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A first approach to measuring the impact of changes in online reviews

on hotel room prices Igor Ibarguren, Ibai Roman, Jon Kepa Gerrikagoitia,

Aurkene Alzua-Sorzabal

CICtourGUNE, Spain

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Agenda

• Introduction– Problem

– Previous research

• Method

• Expected results

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Introduction

Problem•Customers choose a destination and then select accommodation based on price and available rooms (Wu, Zhang, & Fujiwara, 2011), hotel location, category, services, facilities and third party experiences (Dickinger & Manzanec, 2008)•Travel agencies used to recommend a hotel depending on previous experiences

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Introduction

• The user generated content (UGC) changed the information flow to an electronic word-of-mouth paradigm

• There are several studies analysing the influence of online reviews on sales of products such as books (Clevalier & Mayzlin, 2006), but it is more pronounced on experience goods as they require consumption before knowing their quality

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Introduction

• The Internet has changed the global business scene. The development of IDS has brought new opportunities (Van den Poel & Leunis, 1999)

• Most hotel room attributes such as locational and non-locational attributes cannot change in time. Since online, adjust prices rating can be a deciding factor among similar hotels with similar prices

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Related Work

Previous research•Ye, Law, & Gu (2009) studied the effect online reviews had on hotel room sales on the biggest Chinese IDS•Zhang, Ye, & Law (2011) used the hedonic price model to quantify the effect the quality of hotel attributes have on room price based on online reviews

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Related Work

• Studies focused on locational attributes as price determinants:– Espinet, Saez, Coenders, & Fluvia (2003) and Alegre,

Cladera, & Sard (2013) focused on sun and beach destinations in different parts of Spain and both concluded that proximity to the beach is a determining factor on room price.

– Distance to other places, such as the city centre, was only found to affect prices on some destinations, while the polarity of the effect varied between customer nationalities.

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Related Work

• Studies focused on locational attributes as price determinants:– A view of the sea was also found to increase the value

of the room in Mediterranean locations (Fleischer, 2012).

– Other studies concentrated on room specific attributes and identified hot-tub, private bath and a larger room to be determinant for bed-and-breakfasts (Monty & Skidmore, 2003), and hairdryer and mini-bar for hotels in Oslo (Thrane, 2007).

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Related Work

• Pastor (1999) focused on the hotel sector, measuring the relationship between star categories and the services published on hotel guides, and their effect on price.

• However as of yet, no study has analysed the relationship of online ratings and room price over time.

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Method• In previous work, a methodology to measure the

hotel Average Daily Rate (ADR) was developed (Roman, Ibarguren, Gerrikagoitia, & Torres-Manzanera, 2013).

• A information gathering system has been be developed to obtain review information along with, policies, services, star category, location and types of rooms

• Several different hedonic price functions will be used

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Method• Every 24 hours, data on accommodation prices are collected automatically

• The system asks for the price and availability of an overnight for the 1-28, 30, 45, 60 and 90 days -> Future price variation

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Method

Hotels Records Daily recs. Hist. Series

Spain 11.569 140M 195K 5/2011

France 13.784 135M 300K 10/2011

Ireland 742 5M 18K 11/2012

Mediterranean Coastal Destination SampleCroacia 86 323K 2k

6/2013

Egypt 33 123K 1K

Greece 431 138K 10K

Italy 1.105 2,5M 18K

Morocco 217 812K 6k

Portugal 163 141K 4k

Tunisia 28 89k 1k

Turkey 678 2,3M 16k

Data Volume

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Method• Offered prices

• Extracted from Internet Distribution System

• Publicly available features of the hotel• Exact geographic location (coordinates)• Services• Policies• Room features (bed type, AC, etc.)• Customer rating

