EXPRESS: The Competitive Effects of Online Reviews on Hotel Demand

Abstract

The authors examine the effects of a firm’s and its competitors’ online reviews on its demand within the hotel industry. The authors leverage a unique dataset of actual bookings from properties of a major hotel chain in six different markets in the United States, supplemented with online reviews garnered from a popular social media platform. The findings indicate that not only a hotel’s own reviews but also its competitors’ reviews have a significant impact on the hotel’s booking performance. The impact of review sentiment amplifies if the focal hotel also charges higher prices or when the volume of reviews is high. The authors establish heterogeneous effects across consumer segments (business vs. leisure travelers) and by the type of review content (objective vs. subjective attributes to assess quality). Specifically, both own and competitor reviews have a larger impact on bookings for business travelers as compared to leisure travelers, and for reviews that mainly discuss subjective attributes, when consumers need to rely on the experiences of others to assess the quality of a hotel prior to their stay. The study provides a set of comprehensive insights on the impact of both own and competitors’ online reviews on a focal hotel.