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Customer Satisfaction or Service Quality – Identifying Mediating Variable

and Evaluating Behavioral Intention Model in Hotel Industry: An SEM
Approach

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 Customer Satisfaction or Service Quality – Identifying Mediating Variable
and Evaluating Behavioral Intention Model in Hotel Industry: An SEM
Approach

Dr. S. S. Bhakar
Director, Prestige Institute of Management, Gwalior, Madhya Pradesh, India
Dr. Shailja Bhakar
Assistant Professor (Marketing), Prestige Institute of Management, Gwalior
Madhya Pradesh, India
Ms. Shilpa Bhakar
Research Scholar, Devi Ahilya University Indore, Madhya Pradesh, India

Abstract
Previous research has indicated that Service quality and customer satisfaction together determine
behavioral intentions of customers to a large extent. The current study evaluates the causal
relationship between service quality and customer satisfaction affecting behavioral intention of
customers in hotel industry. EFA was applied on the data collected for all the three variables
separately. EFA identified three factors for service quality and single factor each for the remaining
two variables. Confirmatory Factor Analysis (CFA) was applied to evaluate the accuracy of factors in
case of service quality. Finally Behavioral Intention structural model was tested using AMOS 18. The
results of Structural Model testing indicated strong predictive effect of service quality on both
customer satisfaction and behavioral intentions. However, customer satisfaction was found to have
insignificant positive causal effect on behavioral intentions of the customers. Also, Service quality was
found to be significant mediator for customer satisfaction – behavioral intention relationship, where
as customer satisfaction was not a significant mediator for service quality – Behavioral intention
relationship.
Key Words: Service Quality, Customer Satisfaction, Behavioral Intention, Hotel Industry, Mediating
Effect
Literature Review
Continuous growth in the contribution of service sector to the economic development of the countries
has grabbed researcher’s attention towards this sector and the most important element that is talked
about is service quality. Many authors have defined service quality with different perspectives and
there is no common definition of service quality. It may be because of the features of services viz-a-
viz inseparability, perishability, intangibility, heterogeneity etc. In all it can be said that service quality
is the overall excellence and superiority in delivering the services by the service organizations (Bitner
& Hubert, 1994)
Parsuraman, Zethmal, & Berry (1985), Parasuraman, Zeithaml, & Berry (1988), Parasuraman, Berry,
& Zeithaml (1991), developed gap model for measuring service quality on a five dimensional scale
(22 Items); the five dimensions were assurance, empathy, tangibility, responsiveness and reliability.
This model has been criticized by some of the authors as it only focuses on the functional quality
(process) part of service quality, whereas in some of the service settings it has been observed that
service quality has another dimension that is the technical quality that relates to usage of the service
(Gronroos, 1984). While evaluating service quality customers perceive both technical and functional
quality of services that is, what is the outcome of the service and how the service was created. Initially
Parsuraman, Zethmal, & Berry (1985) also stated that service quality had two dimensions functional
and technical but did not include the technical part in the SERVQUAL model.
In some of the service sectors the technical quality is difficult to evaluate therefore both the aspects
have been used by researchers to study service quality; some used the SERVQUAL model and some
others used the functional and technical dimensions of service quality based upon the areas of
research.

