaires were considered appropriate and met the
requirement of minimum sample size for Variance based on Structural
Equation Modeling/PLS as scholars (Hair Jr et al., 2014) suggested that the
generally acceptable minimum sample size for PLS is 10 times the highest
number of indicators used to measure a single construct. Thus, the highest
number of indicators used to measure a construct in this study was six (e.g.,
construct customer loyalty) then the sample size required for this study was
satisfied.
Prior collecting the data, the questionnaires were discussed with two hotel
general managers and two academicians to make sure the logic of
8 A. S. HUSSEIN ET AL.

questionnaires. In addition, as the measures used were adapted from English

literature in the context where the respondents were Indonesian, the process
of translation and re-translation were conducted to convince that the mean-
ing of questionnaires was still same.
For this research, the measurement items used were adapted from several
literatures. The construct of experience quality was adapted from Cetin and
Dincer (2013). For Hotel Image, the measures were adapted from Suhartanto
et al. (2013). The measures of perceived value were adapted from Chitty,
Ward, and Chua (2007) and Nasution and Mavondo (2005) and customer
loyalty was adapted from Han, Kwortnik, and Wang (2008) and Kayaman
and Arasli (2007). Five-point Likert scale was anchored from strongly dis-
agree (1) to strongly agree (5) and was employed in this study.
Partial least squares were used to analyze the data since this study aimed to
predict the relationships among variables in a complex model. To run the
analysis by using PLS, three-step analysis was taken. The first analysis is outer
model evaluation investigating the robustness of the measures used. Three
indicators are tested in outer model evaluation namely convergent validity,
discriminant validity, and uni-dimensionality. The second step is inner
model evaluation. It measures the robustness of the formed structural
model. Three indexes are used to evaluate the inner model namely coefficient
of determination (R2), predictive relevant (Q2), and Goodness of Fit Index
(GoF). The last step was a hypothesis test. In testing the proposed hypoth-
eses, this study set alpha in the level of 5% ðα ¼ 0:05Þ .
To test the mediating effect, this study followed Baron and Kenny (1986)
mediating test approach. This approach suggested that to have a mediating effect,
a predictor must have an effect on the mediator and the mediator must affect
criterion. To examine the hypothesis, this study used sobel’s test (Baron & Kenny,
1986).

Results
Description of respondents
Two hundred and five participated in this study. The following demographic
profile based on the sample: 58% respondents were male, 37% aged between
30 and 39, around 54% were private employees, 56% held undergraduate
degree and 94% stayed less than three nights. The data regarding the demo-
graphy of responds was showed in Table 1.

Outer model evaluation

Prior testing the proposed hypotheses, there was a need to test the validity
(both convergent and discriminant) and uni-dimensionality of the items
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 9

Table 1. Demography of respondents.

Variable Frequency Percentage
Gender Male 119 58
Female 86 42
Age <20 11 5
20–29 41 20
30–39 76 37
40–49 64 31
50–59 11 5
>60 2 1
Occupation Employee 111 54
Government 37 18
Business person 35 17
Student 22 11
Education High school 24 11
Diploma 38 19
Undergraduate 115 56
Postgraduate 25 12
Doctoral 4 2
Length of Stay <3 Nights 193 94
3–5 Nights 8 4
>5 Nights 4 2

used. Convergent analysis was tested by evaluating the outer loading. Hair Jr
et al. (2014) suggested that to be a valid measure, an item must have outer
loading above 0.7. In addition, the score of Average Variance Extracted must
be above 0.5 for each construct. For this study, outer loadings varied between
0.580 and 0.887; and AVEs varied between 0.577 and 0.761. As item PE_1
had outer loading 0.580, this item had to be excluded from the model and the
model had to be re-estimated. Results for the second estimation indicated
that outer loadings varied between 0.708 and 0.887; and AVEs varied
between 0.646 and 0.761. The removal of PE_1 resulted in better
measurements.
Second outer model evaluation was testing the discriminant validity. In
accord to Fornell and Larker’ suggestion (1981), discriminant validity pro-
blems are detected through comparing the square root of AVE with the
correlations among constructs. To be free from discriminant validity pro-
blems, the square root of AVE must be larger than the correlation among
constructs. The discriminant validity evaluation showed that there are no
discriminant validity problems discovered in this study. Table 2 showed the
comparison between square root of AVE (in parenthesis) and the correlation
with other constructs.
Uni-dimensionality test was performed to assure that the constructs used
were uni-dimensions. Composite reliability was used to test uni-
10 A. S. HUSSEIN ET AL.

Table 2. The comparison between square root of AVE and correlations.

Customer Hotel Perceived Physical Social
loyalty image value environment interaction
Customer loyalty (0.806)
Hotel image 0.712 (0.786)
Perceived value 0.734 0.751 (0.872)
Physical 0.595 0.621 0.612 (0,803)
environment
Social interaction 0.628 0.616 0.633 0.616 (0.851)

dimensionality of constructs. To be free from uni-dimensionality problems,

the constructs must have composite reliability above 0.7 (Chin, 2010). The
uni-dimensionality estimation indicated that the composite reliability varied
between 0.890 and 0.929. Hence, all constructs were uni-dimensional. Table 3
summarized the outer loadings, AVE and composite reliability for each
construct.

