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The Impact of Online User Reviews on Hotel

Room Sales
Article in International Journal of Hospitality Management March 2009
DOI: 10.1016/j.ijhm.2008.06.011

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International Journal of Hospitality Management 28 (2009) 180182

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International Journal of Hospitality Management

journal homepage: www.elsevier.com/locate/ijhosman

Research note

The impact of online user reviews on hotel room sales

Qiang Ye a,b,*, Rob Law b,1, Bin Gu c,2
a

School of Management, Harbin Institute of Technology, China

School of Hotel & Tourism Management, Hong Kong Polytechnic University, Hong Kong
c
McCombs School of Business, University of Texas, Austin, USA
b

A R T I C L E I N F O

A B S T R A C T

Keywords:
Online reviews
Online sales
Hotel

Despite hospitality and tourism researchers recent attempts on examining different aspects of online
word-of-mouth [WOM], its impact on hotel sales remains largely unknown in the existing literature. To
ll this void, we conduct a study to empirically investigate the impact of online consumer-generated
reviews on hotel room sales. Utilizing data collected from the largest travel website in China, we develop
a xed effect log-linear regression model to assess the inuence of online reviews on the number of hotel
room bookings. Our results indicate a signicant relationship between online consumer reviews and
business performance of hotels.
2008 Elsevier Ltd. All rights reserved.

1. Introduction
The rapid growth of Internet applications on hospitality and
tourism leads to an enormous amount of consumer-generated
online reviews on different travel-related facilities. According to
Gretzel and Yoo (2008), three-quarters of travellers have
considered online consumer reviews as an information source
when planning their trips. In other disciplines, studies had shown
online user-generated reviews could signicantly inuence the
sales of products like books, CDs, and movies (Chevlier and
Mayzlin, 2006; Ghose and Ipeirotis, 2006; Zhu and Zhang, 2006).
These studies suggest that the inuence of user reviews is
particularly important for experience goods as their quality is
often unknown before consumption (Klein, 1998). Although
experience goods perfectly match the nature of the hospitality
and tourism industries, the issue of the impact of online consumergenerated reviews on the performance of hospitality businesses
has been overlooked by researchers.
Using data collected from a major travel website in China, we
make an initial attempt to investigate the impact of online WOM
on hotel bookings at the organization level. We aim to incorporate
research on the effect of online consumer-generated reviews into
online hotel booking services, one of the largest Internet

* Corresponding author at: School of Hotel & Tourism Management, Hong Kong
Polytechnic University, Hong Kong. Tel.: +852 3400 8541.
E-mail addresses: hmye@inet.polyu.edu.hk (Q. Ye), hmroblaw@polyu.edu.hk
(R. Law), Bin.Gu@mccombs.utexas.edu (B. Gu).
1
Tel.: +852 2766 6349.
2
Tel.: +1 512 471 1582.
0278-4319/$ see front matter 2008 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ijhm.2008.06.011

applications. Findings are expected to make a meaningful

contribution to knowledge development to help hospitality
practitioners and researchers develop a more realistic evaluation
of the inuence of online WOM.
The remaining parts of this paper are organized as follows. A
review of related literature is presented in the next section. The
section after that introduces the empirical model and data used in
this study. Section 4 reports the empirical results, and Section 5
summarizes the study.
2. Literature review
The importance of WOM has been widely documented in the
existing literature (Anderson, 1998; Goldenberg et al., 2001; Stokes
and Lomax, 2002; Zhu and Zhang, 2006). In the Internet era, the
effect and distribution of WOM have been further enhanced as
individuals can make their opinions easily accessible to other
Internet users (Dellarocas, 2003). The inuence of electronic WOM
is directly applicable to tourism and hospitality as Pan et al. (2007)
stated that online user-generated reviews are an important source
of information to travellers. Gretzel and Yoo (2008) further claimed
that travel reviews are often perceived as more likely to provide
up-to-date, enjoyable, and reliable information than content
posted by travel service suppliers.
Additionally, Goldenberg et al. (2001) showed a consumers
decision-making process is strongly inuenced by WOM. Likewise,
Chevlier and Mayzlin (2006) examined the effect of consumer
reviews on books at www.Amazon.com and www.Barnesandnoble.com, and found that WOM can signicantly inuence book
sales. Moreover, Ghose and Ipeirotis (2006) tested the impact of

