THE RELATIONSHIP BETWEEN ONLINE RATING, HOTEL STAR CATEGORY AND ROOM PRICING POWER

Besim Agusaj (), Vanda Bazdan () and Djina Lujak ()
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Besim Agusaj: Rochester Institute of Technology Croatia, Dubrovnik
Vanda Bazdan: Rochester Institute of Technology Croatia, Dubrovnik
Djina Lujak: Rochester Institute of Technology Croatia, Dubrovnik

Economic Thought and Practice, 2017, vol. 26, issue 1, 189-204

Abstract: In the digital way of doing business we see a substantial rise of online customer feedback and customer information sharing communities. The role and importance of social media has considerably increased in the past several years and businesses can no longer overlook its impact. For companies, the acceptance of such sources are not only tangential rather they are becoming central in how they approach their operations. Numerous web based platforms that include social networking, online communities and review sites are critical reference points for companies while deciding how to structure and price their products and services. The tourism and hospitality industry is no exception to this phenomenon, as a matter of fact, it is at the very forefront of this new trend that we are observing. Some of these sites are more popular than others, such as TripAdvisor, Booking.com, Travelocity or Expedia but all of them affect how service providers conduct their business, specifically in the area of pricing. The aim of this paper is to examine and quantify the relationship between customer online rating, hotel category and room pricing power in hotel industry. Findings suggest that there is a statistically significant relationship between hotel star category, online rating and service provider’s room pricing power. Moreover, results indicate a strong correlation between TripAdvisor and Booking.com online customer reviews, suggesting that contrary to popular beliefs, TripAdvisor is as reliable as Booking.com.

Keywords: electronic word-of-mouth; pricing power; hotel star category; online rating (search for similar items in EconPapers)
JEL-codes: J24 L86 M14 M31 (search for similar items in EconPapers)
Date: 2017
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