Inner model evaluation

Upon the evaluation of outer model, the further analysis is evaluating the
inner model/structural model. For this study, inner model was evaluated by
checking the coefficient of determination (R2), predictive relevance (Q2) and
GoF. The following section discusses the inner model evaluation.

Table 3. Outer loadings, AVE, and composite reliability.

Outer loadings AVE CR
BI_1 0.831 0.619 0.890
BI_2 0.715
BI_3 0.827
BI_4 0.757
BI_5 0.800
BL_1 0.803 0.651 0.917
BL_2 0.778
BL_3 0.793
BL_4 0.770
BL_5 0.844
BL_6 0.850
PE_2 0.708 0.646 0.901
PE_3 0.797
PE_4 0.818
PE_5 0.839
PE_6 0.851
SI_1 0.867 0.725 0.929
SI_2 0.833
SI_3 0.887
SI_4 0.792
SI_5 0.877
PV_1 0.884 0.761 0.927
PV_2 0.880
PV_3 0.862
PV_4 0.864
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 11

Chin, Peterson, and Brown (2008) suggested that the value of coefficient
determination is categorized into three classes: weak (0.19), moderate (0.33)
and substantial (0.67). The PLS estimation indicated that the coefficient
determination value for perceived value was between moderate and substan-
tial (R2 = 0.481), hotel image was between moderate and substantial
(R2 = 0.473) and customer loyalty was between moderate and substantial
(R2 = 0.626). These results showed that coefficient determination for all
endogenous constructs were between moderate and substantial. Apart from
the value of coefficient determination, to evaluate the structural model, this
study also used stone-Geisser predictive relevance (Q2). Predictive relevance
explains about how to measure the level of well-observed values which were
restructured by the model and its parameter (Chin, 2010). To have a pre-
dictive relevance, the endogenous constructs must have Q2 greater than 0
(Q2 > 0) (Hair et al., 2014). For this study, the value of Q2 varied between
0.268 and 0.387. As the values of Q2 were greater than 0, it meant all
constructs have a predictive relevance. GoF is the third indicator for evaluat-
ing structural model. Referring into Cohen (1988) suggestion regarding the
calculation of effect size, GoF value 0.10 is considered small, while 0.25 and
0.36 are considered medium and large, respectively. For this study, the value
of GoF was 0.598 which meant the GoF value is considered large.
Upon the evaluation of R2, Q2, and GoF, it can be concluded that the
structural model proposed is robust. Hence, the hypotheses tests can be
conducted. Table 4 summarized the results of inner model evaluation.

Hypotheses test
Hypotheses 1 and 2 proposed that physical environment and social interac-
tion are the predictors of customer loyalty. The statistical calculation showed
that only social interaction having a positive significant effect on customer
loyalty (β = 0.168; t = 2.105). This result supports Hypothesis 2.
Hypothesis 3–6 proposed the mediating effects. Baron and Kenny's (1986)
mediation analysis approach was employed in this study. The mediation
analysis estimation showed that perceived value fully mediated the effect of
physical environment of customer loyalty (β = 0.127; t = 3.231). While
perceived value fully mediated the effect of physical environment on custo-
mer loyalty, perceived value only partially mediated the effect of social

Table 4. The summary of inner model evaluation.

R2 Q2
Customer loyalty 0.626 0.387
Hotel image 0.473 0.268
Perceived value
pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
ffi 0.481 0.351
GoF = 0:527 x 0:678
12 A. S. HUSSEIN ET AL.

Table 5. Hypotheses test.

Hypothesis Path Beta t-statistic Results Mediating Effect
H1 PE → CL 0.099 1.404 NS –
H2 SI → CL 0.168 2.105 Supported –
H3 PE → PV → CL 0.127 3.231* Supported Full mediation
H4 SI → PV → CL 0.147 3.388* Supported Partial mediation
H5 PE → HI → CL 0.149 2.642* Supported Partial mediation
H6 SI →HI → CL 0.104 2.644* Supported Partial mediation
*Significant at p < 0.01.
PE: physical environment; SI: social interaction; PV: perceived value; HI: hotel image; CL: customer loyalty.

Figure 2. The summary of model tested.

interaction on customer loyalty (β = 0.147; t = 3.388). These findings support

Hypothesis 3 and 4. As proposed by Hypothesis 5 and 6 hotel image was
discovered in mediating the effect of both physical environment (β = 0.149;
t = 2.642) and social interaction (β = 0.104; t = 2.644) on customer loyalty.
Hence, Hypothesis 5 and 6 are supported. Table 5 and Figure 2 summarized
the results of hypotheses test.

