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Value CreationMyongjee Yoo & Billy Bai aa William F. Harrah College of Hotel Administration,University of Nevada Las Vegas , 347 Beam Hall, POBox 456023, Las Vegas, NV, 89154, USAPublished online: 08 Sep 2008.

To cite this article: Myongjee Yoo & Billy Bai (2007) Value Creation, Journal of QualityAssurance in Hospitality & Tourism, 8:2, 45-65, DOI: 10.1300/J162v08n02_03

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Value Creation:The Impact of Strategic Alliance

on Customer Loyalty

Myongjee YooBilly Bai

ABSTRACT. The most essential theory of loyalty marketing is that asmall increase in loyal customers can bring a significant increase in prof-itability to a business. Recently, businesses in various industries haveturned single-brand loyalty programs into corporate-wide loyalty pro-grams across different brands. The purpose of the study was to examinethe effect of strategic alliance on customer loyalty in the hotel industry.Results of the study indicate that there is a positive relationship betweenstrategic alliance and customer loyalty, and that value-creation fromstrategic alliance is only one element in the decision-making process ofloyal customers. Managerial implications, limitations, and recommen-dations for future research were discussed. doi:10.1300/J162v08n02_03[Article copies available for a fee from The Haworth Document Delivery Ser-vice: 1-800-HAWORTH. E-mail address: <docdelivery@haworthpress.com>Website: <http://www.HaworthPress.com> � 2007 by The Haworth Press, Inc.All rights reserved.]

KEYWORDS. Customer loyalty, hotel, strategic alliance, value cre-ation

Myongjee Yoo is Marketing Analyst, 10611 Amber Rodge Drive, #102, Las Vegas,NV 89144 (E-mail: yoom@unlv.nevada.edu).

Billy Bai is Associate Professor, William F. Harrah College of Hotel Administra-tion, University of Nevada Las Vegas, 347 Beam Hall, PO Box 456023, Las Vegas,NV 89154 (E-mail: billy. bai@unlv.edu).

Journal of Quality Assurance in Hospitality & Tourism, Vol. 8(2) 2007Available online at http://jqaht.haworthpress.com

� 2007 by The Haworth Press, Inc. All rights reserved.doi:10.1300/J162v08n02_03 45

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INTRODUCTION

Loyalty programs have now become so common in the hospitality in-dustry that it is extremely difficult to find a business that does not utilizesuch a program. It is known that loyal customers make more purchasesthan non-loyal customers do, and they are less likely to switch to a com-petitor brand just because of price and other special promotions (Shoe-maker & Lewis, 1999). One of the most dominant trends of loyaltyprograms is the coalition model. Businesses in various industries haveturned single-brand loyalty programs into corporate-wide loyalty pro-grams across different brands in order to offer customers added valueby partnering with other businesses (Spethmann, 2005). For example,hotels are partnering with other airlines, rental cars, restaurants, andeven credit card companies and offering loyal customers more opportu-nities to earn points and benefits. Researchers claim that loyalty is builtthrough a positive differentiation that is usually obtained by providingsuperior customer service (Javalgi & Moberg, 1997). This positive dif-ferentiation can be noted as value creation. Value creation strategies in-crease the long-term value of the relationship between a service firmand the customer by offering customized service and greater benefitsand it may very well be necessary to influence customer satisfaction andtheir loyalty-switching decisions (Shoemaker & Lewis, 1999).

Parkhe (1993) has pointed out that little systematic attention has beenpaid to the field of strategic alliance and also accentuated the need forgrounded empirical research. While researchers have recognized theimportance of strategic alliance formation and the outcomes and initialcharacteristics of the alliance or of its partners in many subfields ofmanagement and organization theory, Doz (1996) stated that studies ofstrategic alliances as evolutionary process are scarce. It becomes essen-tial for hospitality professionals to explore the underling strategic alli-ance concepts of loyalty programs to assess business strategies as asource of competitive advantage that improve and sustain customerloyalty and eventually bring growth to a company.

