Abstract
PurposeHotels are immersed in a very competitive environment and hoteliers have to plan and redesign their strategies to stay in the hospitality industry while faced with a steady rise in competition. Hoteliers can employ horizontal differentiation strategies and pricing decisions to gain a competitive advantage over their competitors. The goal of our work is to analyse the effect of pricing and horizontal differentiation strategy of a hotel on its online reputation and to analyse if the hotel location and agglomeration of competitors moderates their relationship with online reputation.Design/methodology/approachWith a sample of 264 hotels from Paris, an empirical study is developed that aims to analyse, using regression techniques, the impact of price, differentiation, location and competitive environment on online ratings given by consumers in the hospitality context.FindingsThe paper provides empirical evidence of how a good location improves the online reputation of a company and how pricing strategies should take into account the location and number of competitors since a good location allows premium prices to be valued positively by consumers while an inappropriate location can produce the opposite effect. Depending on location, the number of competitors can intensify or reduce the effect of price on online reputation. Finally, online reputation only benefits from horizontal differentiation strategies when the degree of agglomeration is low.Originality/valueThis work provides insights about how hotels can strengthen their online reputation through pricing and differentiation strategies, incorporating elements of their environment such as location and competition in this decision-making process.
Highlights
Online consumer review (OCR) is considered the most relevant way in which electronic word of mouth (eWOM) occurs (Kim et al, 2018b), playing an essential role in recommender systems (Verma and Yadav, 2021)
We have focused on urban tourism because location plays a relevant role when tourists seek a good location to the detriment of other attributes or additional services (Yang et al, 2018a) and we have contextualized our study in the Parisian hotel industry, as it is a relevant case of a city with a special interest for urban tourism research (Pearce, 1999), in the year 2017 when Paris was the second European city in bednights (European cities, 2018) and the one with the highest value (HVS, 2018)
The results of Model 1 show that only price and horizontal differentiation have an effect on online ratings but, from Model 1, only hypotheses H2 is confirmed, since Differentiation has a negative effect whereas Price has a positive effect
Summary
Online consumer review (OCR) is considered the most relevant way in which eWOM occurs (Kim et al, 2018b), playing an essential role in recommender systems (Verma and Yadav, 2021). When planning a purchase, 51% of French consumers always do some research on the Internet first, with 41% finding customer online reviews very helpful when planning a purchase (Statista, 2020). It has become critical for a firm’s performance (Xie et al, 2016), with an expanding relevance under the New Normal (Arora et al, 2020). A systematic review performed by Rosario et al (2020) reveals that understanding how product characteristics shape eWOM search behaviour remains underanalysed
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