Journal of Quality Assurance in Hospitality & Tourism

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

The Effect of Technical and Functional Quality

on Guests’ Perceived Hotel Service Quality and
Satisfaction: A SEM-PLS Analysis

Faizan Ali, Kashif Hussain, Rupam Konar & Hyeon-Mo Jeon

To cite this article: Faizan Ali, Kashif Hussain, Rupam Konar & Hyeon-Mo Jeon (2017) The Effect
of Technical and Functional Quality on Guests’ Perceived Hotel Service Quality and Satisfaction:
A SEM-PLS Analysis, Journal of Quality Assurance in Hospitality & Tourism, 18:3, 354-378, DOI:
10.1080/1528008X.2016.1230037

To link to this article: https://doi.org/10.1080/1528008X.2016.1230037

© 2017 Taylor & Francis Group, LLC Published online: 14 Dec 2016.

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JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM
2017, VOL. 18, NO. 3, 354–378
http://dx.doi.org/10.1080/1528008X.2016.1230037

The Effect of Technical and Functional Quality on Guests’

Perceived Hotel Service Quality and Satisfaction: A
SEM-PLS Analysis
a
Faizan Ali , Kashif Hussainb, Rupam Konarc, and Hyeon-Mo Jeond
a
College of Hospitality & Technology Leadership, University of South Florida, Sarasota-Manatee,
Sarasota, Florida, USA; bFaculty of Hospitality and Tourism Management, UCSI University, Kuala
Lumpur, Malaysia; cSchool of Hospitality, Tourism and Culinary Arts, Taylor’s University, Subang Jaya,
Malaysia; dDepartment of Hotel & Tourism Management, Dongguk University – Gyeongju, Gyeongju,
South Korea

ABSTRACT KEYWORDS
Numerous models on perceived service quality are discussed in Customer satisfaction;
functional quality; lodging
literature besides SERVQUAL including technical and functional quality index; service quality;
quality model. Functional quality attributes have been well technical quality
studied but studies about technical quality attributes are rather
limited. This article aims to integrate existing frameworks and
propose antecedents towards perceived service quality and
resulting customer satisfaction. A total of 204 questionnaires
were collected from the guests staying at hotels in Malaysia.
Partial least squares (PLS-SEM) method was employed to test
the proposed relationships. Findings from the study support
the significant relationship between functional quality, techni-
cal quality, overall perceived service quality and guest satisfac-
tion. Furthermore, the first order constructs on the designated
second order constructs support that both functional quality
and technical quality as second order reflective constructs with
five and three first order dimensions respectively. Practical
implications and limitations of the study are discussed in detail.

Introduction
Malaysia has been attracting a large number of tourists over past few years.
This continued growth has developed the country as one of the most popular
tourist destinations in Asia. As per the statistics issued by United Nations
World Tourism Organization (UNWTO), Malaysian tourism industry per-
formed above expectations in 2014, with tourist receipts of US$ 21.8 billion
exceeding the initial target of US$ 21 billion. Meanwhile, tourist arrivals also
grew by 6.7% to 27.4 million arrivals compared to 25.7 million arrivals in
2013 despite a challenging year (UNWTO, 2015). This growth in the tourist
arrivals and receipts is expected to grow at a Compound Annual Growth

CONTACT Hyeon-Mo Jeon jhm010@dongguk.ac.kr Department of Hotel & Tourism Management,

Dongguk University – Gyeongju, Gyeongju, South Korea.
© 2017 Taylor & Francis Group, LLC
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 355

Rate (CAGR) of approximately 8% in the coming years (Amin, Yahya,

Ismayatim, Nasharuddin, & Kassim, 2013).
The growth in hospitality and tourism industry is immensely increasing
the competition among service providers. Achieving a competitive advantage
has become dependent on the service providers’ ability to anticipate custo-
mers’ expectations, fulfil their needs and provide quality services (Amin et al.,
2013; Dedeoglu & Demirer, 2015; Dominici & Guzzo, 2010; Kumar, Smart,
Maddern, & Maull, 2008). Ensuring service quality does not only guarantee
customer satisfaction but also result in decreased costs, increased profit-
ability, improved organizational performance, and consequently, positive
word-of-mouth (Giritlioglu, Jones, & Avcikurt, 2014; Seth, Deshmukh, &
Vrat, 2005). In the case of hospitality industry, marketers have started to
contemplate and develop new approaches to manage service quality due to
the different nature of the hospitality services being offered i.e., higher level
of perishability and simultaneous production and consumption makes hos-
pitality services at high risk purchases (Ali & Amin, 2014; Lewis & Chambers,
2000; Zaibaf, Taherikia, & Fakharian, 2013). Hence, service quality, its
measurement and its relationship with customer satisfaction are amongst
the most discussed areas within services marketing literature (Amin et al.,
2013; Han & Ryu, 2009; Ryu & Han, 2010; Wu & Liang, 2009).
Most of the service quality literature (Brady & Cronin, 2001; Cox & Dale,
2001; Chumpitaz & Paparoidamis, 2007; Dagger, Sweeney, & Johnson, 2007;
Kang, 2006; Ladhari, 2009; Santos, 2003; Seth et al., 2005) have mainly
discussed two models namely (i) technical and functional quality model
(Gronroos, 1984) and (ii) Gap Model/SERVQUAL (Parasuraman, Zeithaml,
& Berry, 1985). Though SERVQUAL grabbed a lot of attention, but
Gronroos’ (1990) model is still not studied well and needs more elaboration
(Tamwatin, Trimetsoontorn, & Fongsuwan, 2015). Literature review pin-
points that functional quality attributes have been intensively researched
using SERVQUAL and its improvised versions, whereas in comparison, the
technical quality attributes are somewhat ignored and not discussed (Wu &
Ko, 2013; Yu & Ramanathan, 2012). Recently in hospitality industry, numer-
ous scholars have discussed customer satisfaction and service quality using
different models (Akbaba, 2006; Gržinic, 2007; Markovic & Raspor, 2010;
Mey, Akbar, & Fie, 2006; Ramsaran-Fowdar, 2007; Renganathan, 2011;
Wilkins, Merrilees, & Herington, 2007). However, few studies have inte-
grated multiple conceptualizations of service quality specific to hospitality
industry and its effect on customer satisfaction (Tamwatin et al., 2015). This
integration to understand service quality can be crucial for service providers
in hospitality industry because of the complex nature of the services offered
and delivered (Kang, 2006). Therefore, this article aims to propose a new
framework in the context of Malaysia by integrating various existing models
356 F. ALI ET AL.

to propose antecedents of perceived service quality and resulting customer

satisfaction.
The remainder of this article is structured as follows. The next section
presents the review of the literature, draws the theoretical framework and
develops the hypotheses. Following that, the methodology used for sample
selection and data collection is discussed. Then, data analysis and results are
examined. Finally, the articlue ends with a discussion of research findings,
ideas for future research, and concluding remarks.

