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Factors that Effect the Level of Consumers Loyalty for Budget Hotel in
Indonesia

Andala Rama Putra Barusman, Tina M.B. Virgawenda, Yola Aprila Arwis
Faculty of Economics and Business, University of Bandar Lampung, Indonesia
Email: andala@ubl.ac.id

Abstract
The hospitality industry is growing so rapidly recently, especially in Indonesia which has
abundant natural resources that attract tourists to visit Indonesia. This phenomenon has
opened up the potential growth of budget hotels in Indonesia. The purpose of this study was
to determine the factors that affect the level of consumer loyalty in the budget hotel in
Indonesia. This research used library and field research method. The data used is primary and
secondary data which came from documentation, interviews and survey questionnaires. The
data analyzed with qualitative and quantitative methods. Based on the analysis of data, it
obtained conclusions that service quality significantly has positive effect to consumers
satisfaction; image significantly has negative effect to consumers satisfaction; service quality
significantly has positive effect to trust; image significantly has positive effect to trust;
consumer satisfaction significantly has positive effect to trust; trust significantly has positive
effect to consumers loyalty; consumer satisfaction significantly has positive effect to service
quality and trust. On the other hand, consumer satisfaction has not supported mediation
between image and trust and trust significantly has positive effect to consumer loyalty.

Keyword: Service Quality, Image, Consumers Satisfaction, Trust and Customer Loyalty

I. INTRODUCTION

Hospitality is a global business and has consumer and producer who are spread around the
world. The increasing number of hotel guest around the world has created the opportunity for
hotel industry to grow. That growth is including in Indonesia, a country that has incredible
natural resources which attract many visitors to come to Indonesia for the purposes of
recreation, business and tourism.

From the Table 1, the number of tourist (foreign) in 2017 in Indonesia has reached 9,41
million peoples, that has a rise 12% of growth with gain of 10,57 million visitors in 2018.

Table 1. The Development of Tourist Arrivals to Indonesia 2017-2018

Month Tourist Arrivals The Growth
(Peoples) (%)
2017 2018
February 1.107.968 1.100.677 -0,66
March 1.023.388 1.201.001 17,36
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April 1.171.386 1.300.277 11,00

May 1.148.588 1.242.588 8,18
June 1.144.001 1.318.094 15,22
July 1.370.591 1.540.549 12,40
August 1.393.243 1.510.764 8,44
Feb-Aug 9.418.942 10.577.289 12,30

These conditions had created a growing number of hospitality industry in Indonesia. So, the
competition in hospitality industry was getting tougher. Therefore, it is very important for
hotels as part of industry to maintain their guest to be loyal. Caruana (2002) argues that
behavior is a full expression of loyalty to the brand and not just thoughts.

Customer loyalty is considered as an attitude structure. To gain the loyalty of its consumers,
the hotel requires the trust of the consumer first. Trust is a major determinant of the
relationship, with this belief, it will create a commitment. So, it could be said that trust is the
key for influencing the consumer loyalty. The trust itself can be achieved with the presence of
consumer satisfaction.
Consumer satisfaction is the important factor and the main goal in marketing. Oliver (1993),
Mc Quitty et al., (2000) argues that satisfaction plays an important role in marketing because
it is a predictor of purchase behavior such as purchase intention, repeat purchase, brand
choice and switching behavior. The first step can be carried out of the hotel to improve
customer satisfaction are by providing a combination of good quality service and image. With
good service quality, it will create satisfaction for its consumers. At this moment, the service
(consumer satisfaction) is a vital aspect in order to survive in the business and win the
competition.

Besides the quality of hotel service, image is an important variable that positively or
negatively influences marketing activities. Zeithaml and Bitner (1996) stated that image is
considered to have the ability to influence customers' perception of the goods and services
offered. This indicates that a desirable image leads to customer satisfaction and customer
preference, while an undesirable image may lead to dissatisfaction. This study is examined
various tourism attributes such as service quality, image, consumer satisfaction and trust that
can affect consumer loyalty.

