WINNING THE BATTLE: THE IMPORTANCE OF PRICE AND ONLINE REVIEWS FOR HOTEL SELECTION

Abstract

Traditionally, price has been one of the main revenue managementlevers that allow hotels to sell the right product to the rightcustomer at the right time. Recent research in the area of electronicword-of-mouth has found that travelers’ online reviews may alsobe an influential factor affecting other customers’ bookingdecisions. However, it is challenging to determine the value ofonline reviews for customer decision making and to compare thisvalue to hotel room prices. Therefore, the main goal of this studyis to investigate which factors (room rate, online reviews’ ratingscore, or the number of reviews by other travelers) are moreimportant for customers’ booking decisions and the optimalcombination of these factors for booking a hotel. Conjoint analysiswas applied to measure the relative importance of theaforementioned factors for travelers’ booking decisions. Theresults revealed that the overall online rating was the mostinfluential factor with regard to customer decision making about booking a hotel. In addition, the following combination of factorswas discovered to be optimal for attracting customer reservations:more than 107 reviews with an average rating of at least 3.3 (on a5-point scale), and a price level of $130 or below.