Literature review
Service quality and related theories
Service quality mainly assesses the perceived quality and is referred to as
consumer’s judgment of overall distinction and supremacy of the services
provided (Zeithaml & Bitner, 2003). Since last three decades, scholars have
focused on the concept of service quality because of its significant effect on
business performance, customer satisfaction, retention and profitability
(Amin et al., 2013; Chang & Chen, 1998; Cronin & Taylor, 1992; Dedeoglu
& Demirer, 2015; Giritlioglu et al., 2014; Gummesson, 1998; Guru, 2003;
Lasser, Manolis, & Winsor, 2000; Seth et al., 2005; Sureshchander, Rajendran,
& Anatharaman, 2002). Zeithaml (1988) defines service quality as superiority
or excellence in service delivery whereas Crosby (1979) defines it as a
conformance to needs and requirements. These definitions of service quality
point out that it is largely consumer driven. Moreover, despite intensive
studies conducted on service quality, it remained as an elusive concept
(Brady & Cronin, 2001) because of the distinguishing characteristics of
services such as intangibility, inseparability, heterogeneity and perishability
(Sharif & Kassim, 2012).
In addition to its conceptualisation, measurement of service quality is also
discussed intensively, yet it lacks a general/widely accepted measurement
instrument (Rauch, Collins, Nale, & Barr, 2015; Seth et al., 2005). Despite
the debate about measurement of service quality, numerous scholars agree
with the multi-dimensionality of service quality (Amin et al., 2013; Dortyol,
Varinli, & Kitapci, 2014; Lien & Kao, 2008; Parasuraman, Zeithaml, & Berry,
1988; Rauch et al., 2015). In one of the initial studies on service quality,
Gronroos (1982) developed an early multi-dimensional measure of service
quality by identifying its two primary dimensions including technical quality
and functional quality. As per Lien and Kao (2008) technical quality refers to
what service is provided whereas the functional quality relates to how the
service is provided?
Following the work of Gronroos (1982), Parasuraman and colleagues
(1985) proposed 10 dimensions of service quality based on the ‘Gap
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 357

Model.’ As per Rauch and colleagues (2015), the focus of this model is on the
discrepancy between customers’ expectations and perceptions regarding
these ten dimensions. These 10 dimensions were reduced to 5 dimensions,
i.e., reliability, responsiveness, assurance, empathy, and tangibles—named as
SERVQUAL—by Parasuraman and colleagues (1988). An initial effort of
synthesizing service quality dimensions was made by Swartz and Brown
(1989). They integrated various service quality dimensions presented by
Berry, Zeithaml, and Parasuraman (1985), Lehtinen and Lehtinen (1982)
and Gronroos (1982) considering the literature based on “what” (evaluation
of service after performance) and “how” (during performance service evalua-
tion) dimensions. However, neither Swartz and Brown (1989) nor any other
scholars integrated previously presented service quality models and/or
dimensions to propose and test a holistic model for evaluation of service
quality specific to hospitality industry.

Application and criticism of SERVQUAL within hospitality context

As discussed earlier, numerous researchers have used SERVQUAL instru-
ment to discuss the attributes of functional quality (Amin et al., 2013;
Powpaka, 1996; Sharif & Kassim, 2012). Emphasizing on the gap between
customers’ perceptions of what happened during the service transaction and
their expectations of how the service transaction should have been per-
formed, numerous scholars have applied SERVQUAL instrument within
different facets of hospitality industry (Akbaba, 2006; Gabbie & O’Neill,
1997; Gržinic, 2007; Juwaheer, 2004; Markovic & Raspor, 2010; Mey et al.,
2006; Ramsaran-Fowdar, 2007; Renganathan, 2011; Saleh & Ryan, 1991;
Wilkins et al., 2007).
Moreover, researchers have also attempted to modify the SERVQUAL
dimensions by developing instruments specifically tailored to the tourism
and hospitality industry. From this research, a variety of service quality factor
structures have emerged (Dedeoglu & Demirer, 2015; Giritlioglu et al., 2014;
Mei, Dean, & White, 1999; Nadiri & Hussain, 2005; Zaibaf et al., 2013).
Examples include five dimensions of service quality proposed by Saleh and
Ryan (1991) including (1) conviviality; (2) tangibles; (3) reassurance; (4)
avoidance of sarcasm; and (5) empathy. LODGSERV, which is a 26-item
index was proposed to measure the five SERVQUAL dimensions within the
context of a hotel setting (Knutson, Stevens, Wullaert, & Patton, 1991).
Oberoi and Hales (1990) suggests that service quality plays an important
role in conference hotels in the United Kingdom and reported that service-
quality perception has two dimensions: (1) tangibles; and (2) intangibles.
Getty and Thompson (1995) reports that only two of the SERVQUAL
dimensions (tangibles and reliability) are generic. They developed another
scale named as LODGQUAL which incorporated the dimensions of (1)
358 F. ALI ET AL.