Consumer satisfaction for budget hotel of some regions in Indonesia is still not highly
satisfied (Tripadvisor, 2018). To find out whether the hotel is right in the running of each
activity services follow the promise, and whether the service provider is already giving
satisfaction to the community, then the required instrument to measure service quality and
image has influence on customer satisfaction. This research will be carried out the
measurement of the quality of service and appearance to determine its influence on customer
satisfaction and so as to create trust and consumer loyalty in the hotel. In running a business
budget hotel, there are some problems to maintain consumer loyalty which is not yet known.

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Literature Review

Service Quality
Boone and Kurtz (1995) explained that service quality refers to the expected perceived
quality of service offering. It is primary determinant of customer satisfaction or
dissatisfaction. While Mangold and Babakus (1991) stated that service quality is the outcome
of a process in hich cons mers e pec a ions for he ser ice are compared i h heir
perceptions of the service actually delivered.

Based on the above definition of service quality, it can be concluded as the size of the
assessment of the perceived form someone due the services or products as a result the
perception of the comparison between consumers ' expectations and performance perceived.
Image

Image is an integral part of the reputation and is often used interchangeably with no clear
difference between the two (Chun, 2005). Image is considered to have the ability to influence
customers' perception of the goods and services offered (Zeithaml and Bitner, 1996). While
according to Kotler (2002) image is a set of beliefs, ideas and impressions which is owned by
a person towards a brand.

Customer Satisfaction

According to Kotler and Keller (2009) cited from the book of Marketing Management stated
that customer satisfaction is feeling happy or upset of someone who emerged after comparing
the performance (results) products that are well thought out against expected performance.
The level of consumer satisfaction will be high if consumers feel expectations against a
product or brand equal to or higher than the performance of the product or the brand
(Barusman, 2019). Kotler and Keller (2009) mention that satisfaction is feeling happy or
upset someone who is arise because of comparing the performance perceived product (or
outcome) to their expectations.

Trust

Moorman et al. (1992) defined trust as a willingness to rely on an exchange partner in whom
one has confidence. More specifically, Anderson and Narus (1990) defined trust in
manufacturer-dis rib or rela ionships as a firm s belief ha ano her company will perform
actions that will result in positive outcomes, and that the other company will not take
unexpected actions that result in negative outcomes for the firm. From these definitions it can
be explained that trust is the expectation of the public that are maintained by the individual
greeting from one part to the other part can be trusted.

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Consumers Loyalty

Loyalty has a very important role for the hotel because loyal consumers can be said as
important assets, so the hotel can survive. This is the reason the hotel retains the loyalty of
consumers to the hotel. Gremler & Brown (1996), Barusman & Virgawenda (2019) offers
one definition of customer loyalty that is the degree to which a customer exhibits repeat
purchasing behavior from a service provider, possesses a positive attitudinal disposition
toward the provider, and considers using only this provider when a need for this service
exists.

Kotler et al., (1999) stated that the cost of attracting a new customer may be five times the
cost of keeping a current happy customer. If it is associated with the statement of some of the
previous researchers regarding the definition of consumer loyalty, overall say that consumer
loyalty is consumer loyal towards a brand or product which is indicated by frequency of
purchase over and over.

Based on the data and previous study above then the hypothesis of this research are:
H1: Service quality has a positive and significant effect on consumer satisfaction for
Budget Hotel in Indonesia.
H2: Image has a positive and significant effect on consumer satisfaction for Budget Hotel
in Indonesia.
H3: Service quality has a positive and significant effect on trust for Budget Hotel in
Indonesia.
H4: Image has a positive and significant effect on trust for Budget Hotel in Indonesia.
H5: Customer satisfaction has a positive and significant effect on trust for Budget Hotel
in Indonesia.
H6: Trust has a positive and significant effect on consumer loyalty for Hotel Budget in
Indonesia.

