An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market

Graduate Theses and Dissertations Iowa State University Capstones, Theses and Dissertations 2016 An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market Suzanne Dawn Markham-Bagnera Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/etd Part of the Business Administration, Management, and Operations Commons, and the Management Sciences and Quantitative Methods Commons Recommended Citation Markham-Bagnera, Suzanne Dawn, "An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market" (2016) Graduate Theses and Dissertations 15971 https://lib.dr.iastate.edu/etd/15971 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository It has been accepted for inclusion in Graduate Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository For more information, please contact digirep@iastate.edu An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market by Suzanne D Markham-Bagnera A dissertation submitted to the graduate faculty in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Major: Hospitality Management Program of Study Committee: Thomas R Schrier, Major Professor Eric A Brown Young-A Lee Anthony Townsend Tianshu Zheng Iowa State University Ames, Iowa 2016 Copyright © Suzanne D Markham-Bagnera, 2016 All rights reserved ii TABLE OF CONTENTS LIST OF TABLES

Graduate Theses and Dissertations Iowa State University Capstones, Theses and Dissertations 2016 An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market Suzanne Dawn Markham-Bagnera Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/etd Part of the Business Administration, Management, and Operations Commons, and the Management Sciences and Quantitative Methods Commons Recommended Citation Markham-Bagnera, Suzanne Dawn, "An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market" (2016) Graduate Theses and Dissertations 15971 https://lib.dr.iastate.edu/etd/15971 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository It has been accepted for inclusion in Graduate Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository For more information, please contact digirep@iastate.edu An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market by Suzanne D Markham-Bagnera A dissertation submitted to the graduate faculty in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Major: Hospitality Management Program of Study Committee: Thomas R Schrier, Major Professor Eric A Brown Young-A Lee Anthony Townsend Tianshu Zheng Iowa State University Ames, Iowa 2016 Copyright © Suzanne D Markham-Bagnera, 2016 All rights reserved ii TABLE OF CONTENTS LIST OF TABLES ……………………………………………………………………… v ABSTRACT ………………………………………………………………………………vii CHAPTER 1: INTRODUCTION ………………………………………………………… Purpose …………………………………………………………………………… Word-of-mouth ………………………………………………………… Electronic word-of-mouth ………………………………………………… User-Generated content ………………………………………………… Online reviews …………………………………………………………… Research Objective ……………………………………………………………… Research Contribution …………………………………………………………… Definition of Terms ……………………………………………………………… CHAPTER 2: LITERATURE REVIEW ………………………………………………… The Hospitality Industry ……………………………………………………….… Lodging Accommodations …………………………………………………… Hotel types ……………………………………………………… 10 Traveler types ……………………………………………………… 11 Hotel Classification Systems …………………………………………………… 12 Star rating ……………………………………………………… 13 Diamond rating…………………………………………………………… 14 Management ……………………………………………………………………… 16 Leadership ………………………………………………… …………… 17 Management compared to leadership……………………………….17 Revenue Management …………………………………………………………… 18 Financial indicators ……………………………………………………… 19 Revenue per available room (RevPar) …………………………… 19 Average daily rate (ADR) ……………………………………… 20 Occupancy ……………………………………………………… 21 Service Industry …………………………………………………………………… 21 Service quality…………………………………………………………… 22 Service measurement…………………………………………………… 23 Acceptable service experience …………………………………… 23 Customer Satisfaction …………………………………………………………… 24 Experience …………………………………………………………………26 Customer satisfaction measurement ……………………………………… 27 Dissatisfaction …………………………………………………………… 28 Hotel attributes…………………………………………………………… 28 Value ……………………………………………………… 29 Location ……………………………………………………… 29 Room ……………………………………………………… 31 Cleanliness ……………………………………………………… 33 iii Service ……………………………………………………… 33 Staff ……………………………………………………… 34 Word-of-Mouth (WOM) ………………………………………………………… 34 Electronic-Word-of-Mouth (eWOM) …………………………………………… 37 