tangibles, (2) contact, (3) reliability, (4) safety, and (5) empathy. Similarly,
Mei and colleagues (1999) determines the dimensions of service quality in
the Australian hotel industry and developed a new scale of service quality in
the hospitality industry, called “HOLSERV,” with three dimensions: (1)
employees, (2) tangibles, and (3) reliability. Researchers state that
HOLSERV is more user-friendly than SERVQUAL and they found that
“employees” best represent service quality. Akan (1995) explores the applic-
ability of the SERVQUAL model in the Turkish hospitality industry and
identified seven dimensions in the model: (1) courtesy and competence of the
person, (2) communication and transactions, (3) tangibles, (4) knowledge
and understanding of the customer, (5) accuracy and speed of service, (6)
solutions to problems, and (7) accuracy of hotel reservations. In another
study conducted in luxury hotels, Mohsin and Lockyer (2010) identified five
factors to determine overall service quality including (1) hotel ambience and
staff courtesy, (2) food and beverage product and service quality, (3) staff
presentation and knowledge, (4) reservation services, and (5) overall value for
the money. This scale is also validated in the context of Malaysian hotel
industry by Amin and colleagues (2013) and Malaysian resort hotels by Ali
(2015). Even though, SERVQUAL tool and its modified versions have been
intensively studied in hospitality and tourism related literature (See Table 1),
however, only a limited set of studies has integrated multiple models and
reported their relationship with the overall service quality (Lien & Kao,
2008).

Lodging quality index

Most of the instruments discussed earlier have been proposed by modifying
the original SERVQUAL scale in order to match the requirements of func-
tional quality in hospitality industry (Ladhari, 2012). One of these modified
instruments is the Lodging Quality Index (LQI) developed by Getty and
Getty (2003) while studying the hotel industry in the United States.
Development of this scale started originally with ten dimensions of
SERVQUAL presented by Parasuraman and colleagues (1985). An initial
bundle of 63 items were retrieved from these dimensions, reviewing the
literature and interviews with the faculty members and students of hospitality
management, frequent business travellers and hotel executives. These items
were reduced to 26 final items representing 5 dimensions after conducting
the purification and validation process (Ladhari, 2012; Tamwatin et al., 2015)
including tangibility (8 items referring to the appearance and functionality of
the service setting), reliability (4 referring to credibility and reliability of the
service provider), responsiveness (5 items that refer to staff’s willingness for
responding promptly and solving their problems efficiently), confidence (5
items referring to access, competency, security and courtesy of service
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 359

Table 1. Summary of service quality literature in hotel industry.

Study Dimensions Sample Country
Knutson, Stevens, Five dimensions: Reliability, Assurance, 200 adults USA
Wullaert, Patton, Responsiveness, Tangibles, and Empathy
and Yokoyama
(1990)
Oberoi and Hales Two dimensions: Functional attributes and 133 hotel conference users UK
(1990) Technical attributes
Saleh and Ryan Four dimensions (Guests): Tangibles & 200 hotel guests 17 Canada
(1991) reliability, Responsiveness, Assurance, management staff
andEmpathy.
Five dimensions (Staff): Tangibles,
Reliability, Responsiveness, Assurance,
and Empathy.
Akan (1995) Seven dimensions: Courtesy and 228 Guests Turkey
competence of the personnel,
Communication & transactions, Tangibles,
Knowing and understanding the
customer, Accuracy and speed of service,
Solutions to problems, and Accuracy of
hotel reservations
Ekinci et al. (1998) Two dimensions: Tangibles and 112 resorts service guests Turkey
Intangibles
Mei et al. (1999) Three dimensions: Employees, Tangibles, 155 guests Australia
and Reliability
Getty and Getty Five dimensions: Tangibility, Reliability, 222 and 229 frequent USA
(2003) Responsiveness, Confidence, and traveller business owners
Communication for studies 1 and 2
Juwaheer (2004) Nine dimensions: Reliability, Assurance, 410 international tourists Mauritius
Extra room amenities, Staff
communication & additional amenities
sought, Room attractiveness & decor,
Empathy, Staff outlook & accuracy, Food &
service related factors, and Hotel
surrounding & environment
Nadiri and Hussain Two dimensions: Tangibles and 285 guests Cyprus
(2005) Intangibles
Akbaba (2006) Five dimensions: Tangibles, Adequacy in 234 business guests Turkey
service supply, Understanding & caring,
Assurance and Convenience
Albacete-Saez et al. Five dimensions: Personal response, 172 rural accommodation Spain
(2007) Complementary offer, Tourist relations, service users
Tangible elements, and Empathy
Ladhari (2012) Five dimensions: Tangibility, Reliability, 200 respondents Canada
Responsiveness, Confidence and
Communication
Ali (2015) Five dimensions: Hotel ambience and staff 425 respondents Malaysia
courtesy, Food & beverage product &
service quality, Staff presentation &
knowledge, Reservation services, and
Overall value for the money

provider) and communication (4 items referring to good communication

skills of the employees ate their efforts towards identifying customer’s needs).
LQI has been further validated in a study which utilized a sample of 200
Canadian respondents (Ladhari, 2012). The researchers state that LQI has
360 F. ALI ET AL.

shown an acceptable prediction of overall perceived service quality and is a

general scale to assess service quality of hotels (Getty & Getty, 2003; Ladhari,
2012).

Technical quality
Gronroos’ (1984) model of technical and functional quality is one of the
extensively studied models of service quality. Gronroos (1984) technical qual-
ity refers to the same what has been described as outcome quality by Rust and
Oliver (1994). It refers to what customers are left with after the consumption of
services (Fassnacht & Koese, 2006; Gronroos, 1984). A review of the literature
point out that functional quality attributes have been intensively researched
using SERVQUAL and its modified versions (e.g., SERVPERF, LODGQUAL,
LODGSERV, HISTOQUAL etc.), however, technical quality attributes are
somewhat ignored and not discussed (Wilkins et al., 2007; Wu & Ko, 2013;
Yu & Ramanathan, 2012). Scholars conclude that technical quality attributes
are scant in the literature and most of the researchers have ignored this
dimension of service quality (Ladhari, 2012; Tamwatin et al., 2015).
However, a limited number of scholars have conducted qualitative studies to
develop the attributes of technical quality (Brady & Cronin, 2001; Ladhari,
2012). For instance, Powpaka (1996) conduced in-depth interviews for dis-
covering pertinent dimensions of technical quality followed by open-ended
surveys conducted by Brady and Cronin (2001). Later, Kang and James (2004)
conducted interviews with service providers and consumers to develop tech-
nical quality attributes. Based on review of the related literature, qualitative
and empirical research, Wu and Ko (2013) proposed three dimensions of
technical/outcome quality which are presented as follows:

● Sociability: It refers to the number, type and behavior of the people

within the service-setting.
● Valence: It refers to customers’ post-consumption assessments of
whether the service outcome is acceptable or unacceptable.
● Waiting time: It refers to the amount of time that customers spend
waiting to be served.