Discussion and conclusions

Two research objectives were addressed in this study. The first research
objective was to investigate the effect of physical environment and social
interaction as dimensions of hotel experience quality on customer loyalty and
the second research objective was to test the mediating effects of perceived
value and hotel image in the relationship between experience quality and
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 13

customer loyalty. The following section will discuss the findings of this study,
its implications and contributions.
The effect of physical environment as dimension of experience quality on
customer loyalty was proposed by this study. However, the PLS estimation
indicated that there is no effect of physical environment on customer loyalty.
Though the physical environment does not have a positive effect on customer
loyalty, this study found the positive significant effect of social interaction on
customer loyalty. This finding strengthens the previous studies showing the
positive significant effect of social interaction on customer loyalty (Cetin &
Dincer, 2013; Yoon & Uysal, 2005). It means, the better the interaction
between boutique hotel services provider and customers is, the higher cus-
tomer loyalty will be. This finding theoretically implies that experience
quality plays a significant role to create customer loyalty. However, in
specific, it is revealed that only social interaction as dimension of experience
quality has a direct significant effect on customer loyalty.
As an important predictor of customer loyalty (Hapsari et al., 2017;
Suhartanto et al., 2013), this study discovered the fully mediating effect of
perceived value in the relationship between physical environment on
customer loyalty. Theoretically, it implies that perceived value bridges
the effect of physical environment on customer loyalty. Apart from its
role in fully mediating the effect of physical environment on customer
loyalty, the perceived value was also found to partially mediate the effect of
social interaction on customer loyalty. It meant that in affecting customer
loyalty, social interaction has two significant effects namely direct and
indirect effects.
Similar to the perceived value, previous studies have recognized that hotel
image has an important role to create customer loyalty (Ali & Amin, 2014;
Channoi et al., 2013; Kandampully & Suhartanto, 2000). Apart from its role
as the predictor of customer loyalty, this study found the mediating role of
hotel image in the relationship between both physical environment and social
interaction on customer loyalty. Hotel image offers a full mediation effect in
bridging the effect of physical environment on customer loyalty. This full
mediating effect occurs as physical environment does not have a significant
direct effect on customer loyalty. In affecting loyalty, physical environment is
mediated by the notion of hotel image. While hotel image fully mediated the
effect of physical environment on customer loyalty, it just partially mediated
the effect of social interaction on customer loyalty as social interaction has a
positive direct effect on customer loyalty.
The mediation roles of both perceived value and hotel image explain the
nonsignificant direct effect of physical environment on customer loyalty.
This finding mean that the importance of physical environment on customer
loyalty is recognized via the mediating effect of perceived value and hotel
image. It implies that hotel boutique physical environment is the key
14 A. S. HUSSEIN ET AL.

determinant of perceived value and hotel image which finally affect the
loyalty of customers.
Upon the completion of this study, two theoretical contributions were
provided. First and foremost, this study extends the service marketing and
hospitality body of knowledge by providing a comprehensive model explain-
ing the interrelationship among physical environment, social interaction,
hotel image, perceived value, and customer loyalty. Second, the proposed
model explains the effects of both physical environment and social interac-
tion as the dimensions of hotel experience quality on customer loyalty
directly and indirectly. Previous studies in lodging industry (Alexandris
et al., 2006; Cetin & Dincer, 2013; Chen et al., 2013) only tested the effect
of experience quality on customer loyalty directly. However, this study tested
the indirect effect through hotel image and perceived value.
For practical implication this study provides a guideline for boutique hotel
managers to create good quality of experience for customers staying at
boutique hotels. This study confirms that to have a high quality of experi-
ence, a boutique hotel must be able to provide good physical environment
and social interaction between hotel employees and customers. Moreover,
this study practically suggested hoteliers to enhance the image of hotel and
always give higher value of money to the customers as these two factors are
important to enhance the loyalty of customers.

Limitations and future research

While this study provides some theoretical and practical contributions, it
has some limitations which need to be acknowledged. First, in measuring
customer boutique hotel experience quality this study used physical envir-
onment and social interaction as dimensions of customer experience
quality proposed by Cetin and Dincer (2013). Suhartanto (2011) con-
tended that the notion of experience quality might be different among
culture. Hence, it is suggested to explore the dimensions of experience
quality prior testing its relationship with other variables. Consequently, to
have deeper understanding about customer boutique hotel experience
quality, further study might start with exploratory study to investigate
the structure and formation of hotel boutique experience quality. Second,
while this study recruited relatively large sample (n = 205), the respon-
dents were the boutique hotel guest stayed in Malang and Magelang City
Indonesia. This sample does not represent all boutique hotel guests in
Indonesia and thus the findings may not be generalized into other bou-
tique hotel guests in other places. Therefore, further study might replicate
this model and test other places. The last limitation is about the self-
administered questionnaires employed by this study. The lack of
researcher control might cause respondent misinterpretation which led
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 15

into validity and reliability problem. However, to minimize this possible

common method bias, this study protects the anonymity of respondents
and assures them that there is no right or wrong answers. Furthermore, to
reduce the bias this study keeps the questions simple, concise, and specific.
This study also avoids double negative questions and double-barreled
questions in developing the questionnaires.

ORCID
Ananda Sabil Hussein http://orcid.org/0000-0002-4030-1073

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