Other eWOM classifications ……………………………………………… 39 Evolution of eWOM ……………………………………………………… 42 Financial impact ……………………………………………………… 46 Internet …………………………………………………………………………… 47 Social Media ……………………………………………………………………… 48 Social media marketing ………………………………………………… 51 Social media platforms …………………………………………………… 53 Online social networks …………………………………………………… 53 Facebook ……………………………………………………… 54 Commercial review sites ………………………………………………… 55 TripAdvisor ……………………………………………………… 56 Yelp ……………………………………………………… 63 Zagat ……………………………………………………… 64 Specific supplier travel sites ……………………………………………… 64 Content and virtual communities ………………………………………… 65 Twitter ……………………………………………………… 66 IgoUgo ……………………………………………………… 67 User-Generated Content (UGC) ………………………………………………… 67 Consumer-Generated media……………………………………………… 69 Consumer opinion portal (COP) ………………………………………… 70 Online reviews …………………………………………………… 70 Positive and negative reviews …………………………… 72 Impact of reviews ………………………………………… 73 Review-related factors …………………………………… 75 Fraudulent reviews ……………………………………… 77 Trust ……………………………………………………………………………… 79 Credibility.………………………………………………………………… 81 Homophily ……………………………………………………… 83 Authority ……………………………………………………… 84 Interestingness …………………………………………………… 84 Source trustworthiness …………………………………………… 84 Loyalty.…………………………………………………………………… 85 Purpose of This Study ……………………………………………………… 86 Research Questions ……………………………………………………… 86 Chapter Summary ……………………………………………………… 87 CHAPTER 3: METHODS ……………………………………………………………… 88 Introduction……………………………………………………………………… 88 Method of Study ………………………………………………………………… 88 Sample …………………………………………………………………………… 88 Smith Travel Research (STR).…………………………………………… 89 TripAdvisor.……………………………………………………………… 90 iv Data Collection …………………………………………………………………… 91 Research Method ………………………………………………………………… 92 Data Analysis ……………………………………………………………………… 92 Quantitative methodology.………………………………………………… 94 Chapter Summary ………………………………………………………………… 95 CHAPTER 4: RESULTS AND DISCUSSION ………………………………………… 96 Introduction ……………………………………………………………… 96 Data Analysis ……………………………………………………………………… 96 General summary ………………………………………………………… 98 Yearly analysis …………………………………………………………… 100 Yearly summary ………………………………………………… 107 Diamond level rankings ………………………………………………… 108 Diamond level summary ………………………………………… 115 Price of hotels …………………………………………………………… 116 Price summary …………………………………………………… 128 Hotel market ……………………………………………………………….128 Hotel summary …………………………………………………… 137 Size segmentation ………………………………………………………… 138 Size summary …………………………………………………… 146 Operation segmentation ………………………………………………… 146 Operation segmentation summary ………………… …………… 153 Relational Impact to Research Questions ………………………………………… 154 Chapter Summary ………………………………………………………………… 154 CHAPTER 5: CONCLUSIONS ………………………………………………………… 155 Introduction ……………………………………………………………………… 155 Data Description ………………………………………………………………… 155 Discussion of Findings …………………………………………………………… 156 General summary ………………………………………………………… 156 Yearly analysis …………………………………………………………… 158 Diamond level rankings ………………………………………………… 161 Price of hotels …………………………………………………………… 166 Hotel market ……………………………………………………………….172 Size segmentation ………………………………………………………… 177 Operation segmentation ………………………………………………… 181 Category Summary ……………………………………………………………… 184 Industry Implications ……………………………………………………………… 184 Academic Implications …………………………………………………………… 186 Limitations and Future Research ………………………………………………… 186 Chapter Summary ……………………………………………………… 188 REFERENCES …………………………………………………………………………… 189 ACKNOWLEDGEMENTS ……………………………………………………………… 241 v LIST OF TABLES Table Differences between WOM and eWOM 43 Table Standardized Coefficients of the Dependent Variables for All Hotels 99 Table Standardized Coefficients of the Dependent Variables for Year 2010 101 Table Standardized Coefficients of the Dependent Variables for Year 2011 102 Table Standardized Coefficients of the Dependent Variables for Year 2012 104 Table Standardized Coefficients of the Dependent Variables for Year 2013 105 Table Standardized Coefficients of the Dependent Variables for Year 2014 106 Table Yearly Summary of Variable Significance 108 Table Descriptive Statistics for Diamonds 109 Table 10 Standardized Coefficients of the Dependent Variables for Five-Diamonds 110 Table 11 Standardized Coefficients of the Dependent Variables for Four-Diamonds 111 Table 12 Standardized Coefficients of the Dependent Variables for Three-Diamonds 113 Table 13 Standardized