Curvilinear Effects of User-Generated Content on Hotels’ Market Share

Abstract

Potential service clients concerned about their prepurchase decision increasingly turn to what are called "third party" websites (e.g., Tripadvisor.com, Zagat.com, Yelp. com, Angieslist.com) for reassurance. User reviews and ratings on services such as hotels, airlines, car rentals, restaurants, plumbers, doctors, or movies help consumers make decisions. These reviews are perceived as unbiased since they are posted by the service provider's past customers, who appear to trust websites, such as Tripadvisor.com, to make their decisions (Verna 2008). These reviews can be used as a proxy for WOM (Dellarocas, Zhang, and Awad 2007), and modeled to improve revenue forecasts (Dellarocas, Zhang, and Awad 2007;Liu 2006). Some researchers, however, have found no effects between ratings and sales (Chen and Xie 2008; Duan, Gu, and Whinston 2008a), although the observed effects could be confounded by a between segment or product category effect (Zhu and Zhang 2010).Despite these contrasted results, some firms have been shown to strategically manipulate online reviews in an effort to influence consumers' purchase decisions (Dellarocas, Awad, and Zhang 2006). A recent user reviews and ratings report from TripAdvisor.com titled "2010 Dirtiest Hotels 478498J TRXXX10.

What makes a useful online review? Implication for travel product websites

“…From the tourism and hospitality perspectives, several researchers have investigated the role of online reviews in the decision making process for general trips (Xiang & Gretzel, 2010), hotels (Sparks & Browning, 2011), and restaurants (Racherla & Friske, 2012), as well as in estimating the market shares of travel products, such as hotels (Duverger, 2013;Ogut & Tas, 2012) and restaurants (Zhang, Ye, Law & Li, 2010). Vermeulen and Seegers (2009) investigated the impact of online hotel reviews on the formation of consumer consideration, and found out that online reviews improve hotel awareness, which ultimately helps travellers to develop their consideration set.…”

“…In this vein, many studies have investigated the effect of online reviews on travel behaviours (Vermeulen & Seegers, 2009) and product sales (Duverger, 2013;Racherla, Connolly & Christodoulidou, 2012;Sparks & Browning, 2011). It is important to recognize that while the abundance of online consumer reviews in travel-related social communities makes it easy for travellers to find information, it is difficult for them to process and judge useful information.…”

If we Build it will they Stay?: User Generated Content and Website Effectiveness

“…While UGC sites may not directly affect a consumer's purchase decision, having comments on a company's products or services has potential to enhance their reputation (Cox et al 2009). Others have found that the impact of UGC on the important metric of market share is positive but is not linear (Duverger 2013). Instead, it is curvilinear and thus, not equally impactful across all circumstances.…”

Role of e-WOM in hospitality market pricing

“…Yacouel& Fleischer (2012) claimed that positive reviews posted by past guests on online travel agents (OTAs) like Booking.com play an important role in en-hancing the image of hoteliers, which enables the generation of higher prices for hotels that hold a good reputation. Favorable opinions about the reserved facilities increase their popularity, the probability of additional bookings, and their market share [e.g., Park et al 2007;Ye et al 2011;Duverger 2013;Mauri & Minazzi 2013]. Öğüt & Onur Taş [2012] proved that assessment is also reflected in the price levels of rated hotels, and, according to studies by Kim, Lim & Brymer [2015], even in the financial condition of hotels.…”

“…For Duverger [2013], these are a form of general evaluation of services and should not be associated with e-WOM. Chatterjee [2001] presents a different point of view, suggesting that both reviews and assessments are the most common forms of e-WOM, and Kim, Lim & Brymer [2015] divide electronic opinions into two main parts: basic (evaluation) and additional (text argumentation).…”