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Previous research strongly advocates that service quality leads to customer satisfaction and in turn
affects their behavioral intentions. Some authors have proposed that both service quality and
satisfaction are same, however, Toosi, Niya, & Pooya (2014) quoted Dabholkar, Thorpe, & Rentz,
(2000) and Kotler (2003) and advocated that satisfaction was a broader concept which had two parts
cognitive and affective whereas service quality was only cognitive,. Satisfaction is the overall
evaluation of a service by a customer against his expectations. It may or may not include service
quality. Eboli & Mazzulla (2007) found that both cognitive and effective components together leads
to customer satisfaction. They identified that higher satisfaction is the result of improvements in both
service planning and service reliability.
Zeithaml, Berry & Parasuraman (1996) defined behavioral intentions as the potential behaviors
generated as a result of higher service quality and satisfaction. According to Angelova & Zekiri (2011)
if organizations want to ensure higher satisfaction of customers they must know how customers
perceive their service quality and how they can measure it. This will help organizations better
understand various service quality dimensions that affect overall service customer satisfaction.
Maddern, Maull, & Smart (2007) used Gronroos (1982) viewpoint of service quality and found that
technical quality has a higher effect on satisfaction compared to functional quality. Toosi, Niya &
Pooya (2014) found that both functional and technical quality have significant effect on satisfaction as
well as behavioral intentions.
Sunjuq (2014) used Parasuraman et al. (1985) SERVQUAL model and proposed that it was the most
effective model for evaluating service quality. Ahmed, et al. (2010) observed that in perspective of the
SERVQUAL model tangibility and assurance are the most important factors of service quality that
lead to satisfaction while empathy has the least contribution to satisfaction. Aliman & Mohamad
(2013) found that reliability also effects satisfaction along with tangibility and assurance. Aliman &
Mohamad (2013) found that tangibility empathy and assurance significantly affect behavioral
intentions.
Contrary to this Abbas, Ghaleb, & Refae (2012) found that tangibility and empathy significantly affect
satisfaction as well as behavioral intentions whereas assurance does not have a significant effect on
satisfaction and behavioral intentions. Ahmed, et al. (2010); Bharwana, Bashir, & Mohsin (2013)
found that empathy has a negative correlation with satisfaction whereas tangibility, reliability,
assurance and responsiveness all have positive correlation with service quality. Saleem & Raja (2014)
added that innovation in service quality will further enhance satisfaction.
A large number of researchers believe that service quality does not affect behavioral intentions
directly; the relationship between service quality and behavioral intentions is mediated by satisfaction
(Cronin, Brady, & Hult, 2000; Aliman & Mohamad, 2013; Huang, 2009; Dado, Petrovicova, Cuzovic,
& and Rajic, 2012; and Clemes et al., 2009). Olorunniwo & Hsu (2006) found significant causal effect
of both customer satisfaction and service quality on behavioral intention; however, relationship
between customer satisfaction and behavioral intention was strengthened by service quality. Lee,
Patrick, and Crompton (2007) conducted a study on tourism and found that service quality and
satisfaction both affect behavioral intentions where as service quality does not increase customer
satisfaction.
Managers in the service sector are more concerned about the behavioral intention of the customers as
this factor contributes to repeat visit of the customers leading to customer loyalty. A positive attitude
towards the brand enhances the probability of repetition and recommendation to other consumers
(Reichheld & Sasser, 1990). Looking at the influences of satisfaction and service quality on customer
intentions, Taylor & Baker (1994) suggested that satisfaction could be described as a moderator
between service quality and purchasing intention. Cronin & Taylor (1992); Woodside, Frey, &
Timothy (1989) also believe that consumer satisfaction is a cause of their purchasing intentions. A
different perspective is supported by Bitner (1990) according to whom the service quality judgments
mediate satisfaction and purchasing intention.
The hotel industry is very sensitive to word-of-mouth (WOM) communications. Baumeister,
Bratslavsky, Finkenauer, & Voh (2001) found that customers will spread negative word of mouth
more quickly, frequently and extensively than they share the positive experience. Also, a negative

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word of mouth is far more likely to be heard, processed, remembered and acted on by prospects than
positive WOM. Therefore, for restaurants and hotels it is far more important to minimize negative
experiences by the customers as this will obviously influence the hotel’s image, repeat visit by current
customers and subsequent efforts to attract new customers. Getty & Thompson (1994) in a study
conducted on hotels concluded that the intention of recommending is more affected by the service
quality level than by the expressed level of consumer satisfaction. Kandampully & Suhartanto (2000)
on the other hand reported that customer satisfaction is a significant determinant of the consumer’s
decision of returning and recommending the hotel. Koshki, Esmaeilpour, & Saleh ardestan (2014)
found that physical environment, food quality and service quality have positive impact on the image of
a restaurant and customer perceived value. They also found that customer perceived value predicted
customer satisfaction and in turn behavioral intention of customers of a restaurant.
Kivela, Inbakaran, & Reece (2000) identified five-dimensions of customer satisfaction with
restaurants; they are: first and last impressions, service excellence, ambience excellence, food
excellence, and reservations & parking. Pun and Ho (2001) identified competitive location, prices,
food quality and customer services among the main determinants for people considering the restaurant
services again.
Andaleeb & Conway (2006) evaluated customer satisfaction in a full service restaurant and suggested
that a full service restaurant should focus on three elements: service quality (responsiveness), price and
food quality (reliability) and overall ambience if customer satisfaction is to be treated as a strategic
variable.
The current study treats Customer satisfaction and service quality alternatively as moderators for the
causal effect the other variable (service quality or customer satisfaction) has on behavioral intention.
The study also aims at evaluating the direct effect of service quality and customer satisfaction on
behavioral intention of the customers. Thus, the study aims at testing the model given below:
Fig 1: Antecedents of Customer Behavioral Intentions
Service
Quality

