The hotel industry contributes significantly to Ghanas development. However, they face the challenge of meeting and exceeding their customers expectations through high quality service delivery in order to ensure customer loyalty which is the bedrock of any business. The study investigates how service quality impacts customer loyalty in Golden Tulip, a 4-star hotel; Miklin Hotel, a 3-star hotel and Lizzies Hotel, a 2-star hotel in Kumasi, a leading city in Ghana. 50 customers seeking lodging and boarding services were randomly selected and 5 staff members were purposively selected from each hotel for the study. By use of the SERVQUAL model through survey questionnaire and interviews, the study reveals that customer satisfaction is not based solely on the rankings/classification of the hotels but on service quality that gives value for money which in turn produces customer loyalty. Miklin Hotel produced most satisfied and loyal customers, followed by Golden Tulip Hotel and then Lizzies Hotel contrary to the classification order. In addition to responsiveness service quality variable for Miklin, empathy and assurance variables made significant impact on customer loyalty for guests from Miklin and Golden Tulip hotels, while reliability accounts for the loyalty of guests from Lizzies Hotel. This confirms the direct relationship between customer satisfaction and loyalty. Tangibility does not play any significant role in developing customer loyalty for all the hotels because the guests were least satisfied with it and are likely to take it for granted in their quest for change. The study recommends that hotel classification should not be based mainly on the tangible factors alone but rather on comprehensive service that provide value for money and impact on customer loyalty. Key words: SERVQUAL, Satisfaction, Hotel, Loyalty and Tangibility.