Abstract
ABSTRACT This study aims to bridge a significant research gap in the electronic word-of-mouth (eWOM) literature: measuring the effect of the degree of online review helpfulness (ORH) on firms’ financial performance. As studies of the impact of ORH on firm performance in the context of service industries in general and more specifically in the hospitality sector are virtually nonexistent, this work intends to offer insights to eWOM researchers by analyzing if and to what extent ORH affects the financial performance of hospitality firms. Based on a re-visitation of the antecedents of ORH stemming from information adoption models, social influence theory and dual process theory, we analyze the moderating effects of the degree of ORH on the relationships between online review valence/volume and firms’ financial performance. Based on the examination of 395,964 online reviews related to 261 higher-end hotels located in London, the third most visited destination worldwide, we find that the degree of ORH positively moderates the positive effect of the reviews’ valence on financial performance, while it does not moderate significantly the positive effect of the reviews’ volume on financial performance. Theoretical contributions to the nascent research stream taking an outcome-oriented approach to the study of eWOM helpfulness and managerial implications are discussed.
Highlights
An increasing number of market intelligence companies have recently highlighted that the online search for durable and higher-priced categories, such as consumer electronics and travel and accommodation services, is gaining momentum among consumers [106]
Based on the examination of 395,964 online reviews related to 261 higherend hotels located in London, the third most visited destination world wide, we find that the degree of online review helpfulness (ORH) positively moderates the positive effect of the reviews’ valence on financial performance, while it does not moderate significantly the positive effect of the reviews’ volume on financial performance
Both academic and industry research has emphasized that electronic word-of-mouth (eWOM) influences consumer decision-making and purchasing behaviors as Online reviews (ORs) play a major role for online shoppers’ information adoption, gathering, and deal seeking in both goods contexts (e.g., [11]) and services ones (e.g., [57])
Summary
An increasing number of market intelligence companies have recently highlighted that the online search for durable and higher-priced categories, such as consumer electronics and travel and accommodation services, is gaining momentum among consumers [106]. The multi plication of ORs has been found to generate information overload for consumers [110], who are increasingly facing the issue to understand which piece of information is helpful for them to better understand the quality of the services they can find online To address this issue, sites such as TripAdvisor.com, Booking.com, and Expedia.com have developed mechanisms allowing customers to mark, vote, or like the helpfulness of the review, to signal to other consumers which ORs are most valuable in assessing travel services’ quality and performance. 265] emphasize that “further studies could evaluate the impact of this feature [online review helpfulness] on the financial performance that is achieved by hotels.” The urgency of these calls for research on the commercial and financial effects of ORH in the hospitality sector is critical, as hotel customers increasingly use helpful ORs to make purchasing decisions [54], with some groups of consumers using them as a selective processing mechanism [55]. While a few scholars have analyzed the direct effects of OR valence and volume on firm performance (e.g., [28, 95, 101, 103, 133, 151]), to the best of our knowledge no study has yet examined if and to what extent ORH interacts with other OR features such as OR valence and volume in affecting (hotel) financial performance, except for two studies conducted on the movie sector [86, 134] and examining products rather than services
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