Abstract
Although past studies advocate a positive impact of service quality on business performance, empirical studies investigating the nature of the relationship between service quality and profit growth in the hotel industry are limited. This study contributes to an ongoing debate as to whether service quality has a direct or indirect influence on profitability in the hotel industry. The data were collected from a national budget hotel company in the UK and the research hypotheses were tested through structural equation modeling via the LISREL software. The findings of the study found that service quality had a positive influence on brand loyalty and premium price. The effect of service quality on profit growth was indirect and mediated by premium price, brand loyalty, and sales growth.