Behavioral
Intentions

Customer
Satisfaction

Objectives of the Study

• To evaluate the relationship between services quality & customer satisfaction as independent
variables & behavioral intentions as dependent variable in Hotel Industry.
• To evaluate the mediating effect of service quality and customer satisfaction alternatively on
the relationship the other variable (service quality or customer satisfaction has with behavioral
intention of customers in hotel industry.
• To identify the new ideas for further research.
Hypothesis
H1: Service Quality has positive effect on Customer Satisfaction in Hotel Industry
H2: Service Quality has positive effect on Behavioral Intention in Hotel Industry
H3: Customer Satisfaction has positive effect on Behavioral Intention in Hotel Industry
H4: Customer Satisfaction is a mediating variable for Service quality – Behavioral Intention
relationship in Hotel Industry
H5: Customer Satisfaction has positive effect on Service Quality in Hotel Industry

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H6: Service Quality is a mediating variable for Customer Satisfaction – Behavioral Intention
relationship in Hotel Industry
Research Methodology
The study: The study was causal in nature. Survey method was used to collect the data. There are
three variables in the study; Service Quality, Customer Satisfaction and Behavioral Intentions. The
study was Experimental in nature with after only experimental responses.
Sampling Design: All the customers who stayed in hotels at Gwalior during February to April 2014
(data collection phase of the study) were considered as total population for the study. Sample frame
included customers who stayed in 20 grade one or higher level hotels during the data collection phase
of the study. Systematic random sampling technique was used to identify respondents for the study.
Every tenth customer who booked in the identified hotels was selected for data collection. Individual
people staying in hotel were considered as sample elements. Initially, 130 respondents were
approached for their responses; 118 questionnaires were received and after screening for
completeness, 100 questionnaires were found complete and suitable for analysis.
Tools Used for Data Collection: The 29 item scale developed for measuring logistic service quality
by Olorunniwo, Hsu and Udo (2006) was used for collecting data on service quality variable. The
operational superiority of SERVPERF as advocated by Cronin and Taylor (1992) was the basis for
selecting the scale. The responses were collected on a Likert type scale of 1 to 7 where 1 indicated
very low quality service and 7 indicated very high quality service. The four item scale developed by
Westbrook and Oliver (1991) was used for collecting data on satisfaction level of the hotel customers.
The data was collected on a Likert type scale of 1 to 7 where 1 indicated highly dissatisfied and 7
indicated highly satisfied. For the Behavioral Intentions variable a three item measure was developed
based on suggestions of Zethmal et al. (1996). BI was evaluated on a Likert type scale of 1 to 7 where
1 indicated highly disagrees and 7 indicated highly agree with the contents of the statement.
Tools for Data Analysis: Reliability of all the constructs in the study (Service Quality, Customer
Satisfaction and Behavioral Intentions) was established through computation of Cronbach’s Alpha
reliability coefficient for each construct separately. Exploratory Factor Analysis (EFA) was applied
using Principle Components Analysis (PCA) as method of convergence and Kaiser as method of
normalization. CFA was applied to test the model with the factors identified through EFA. Goodness
of fit of the model with data was tested; Composite reliability of all the factors was computed; and
convergent, discriminant and nomological validity of the constructs were evaluated. The model given
at Fig. 1 was tested using Structural Equation Modeling (SEM) method.

