| Summary: | Hotel sector is regarded as one of the most competitive service sectors because of the big number of players in the sector. Thus, to stay competitive, hotels have to regard customer satisfaction as their ultimate goal. However, a question arises as whether lower rated hotels in Malaysia are also considering customer satisfaction as their central purpose. Using the SERVQUAL model, this study examines the customers' perceptions on service quality of two-and three-star hotels in Malaysia. Analyzing responses from 288 customers and 40 management staffs from various hotels, the study established that the majority of respondents perceived the hotel's service quality lower than they expected. The results provide insights on how the two- and three-star hotels and other organizations of a similar structure could improve their hotel services. Moreover, this chapter is perhaps the first the concentrate on service quality in two-and three star hotels in Malaysia. © 2011 Nova Science Publishers, Inc. All rights reserved.
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