Customer satisfaction
In rapidly growing service environment, service providers can only maintain
their competitive advantage by delivering high quality services to their
customers (Hu, Kandampully, & Juwaheer, 2009). Satisfied customers can
bring lot of other advantages for the service providers as a ripple effect
including loyalty to service provider, engagement in positive word-of-
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 361

mouth promotion and paying premium prices etc. (Ali, Ryu, & Hussain,
2016; Amin et al., 2013; Dedeoglu & Demirer, 2015; Dominici & Guzzo,
2010; Kim & Lee, 2010; Ryu & Han, 2010). Therefore, customer satisfaction
has grabbed considerable attention from both academicians and practitioners
(Hu et al., 2009). Oliver (1981) defines satisfaction as customer’s emotional
reaction to a specific product/service experience, and this reaction is devel-
oped based on the disconfirmation of customer’s perceptions and expecta-
tions of service performance. If the perceived service performance exceeds
the expectations of customers, the disconfirmation results in customer’s
pleasure, whereas in the opposite case it results in their disappointment
(Crotts & Magnini, 2011). Another group of scholars believe that satisfaction
of customers may develop not only because of a single experience but can be
because of a series of various experiences (Ali et al., 2016; Ryu, Lee, & Kim,
2012). Therefore, Hu, Kandampully, & Juwaheer (2009; p. 115) defines
customer satisfaction as “a cognitive or affective reaction that emerges in
response to a single or prolonged set of service encounters.” In this notion,
McDougall and Levesque (2000) view customer satisfaction as the overall
assessment of the service provider.
Measurement of customer satisfaction varies within marketing literature.
For instance, Cronin and Taylor (1992) considered it as a uni-dimensional
construct and measured it by assessing customer’s overall feeling towards the
services provided. However, this one item scale fails to capture the richness
of customer satisfaction construct (Hu et al., 2009). Recent scholars agree
that satisfaction is a complex evaluative process toward multiple experiences,
therefore, it should be measured using multi-item scales. Consequently,
scholars developed and adopted multi-item scales to measure customer
satisfaction. For example, Bitner and Hubbert (1994) used four items to
measure customers’ overall satisfaction with the service provider. Barsky
and Labagh (1992) counted nine attributes of customer satisfaction, namely,
employee attitudes, location, room, price, facilities, reception, services, park-
ing, and food and beverage. Similarly, Sureshchander and colleagues (2002)
included five factors to measure customer satisfaction including core service
or service product, human element of service delivery, systematization of
service delivery (non-human element), tangibles of service (servicescape) and
social responsibility. Westbrook and Oliver (1991) also used four emotion-
laden items to assess customer satisfaction which were adapted and tested in
the context of hospitality industry by Ali and Amin (2014).

Hypotheses development
As argued earlier, there is lack of well-accepted conceptual and operational
definition and model of service quality yet there is a unanimous support for
its multi-dimensionality within the related literature. This article also goes in
362 F. ALI ET AL.

line with the same argument and adopts Gronroos’ (1982) conceptualisation
of service quality with two dimensions including technical and functional
quality. Technical quality refers to what is delivered whereas functional refers
to how it was delivered and both of them develop customers’ perceived
service quality (Rauch et al., 2015; Tamwatin et al., 2015). Despite the effect
of technical and functional quality dimensions on customers’ perceptions of
service quality, components of both of these dimensions have yet to be
studied (Kang & James, 2004). In this study, functional quality is operatio-
nalized by adopting a hospitality industry specific model, “Lodging Quality
Index” (LQI) as presented by Getty and Getty (2003). On the other hand,
latent variables associated with technical quality dimension are adopted from
a recent conceptualisation proposed by Wu and Ko (2013).
Gronroos (1982) discussed the technical aspect and the functional aspect
of service quality and argued that customers’ perception is based on their
perceptions of these two dimensions. The relationship between functional
and technical attributes and perceived service quality was also tested by Kang
and James (2004) on a sample of cell phone users in Korea. They observe a
positive and significant effect of technical quality and the functional quality
on perceived service quality. These relationships were also tested and con-
firmed by Kang (2006) in another study. A recent study conducted by Zaibaf
and colleagues (2013) on tourists staying at hotels in Mashhad, Iran also
tested these relationships. They also observed a positive and significant
impact of functional and technical attributes on perceived service quality.
Therefore, following hypotheses are proposed:

H1: Functional quality has a significant impact on overall service quality.

H2: Technical quality has a significant impact on overall service quality.

There has been some confusion in terms of the conceptualization of quality

and satisfaction. Understanding for both constructs is mainly derived the
Expectancy-Disconfirmation theory. This theory defines quality and satisfac-
tion in terms of the magnitude of a customer’s disconfirmation (Dabholkar,
Shepherd, & Thorpe, 2000). Given this definition, the two constructs appear to
be similar. However, several researchers have attempted to distinguish between
quality and satisfaction (Gronroos, 1990; Ha & Jang, 2012). For instance, Oliver
(1980) suggested that quality is primarily a cognitive response to the product or
service, but satisfaction involves both cognitive and affective responses. Also,
Kang and James (2004) claimed that quality is a specific belief evaluation and
satisfaction is a more general evaluative construct. Based on a general agree-
ment in the literature that quality and satisfaction are distinct, researchers have
offered theoretical and empirical evidence for the relationship between quality
and satisfaction, suggesting that quality is an antecedent of satisfaction. A large
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 363

number of these researchers have observed that customers’ perceived service

quality significantly predict customer satisfaction in various industries includ-
ing banking, hospitality and tourism and retail, etc. (Amin et al., 2013; Cronin
& Taylor, 1992; Dominici & Guzzo, 2010; Gronroos, 1990; Parasuraman et al.,
1985; Ryu & Han, 2010). Bitner and Hubbert (1994) also stated that a better
service quality will develop customer satisfaction and this relationship is intui-
tive. Moreover, Ryu and colleagues (2012) conducted a study in hospitality
Industry and confirmed the significant influence of perceived service quality
over customer satisfaction. This relationship is also tested and confirmed Ha
and Jang (2012) in the context of fine dining restaurants. Ladhari (2009)
conducted a study on 200 Canadian travellers and also confirmed the impact
of perceived service quality on customer satisfaction. Therefore, the following
hypothesis is proposed:

H3: Overall service quality has a significant impact on customer satisfaction.

Research methodology
Research instrument
The primary purpose of this research has been to investigate how functional
quality and technical quality effect on perceived service quality and resulting
customer satisfaction in hotel industry. Since the purpose of this study is
exploratory, the best possible strategy to collect data is by questionnaire
based survey. It can help collection of data from a larger sample in a shorter
time. To design the questionnaire, instruments were adapted from existing
models and studies in order to ensure the reliability and validity. Functional
quality was operationalized by adapting 26 items related to five dimensions of
‘Lodging Quality Index’ including tangibility, reliability, responsiveness, con-
fidence and communications (Getty & Getty, 2003). Technical quality was
operationalized by adopting 11 items related to three dimensions presented by
Wu and Ko (2013) including sociability, valence and waiting time. Following
the procedure of Kang and James (2004), the respondents were asked to rate
the “overall service quality” of the hotel using a 5-point semantic differential
scale. Scores could range from “Very low” (1) to “Very high” (5). Customer
satisfaction was measured with a total of four items as proposed by Ali and
Amin (2014). A pre-test was carried out to validate the survey instrument,
which involved thirty (30) guests who had their stay at Malaysian hotels. Based
on the comments from this pre-test, a few grammatical changes were made to
the sentences used in the questionnaire.
364 F. ALI ET AL.

Sample design and data collection

The target population for this study was limited to those guests, both
Malaysian and foreigners, who were above 18 years old and had stayed at
least for one night at selected hotels in Malaysia. The survey was conducted by
three experienced research students through face-to-face interaction with the
guests at hotels in a Malaysian island, Langkawi. All the selected hotels were of
3-star quality. A non-probability purposive sampling was used to draw the
sample for this study. A self-administered questionnaire was used to collect the
data from the guests at different times of the day, over a 1-week period. In
order to increase the rate of participation, guests were explained with the
purpose of the research. A total of 300 guests were approached where 221
completed the questionnaires showing a response rate of 74%. Amongst these
221 responses, 17 were considered invalid because of having missing data or
unengaged responses. Rest of the 204 responses were used for further data
analysis. Out of these 204 respondents, 59% were male, whereas 41% were
female. 18% were below 25 years of age, 40% were between 26 and 40 years,
22% were between the ages of 41 and 55 years and 20% were older than 55 years
old. Amongst the 204 respondents, 56% were Malaysians whereas 44% were
foreigners, mostly from various European and Arab countries.

Analytical methods
For this study, statistical analysis and hypotheses were tested using Structural
Equation Modelling (SEM) by performing Partial Least Squares (PLS)
method. In order to conduct the analysis, SmartPLS software, Version 2.0
(Ringle, Wende, & Will, 2005) was used. Despite criticism, PLS is a well-
established technique for estimating path coefficients in structural models
and has become increasingly popular in marketing research more generally
in the last decade because of its ability to model latent constructs under
conditions of non-normality and small to medium sample sizes (Hair, Ringle,
& Sarstedt, 2013). In addition, the PLS analysis was performed and found
suitable in this study since one of the constructs in the study is measured
using single item (Hair et al., 2013). As a prerequisite, data normality was
tested. The skewness statistics ranged from −1.083 to .106 and the kurtosis
statistics from −.762 to 4.136. Because some of the values of skewness
exceeded 1 and some of the values of kurtosis exceeded 2, the data were
considered as violating normality according to Kline’s (2011) criteria. Hence,
usage of PLS used for this study is well-justified. PLS algorithm procedures
was performed to determine the significance levels of the loadings, weights,
and path coefficients followed by bootstrapping technique (5000 resample)
was applied to determine the significance levels of the proposed hypothesis.
Following the procedure suggested by Anderson and Gerbing (1988), validity
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 365

of measurement model was estimated before testing the structural relation-

ships outlined in the structural model.

Findings and results

Measurement model
First, the measurement model was tested for convergent validity. This was
assessed through factor loadings, Composite Reliability (CR) and Average
Variance Extracted (AVE) (Hair, Black, Babin, Anderson, & Tatham, 2006).
Table 2 shows that all item loadings exceeded the recommended value of .6
(Chin, 1998). Composite reliability values, which depict the degree to which
the construct indicators indicate the latent construct, exceeded the recom-
mended value of .7 (Hair et al., 2006) while average variance extracted, which
reflects the overall amount of variance in the indicators accounted for by the
latent construct, exceeded the recommended value of .5 (Hair et al., 2006).
The next step was to assess the discriminant validity, which refers to ‘the
extent to which the measures are not a reflection of some other variables’ and it
is indicated by the low correlations between the measure of interest and the
measures of other constructs (Ramayah, Yeap, & Igatius, 2013; p. 142).
Table 3 shows that the square root of the AVE (diagonal values) of each
construct is larger than its corresponding correlation coefficients pointing
towards adequate discriminant validity (Fornell & Larcker, 1981). To con-
clude, the measurement model showed an adequate convergent validity and
discriminant validity. Table 3 also exhibits the mean and standard deviation
values for all the constructs.
Moreover, comparing the loadings across the columns in the Table 4 also
indicates that an indicator’s loadings on its own construct are in all cases
higher than all of its cross loadings with other constructs. Thus, the results
indicate that there is discriminant validity between all the constructs based
on the cross loadings criterion.
Table 5 shows weights of the first order constructs on the designated second
order constructs indicating that Functional Quality (FQ) is a second order
factor with five significant first order dimensions including tangibility, relia-
bility, responsiveness, confidence and communications. Table 5 also indicates
that Technical Quality (TQ) is a second order factor with three significant first
order dimensions including sociability, valence and waiting time.

