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In this study, a critical incident technique(CIT) was employed to show the issues of physical evidence and types of service recovery on customer satisfaction regarding hotel industry. The purpose of this study is to determine the issues of physical environment by use of qualitative approaches. The CIT data showed four major categories of service failure on physical environment: mechanical equipment, cleanliness, facilities, and design. The highest frequency of failure subcategories is mechanical problems, and the next one is cleanliness problems. The data also demonstrate that tangible recovery(discount, free meal, upgrade) seemed to be a better recovery strategy than the other types of intangible recovery. Furthermore, the results indicate that service failure severity and satisfaction have a significant effect on hotel image and intention to revisit.