The purpose of this paper is to determine the effect that strategic alli-ances have loyalty customers. In fact, this is one of the very limited em-pirical studies that has attempted to investigate the relationship betweenstrategic alliances and loyalty programs in the hotel industry. This studywill add to the limited but growing body of related empirical research inthis area. Theoretically, this study attempts to explain the relationshipbetween strategic alliances and customer loyalty in the hotel industry.From the managerial perspective industry practitioners will be able to

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develop practical business strategies for sustainable market growthfrom a cost minimization and profit optimization perspective.

LITERATURE REVIEW

Loyalty Marketing and Value Creation

What Is Loyalty Marketing?

Loyalty marketing has become a key factor for success in the serviceindustry. In such a highly competitive market, service providers inmany industries have discovered the importance of customer retention(Shoemaker & Lewis, 1999). They recognize the fact that keeping theircustomers is just as important as creating them. Numerous studies em-phasize the significant value of repeat patronage of customers. Existingpatrons tend to visit the property more frequently and, as the number ofvisits increases, their purchase amount may increase over time as well(Haywood, 1988). Studies also indicate that there is a positive relation-ship between loyalty and profitability (McCain, Jang, & Hu, 2005).

Many researchers attempted to clarify it, given the interest in cus-tomer loyalty. “Loyalty is the likelihood of a customer’s returning to ahotel and that person’s willingness to behave as a partner to the organi-zation” (Shoemaker & Lewis, 1999, p. 349). Petrick (2004) explainedthat while repeat visitation or repeat purchase infer loyalty, it is wellperceived that true loyalty is a two-dimensional concept that encom-passes both a psychological attachment and emotional commitment.Other researchers describe loyalty as the extent to which a customer pa-tronizes the service provider and desires to continue an ongoing rela-tionship with that service provider (McAlexander, Kim, & Roberts,2003).

Leaders in the industry know that when customer loyalty increases,profits increase as well and that they can acquire customer loyalty byproviding superior value continuously (Reichheld, 1993). When a firmattains higher customer loyalty, the economic benefits become consid-erably high because market share and revenue go up, and the cost of ob-taining and serving customers actually go down. This could possiblyclarify the differences in profitability among other competitors andcould be one of the reasons why many businesses offer loyalty pro-grams to their customers, although not every one of them achieve ameaningful and measurable improvement. Key to earning and sustain-

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ing outstanding customer loyalty is to understand what exactly the cus-tomers’ wants and needs are and to design and manage this self-reinforcing system (Reichheld, 1993).

Measuring Customer Loyalty

Bowen and Chen (2001) stated that there are three distinctive ap-proaches to measuring loyalty in general: behavioral measurements; at-titudinal measurements; and composite measurements. The behavioralmeasurement implies repetitious purchase behavior that is consistent.Attitudinal measurements are considered as the sense of loyalty (e.g.,having favorable attitude toward a hotel brand or recommending the ho-tel positively to others). Composite measurements of loyalty combineboth the behavioral measurement and the attitudinal measurement and itmeasures loyalty by indicators such as customers’ preference of prod-uct, frequency of purchase, total amount of purchase, and propensity ofswitching brands. Other researchers suggest repeat purchase, prefer-ence, commitment, retention, and allegiance as major loyalty indicators(Rundle-Thiele & Mackay, 2001). According to Dick and Basu (1994),there are relative attitudes that affect the repeat patronage of loyal cus-tomers. They described relative attitudes in three categories: cognitive-those related to informational determinants towards a brand; affective-those related to feelings toward a brand; and, conative–those related tobehavioral characters toward a brand. Nonetheless, they explained hownon-relative attitudes such as situational factors or subjective normsinfluence repeat patronage as well.

Similar to Dick and Basu’s study, Baloglu (2002), proposed thatthere are two major variables that assess customer loyalty: behavioralvariables and attitudinal variables. Examples of behavioral variables arethe proportion of visit, time spent in a hotel property, cooperation, andword-of-mouth recommendations. The most significant examples of at-titudinal variables are trust and emotional attachment or commitment.Morgan and Hunt (1994) also proposed commitment and trust as majorconstructs of relationship marketing.

