Qiang Ye; Rob Law; Bin Gu
International Journal of Hospitality Management
Previously I described the relationship between the quality of web-site and the purchase intention. What that post lacked was the impact of online user reviews on customer purchase intention and as a result sales of the rooms. Intuitively, the reviews have immense influence when doing online shopping. Are they also that important, when we book rooms? Let’s find out.
Many different studies (Chevlier and Mayzlin, 2006; Ghose and Ipeirotis, 2006; Zhu and Zhang, 2006) have shown that online online-generated reviews can influence purchase intention of customers that are buying products like books, CD’s and movies. Moreover, due to Gretlzel and Yoo (2008), 1/3 of travellers use online consumer reviews as information source when planning a trip. The question is therefore, what influence has those reviews on the travellers?
Online-generated consumer reviews are basically other type of Word-to-month marketing which importance is unquestionable. Nowadays, the internet enhances customers to share opinion and information world-wide with other people. As this is profitable for both parties the web-sites that enable such a exchange are growing and becoming more and more important. In hotel industry, one of the biggest is trip-advisor which gained its users because of easy mechanism of exchanging opinions (moreover, trip-advisor also has a very good algorithms to distinguish opinions/reviews that are generated by computer programs). From the traveller side, they perceive travel reviews as “more likely to provide up-to-date, enjoyable and reliable information than content posted by travel agent suppliers” (Gretzel and Yoo, 2008). However, the online user-generated reviews tend to have lower credibility and influence on customers than traditional word-of-month, as the source of information is “intangible” (Smith et al., 2005)
The authors of this article (Qiang Ye, Rob Law and Bin Gu) created an interesting method of calculating the influence of online-generated reviews on hotel rooms sales. They took into consideration two types of information
- reviews from the biggest travel website in China (Ctrip: link) – obtained using internet crawler
- sales information, as approximation of number of bookings by number of Reviews
The final model of influence had structural form of:
numRvws=x*numBookings ; x – is assumed fixed probability of users that were at certain hotel and left a review. It’s derived from Ctrip policy that it only allows customers to post one review per transaction after check-out.
AveRating – the average rating (from 1 to 5) from first two pages of reviews (usually customers don’t check more than 2 pages) during 12-month period)
VarRating – the variance of ratings from first two pages during 12-month period.
Price – the lowest price of the hotel room rate on Ctrip
CityRank – a dummy variable for the ranking of three cities based on GDP in 2007
Stars – the official category of a hotel in star ratings (from 2 to 5)
Summary of Dataset:
- travel website: Ctrip
- number of selected cities (randomly): 3
- number of hotels: 248
- number of consumer reviews: 5 777
The main objective of estimating such a model was to identify b0 and b1 as they represent the influence of online reviews on hotel sales.
After estimating this model, they achieved following results:
Improvement of 10% in user reviews can increase sales by 4,4%.
10% increase in variance may decrease sales by 2,8%
It is common knowledge that customers with bad experience are more likely to share their opinion in internet. Therefore, hotels should encourage their customers to share their positive experience.
Main Article: Ye, Q., Law, R., Gu, B., 2009. The impact of online user reviews on hotel rooms sales. International Journal of Hospitality Management 28, 180-182
- Chevlier, J.A., Mayzlin, D., 2006. The effect of word of mouth on sales: online book reviews. Journal of Marketing Research 43 (3), 345–354.
- Ghose, A., Ipeirotis, P., 2006. Towards an understanding of the impact of customer sentiment on product sales and review quality. In: Proceedings of the Workshop on Information Technology and Systems, Milwaukee, December, pp. 1–6.
- Gretzel, U., Yoo, K., 2008. Use and impact of online travel reviews. In: O’Connor, P., Ho ̈pken, W., Gretzel, U. (Eds.), Information and Communication in Tourism 2008. Springer-Verlag, Wien/New York, pp. 35–46.
- Smith, D., Menon, S., Sivakumar, K., 2005. Online peer and editorial recommendations, trust, and choice in virtual markets. Journal of Interactive Marketing 19 (3), 15–37.
- Zhu, F., Zhang, X., 2006. The influence of online consumer reviews on the demand for experience goods: the case of video games. In: Proceedings of 27th International Conference on Information Systems, Milwaukee, December, pp. 367–382.
Author: Mateusz Konopelski