The Conceptual Framework

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II. METHOD

Type of research used in this research are literature research (library research) and field
research. This study is descriptive in solving a problem with the way used to search for an
overview, phenomenon, situation, event or something ongoing at the present time based on
the facts that occurred as it is. The target of sample of this research is the local consumers
who have stayed in budget hotel in Indonesia within 6 months from the day they participate
in this research. The reason data set for duration within 6 months is because the experience is
still remains fresh for responden s mind and eas for hem o recall the experience of staying
in budget hotel. The population in this study is not yet known.

Fraenkel and Wallen (1993) argue the size of the sample testing of the research instruments
for descriptive research at least 100 respondents, so this research use 110 sample. The
sampling method in this research is to non-probality sampling. The sampling techniques used
in this Non-Probability Sampling is Convenience Sampling.

This technique used for this research when distribute the questionnaire for target respondents.
Convenience sampling is sampling based on the availability of elements and the ease to get it.
The following is the criteria for selection of samples determined in this study based on
Convenience Sampling that is in use:
1. Consumers budget hotel, more specifically students, working adults and anyone who had
has experienced stay in budget hotel before.
2. Consumers young adult whose are age from 18 to 50 years old (Balota & Duchek, 1988).
The main reason selecting this sample was because their increasing purchasing power and
spending behavior which has made them to be an attractive target customer for different
industries (Reisinger & Mavondo, 2002).

To answer the problem formulation about the factors that affecting the levels of consumer
loyalty in budget hotel in Indonesia, then used the method of Quantitative Analysis and
Qualitative Analysis methods.

Analysis tools used in this research is Structural Equation Modeling (SEM), where is a
technique of multivariate analysis that was developed in order to cover the limitations of the
models the previous analysis has been used widely in statistical research. Structural Equation
Modeling is one of multivariate analysis which can analyze the relationship between complex
variables. The software used in this research is LISREAL 8.80 Full Version and estimation
technique the model used is the covariance matrix.

By using LISREL, can be analyzed the structure of the covariance (the structure of which
shows a linear relationship between variables) is complicated, variable latent, the
interdependence between variables and cause and effect that reciprocity can be handled easily
by using the measurement model and the equation is structured. In addition, the basis of the
estimation method of Maximum Likelihood is the Covariance Matrix. Maximum Likelihood
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seeks to minimize the difference between the sample covariance and the predictions of
theoretical models are built. To determine the quality of the instrument determined the results
of the test validity and reliability.

Validity Test

Mustafa (2009) define validity of an instrument is a measure of how appropriate the

instrument was able to produce data in accordance with the size to be measured. In this
research, each item of the items in the test of its validity with the correlation formula of
product moment from Pearson with rough numbers, as follows:

Realibility Test
According to Arikunto (2010), reliability refers to the notion that the instrument can be
trusted to be used as a means of collecting data because the instrument is already good.
According to Arikunto (2010), to determine the reliability of the questionnaire using the
formula K R20, namely:

III. RESULT AND DISCUSSION

Result

The result of this research as seen in this table:

Table 2. Index Goodness of Fit (GOF) Structural Model

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Based on table 1, test matches (goodness of fit) structural model (overall model) shows the
result was satisfactory, i.e. all values of goodness of fit (GOF) used to build the structural
model at this stage shows matches either. The third stage of the procedure is to build models
(long-sleeved model) the influence of independent variable service quality and image, of the
dependent variables the consumers loyalty mediated the consumers satisfaction and variables
such as trust.

Structural Model of The Variable without Moderation (Overall Model)

Based on the estimation of the structural model (overall model) that is contained in image
above structural equation model is obtained as follows:

Thus, the results of the estimation of the structural model (overall model) there is in table
hypothesis test results obtained as follows:

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Table 3. Effects of Mediation and Hypothesis Testing

Discussion

The Effect of Service Quality on Consumer Satisfaction

Hypothesis 1 is to examined whether the service quality has positive effect significantly on
consumer satisfaction. The test results obtained the value of the direct positive effect is 0.53
and t-value is 2.31. This means that the service quality has positive and significant effect on
consumer satisfaction or hyphothesis can be accepted.

The Effect of Image on Consumer Satisfaction

Hypothesis 2 is to examined whether image has negative effect significantly on consumer
satisfaction. The test results obtained the value of the direct negative effects is -0.46 and t-
value is 1.99. This means that image has negative and not significant effect on consumer
satisfaction or hyphothesis is rejected.