Meanwhile, many studies accentuated the importance of satisfactionin customer loyalty. McAlexander et al (2003) emphasized the need toprovide and improve customer satisfaction to achieve loyalty. Theyconcluded that the management of satisfaction is most useful for devel-oping loyalty among customers who are not persuaded toward estab-lishing enduring relationships with a certain brand. Lam, Shanker,Erramilli, and Murthy (2004) also contended customer satisfaction as

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one of the potential antecedents in building customer loyalty. Customersatisfaction influences variables that are indicators of customer loyaltyor orientation toward a long-term relationship. Customers who are sat-isfied with a service provider can be motivated to patronize that serviceprovider again and recommend other customers to the provider. Theyalso suggested that there are increasing returns to scale in the relation-ship between customer satisfaction and customer loyalty. Although sat-isfaction might not be sufficient, it becomes a necessary factor inbuilding customer loyalty (Shoemaker & Lewis, 1999). It should alsobe noted that there is a school of thought that believes customer satis-faction may not be important or in the disconnect of relationships be-tween customer satisfaction and their actual behavior. Williams andVisser (2002) stated that customer satisfaction is a major concern formiddle managers but not for key groups such as investors, top and linemanagement, marketers and even for customers. In addition, therecould be more mediating variables between customer satisfaction andloyalty as indicated in the study by Homburg and Giering (2001). Theyfound that consumer’s personal characteristics such as variety seeking,age, and income are important moderators of the relationship betweensatisfaction and loyalty.

According to Shoemaker and Lewis (1999), the Loyalty Triangle is aframework which creates long-term loyalty and proposes companies toexecute all the functions described on each side of the triangle equallywell in order to build customer loyalty. The functions described areprocess, database management/communication, and value creation.The process indicates how the service works and it involves all activ-ities from both the customer and the service provider’s viewpoint.For the customer, the process involves all the behaviors that startfrom when they purchase the service to the time when they leave theservice property. Even the interactions with the employees of the ser-vice company are a part of the process. For the service company, theprocess involves the service operation’s design, employee recruitmentand training, and the collection of customers’ information to knowthem better and provide advanced service. The database management/communication function focuses on how the service provider commu-nicates with its customers. It is essential because it is the foundation ofpersonnel marketing. A firm can keep good track of customers’ favor,preference, and needs and therefore provide customized service to theirguests through a well-designed database. Such activities include data-base marketing, newsletters, and general advertising. Finally, there aretwo components for value creation: value-added and value-recovery.

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Value-added strategies focus on the long-term value of the relationshipbetween the customer and the service firm, while value-recovery strate-gies focus on the service delivery occurring in specific transactions.These two strategies are designed particularly to improve customer per-ceptions of the rewards and costs associated with service transactionsand therefore increase customer satisfaction. Customers can earn addi-tional rewards that accumulate for future transactions so long as theykeep their relationship with the brand through value-added strategies.For example, hotel customers can acquire benefits such as upgrades,priority check-ins, and late check-outs. Cross-promotions with comple-mentary services such as airlines and rental cars are also available. Gen-erally, value-added strategies increase the rewards related to the currentrelationship, and value-recovery strategies reduce or remove the costsassociated with service failure.

Likewise, O’Malley (2000) stated that there is an assumption thatloyalty programs provide customers with benefits which representvalue, and it is because of this value that loyalty programs can encour-age customer loyalty. Bolton, Kannen, and Bramlett (2000) also arguedthat creating value by proposing noncomparable service experiencescan increase customer loyalty. There is somehow a correlation that ben-eficial factors or advantages affect customer loyalty positively and ser-vice firms are practically trying to develop strategies to fulfill the wantsand needs of their customers. There are many ways that service provid-ers can develop new schemes and create value by presenting beneficialfactors and forming alliances with other companies in various industriesis becoming one common method. It becomes an absolute necessity tounderstand the concepts of strategic alliance and its relation to customerloyalty.

Strategic Alliance and Its Developments

Alliances are relationships between two or more independent partiesthat agree to cooperate but still maintain their own identities (Dev &Klein, 1993). Alliances are also known as partnerships and vary in theform that they take. They can fall into different categories such as oper-ational, relationship, and strategic (Kaplan & Hurd, 2002). Althoughthe types of alliances might differ, the basic underlying concept withinalliances is the same in that companies collaborate with one another tofulfill their individual needs.