Structural model
SmartPLS 2.0 was used to test the structural model and hypotheses (Ringle
et al., 2005). A bootstrapping procedure with 5000 iterations was performed
to examine the statistical significance of the weights of sub-constructs and
366 F. ALI ET AL.

Table 2. Validity and reliability for constructs.

Constructs Items Loadings
Tangibility (TAN) The front desk was visually appealing .714
AVE = .505 The employees had clean, neat uniforms .774
Cronbach’s Alpha = .858 The hotel’s atmosphere was inviting .758
Composite The hotel’s interior was pleasant and attractive .762
Reliability = .890 The outdoor surroundings were visually attractive .789
The hotel was bright and well-lighted .740
The hotel’s interior and exterior were well maintained .669
The hotel was clean .589
Reliability (REL) My reservation was handled efficiently .693
AVE = .579 My room was ready as promised .826
Cronbach’s Alpha = .752 All the equipment in the room was working properly .857
Composite I got what I paid for .647
Reliability = .844
Responsiveness (RES) Employees responded promptly to my requests .805
AVE = .599 Informative literature about the hotel was provided .805
Cronbach’s Alpha = .830 Employees were willing to answer my questions .842
Composite Employees responded quickly to solve my problems .836
Reliability = .881
Room service was prompt .679
Confidence (CON) Employees knew about the local places of interest .813
AVE = .612 Employees treated me with respect .865
Cronbach’s Alpha = .839 Employees were polite when answering my questions .809
The hotel provided a safe environment .772
Composite The facilities were conveniently located .634
Reliability = .887
Communication (COM) Charges on my account were clearly explained .836
AVE = .547 I received undivided attention at the front desk .814
Cronbach’s Alpha = .717 Staff tried to find out my particular needs .788
Composite Employees anticipated my needs .588
Reliability = .826
Sociability (SOC) I was provided with opportunities for social interaction. .831
AVE = .714 I felt a sense of belonging with other customers. .879
Cronbach’s Alpha = .799 I made social contacts .823
Composite
Reliability = .882
Valence (VAL) At the end of my stay, I felt that I had a good experience. .903
AVE = .804 When I left, I felt that I’ve got what I wanted. .891
Cronbach’s Alpha = .756 I would evaluate the outcome of the services favourably .483
Composite
Reliability = .891
Waiting Time (WAT) The waiting time for service was reasonable. .634
AVE = .519 The employees tried to minimize my waiting time. .794
Cronbach’s Alpha = .763 The employees understood that waiting time is important to .822
me.
The employees provided service for me punctually. .828
Composite The employees were able to answer my questions quickly. .567
Reliability = .842
Customer Satisfaction (CS) I am satisfied with my decision to use this resort as service .856
provider
AVE = .537 My choice to choose this resort as a service provider was a wise .809
one
Cronbach’s Alpha = .726 I think I did the right thing when I chose to stay at this resort .717
Composite I feel that my experience with this resort has been enjoyable .518
Reliability = .818
Note. Items in italics were deleted because of low factor loadings.
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 367

Table 3. Discriminant validity and descriptives.

COM CON OSQ REL RES CS SOC WAT TAN VAL Mean SD
COM .812 3.854 .774
CON .664 .782 4.004 .744
OSQ .395 .527 1.000 3.989 .635
REL .501 .734 .406 .760 3.792 .837
RES .427 .689 .382 .684 .773 3.803 .776
CS .485 .606 .598 .425 .459 .796 4.019 .802
SOC .462 .627 .311 .533 .532 .413 .844 3.565 .837
WAT .557 .578 .373 .436 .411 .486 .799 .773 3.896 .738
TAN .539 .877 .454 .705 .582 .531 .605 .493 .732 3.898 .744
VAL .350 .440 .236 .404 .341 .329 .804 .432 .420 .896 3.656 .823
Note. The square root of AVE in every multi-item construct is shown on the main diagonal.

Table 4. Cross loadings.