Results and Discussion

The data collected from respondents on each variable was checked for reliability using PASW 18. The
Cronbach’s Alpha computed for each variable were found to be higher than the desired value of 0.7
and are displayed in table 1 below:
Table 1: Showing Reliability coefficients for each variable
Reliability Statistics
Measure Cronbach's Alpha N of Items
Service Quality .972 29
Customer Satisfaction .965 4
Behavioral Intentions .937 3
Exploratory Factor Analysis
Kaiser-Meyer-Olkin Measure of Sampling Adequacy test was applied on service quality measure to
test whether the sample was adequate to consider the data normally distributed. The results of KMO
applied on the value of KMO was found to be 0.934 indicating that the sample size was adequate to
consider the data normally distributed as the KMO values above 0.5 are considered to indicate
normality of data. Bartlett’s Test of Sphericity was applied to test the hypothesis that the item-to-item
correlation matrix is an identity matrix. The Chi square test value of 2610.423, which is significant at
0% level of significance, indicated that the null hypothesis was rejected. Thus the item to item
correlation matrix is not an identity matrix. Therefore, the data is suitable for factor analysis.

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 Table 2: Showing the KMO test Results for Service Quality Measure
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .934
Bartlett's Test of Sphericity Approx. Chi-Square 2610.423
df 406
Sig. .000
PCA was applied on service quality data and the principle component analysis converged on three
factors after 6 iterations. The summary results of PCA are placed at Annexure 1. The importance of
the three factors is indicated through their Eigen values and variance explained by them. The total
variance explained by all the three factors was 67.702. PCA is considered efficient if the overall
variance explained is greater than 50%. The PCA applied on service quality measure is thus efficient.
As can be seen from Annexure 1, eleven items converged on the first factor, eleven on the second
factor and seven on the third factor. The factors were given names based on the commonality of all the
items that converged on that factor. The three factors were named as recovery, tangibles and
knowledge respectively. The table showing details of items converged on each factor along with their
factor loads is placed at annexure 1.
The model that emerged after EFA was put through confirmatory factor analysis using AMOS.
Confirmatory Factor Analysis (Service Quality): CFA was applied using AMOS 18 on Service
Quality measure using the information provided by EFA about the items that converged on the three
factors that emerged after EFA. CFA was used mainly to evaluate the following:
1. Goodness of Fit – Does the estimated covariance matrix = observed covariance matrix (absolute
fit)
2. Validity and Reliability of Measurement Model
1. Model Fit (Detailed results are placed at Annexure 2): The initial model based on factors
identified through EFA was evaluated using goodness of fit results and improved using modification
indices to ensure that final model has good fit to the data. The final improved model is placed at fig. 2.
The most commonly used model fit statistics is the Chi Square (χ2) test for association. Because we
are dealing with a measure of misfit, the p-value for χ2 should be larger than .05 to decide that the
theoretical model fits the data. The χ2 value for service quality is 64.665 and is significant at .338
indicating very good fit of the model to data. The Cmin/df value should be smaller than 2 to consider
the model having good fit, for the current study the Cmin/df value is 1.043
Fig. 2: Showing Final improved model of Service quality after CFA