Coefficients of the Dependent Variables for Two-Diamonds 114 Table 14 Diamond Summary of Variable Significance 116 Table 15 Descriptive Statistics for Price 117 Table 16 Standardized Coefficients of the Dependent Variables for Luxury Chain Price of Hotels 118 Table 17 Standardized Coefficients of the Dependent Variables for Upper Upscale Chain Price of Hotels 120 Table 18 Standardized Coefficients of the Dependent Variables for Upscale Chain Price of Hotels 121 Table 19 Standardized Coefficients of the Dependent Variables for Upper Midscale Chain Price of Hotels 123 vi Table 20 Standardized Coefficients of the Dependent Variables for Midscale Chain Price of Hotels 124 Table 21 Standardized Coefficients of the Dependent Variables for Independent Price of Hotels 126 Table 22 Price Summary of Variable Significance 127 Table 23 Descriptive Statistics for Market 129 Table 24 Standardized Coefficients of the Dependent Variables for Luxury Hotel Market 130 Table 25 Standardized Coefficients of the Dependent Variables for Upper Upscale Hotel Market 132 Table 26 Standardized Coefficients of the Dependent Variables for Upscale Hotel Market 133 Table 27 Standardized Coefficients of the Dependent Variables for Upper Midscale Hotel Market 135 Table 28 Standardized Coefficients of the Dependent Variables for Midscale Hotel Market 136 Table 29 Market Summary of Variable Significance 137 Table 30 Descriptive Statistics for Size 138 Table 31 Standardized Coefficients of the Dependent Variables for Hotels With Less Than 75 Rooms 139 Table 32 Standardized Coefficients of the Dependent Variables for Hotels 75 to 149 Rooms 141 Table 33 Standardized Coefficients of the Dependent Variables for Hotels 150 to 299 Rooms 142 Table 34 Standardized Coefficients of the Dependent Variables for Hotels 300 to 500 Rooms 144 Table 35 Standardized Coefficients of the Dependent Variables for Hotels With Greater Than 500 Rooms 145 Table 36 Size Summary of Variable Significance 147 Table 37 Descriptive Statistics for Operation 148 vii Table 38 Standardized Coefficients of the Dependent Variables for Chain Owned and/or Managed Hotels 149 Table 39 Standardized Coefficients of the Dependent Variables for Franchised Hotels 151 Table 40 Standardized Coefficients of the Dependent Variables for Independent Hotels 152 Table 41 Operation Segmentation Summary of Variable Significance 153 viii ABSTRACT This research study is designed to examine the impact that a posted online review rating has on the financial performance of a hotel room in the lodging industry The popularity ratings of hotels in the Boston, Massachusetts market, as posted on the popular online travel review website TripAdvisor, will be examined against the hotel performance metrics of average daily rate (ADR), occupancy, and Revenue per Available Room (RevPar) This study examines the literature to better understand the previous research behind the impact that word-of-mouth communication, both in traditional and electronic forms, has on customer satisfaction The emergence of social technologies has created an environment in which businesses can be rated and reviewed in an open market for potential future customers to read, and the development of user-generated content has become a more trusted and credible source of product and service information The purpose of this study was to determine the influence of these online ratings on hotel performance, specifically that of TripAdvisor rating attributes on the financial performance of a hotel The study found that the various attributes had varying levels of significant impact on Average Daily Rate (ADR), Occupancy, and Revenue per Available Room (RevPar) Based on the natures of the lodging properties in Boston, Value was found to be statistically significant across all categories analyzed Ultimately, the contribution of this research is both academic and practical, as this study will be among the first to examine and test the various TripAdvisor rating attributes on each hotel financial performance metric In addition, this study will expand upon the current body of knowledge in the areas of user-generated content, online reviews, ratings of TripAdvisor, and electronic word-of-mouth (eWOM) CHAPTER INTRODUCTION Purpose The purpose of this research is to examine the impact that a posted online review rating has on the financial performance of a hotel in the lodging industry This has been done by examining the popularity ratings of hotels in the Boston, Massachusetts