Consumer Evaluation of a Vertical Brand Extension in the Lodging Industry: Relationships among Brand Trust, Band Loyalty, Brand Distance, and Brand Extension

Vertical brand extensions have been used as popular strategies in the lodging industry. Research on brand extension that is related with brand trust and brand loyalty has been useful in making brand extensions successful. However, previous research focused on aggregated relationships among brand trust, brand loyalty, and brand extension. In addition, it has been found that quality and price distance from a core brand of the brand extension has an impact on the success of the brand extension. Therefore, this dissertation proposes a theoretical model with six hypotheses investigating relationships among brand trust, brand loyalty and brand extension simultaneously. Further, the impact of distance from a core brand (brand distance) on the brand extension was examined.

Data was collected using an online panel. A final sample of 396 was used for the data analysis. Structural equation modeling (SEM), a Chi-square difference test, and independent t-tests were utilized to test the hypotheses. The data was randomly split in two. One half of the dataset was used to test a measurement model and the other half of the dataset was used to test a structural equation model.

The findings suggested there were positive relationships between brand trust and brand loyalty, brand trust and brand extension, and brand loyalty and brand extension. Furthermore, it was found that brand distance plays a significant role not only on brand extension, but also on the relationship between brand trust and brand extension and the relationship between brand loyalty and brand extension. This study contributes to vertical brand extension literature by providing a theoretical model by which simultaneous relationships among brand trust, brand loyalty and brand extension were investigated with a moderating factor: brand distance. The findings of this dissertation have important managerial implications for lodging industry brand managers.