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There are three other groups of measures of goodness of fit for CFA model and it is imperative to
include at least one measure from each group. The summary goodness of fit results for Service
Quality are displayed at Annexure 2. Both the values of Goodness of Fit Index (GFI) and Adjusted
Goodness of Fit Index (AGFI) are 0.906 and 0.862 respectively and are both higher than the desired
minimum level for high fit. RMR is used to compare models during improvement process, the lower
value of RMR indicating better fit of the model. During the model improvement process the value of
RMR was continuously monitored and the current model has minimum RMR (0.051).
All the comparative fit indexes should also be greater than 0.9. The table above indicates that all the
comparative fit indexes NFI, RFI, IFI, TLI and CFI are .938, .922, .997, .997 and .997 and are thus
greater than the minimum requirement of 0.9, indicating good fit of the model to data.
All the Parsimony Goodness of Fit Indexes need to have values that are greater than 0.5, as can be
seen in the table above, the values of PNFI and PCFI are 0.745 and 0.793 respectively indicating good
fit of model to the data.
The badness of fit index RMSEA need to be smaller than 0.08 for the model that fits the data
adequately. As can be seen from the table above the value of RMSEA is 0.021 indicating good fit of
model to the data.
Validity and Reliability of the measurement model
Convergent validity – Convergent validity is established through evaluation three sets of measures:
• Factor loadings - Standardized loadings estimates should be 0.5 or higher, and ideally 0.7 or
higher.
• Average Variance extracted (AVE) - AVE should be 0.5 or greater to suggest adequate
convergent validity. AVE estimates also should be greater than the square of the correlation between
that factor and other factors to provide evidence of discriminant validity.
• Reliability - Reliability should be 0.7 or higher to indicate adequate convergence or internal
consistency.
Factor Loading: The CFA results indicate that all the factor loadings are greater than 0.644. Thus the
first criterion of high convergent validity is fulfilled.
A good rule of thumb is an AVE of 0.5 or higher indicates adequate convergent validity. An AVE of
less than .5 indicates that on average, there is more error remaining in the items than there is variance
explained by the latent factor structure that has been imposed on the measure. All the values of AVE
are greater than 0.55, thus second criterion for high convergent validity is fulfilled.
Table 3: Showing Average Variance Explained and Construct Reliability
Latent Factors Recovery Tangibles Knowledge
Average Variance Extracted 0.6701535 0.6941794 0.5560035
Construct Reliability 0.859699823 0.880517087 0.736607987
Construct Reliability (CR) – is computed from the sum of factor loadings (λi), squared for each
construct and the sum of the error variance terms for a construct (δi) using the formula given below.
Note: error variance is also referred to as ndelta.
(∑ λi ) 2
i =1
CR = n n
The rule of thumb for a construct (reliabilityλi ) 2 + (estimate
δ i ) is that 0.7 or higher suggests good reliability.
∑
Reliability of the three factors of service
i =1 quality
∑
i =1 varies between .73 and .88 and therefore, the service
quality measure has high construct reliability. High construct reliability indicates that internal
consistency exists. It also fulfills the third criterion for convergent validity.
Discriminant Validity – Average Variance Extracted (AVE) estimates (see table 4) are larger than the
corresponding squared inter-construct correlation estimates (SIC). This means the indicators have
more in common with the construct they are associated with than they do with other constructs.
Therefore, the Service Quality - three factor CFA model demonstrates discriminant validity.

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 Table 4: Showing discriminant validity computations
Recovery Tangibles Knowledge
Recovery 0.6701535
Tangibles 0.573049 0.6941794
Knowledge 0.528529 0.553536 0.5560035
The EFA carried out on the other two constructs of the study viz. Customer Satisfaction and
Behavioral Intentions converged on single factors and therefore no CFA was carried out on them
separately. To evaluate the complete three construct BI model; SEM process was carried out using
AMOS 18. The final SEM models for the three construct BI model are placed at Annexure 3&4. The
simplified model with standardized regression values is placed at Fig 2 below:
Fig 2: Showing Customer satisfaction as mediating Variable

Customer H3, r2 = .212

H1, r2 = .948
Satisfaction SE = .132
SE = .019
CR = 1.031
CR = 13.521
P = .000
P = .000