Q. Ye et al. / International Journal of Hospitality Management 28 (2009) 180182

online reviews on a variety of products, and stated that certain

online reviews could reduce cognitive loads of readers and thus
result in more sales. On the contrary, some prior studies reported
that online user-generated reviews are perceived as having lower
credibility than traditional WOM due to the absence of source cues
on the Internet (Smith et al., 2005; Dellarocas, 2006). As such, the
inuence of consumer reviews needs to be further tested in
different contexts. A study on the impact of online reviews on hotel
room sales at the organization level would certainly be useful for
hospitality practitioners to better understand the importance of
electronic WOM on their businesses.
3. Methodologies
3.1. Data
The data used in this study were retrieved from Ctrip (URL:
www.ctrip.com), which is the largest travel website in China. Ctrip
has a mechanism that enables consumers to input reviews for their
hotel stays. In this research, a crawler was developed by Ruby to
download web pages of consumer reviews and hotel information
from Ctrip. Another Ruby-based system was developed to parse
HTML and XML web pages into a database. The data collection was
conducted in February 2008, and the crawler was used to retrieve
all available information of hotels in three randomly selected large
cities in China (Guangzhou, Chongqing, and Xian). Every consumer
reviews for a hotel was collected since it joined Ctrip. Table 1
summarizes the data we collected from www.ctrip.com. Ctrip
provides time stamp for each posted review. This study thus
focuses on consumer reviews posted during the 12 months
between February 2007 and January 2008. Totally, we have 3625
reviews for 248 hotels during the study period.
Prior studies suggested that customers rarely view online
comments beyond the rst two web pages (Pavlou and Dimoka,
2006). To control for the limitation of consumer attention, we
establish a moving window of the most recent 20 reviews over the
study period. Each day, we identify the most recent 20 reviews and
calculate the average and standard deviations of the review
ratings. We then average the average rating and standard deviation
over the study period to reect the average consumer opinion of
the hotel during the study period and the variability of the opinion.
Table 2 presents the variables used in the analysis.
Table 1
Summary of the dataset
Travel Website
Number of selected cities
Number of hotels
Number of consumer reviews
Number of reviews posted in February 2007January 2008

Ctrip
3
248
5777
3625

Table 2
Variables used for analysis
Variable

Description

NumRvws

Number of reviews published during the 12-month period

(as a proxy of the number of bookings).
The average rating (from 1 to 5, i.e. the worst to the best)
of reviews on rst two pages during a 12-month period.
The variance of rating among reviews on rst two pages
during a 12-month period.
The lowest price of the hotel room rate on Ctrip.
A dummy variable for the ranking of the three cities based
on GDP in 2007.
The ofcial category of a hotel in star ratings (from 2 to 5).

AveRating
VarRating
Price
CityRank
Stars

181

3.2. Empirical model

The following log-linear model for online sales of hotel i was
developed for evaluating the inuence of online reviews:
log numBookingsi b0 b1 AveRatingi b2 VarRatingi
b3 log pi GXi ei

(1)

where AveRatingi and VarRatingi represent hotel is average user

ratings and their variance; and pi represents the hotel room rate.
Additionally, Xi comprises other factors that can inuence hotel
sales. In this research, the star rating of the hotel and city ranking
were used as control variables.
A challenge we had encountered in the study was the
unavailability of detailed hotel booking data. Previous studies used
a variety of approaches to nd a proxy for product sales. To illustrate,
Ghose and Ipeirotis (2006) as well as Chevlier and Mayzlin (2006)
used www.Amazon.com sales ranks to deduce product sales. We
address this issue by noting Ctrips policy that it only allows
customers to post one review per transaction after check out.
Furthermore, we assume a customers probability of posting a review
on the travel website is stable across hotels. The number of online
reviews for hotel i is, therefore, a linear function of the hotel room
sales, rendering the outcome of numRvws = f  numBookings. In
other words, the number of published reviews on a travel website
can serve as the proxy for number of online bookings for a hotel.
The model to be tested in this study thus appears in the
following form:
log NumRvwsi b0 b1 AveRatingi b2 VarRatingi
b3 log pi b4 CityRank b5 Stars ei

(2)

The main objective of the analysis is to identify b1 and b2 as

they represent the inuence of online reviews on hotel sales.
4. Empirical results
As indicated in Table 3, there is a signicant relationship
between the independent variables and dependent variable with
an Adjust R-square of 67.8%. The result showed that positive online
reviews can signicantly increase the number of bookings in a
hotel, and the variance or polarity of WOM for the reviews of a
hotel had a negative impact on the amount of online sales. The
results further suggested that a 10% improvement in reviewers
rating can increase sales by 4.4% and a 10% increase in review
variance can decrease sales by 2.8%. Additionally, hotels with
higher star ratings received more online bookings, but room rates
had a negative impact on the number of online bookings.
Furthermore, the GDP of the host city had a positive impact on
the number of online bookings.
Table 3
Empirical results
Model

Unstandardized coefcients

Constant
AveRating
VarRating
Ln(price)
Stars
CityRank
Number of observations
Adjust R-square (%)
Signicance of model (p)
Dependent variable

3.844
0.444
0.278
0.245
0.091
1.175

Beta

Signicance

S.E.
0.679
0.046
0.099
0.119
0.027
0.065
248
67.8
0.000
Ln(NumRvws)

0.000
0.000
0.006
0.040
0.001
0.000

182

Q. Ye et al. / International Journal of Hospitality Management 28 (2009) 180182

5. Conclusions
This study contributes to the hospitality literature by revealing
the inuence of online consumer-generated reviews on the
amount of online sales of hotel rooms. Additionally, a methodological contribution is made by introducing a proxy to identify the
number of online bookings on a travel website. Our results suggest
that online user reviews have an important impact on online hotel
bookings. Findings of this research are consistent with prior
studies in other elds. Hotel managers should, therefore, seriously
consider online reviews, especially those that were posted on a
third-party website, about their hotels. Future research, such as the
renement of the evaluation model, is needed to improve the
generalization of research ndings in this area.
Acknowledgements
This research was partially funded by the Hong Kong
Polytechnic University (G-YX93) and NSFC (70771032).
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