Winning the Battle: The Importance of Price and Online Reviews for Hotel Selection

Abstract

Traditionally, price has been one of the main revenue management levers that allow hotels to sell the right product to the right customer at the right time. Recent research in the area of electronic word-of-mouth has found that travelers’ online reviews may also be an influential factor affecting other customers’ booking decisions. However, it is challenging to determine the value of online reviews for customer decision making and to compare this value to hotel room prices. Therefore, the main goal of this study is to investigate which factors (room rate, online reviews’ rating score, or the number of reviews by other travelers) are more important for customers’ booking decisions and the optimal combination of these factors for booking a hotel. Conjoint analysis was applied to measure the relative importance of the aforementioned factors for travelers’ booking decisions. The results revealed that the overall online rating was the most influential factor with regard to customer decision making about booking a hotel. In addition, the following combination of factors was discovered to be optimal for attracting customer reservations: more than 107 reviews with an average rating of at least 3.3 (on a 5-point scale), and a price level of $130 or below.

Keywords

• revenue management,conjoint analysis,user generated content,review valence,review volume,eWOM

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