Strategic alliances are considered to be collaborative efforts betweencompanies to pool their joint resources and achieve mutually compati-

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ble goals (Lambe, Spekman, & Hunt, 1995). In this context, “resources”mean any tangible or intangible entities available to the firms that en-able it to achieve competence and compete in its marketplace (Hunt &Morgan, 1995). Every firm has a mixture of resources that are uniquein at least some ways and these resources cannot be easily bought andsold in the marketplace. In other words, firm resources are notably het-erogeneous and imperfectly mobile. Barney (1991) stated that whenheterogeneous resources are valuable, rare, durable, and inimitable,companies are able to attain competitive advantages because they canproduce products with higher value for their customers than their com-petitors. Therefore, companies develop strategic alliances to obtain theresources needed to increase and sustain competitive advantage (Lambeet al., 2002). That is, strategic alliances can be regarded as a potentialsource of value creation as partnering firms use each other’s strengths toboost market opportunities (Chathoth & Olsen, 2003).

Strategic alliances are not static but dynamic. Using a longitudinalstudy of firms forming alliances, Doz (1996) found that successfulstrategic alliances are highly evolutionary and that these alliancesexperience a sequence of interactive cycles of earning, reevaluation,and readjustment. Gulati (1995) examined social structure and alli-ance-formation patterns with comprehensive longitudinal multi-in-dustry data on the formation of interfirm strategic alliances between1970 and 1989. His research provided empirical evidence for the signif-icant relationships between social structure and alliance-formation pat-terns. Among other specific results, firms are likely to form furtheralliances if they are previously engaged. However, this trend may pres-ent a non-linear relationship.

Travel and tourism companies are competing on a global field. Fur-thermore, hotel companies have continued to acquire, renovate, andbuild new properties in order to gain greater market presence and mar-ket share. Due to such heavy competition and low profitability, strategicalliances are becoming more important for the hospitality industry.Growth is the key component to prosperity in the hotel industry. Thechallenge for hotels is to come across in such way that maximizes mar-ket coverage, while also achieving economies of scale and scope thatminimize capital investments (Dev & Klein, 1993). The primary factorin why companies create and maintain strategic alliances would be “ashared perception of opportunity, potential impact on market values,high returns, and low exit barriers” (Newman & Chaharbaghi, 1996, p.851). Therefore, one such method for a firm to grow is to form strategicalliances by which companies can develop relationships for each of

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their particular reasons. Operating independently can be more expen-sive, difficult, and time-consuming than working collaboratively. It ispossible to improve performance when one company compensates foranother company’s weaknesses (Dev & Klein, 1993).

Now that organizations are recognizing that their partners are reduc-ing the risk associated with market and technology uncertainty andlessening the degree of conflict in such a competitive industry, strate-gic alliances are becoming the norm in the hospitality industry. Stra-tegic alliances are making it possible for companies to provide thenecessary connectivity across complementary abilities to producenew market values without stretching each party out of its existingcompetencies (Newman & Chaharbaghi, 1996). Hotels are increasingpartnerships with different industries more and more. Such partner-ships started with well-known restaurant companies because of thehigh cost structure of food and beverage operations. Nowadays, hotelsare broadening the ranges of strategic alliances within other industries.For example, one of the world’s most recognized hotel rewards pro-gram, the Marriott Rewards, has partnerships with Boston Coach,Chase, Hertz, Skymall, Air Canada, British Airways, American Air-lines, and numerous other airline companies. Members of the MarriottRewards can also earn additional points via the Marriott Rewards Visacard issued by Bank One (Marriott International, Inc., n.d.).

Hospitality businesses have become aware of the fact that maintain-ing relationship bonds with alliance partners is as important as main-taining relationship bonds with their customers. A relationship betweentwo companies may not be observed in the exact same way by each ofthe participants of the strategic alliance. From one company’s view-point, the alliance relationship may be observed as building links with a“client” company. On the other hand, the “client” company may ob-serve the same relationship as a strategic alliance to achieve future goals(Jarratt, 1998). All in all, if it is difficult for competitors to imitate cus-tomized service that is developed through unique interactions between ahospitality service provider and a different organization, it contributesto the value-adding process and the hospitality service provider isenabled to gain sustainable competitive advantage (Varadarajan &Cunningham, 1995).

