Beyond a Good Stay: How Service Quality and Customer Satisfaction Create Loyal Customers

Abstract

This study examines how service quality based on the SERVQUAL model dimensions (Tangibles, Reliability, Responsiveness, Assurance, and Empathy) affects customer satisfaction and customer loyalty in the hotel industry. The study also evaluates the mediating role of customer satisfaction and potential differences between Albania and Montenegro. The study adopts a quantitative research design based on primary data collected from 467 hotel guests in Albania and Montenegro. Data were analyzed using IBM SPSS Statistics for descriptive purposes and SmartPLS to perform partial least squares structural equation modeling (PLS-SEM), including measurement and structural model assessment, mediation analysis, and multi-group analysis. The findings show that Reliability is the strongest factor affecting customer satisfaction and customer loyalty. Empathy, Assurance, and Tangibles also have a significant positive effect on customer satisfaction, while Assurance and Empathy have significant positive effects on customer loyalty. Responsiveness does not have a direct significant effect on either customer satisfaction and customer loyalty. Customer satisfaction has a strong positive effect on customer loyalty and significantly mediates the relationships between Tangibles, Reliability, Assurance and Empathy with customer loyalty. The multi-group analysis reveals no significant cross-country differences in the relationships between service quality dimensions and customer satisfaction, but significant differences emerge in several paths predicting customer loyalty. These findings highlight the importance of examining service quality dimensions separately and emphasize customer satisfaction as a key mechanism through which service quality contributes to hotel customer loyalty.