Role of e-WOM in hospitality market pricing

Abstract

(ProQuest: ... denotes formulae omitted.)1.IntroductionDirect, informal communication is a very effective method for encouraging a client to consume a product [Arndt 1967; Westbrook 1987]. Not surprisingly, word-of-mouth marketing (WOM) has rapidly moved to the virtual world along with the development of the Internet, which is a quick and convenient space where consumers can exchange information [Nielsen Company 2014]. The need for people to share their opinions about products can be seen from the number of specialized portals and mobile applications dedicated to reviewing goods and services (e.g., Tripadvisor.com), as well as expanded pages devoted to ratings and comments offered by the suppliers of goods (Amazon.com) and services (Booking.com).When it comes to tourism, consumers mainly share information associated with the hotel industry and use it to make decisions concerning accommodation [Gretzel & Yoo 2008]. Online reviews are perceived by potential customers as being authentic, trustworthy, and helpful [Li & Hitt 2008], thus influencing their market choices [Park, Lee & Han 2007; Ye et al. 2011; Mauri & Minazzi 2013]. Most of the previous studies were concerned with a certain segment of the market. Not many investigations have researched the impact that these reviews have on hotel room prices [e.g., Zhang, Ye & Law 2011; Ogut & Onur Tas 2012]. According to the author's knowledge, none of them contain a complete comparison of the high and low seasons. Therefore, the lack of examinations of the role of e-WOM in hospitality market pricing can be noted, especially for the Polish market.Hence, the aim of this study was to identify which attributes of hotels (the subject of electronic word of mouth - e-WOM) affect the level of room prices in Cracow. The study shows the relationship between these elements during the low and high seasons and demonstrates which characteristics of hotels are perceived similarly by visitors. The strength and direction of consumer ratings in connection with hotel room prices were tested with multiple regression analysis using an ordinary least squares method (OLS). Consumer ratings were taken from the platform Booking.com. The research sample included 97 hotels, which is the representative research group (according to the quantitative calculations).The survey results allowed for the identification of elements that should be improved in order to maximize online consumer ratings; the results also provided information about why some elements of a facility may receive customer evaluations below their actual quality. In addition, the features assessed using the platform Booking.com that significantly affect the price levels of accommodation services in the low and high seasons were identified.The elaboration is divided into five sections. The first one contains a literature review of the role of e-WOM and determinants of hotel room prices. In the second part, the methodology of the survey, including the aim of the study, sample, and statistical method, is presented. The third part consists of the survey results, which are discussed in the fourth section. The article concludes with practical tips for managing hotel facilities.2.Literature review2.1.e-WOM in tourismThe concept of word of mouth (WOM), which assumes a higher efficiency of informal personal communication over traditional forms of advertising, has been around since the 1960s [Arndt 1967]. Over time, an understanding of this concept has evolved and has ceased to signify only a verbal message; it now encompasses all forms of communication between clients [Westbrook 1987]. The Internet revolution and further rapid growth of social media have allowed more and more customers to look for recommendations about products on the web. The growing importance of virtual opinions is confirmed by research published by the Nielsen Company [2014]. According to this research, nearly 60% of consumers in developed countries base their purchasing decisions on information available on the Internet. …