Behavioral
Service Intentions
Quality
H2, r2 = .780
SE = .060
CR = 3.11
P = .302

The goodness of fit results for the measurement model of the service quality-customer satisfaction-
customer behavioral intentions SEM model are summarized in Annexure 5.
Chi Square goodness of fit was found to be 25.337 with a p-value of 0.333 indicating that the Chi
square value was not significant indicating over all good fit of the model to data. The finding is also
supported by a smaller than 3 value of CMIN/DF (1.102).
The other goodness of fit statistics also supports the overall goodness of fit. As can be seen from the
table above the value of GFI is 0.972, higher than desired value of .9 and AGFI is 0.898 very close to
desired value of 0.9 for good fit. Similarly, the value of RMR, which needs to be lowest for the best
model, is 0.105, and was lowest for all the variant of the model.
The next set of goodness of fit statistics relate to improvement and as can be seen from the table above
all the five statistics NFI, RFI, IFI, TLI and CFI are above 0.9 indicating good fit of the model.
The badness of fit index RMSEA need to be smaller than 0.05 for the model that fits the data
adequately. As can be seen from the table above the value of RMSEA is 0.038 indicating good fit of
model to the data.
Table 5: Showing Regression Weights: SEM model with Customer Satisfaction as Mediating
Variable
Dependent Independent Hypothesis Estimate Standardized S.E. C.R. P Results
Variable Variable Reg. Wts.
Customer Service Quality H1 0.250 0.948 .019 12.819 *** Supported
Satisfaction
Behavioral Service Quality H2 0.185 0.780 .060 3.110 0.002 Supported
Intention
Behavioral Customer H3 0.191 0.212 0.220 0.889 .374 Rejected
Intention Satisfaction

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H1: Service Quality has positive effect on Customer Satisfaction in Hotel Industry
The standardized regression value between Service Quality as independent variable and Customer
satisfaction as dependent variable is 0.948 with a p-value that is significant at 1% level of significance.
The hypothesis H1 is therefore supported. Thus there is a significant positive cause and effect
relationship between service quality and customer satisfaction. That means higher the service quality
higher the customer satisfaction and an increase of service quality by a factor of 1 will improve
customer satisfaction by a factor 0.25.
The results of the current study indicate that service quality leads to customer satisfaction the findings
are consistent with Young et.al. (2011), Shafiq, Shafiq, Muhammad, Rehman, & Cheema (2013),
Hafeez & Muhammad (2012), Sunjuq (2014), Dabholkar & Overby, (2005), Landrum & Prybutok
(2004), Zhang & Prybutok (2005), Birgelen, Ghijsen, & Janjaap (2005), Cristobal, Flavian, &
Guinaliu (2007), Ho, (2007) and Canny (2014).
The results of the study are contradictory to Lee, Petrick, & Crompton, (2007) who found that service
quality did not lead to satisfaction for festival visitors and the authors justified their results by saying
that customers expectation regarding service quality are created before visiting the festivals and if the
expectations don’t meet the actual service quality it will not lead to satisfaction. The current study was
conducted in hotel industry and since people can see the facilities of the hotels online and their
expectation about the service quality are based upon that information, there are more chances of
matchup between the actual and expected service quality leading to satisfaction in hotel industry.
H2: Service Quality has positive effect on Behavioral Intention in Hotel Industry
Similarly Service Quality has significant positive cause and effect relationship with Behavioral
intention with r2 value of 0.750 significant at 1% level of significance. The results indicate positive but
insignificant cause and effect relationship between customer satisfaction as independent variable and
Behavioral Intention as dependent variable with r2 value of 0.240 significant at 0.302 level of
significance.
The results on relationship between service quality and behavioral intentions are consistent with the
results of Kuruuzum & Koksal, (2010), Pe´rez, Abad, Carrillo, & Ferna´ndez (2007), Ravichnadran,
Bhargavi, & Arun Kumar (2010), Khraim (2013), Canny (2014) where they found that service quality
predicted behavioral intentions.
H3: Customer Satisfaction has positive effect on Behavioral Intention in Hotel Industry
The hypothesis is rejected as the standardized regression value between customer satisfaction as
independent variable and Behavioral intention as dependent variable was found to be 0.240 significant
at 0.302 level of significance. The results are contrary to Canny ( 2014) where the author found
significant positive relationship between Cutomer satisfaction and Behavioral Intention in a casual
restaurant study. The results are also contrary to Saleem & Raja (2014) who found that customer
satisfaction was positively related with customer loyalty in hotel industory.
Mediating Effect of Customer Satisfaction and Service quality on relationship with behavioral
Intention
Mediation effect of Customer satisfaction/service quality was evaluated using Sobel (1982) model.
MacKinnon, Lockwood, Hoffman, West, & Sheets, 2002) have compared the three equations for
computing mediation effect Sobel (1982); Goodman (1960) and Aroian (1944/47) for their accuracy of
computation and found that the three equations vary only in computation of product of variance in
estimation of the standard error term. Although for majority of cases this product term is very small
and provides similar results by the three equations.
Fig 3: Showing Service Quality as Antecedent to Customer Satisfaction and Customer
Satisfaction as the Mediating Variable

