The pre-pandemic role of customer online satisfaction in price determination: evidence from hotel industry

Abstract

This study examines the importance of online reviews for price determination in the hotel industry in the pre-pandemic period. The research is conducted for Croatian small open economy with a developed tourism sector. The paper fills the gap in existing literature by using multivariate principal component analysis to group various customer satisfaction categories in the hotel industry and assessing the relationship between customer satisfaction and hotel price. The conducted empirical analysis points to a positive statistically significant relationship of guest satisfaction and hotel prices. Moreover, linear regression modelling is conducted separately for four-star and five-star hotels. The estimated impacts are statistically significant and positive, but the effects are twice as strong in five-star hotels then in four-star hotels. The obtained results indicate that hotel star rating impacts the strength of the relationship between hotel prices and guest satisfaction. Recognizing the link between hotel ratings, online reviews and pricing is essential both for hotel managers and customers. Hence, the paper provides valuable conclusions from the aspect of supply and demand side in the hotel industry.

Analysis of Influencing Factors and Distribution Simulation of Budget Hotel Room Pricing Based on Big Data and Machine Learning from a Spatial Perspective

“…Other scholars have studied the impact of online evaluations on prices directly. Palić et al [27] believe that evaluating the relationship between online evaluation and pricing is necessary for appropriate pricing in the hotel industry. Online ratings have a significantly positive impact on hotel prices.…”