Study of spillover effects of multiple hotel brand extensions

Abstract

Scope and Method of Study: The purposes of the study were (1) to propose and test a theoretical model on the spillover effects of previous hotel brand extensions on customer attitudes toward subsequent hotel brand extensions, customer perceptions of core brand reputation, and core brand loyalty; and (2) to provide practical implications and suggestions for the lodging industry and future research. An online survey was conducted to collect data. A total of 511 responses were analyzed using confirmatory factor analysis, structural equation modeling, and multiple group analysis methods.

Findings and Conclusions: The results of structural equation modeling revealed that (1) for a hotel brand that has been extended more than one extension, the performance of any previous hotel brand extensions, measured by customer perceptions of service quality in three dimensions, physical environment quality, interaction quality, and outcome quality, had positive impacts on customer attitudes toward subsequent hotel brand extensions, customer perceptions of core brand reputation, and core brand loyalty; (2) outcome quality had the strongest effect on both perceived overall service quality of subsequent hotel brand extensions and core brand reputation; and (3) the relationship between perceived physical environment quality of previous brand extensions and perceived overall service quality of the subsequent brand extension was moderated by perceived image similarity of the two extensions. The results suggested that before implementing the multiple brand extension strategy, hotel management needs to ensure that service quality of each hotel under the umbrella brand meets customer expectations. This is because low perceptions of service quality of one hotel has repercussions for all hotels of an umbrella brand, weakens reputation of the core brand, and lowers perceptions of service quality of newly extended hotel brands, which consequently decrease loyalty of the core brand.