Abstract
Social media, in the form of online reviews (ORs), has become an essential element for consumers in the restaurant industry, providing reliable and unbiased information based on the dining experiences of other consumers. Social media is not only a crucial phenomenon for the strategy of restaurants, but also for their corporations. However, previous literature has focused on the analysis at the establishment level, rather than at the corporate level, especially when referring to financial performance. The present study tries to verify if social media also affects corporate financial performance. For this, the impact of ORs on advanced measures of financial performance was examined at the corporate level on a sample of 800 restaurants selected from the total population of active restaurants in Europe in 2018. The investigation applied both regression analysis and nonparametric techniques. They demonstrate a positive effect of ORs on financial performance, and a heterogeneous relationship between both variables across the European countries. Restaurants are becoming aware of the implications of this phenomenon since it could provide strategies for sustainable economic development.
Highlights
Rapid technological change, market competition, and more demanding customers are challenging tourism companies, and forcing them to face this setting by constantly reassessing the effectiveness of their competitive strategies
Literature on strategy presents a wide range of classic rules and universal concepts on how to improve performance, there is a lack of new approaches to identify unexplored determinants of tourism performance regarding social media and its implications on financial performance [2,3]
We detected empirical evidence of the significant effect that online reviews (ORs) have on the financial performance of European restaurant corporations. This effect is a global phenomenon for the whole sample, our results indicate a heterogeneous pattern among European countries
Summary
Market competition, and more demanding customers are challenging tourism companies, and forcing them to face this setting by constantly reassessing the effectiveness of their competitive strategies. The new Internet and Web 2.0 technologies, such as forums, wikis, or social networks, are of particular importance in the tourism industry due to the experiential nature of the products offered. Dining experiences, sightseeing, and hotel stays can only be evaluated after consumption; customers rely on the information provided by other consumers, who have already experienced the product, to set expectations and make a purchase decision, and thereby reduce uncertainty [4,5,6]. New technologies have turned traditional word-of-mouth (WOM) into electronic word-of-mouth (eWOM), defined as any statement, positive or negative, by former, current, or potential consumers about a product or a company, which is available for a large number of people and institutions through the Internet [7]
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