Research Hypotheses

The findings of the literature review could suggest a positive rela-tionship between strategic alliances and customer loyalty. One source

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from which customers find value is beneficial factors from coalitionmodels of loyalty programs. Affiliated loyalty programs are market-ing strategies developed with such attempts. Through previous stud-ies, researchers found a number of factors that affect customerloyalty. With the aim to find out the impact of strategic alliance oncustomer loyalty, six aspects were selected based on the literature re-view and the following hypotheses were advanced:

H1: There is a positive relation between value creation from strate-gic alliances and repeat purchase intention.

H2: There is a positive relation between value creation from strate-gic alliances and retention.

H3: There is a positive relation between value creation from strate-gic alliances and prevention of brand-switching.

H4: There is a positive relation between value creation from strate-gic alliances and preference.

H5: There is a positive relation between value creation from strate-gic alliances and sense of loyalty (positive word-of-mouth).

H6: There is a positive relation between value creation from strate-gic alliances and customer satisfaction.

METHODOLOGY

Measurement Variables

This study designed and conducted a survey to achieve the researchobjectives. The initial instrument was first developed after reviewingthe existing literature with some modifications introduced. The ques-tionnaire included 24 value-creation items as the indicators for theindependent variables, from the study by Shoemaker and Lewis(1999). Additional items for value creation were developed throughthe pilot test and extra research from various hotel loyalty programsas presented on their websites. The specific benefits to indicate thevalue-creation sources were the following: discounts, bonus points,affinity cards, point exchange, priority check-in, room assigned, late

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check-out, room guarantee, check cashing, reservation convenience,website effectiveness, sweepstakes, upgrade, immediacy of reward’savailability upon request, chances to earn points, point usage, cross-shopping experience, reimbursement of service failure, complimentaryaccess, point-tracking availability, recognition, welcome gift, newslet-ters, interpersonal linkage with service provider, and special eventssponsored by the service provider.

Several units of analysis have been used in the literature review sec-tion to identify the determining indicators by which to measure cus-tomer loyalty. Overall, this study included the following indicators asdependent variables to measure loyalty: repeat purchase intention, pro-pensity of brand-switching, retention, preference, sense of loyalty (pos-itive word-of-mouth), and satisfaction.

A five-point Likert-type scale, with 1 being “very unimportant” to 5being “very important” was used to measure the hotel customer’s per-ception of the importance of benefits offered by its affiliated loyaltyprogram. The impact of the benefits from partners on the loyalty deter-minants was also measured using items with a five-point Likert-typescale, with 1 being “strongly disagree” or “very unsatisfied” to 5 being“strongly agree” or “very satisfied.” The final section was designed toprovide the demographic profile of the respondents.

A pilot test was conducted in order to establish content validity.Eighteen graduate students majoring in hospitality administration at amajor southwest U.S. university voluntarily participated. Each partici-pant was asked to complete the questionnaire. After analyzing the re-turned questionnaires, minor changes were made.

Sample and Data Collection

This study limited the unit of analysis to nation wide brand hotels thatcarry loyalty programs and the customers who are engaged in the ho-tel’s loyalty program. One major hotel chain was solicited for supportwith data collection. Three mid-priced hotel properties from the hotelchain, located near the Las Vegas Strip participated in this study. Thestudy selected the sample among customers who visited the hotel prop-erties from October 6 to December 31, 2005. Four-hundred copies ofthe questionnaire were initially sent out to the three hotel properties. Anadditional 200 copies were included in the middle of the data-collectionprocess. The hotel properties distributed the questionnaires only to cus-tomers who were engaged in their loyalty program. In other words, allthe customers who were selected to participate in this study were to

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some extent loyal customers to the hotel. A copy of the questionnairewas placed in the guest’s room along together with the hotel’s welcomeletter. The questionnaire had a cover page explaining the objectives ofthe survey, providing instructions, and requesting participation. Partici-pation for the study was absolutely voluntary. Customers who did de-cide to participate in the study were offered additional loyalty programrewards points to their loyalty program as an incentive when theyhanded in their completed questionnaire at check-out. A total of 309 outof 600 questionnaires were collected, out of which 15 were assumed in-valid since they missed an excessive amount of the questions or theywere problematic with biased answers. Therefore, the usable number ofquestionnaires was 294 with a response rate of 49%.

