Beyond discrete innovations: holistic service innovation consequences on loyalty

Abstract

Objective: This article examines how core and peripheral innovation dimensions combine to form customers’ holistic perception of innovativeness, thereby indirectly shaping customer loyalty via two parallel mediating pathways: perceived quality and satisfaction, and firms’ sustainability orientation. Methodology: Drawing on an integrated framework, we designed and estimated a dual-path model linking innovation typologies to customer outcomes. The model was estimated using partial least squares structural equation modeling (PLS-SEM) with data gathered online from 566 hotel customers across three countries. Results: Findings suggested that peripheral service-product innovation is the strongest driver of holistic service innovation. Loyalty is then shaped mainly by the customer’s overall evaluation, with sustainability-oriented service innovation serving as a weaker but relevant complementary pathway when it is visible and credible. Therefore, innovation builds loyalty primarily when it improves the customer’s overall evaluation of the hospitality experience, while sustainability-oriented service innovation contributes more strategically. Limitations: Reliance on self-reported data may explain the smaller contribution of core innovations, as they are less visible to most guests; however, it presents a limitation, alongside the cross-sectional nature. Both aspects restrict causal inferences, and generalisation of findings to other parts of the world and across different markets is limited. Practical implications: Firms should prioritise customer-facing innovations to shape perceptions of innovativeness, while maintaining core operational investments as enabling infrastructure. Sustainability-oriented service innovation supports loyalty, but mainly when it is visible, credible and embedded in the guest experience. Generic communication or backstage practices alone are unlikely to generate strong loyalty effects.