The Effect of Service Quality on Trust

Hypothesis 3 is to examined whether service quality has positive effect significantly on trust.
The test results obtained the value of the direct positive effect is 0.46 and t-value is 2.78.
This means that service quality has positive and significant effect towards trust or
hyphothesis can be accepted.

The Effect of Image on Trust

Hypothesis 4 is to examined whether the image has positive effect significantly on trust. The
test results obtained the value of the direct positive effect is 0.42 and t-value is 2.59. This
means that image has positive and significant effect on trust or hyphothesis can be accepted.

The Effect of Consumer Satisfaction on Trust

Hypothesis 5 is to examined whether consumer satisfaction has positive effect significantly
on trust. The test results obtained the value of the direct positive effect is 0.16 and t-value is
2.04. This means that consumer satisfaction has positive and significant effect on trust or
hyphothesis can be accepted.

The Effect of Trust on Consumers Loyalty

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Hypothesis 6 is to hyphothesis whether trust has positive effect significantly on consumers

loyalty. The test results obtained the value of the direct positive effect is 0.80 and t-value is
5.98. This means that trust has a positive and significant effect on consumers loyalty or
hyphothesis can be accepted).

The Mediation Effect of Consumer Satisfaction in the Relationship of Service Quality

and Trust Relationships
Based on the results of testing a hypothesis as presented, the effects of mediation and testing
hypothesis there is difference between the coefficients, i.e. the value of the direct positive
effect of 0.46 and t-value 2.78. This means that the service quality has positive and
significant effect on trust. It means that, empirically consumer satisfaction are proven to be a
mediation between these two variables.

The Mediation Effect of Consumer Satisfaction in the Relationship of Image and Trust

Based on the results of testing a hypothesis as presented, the effects of mediation and testing
hipoteesis there is difference between the coefficients, i.e. the value of the direct positive
effect of 0.42 and 2.59. t-value. This means that image has positive and significant effect
towards trust. This means that, the consumer satisfaction are pro en can be a media ion
between these two variables.
The Mediation Effect of Consumer Satisfaction in the Relationship of Trust and
Consumers Loyalty

Based on the results of testing a hypothesis as presented, the effects of mediation and testing
of the hypothesis, there is difference between the coefficients, i.e. the value of the direct
positive effect of 0.80 and t-value 5.98. This means that there is a positive and significant
effect of the trust on consumers loyalty. It means that, consumer satisfaction are proven to be
a mediation between these two variables.

IV. CONCLUSION AND SUGGESTIONS

Based on the results of the study and a discussion of the factors that effects the level of
consumer loyalty in budget hotel in Indonesia, conclusions can be drawn as follows:
1. Service quality has positive effect significantly on consumer satisfaction.
2. Image has negative effect significantly on consumer satisfaction.
3. Service quality has positive effect significantly on trust .
4. Image has positive effect significantly on trust.
5. Consumer satisfaction has positive effect significantly on trust.
6. Trust has positive effect significantly on consumer loyalty.
7. Consumer satisfaction has positive effect significantly on service quality and trust. It
means that consumer satisfaction are proven empirically as mediation between these
two variables.
8. Consumer satisfaction are proven not supported as a mediation variables between
image and trust.
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9. Trust has a positive and significant effect on the consumers loyalty and customer
satisfaction. It means that trust are proven empirically as a mediation between
customer satisfaction and customer loyalty.

The suggestions that can be given by researches are follows:

1. The hotel should choose more strategic locations.
2. The hotel should give a better impression on the consumer.
3. The hotel should give reality to suit what is promised on the consumer.
4. The hotel should choose a location that is safe and convenient for the consumer.
5. The hotel should provide the best services so that consumers become more loyal
towards the hotel.

ACKNOWLEDGEMENT

This publication is dedicated to the Faculty of Economics and Business University of

Bandar Lampung and Lampung Administration Foundation who give fully supports so the
authors can be completed this research.

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