Data Analyses

The data was entered and analyzed in SPSS version 13.0. Questionsfrom the questionnaire were selected separately and coded specifically.Descriptive statistics for all questionnaire items and research variableswere computed in order to check for missing data and errors in data en-try. Data entries were then listed and checked against the originalquestionnaire.

Factor Analysis

Twenty-four items were developed from the literature review to mea-sure the customer’s perceived level of importance of value-creation fac-tors offered by the hotel’s loyalty program. The study performed afactor analysis to categorize the value-creation items into distinctivefactors. For factor analysis, Varimax with Kaiser normalization was uti-lized to condense the large set of value-creation variables into underly-ing constructs. The Kaiser-Meyer-Olkin value from the KMO andBartlett’s test achieved 0.917, indicating an excellent sampling ade-quacy. Factor loadings of over 0.50 were accepted for further analyses.As seen in Table 1, the cumulative percentage of the four components isover 60% so this would be acceptable (Comrey & Lee, 1992).

As a result, the 24 items that were developed to measure the custom-ers’ perceived level of importance of value creation factors were com-posed as the following: Factor 1, Fundamental (Discounts, Bonus points,Priority check-in, Late check-out, Rooms assigned, Rooms guarantee,Reservation convenience, Website effectiveness, Upgrade, Immediacyof reward’s availability, Opportunity to earn points, Point usage); Factor

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2, Social (Welcome gifts, Newsletters, Interpersonal linkage with ser-vice provider, Special events); Factor 3, Practical (Affinity cards, Ex-change points, Cross shopping); and Factor 4, Serviceable (Checkcashing, Sweepstakes). One of the value creation items, reimbursementof service failure, was deleted because it was suppressed at 0.50 loadinglevel.

The reliability in this study was measured by the reliability analysison SPSS 13.0. The Cronbach alpha values ranged from 0.604 to 0.949.Cronbach’s alpha is one of the most commonly used measurements forassessing the consistency of the entire scale and the index ranges from 0to 1. Higher alpha value means higher internal consistency. As shown inTable 1, all the variables had acceptable alpha values that were, in fact,values very close to 1 or very close to the generally agreed lower limit of

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TABLE 1. Results of Factor Analysis

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the Cronbach’s alpha value of 0.70 (Nunnaly, 1978). The factor’s con-tent validity was established through the careful process of developingthe questionnaire and theoretical support from the literature review.

Multiple Regression Analysis

The assumptions that needed to be checked before performing re-gression analysis were the following: normality, independence of ob-servations, linearity, constant variance, outliers, and multicollinearity.All data was screened for outliers and scatter plots were reviewed fornonlinear distributions and relationships. Histograms and normal prob-ability plots were examined for normal distribution in each performanceas well. The independence assumption was checked to make sure thatthere was no relationship between the observations in the differentgroups and between the observations within the same group. Linearitywas checked by producing all partial plots. The constant variance wasverified by checking the plots with standardized residual as the Y vari-able and standardized predicted as the X variable (Norušis, 2004). Fi-nally, analysis of variance inflation factors (VIF) was checked formulticollinearity. “A value close to 1 indicates that an independent vari-able has little of its variability explained by the other independent vari-ables which was acceptable” (Norušis, 2004, p. 529). Numbers rangedfrom 1.000 to 1.001. All the assumptions were checked and none ofthem were violated.

Six multiple linear regression models were tested with each loyaltyindicator as the dependent variable and the factors that were created byfactor analysis as the independent variables at a 0.05 alpha level. Re-gression analysis explains if there is a relationship between two or morevariables and it also clarifies whether the relationship is linear as inpositive or negative.

RESULTS

Profile of the Respondents

Table 2 summarizes the profile of the respondents. Approximately68% of them stayed with the hotel’s affiliated loyalty programs formore than four years. More than 77% of the respondents were male andapproximately 22% were female. In term of age distribution, the major-ity of the respondents were young and middle-aged (71%). The marital

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status of the majority of the respondents was either single or marriedand only a few were divorced or separated. Based on their nationality,respondents could be separated into two groups: the American and thenon-American. Over 76% were American and only 11.9% were non-

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TABLE 2. Profile of Participants

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American from countries such as Australia, Canada, China, Japan,Mexico, Poland, and India. With regard to the highest educational de-gree received, the majority (79%) either had a college degree or a gradu-ate degree. More than half of the respondents’ purpose of trip wasbusiness and over 61% of the respondents had an approximate annualhousehold income of over $100,000.