COM CON OSQ REL RES CS SOC WAT TAN VAL
Cm1 .836 .542 .327 .413 .430 .404 .318 .392 .408 .178
Cm2 .814 .561 .374 .356 .277 .382 .296 .377 .405 .228
Cm3 .788 .517 .266 .449 .329 .395 .506 .582 .499 .444
Co1 .476 .813 .441 .447 .459 .466 .388 .440 .535 .271
Co2 .544 .865 .424 .421 .415 .441 .340 .380 .477 .226
Co3 .525 .809 .389 .376 .380 .410 .357 .364 .462 .186
Co4 .538 .772 .336 .432 .381 .408 .382 .374 .484 .200
Co5 .533 .634 .274 .274 .251 .384 .254 .290 .332 .161
Rel1 .401 .383 .335 .693 .369 .362 .324 .330 .471 .235
Rel2 .454 .447 .279 .826 .520 .296 .413 .312 .613 .268
Rel3 .482 .416 .371 .857 .563 .370 .472 .480 .600 .431
Rel4 .146 .273 .251 .647 .641 .268 .406 .176 .441 .282
Rs1 .286 .383 .299 .509 .805 .308 .405 .242 .448 .205
Rs1 .286 .383 .299 .509 .805 .308 .405 .242 .448 .205
Rs2 .317 .340 .271 .606 .842 .291 .386 .317 .471 .291
Rs3 .383 .414 .394 .597 .836 .417 .441 .314 .534 .295
Rs4 .379 .369 .289 .459 .679 .361 .445 .353 .387 .257
Rs5 .287 .389 .211 .458 .691 .403 .383 .378 .397 .271
S1 .427 .356 .250 .469 .453 .400 .829 .417 .495 .580
S2 .366 .315 .256 .428 .407 .311 .882 .380 .453 .559
S3 .378 .455 .281 .453 .488 .335 .821 .431 .478 .529
SQ .395 .482 1.000 .406 .382 .598 .311 .373 .454 .236
Sat1 .366 .480 .583 .272 .387 .856 .308 .328 .429 .224
Sat2 .451 .402 .450 .393 .343 .809 .391 .390 .423 .350
Sat3 .354 .400 .353 .395 .374 .717 .299 .499 .430 .224
T1 .400 .402 .332 .449 .397 .381 .350 .302 .714 .325
T2 .418 .459 .324 .525 .392 .365 .389 .314 .774 .256
T3 .409 .463 .283 .536 .465 .382 .384 .315 .758 .336
T4 .422 .433 .334 .531 .458 .404 .541 .419 .762 .405
T5 .367 .438 .321 .525 .471 .412 .487 .382 .789 .341
T6 .426 .438 .339 .571 .487 .392 .428 .420 .740 .264
T7 .314 .400 .421 .474 .291 .395 .284 .385 .669 .216
V1 .303 .292 .226 .388 .357 .262 .619 .399 .406 .903
V2 .326 .189 .197 .336 .252 .330 .561 .376 .346 .891
WT1 .482 .474 .400 .335 .275 .415 .311 .634 .429 .282
WT2 .378 .269 .310 .257 .275 .358 .358 .794 .305 .310
WT3 .441 .338 .201 .354 .319 .314 .383 .822 .354 .341
WT4 .436 .412 .273 .401 .393 .427 .434 .828 .447 395
Note. Bold values show the items falling on a particular construct.
368 F. ALI ET AL.

Table 5. Weights of the first order constructs on the designated second-order constructs.
Second-order constructs First-order constructs Weight t-value
Functional Quality Tangibility .877 28.593**
Reliability .833 27.123**
Responsiveness .788 27.291**
Confidence .800 19.060**
Communications .732 14.644**
Technical Quality Sociability .870 51.346**
Valence .799 19.551**
Waiting Time .804 30.279**
Note. Critical t-values. **2.58 (p < .01).

the path coefficients (Chin, Peterson, & Brown, 2008). As PLS does not
generate overall goodness of fit indices, R2 is the primary way to evaluate
the explanatory power of the model (Wasko & Faraj, 2005). However a
diagnostic tool is presented by Tenenhaus, Vinzi, Chatelin, and Lauro
(2005) to assess the model fit and is known as the Goodness of Fit (GoF)
index. The GoF measure uses the geometric mean of the average commun-
ality and the average R2 (for endogenous constructs). Hoffmann and
Birnbrich (2012) report the following cut-off values for assessing the results
of the GoF analysis: GoFsmall = .1; GoFmedium = .25; GoFlarge = .36. For
the model used in this study, a GoF value of 0.462 is calculated which
indicates a very good model fit as shown in Table 6.
Following the measurement model and goodness of fit, the hypothe-
sized relationships in the structural model were tested. Figure 1, shows the
results of the analysis. The corrected R2s in Figure 1 refer to the expla-
natory power of the predictor variable(s) on the respective construct.
Functional quality and technical quality predict 27.9% of the overall
service quality (R2 = .279) which predicts 35.7% of the customer satisfac-
tion (R2 = .357). In regard to model validity, Chin and colleagues (2008)
classified the endogenous latent variables as substantial, moderate or weak

Table 6. Goodness-of-fit index.

Variable AVE R2
COM .661
CON .612
OSQ 1.000 .278
REL .579
RES .599
CS .634 .357
SOC .714
WAT .598
TAN .537
VAL .804
Average Scores .673 .317
AVE * R2 pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi .213
(GOF ¼ AVE  R2 ) .462
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 369

Figure 1. Structural model.

Table 7. Structural estimates (Hypotheses testing).

Hypotheses Beta SE t-value
H1: Functional Quality -> Overall Service Quality .496** .110 4.525
H2: Technical Quality -> Overall Service Quality .444** .094 5.475
H3: Overall Service Quality -> Customer Satisfaction .597** .059 10.071
Note. Critical t-values. **2.58 (p < .01).

based on the R2 values of .67, .33, or .19, respectively. Accordingly, overall

service quality (R2 = .279) and customer satisfaction (R2 = .357) can be
described as weak and moderate respectively. Moreover, Falk and Miller
(1992) suggested that R2 must be greater than 0.10 in order for the model
to have predictive relevance. Moreover, the complete results of the struc-
tural model and hypotheses testing are presented in Table 7. All the three
hypotheses (H1, H2, and H3) were strongly supported indicating that
both functional and technical quality are good predictors of overall service
quality which in turn significantly predicts customer satisfaction.
In addition to the size of R2, the predictive sample reuse technique (Q2)
can serve effectively as a criterion for predictive relevance (Chin et al., 2008).
Based on the blindfolding procedure, Q2 shows how well collected data can
be reconstructed empirically using the model and the PLS parameters. For
this study, Q2 was obtained using cross-validated redundancy procedures, as
suggested by Chin (2010). A Q2 greater than 0 means that the model has
predictive relevance, whereas a Q2 less than 0 means the model lacks
predictive relevance (Fornell & Cha, 1993). As shown in Figure 1, Q2 for
370 F. ALI ET AL.

overall service quality and customer satisfaction indicate acceptable predic-

tive relevance.