• Historic booking data• From the hotel’s Property Management System

• Event Databases

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MethodData Sets

• 1. Acommodation• 2. Policy• 3. Service• 4. Product• 5. Rating• 6. Prices

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2. Policyaccommodation_id group description

hotel_91748 Cancellation / PrepaymentCancellation and prepayment policies vary according to room type.\

hotel_91748 Check-out Until 12:00 hourshotel_91748 Pets Pets are not allowed.hotel_91748 Accepted credit cards American Expresshotel_91748 Accepted credit cards Visahotel_91748 Accepted credit cards Euro/Mastercardhotel_91748 Accepted credit cards Carte Bleuehotel_91748 Accepted credit cards Diners Clubhotel_91748 Check-in From 15:00 hourshotel_91748 Groups When booking more than 5 roomshotel_91748 Groups different policies and additional supplements may apply.hotel_91748 Children and extra beds

hotel_90599 Cancellation / PrepaymentCancellation and prepayment policies vary according to room type.\

hotel_90599 Check-out Until 12:00 hourshotel_90599 Accepted credit cards American Expresshotel_90599 Accepted credit cards Visahotel_90599 Accepted credit cards Euro/Mastercardhotel_90599 Accepted credit cards Diners Clubhotel_90599 Check-in From 14:00 hourshotel_90599 Pets Pets are not allowed.

Method

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3. Servicehotel_90318 Services Meeting/banquet facilitieshotel_90318 Services Business centrehotel_90318 Services Babysitting/child serviceshotel_90318 Services Laundryhotel_90318 Services Dry cleaninghotel_90318 Services VIP room facilitieshotel_90318 Services Ironing servicehotel_90318 Services Shoeshinehotel_90318 Services Car hirehotel_90318 Services Tour deskhotel_90318 Services Fax/photocopyinghotel_90318 Services Concierge servicehotel_90318 Services Special diet menus (on request)hotel_90318 Services Trouser presshotel_90318 Services Bicycle rentalhotel_90318 Services Ticket servicehotel_90318 Services Bikes available (free)hotel_90318 Services Vending machine (drinks)hotel_90318 Services Vending machine (snacks)hotel_90318 Internethotel_90318 Parking Public parking is possible at a location nearhotel_90318 General 24-hour front deskhotel_90318 General Newspapershotel_90318 General Non-smoking roomshotel_90318 General Facilities for disabled guests

Method

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accommodation_id name adult_amount children_amount

hotel_91748 Superior Double or Twin Room 2 \N

hotel_91748 Standard Double or Twin Room 2 \N

hotel_91748 Standard Triple Room 3 \N

hotel_91748 Junior Suite 2 \N

hotel_91748 Standard Single Room 1 \N

hotel_91748 Junior Suite with views 2 \N

hotel_90599 Guggenheim Museum Package - Double or Twin Ro 2 \N

hotel_90599 Double or Twin Room (1-2 Adults) 2 \N

hotel_90599 Single Room 1 \N

hotel_273500 Superior Double or Twin Room 2 \N

hotel_273500 Standard Double or Twin Room 2 \N

hotel_273500 Junior Suite (2 Adults + 2 Children) 2 2

hotel_273500 Double or Twin Room with Sofa Bed (3 Adults) 3 \N

hotel_273500 Family Room (2 Adults + 1 Child) 2 1

hotel_273500 Junior Suite (2 Adults + 1 Child) 2 1

hotel_273500 Junior Suite 2 \N

hotel_273500 Family Room (2 Adults + 2 Children) 2 2

hotel_273500 Double or Twin Room with Sofa Bed (2 Adults + 2 1

hotel_273500 Special Offer - Double or Twin Room 2 \N

hotel_92284 Twin Room (interior) 2 \N

hotel_92284 Twin Room Exterior 2 \N

hotel_92284 Guggenheim Offer 2 \N

4. Product

Method

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hotel_94558 04/06/13solo 6.6 7.2 6.5 7.7 6.6 8.0

hotel_94558 04/06/13youngCouples 6.6 7.6 7.3 7.4 6.8 8.0

hotel_94558 04/06/13average 6.6 7.5 7.0 7.5 6.6 8.0

hotel_94558 04/06/13friendGroups 6.1 7.7 6.7 7.3 6.8 8.3

hotel_94558 04/06/13familiesYoungChildren 6.7 6.3 7.5 7.2 5..6 7.5

hotel_94558 04/06/13familiesOlderChildren 6.1 7.7 6.7 7..3 6.8 8.3

hotel_94558 04/06/13matureCouples 6.7 7.5 6.7 7.6 6.7 8.0

accommodation_id booking_date name comfort value location clean services staff

5. Rating

Method

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Expected results

• The study will be to validate the effects found in the literature within the scope proposed in this work

• A data gathering process will be launched periodically and changes in online rating and hotel room prices will be analysed, looking for causal relationships