The Impact of Strategic Alliance on Customer Loyalty

Table 3 reports the results of the regression analysis. The first hy-pothesis was built to examine the effect of the value creation from stra-tegic alliances on customers’ repeat purchase intention. The resultsindicate that the model was significant (p < 0.05, F = 18.536) and 21.1%of the repeat purchase intention is explained by the value-creation fac-tors. Fundamental factor (p < 0.05, t = 8.179) and practical factor (p <0.05, t = 2.075) value-creation items turned out to be especially signifi-cant specifically. Thus, H1 was supported.

A significant result was detected between the value-creation factorsand retention (p < 0.05, F = 19.802). From this regression model, 22.2%of the customers’ intention to continue to stay with the hotels’ affiliatedloyalty programs is explained by the value-creation factors. As a result,H2 was supported. Fundamental factor (p < 0.05, t = 8.389) and practi-cal factor (p < 0.05, t = 2.663) value creation items turned out to besignificant.

There was a positive relation between value creation from strategicalliances and prevention of brand-switching as well. From the regres-sion model, 8.1% of the customers’ propensity of brand switching is ex-plained by the value-creation factors. The results show that the modelwas significant (p < 0.05, F = 6.076). While H3 was supported, it showsthat fundamental factor (p < 0.05, t = 3.597) and social factor (p < 0.05, t= 2.528) of the value creation sources appeared to be significantly re-lated to the propensity of brand switching separately.

Results of regression analysis also indicate that there was a positiverelation between the value-creation factors and preference of brand.About 12.2% of the customers’ preference of the hotel brand is ex-plained by the value-creation factors. Fundamental factor (p < 0.05, t =5.616) and servicable factor (p < 0.05, t = 2.373) turned out to be signifi-cant. As a result, H4 was supported (p < 0.05, F = 9.598).

The value-creation factors and sense of loyalty (positive word-of-mouth) were found to be positively correlated. The regression model re-ports that approximately 16% of the customers’ sense of loyalty was ex-

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TABLE 3. Regression Results of Strategic Alliance on Customer Loyalty (N =294)

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plained by the value-creation factors. As a result, H5 was supported (p <0.05, F = 13.186). The significance level of fundamental factor (p <0.05, t = 6.291), practical factor (p < 0.05, t = 2.783), and serviceablefactor (p < 0.05, t = 2.082) appeared to be significant.

Finally, 3.7% of the customers’ extent of satisfaction is explained bythe value-creation factors and the results indicate that the model wassignificant (p < 0.05, F = 2.600). Fundamental factor (P < 0.05, t =2.725) was the only factor that turned out to be significant in relation tosatisfaction separately.

Empirical results from this study provide valuable findings for strate-gic alliance and loyalty programs in the hotel industry. The results sup-ported all six hypotheses that were developed in this study and thus itcan be concluded that there is a positive relation between strategic alli-ances and customer loyalty. However, the results of the R square valuesof each multiple linear regression performance ranged between at low-est of 0.037 to at highest of 0.222. That means only 3.7% to 22.2% ofthe variability in observed strategic alliance value-creation items are ex-plained by loyalty decisions. This implies that there should be more fac-tors that can be explained by customers’ loyalty decisions.

As discussed in the literature review, previous studies proposed emo-tional attachment, trust, and commitment as some major features ofbuilding customer loyalty (Baloglu, 2002; Morgan & Hunt, 1994).Other researchers, Dick and Basu (1994) proposed that relative atti-tudes such as informational determinants toward a brand, feelings to-ward a brand, behavioral characters toward a brand and nonrelativeattitudes such as situational factors or subjective norms influence repeatpatronage of loyal customers as well. Besides, the Loyalty Triangle sug-gested from Shoemaker and Lewis (1999) emphasized the need forcompanies to execute the three functions described on each side of thetriangle equally to build customer loyalty. Therefore, the results couldactually make sense in a way because this study not just touched one ofthe function among the other two functions of the Loyalty Triangle butthe function that was touched was also just on the strategic allianceperspective.