Conclusion and implications

Theoretical implications
Despite the fact that service quality has been consistently discussed within the
literature, there is no universally accepted conceptualisation and operational
structure of service quality. Many scholars have focused and agreed on the
multi-dimensional conceptualisation of service quality (Dedeoglu & Demirer,
2015; Getty & Getty, 2003; Giritlioglu et al., 2014; Gronroos, 1982;
Parasuraman et al., 1988). However, most of these studies have focused on
the functional dimensions of service quality and the dimension of technical
quality has been ignored (Kang, 2006; Wu & Ko, 2013). In this regard, this
study proposes to validate the European perspective of service quality which
conceptualises it based on two dimensions including functional quality and
technical quality. The findings of this study contribute to the hotel manage-
ment and marketing literature in various important ways. First, the proposed
research model provides an understanding of the concept of service quality in
the Malaysian hotel industry. Second, this article intends to propose a new
framework by integrating “Lodging Quality Index” and dimensions of tech-
nical quality attributes by Wu and Ko (2013) based on Gronroos (1982)
conceptualisation of technical and functional quality and proposing them as
antecedents to overall service quality. This approach helps to overcome some
of the weaknesses of traditional measurement methods (SERVQUAL,
SERVPERF, LODGQUAL, HOLSERV, LODGSERV & HISTOQUAL), and
thus provides a more conceptually sound method for assessing service quality
in the hotel sector. The model developed in this study can provide marketers
and researchers with a diagnostic tool to assess service quality from the
perspectives of customers and meet the customer’s expectations and ensure
customer satisfaction within the hospitality industry.

Managerial implications
This proposed framework is specific to hotel industry and it has the potential
to help the managers to have a better understanding of consumers’ assess-
ment of the functional and technical quality which can develop overall
service quality and the customer satisfaction. Traditionally, functional quality
is given much attention by the researchers and technical quality has been
disregarded. However, complex services such as hospitality services provided
within tourism industry actually have ‘search-and-experience’ properties,
highlighting the significance of both the technical quality as well as
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 371

functional quality for achieving a competitive advantage. Hence, it is impor-

tant for the hotels to distinguish the individual effects of functional quality
and technical quality in order to create positive perceptions of service quality.
Yet, managers should ensure that a right mix of functional and technical
quality is adapted because consumers will accept and consider technical
quality as long as the functional quality of service offered is in the right
proportion.
Most of the literature agree that functional quality has a significant effect
on the perception of overall service quality. The evaluation of “how” the
service is being performed is a critical factor in the perception of service
quality. The current framework has also emphasized on the importance of
functional quality in developing positive perceptions of overall service and
used five dimensions of LQI to assess functional quality in service delivery,
specifically in hotel industry. These facets include tangibility, reliability,
responsiveness, confidence and communications that differ from those
instruments that are limited by the traditionally used five dimensions of
SERVQUAL model (Ladhari, 2012). In terms of relative importance of
these five dimensions, tangibility has the strongest weight. It implies that
hotels must strongly emphasise on the tangibility of the hotel, its interior and
exterior and the outlook of their staff. It is evident that creating a high quality
and attractive tangible aspects are substantial constituents of customer
experience (Getty & Getty, 2003). Moreover, in order to create positive
experience and satisfaction of guests, hotels must ensure that they provide
services as promised. This also include surety that the equipment provided in
the room is working properly. Hotels should make an effort develop satisfac-
tion of guests through a well-designed and maintained service. Other impor-
tant aspects of functional quality are the responsiveness, communication and
confidence. All these three dimensions are related to the staff and includes
customers’ perceptions related to staffs’ personal care, knowledge, willingness
to serve and being friendly (Ladhari, 2012; Tamwatin et al., 2015). Hotel
managers should be well-aware of the significant role of employees in
delivering services to the guests. Management should understand that selec-
tion, promotion, motivation, training, empowerment and retention are of
crucial importance for better service delivery. Therefore, hotel managers
should focus on enhancing the knowledge, skills and commitment of their
employees by providing regular trainings and incentives.
The second construct is technical quality which is defined by three
specific sub-dimensions including sociability, valence and waiting time
(Wu & Ko, 2013). Amongst these three dimensions, sociability—the num-
ber and type of people evident in the service setting, as well as their
behavior—has the strongest weight. This must also be ensured by the
hotels since positive experiences may develop from the social gratification
of being with others who also enjoy the same activity. This implies that
372 F. ALI ET AL.

hotels should consider their clientele as a part of their product or custo-

mers’ experience. Guests’ motivation of sharing and communicating with
other clients has also been discussed in other studies (Ali & Omar, 2014).
Other guests (respectful and social) are also ranked high as an important
factor of customer satisfaction and behavior and misbehaving customers
might impact customer satisfaction negatively (Wilkins et al., 2007; Wu &
Ko, 2013; Yu & Ramanathan, 2012). Management of hotels should empha-
sise on understanding the different needs and cultural backgrounds of
their guests and group their customers with similar interests and back-
grounds to ensure positive customer to customer interactions (Ali &
Omar, 2014). Another significant facet of technical quality is waiting
time, which refers to the amount of time that customers spend waiting
for service to be provided. Customers have a certain level of expectation
regarding an acceptable waiting time that contributes to satisfaction, there-
fore, reduced waiting time should be a primary goal for managers. Lastly,
valence, which is defined as customers’ post-consumption assessments of
whether the service outcome is acceptable or unacceptable.

Limitations and avenues for future research

Although the results of the current study have shed light on several
important issues, some limitations need to be considered in future
research. Since purposive sampling was used in this study, results cannot
be generalized. For instance the findings should be interpreted with cau-
tion when applied to different types of industries. Future research should
examine the proposed relationships in other types of hotels such as resort
hotels, boutique hotels or budget hotels etc. Besides, this study employed
functional quality and technical quality as predictors of overall service
quality. Future studies can use these two as dimensions of overall service
quality with inclusion of image as the third dimension. Moreover, this
study used five dimensions for functional quality and three dimensions for
technical quality. However, there is a possibility of other sub-dimensions
effecting functional and technical quality and can be identified and used in
further studies. Moreover, emotions are also emerging as a relevant subject
to service quality and customer satisfaction. Exploring the emotions devel-
oped by service quality might also be an interesting subject in future
studies. In addition, there is also a possibility of guests’ demographic
characteristics moderating the proposed relationships in this study.
Hence, future studies may also test the proposed model with inclusion of
additional variables, i.e., demographic profile (e.g., gender), travel involve-
ment, hotel climate and travel experience, etc. as moderators.
 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM 373

ORCID
Faizan Ali http://orcid.org/0000-0003-4528-3764

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