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H4: Customer Satisfaction is a mediating variable for Service quality – Behavioral Intention
relationship in Hotel Industry
The mediation effect of Customer satisfaction on the relationship between Service Quality and
Behavioral Intention was evaluated using Sobel (1982) method and the Sobel Z was found to be 0.889;

Customer
Satisfaction

A = 0.244 B = 0.185
Sa =0.019 Sb = 0.220

Service Quality
Behavioral
Intention

C= .185
C’ = .045
not significant at 5% level of significance. The indirect effect between Service Quality and Behavioral
intention C’ was found to be .045 significantly smaller than the direct effect C which was 0.185. Thus
customer satisfaction introduced as mediating variable has the insignificant diminishing effect on the
causal relationship between service quality and behavioral intention. Sobel (1982) method has been
found to provide accurate computation of total indirect effect and in turn the mediating effect
(MacKinnon, Lockwood, Hoffman, West, & Sheets, 2002)
Insignificant mediating effect of customer satisfaction on the causal relationship of service quality
with Behavioral Intention was contradictory to the findings of Aliman & Mohamad (2013); Cronin,
Brady, & Hult (2000), Huang (2009), Dado, Petrovicova, Cuzovic, & and Rajic, (2012) Huang
(2009). They found significant mediating effect of customer satisfaction on the causal relationship
between service quality and behavioral intention. Which means higher service quality would increase
customer satisfaction in-turn increasing behavioral intention. Contrary to the above findings,
Shrivastava (2014) found that customer satisfaction was not a significant mediating variable to Service
quality-behavioral Intention relationship in a study based on e-retailer services in India and provide
support to the findings of this study.
Since the mediating effect of customer satisfaction was not found positive significant, the mediating
effect of Service quality was measured using the model shown at fig 4
Fig 4: Showing Customer Satisfaction as Antecedent to Behavioral Intention and Service Quality
as Mediating Variable

Service
Quality

A = .948 B = .780
Sa =.278 Sb = .060

Customer
Satisfaction Behavioral
Intention

C= .212
C’ = .73944

The complete model that was tested for goodness of fit and used for evaluating estimates is placed at
annexure 4. The goodness of fit results for the measurement model were the same for both the models
having customer satisfaction/service quality as the mediating variable.

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Table 5: SEM model with Service Quality as Mediating Variable