Still, the findings of this study would be able to assist hotel managerswith practical ideas. The results of this study revealed that strategic al-liances somehow affect loyal customers positively. However, it ismore important to investigate which value-creation source or item thecustomers most likely perceive significant to their loyalty decisions.Moreover, other definitive requisites should always be performed si-multaneously.

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CONCLUSION

This study guides hotels to identify the crucial value-creation itemsin each loyalty decision used as a variable. By focusing on those attrib-utes on specific customer’s decision behavior, the hotels can developpractical strategies related to strategic alliances that offer attractivebenefits to their customers. For instance, fundamental factor and prac-tical factor value-creation items turned out to be more significant for re-peat purchase intentions. Fundamental factor and serviceable factorvalue-creation items were more significant for preference of the hotelbrand. Fundamental value-creation items revealed to be significant forsatisfaction. Therefore, the hotels can build up strategies for differentpurposes by attracting customers with specific value-creation items.Yet it is impossible for a hotel company to conclude that customer loy-alty has increased by a single feature, given all of the various factors thataffect loyalty decisions. The importance of each item varies among dif-ferent customers so it is necessary for the hotels to pay attention to all ofthe factors depending on their particular needs.

Value-creation strategies do play an important role in increasing thelong-term value of the relationship between a service provider and thecustomer by offering greater benefits. It is important to influence cus-tomers’ loyalty decisions. The findings of this study indicate that thereis a correlation between beneficial factors and customer loyalty in oneway or another. Still, value-creation strategies should be implementedalong with the other functions of the Loyalty Triangle framework rec-ommended by Shoemaker and Lewis (1999) in order to make the bestuse of it. Not only the Loyalty Triangle functions, but also the otherrelevant factors in loyalty decisions, need to be considered–such astrust and commitment. Strategic alliances have a positive impact oncustomer loyalty and it can be a competitive source to improve and sus-tain customer loyalty. Results of this study accurately point out thatvalue-creation factors from strategic alliances are only one element ininfluencing customers’ loyalty decisions. Hotels need to constantlymonitor the value-creation drivers that can eventually enhance cus-tomer loyalty.

Limitation and Future Research

However, there are limitations in the methodology for this study.First of all, since the data was collected only in hotel properties thatwere located in Las Vegas, it might not be suitable to generalize the

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findings throughout the whole nation due to the unusual characteristicsof the city. The fact that the data originates from only three hotel prop-erties also makes it obvious that the findings are not generalizable, andthe fact that data was collected on a mid-price segmentation hotelproperty may indicate that it cannot be used to generalize in regards todifferent levels of hotels such as luxury and upscale segments. More-over, the majority of the people who participated in the survey werebusiness travelers. Such travelers may not actually have the option tochoose a particular hotel brand in which they are engaged to a loyaltyprogram and they may tend to be influenced more by the group’s chosenheadquarters hotel if they are driven by a specific event. Future researchshould put consideration into determining whether business travelersare from convention/meeting attendance versus individual transientbusiness because they could have a critical impact in hotel choice.

Repeating this study with other hotel segments from more geo-graphic locations would assist in establishing the external general-izability or applicability of the results and thus contribute to the essen-tial of our research stream. Furthermore, more indicators should be usedto measure loyalty. Future research can incorporate additional variablessuch as trust, commitment, proportion of visit, or time spent at the hotelproperty. One useful and important extension of this research would beto investigate the actual items that customers want or need. The ques-tionnaire can directly ask the customers what specific benefits theywant from their affiliated loyalty program. That way, hotels will be ableto select the right partner and provide greater service. It is possible toextend the value of the research to develop a guide model for hotels tochoose the right partner for success. Finally, it would make a significantcontribution if efforts are made for further analyses on which itemsunder each value particularly have more effect on customer loyalty.

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SUBMITTED: December 4, 2006FIRST REVISION SUBMITTED: March 28, 2007

SECOND REVISION SUBMITTED: April 30, 2007ACCEPTED: May 18, 2007

REFEREED ANONYMOUSLY

doi:10.1300/J162v08n02_03

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