Dependent Independent Hypothesis Estimate Standardized S.E. C.R. P Results

Variable Variable Estimate
Service Customer H5 3.682 .948 .278 13.253 *** Supported
quality satisfaction
Behavioral Service H2 .185 .780 .060 3.110 .002 Supported
Intention quality
Behavioral Customer H3 .196 .212 .220 .880 .374 Rejected
Intention satisfaction
H5: Customer Satisfaction has positive effect on Service Quality in Hotel Industry
The hypothesis is supported as the standardized regression value between customer satisfaction as
independent variable and Service Quality as dependent variable was found to be 0.948 significant at
0.000 level of significance.
H6: Service Quality is a mediating variable for Customer Satisfaction – Behavioral Intention
relationship in Hotel Industry
The mediation effect of Service Quality on the relationship between Customer Satisfaction and
Behavioral Intention was evaluated using Sobel (1982) method and the Sobel Z was found to be 2.746;
significant at 5% level of significance. Thus hypothesis H6 is supported. The indirect effect between
Service Quality and Behavioral intention C’ was found to be .73944 significantly higher than the
direct effect C which was 0.212. Thus when service quality is introduced as mediating variable; it
enhances the causal relationship between service quality and behavioral intention. Thus the mediating
effect of service quality was found to be partial but significant.
Although a large number of studies have found strong causal effect of service quality and customer
satisfaction on behavioral intentions or customer loyalty; the mediating role of service quality was
never tested (Wolfinbarger & Gilly, 2003; Parasuraman, Zeithaml, & Berry, 1985). However, the
customer satisfaction as an antecedent to service quality has been reported in few studies Oliver
(1981); Bitner (1990); Bolton & and Drew (1991) and Mohr & Bitner (1995). Thus, there is evidence
that customer satisfaction as antecedent of service quality concept is well accepted.
Implications
The current study has tested two models evaluating the effect of service quality and customer
satisfaction on behavioral intention of the customers. In the first model the direct effect of service
quality and customer satisfaction was evaluated along with the indirect effect of service quality on
behavioral intention. In the second model the indirect effect of customer satisfaction has been
evaluated along with the direct effect of service quality and customer satisfaction on behavioral
intention. The direct and indirect effects of service quality as single antecedent or as one of the
antecedents have been evaluated in majority of the studies looking at antecedents of behavioral
intention as referenced in the previous sections of the current study. Similarly, customer satisfaction
has also been included as one of the antecedents of behavioral intention or loyalty in majority of such
studies. However, very few authors have attempted to evaluate the indirect effect of customer
satisfaction (Oliver, 1981; Bitner, 1990; Bolton & and Drew, 1991 and Mohr & Bitner, 1995).
It is well established in literature that service quality is not the only antecedent of customer satisfaction
in hotel industry. The other antecedents found having significant causal effect on satisfaction are food
quality, physical environment (Liu & Jang, 2009 and Ryu & Han, 2010). In smaller cities, the
customers having limited options with poor physical environment give more importance to service
quality while deciding the hotel for dinning purposes. In such cities service quality may have higher
impact on behavioral intentions than in larger cities where physical environment provided by major
hotels may be good. Current study therefore, has significant implications for hoteliers, that in places
where physical environment is less relevant, service quality determines the behavioral intention of the
customers. Therefore, the hotels cannot compromise with service quality even if the other factors
affecting behavioral intention are weak.

www.theinternationaljournal.org  >  RJSSM:  Volume:  05,  Number:  2,  June  2015                                            Page  120
The study was carried out in hotels at Gwalior, a B-grade city in Madhya Pradesh. The study needs to
be replicated in different sizes of cities for generalizing the results for hotels located anywhere in
India. The literature indicates that studies that found higher direct effect of service quality than
customer satisfaction have not tested the possibility of service quality mediating the effect of customer
satisfaction. Therefore, the study needs to be replicated in all sectors of service to ensure
generalization of the results for other sectors. Such studies need to be compared to identify situations
in which service quality may have higher direct effect than the customer satisfaction. The study is a
important contribution to the understanding of antecedents of behavioral intentions for dinning.
Conclusion
The study has tested behavioral intention model using SEM approach for evaluating the causal effect
of Service Quality and Customer satisfaction on behavioral intention of customers. The mediating
effect of customer satisfaction and service quality has been evaluated through alternative model
testing. Both the models (Customer satisfaction mediating Service quality effect on behavioral
intention and service quality mediating customer satisfaction effect on behavioral intention) have been
found to have very high goodness of fit. The results of the study are significantly different from the
existing literature where customer satisfaction has not been found to effect behavioral intentions
significantly. However, in line with existing literature, service quality has been found to have
significant positive causal relationship with behavioral intentions.
The results of this study have significant importance for hotel industry as service quality has been
identified as the significant positive mediating variable rather than customer satisfaction. Thus causal
effect of customer satisfaction will be further enhanced through service quality. The hotel industry
needs to be very care full in ensuring high service quality at all times; otherwise the satisfied
customers’ behavioral intention towards patronizing the hotel again will not be positive. Majority of
the behavioral Intention studies have identified customer satisfaction as the mediating variable. The
study has also found that customer satisfaction when viewed as mediator suppresses the causal effect
of service quality on behavioral intention; indicating that the short term service quality improvements
will not be able to alter the behavioral intention.
In hotel industry a satisfied customer has higher expectations on service quality delivery. If that is not
delivered the customers are more likely to negatively evaluate the hotel during evaluation for re-
patronizing.
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