market, as posted on the popular online travel review website, TripAdvisor To start, this introduction discusses the foundations of word-of-mouth and electronic word-of-mouth and provides background on Usergenerated Content (UGC) Secondly, it presents an outline of the research purpose Finally, the potential contributions of this study to the lodging industry are discussed Word-of-mouth Word-of-Mouth (WOM) is defined as a form of communication between consumers over a product, service, or company, whereby the source is considered independent of commercial influence (Litvin, Goldsmith, & Pan, 2008) Information provided by consumers is considered to be the most influential communication media form of delivering a product and/or service (Arndt, 1967; K T Lee & Koo, 2012) This traditional form of communication is considered an informal process, which is restricted to face-to-face interaction (Arndt, 1967; Yang, 2013) As the hospitality industry offers products that are typically intangible in nature, the WOM process helps to eliminate the element of risk (Klein, 1998; Z Zhang, Ye, Law, & Li, 2010) As technology has advanced, so too has the format that communication has taken Therefore, electronic word-of-mouth (eWOM) is an advance that is a primary focus for this study One of the challenges exhibited by the traditional form of WOM is its limitation by boundaries, both geographic and social (Ellison & Fudenberg, 1995; United 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the value of pithy diction as a written document comes together In addition to my department chair, Dr Robert Bosselman, I would like to thank all faculty members in the College of Human Services and the department of Apparel, Events, and Hospitality Management (AESHM) for making a positive impression on me during my graduate studies at Iowa State University I would like to thank my industry friends and partners, particularly Brian Payea of TripAdvisor, along with Duane Vision and Steve Hood of Smith Travel Research for working with me to create the queries referenced in this study and provided me with the necessary data for the research design I would like to recognize my cohort members and dear friends William Solomon, Wendy Kasche, and Don Schoffstall for their encouragement, support, and friendship I also would like to thank my Boston University colleagues for sharing their dissertation tales of woe, while providing a glimmer of hope for post-dissertation completion While there have been so many friends who have supported me during the completion of my PhD, there are a few who deserve a special highlight I would like to recognize my friend Annie Jekova for taking significant time to assist me with my Excel data files, so that they could 242 be more easily managed I would like to thank Jing Yang for all of her expertise and experience throughout some of my more stressful data analysis I am indebted to the editorial services of Gabrielle Guarracino I would like to thank my son’s godfather, Paul Bagdan, for his enduring support and encouragement throughout the process I am grateful for the encouragement that my former Dean, Caroline Cooper, provided as she persuaded me to pursue a degree in my field of study The encouragement and supportive references of my former employers, Dr Deborah Hirsh and Keane Bell, for assisting the completion of my ISU application is much appreciated I would like to thank my BAM girls, for cheering me on, offering to assist in caring for my son, and providing support and genuine friendship I would like to thank my North Reading town community friends, along with my Rhode Island Johnson & Wales alumni friends, for their motivation to ‘kill it.’ I would also like to recognize all of my students over the last four years for their inquiries about my progress and support for each step, as I shared milestones with them to demonstrate and encourage their own love for knowledge as a life-long learner I started this adventure a few months before I married my husband; the last four and a half years have been woven into the tasks to accomplish this final goal During that time, we bought a house, got our adorable black Labrador retriever, Aja, both started several new jobs, and finally—against all odds—got pregnant John Louis joined our family in September of 2014, slightly alternating my ability to complete things in the timely fashion to which I was normally accustomed I would like to recognize and thank my husband, Ronny Bagnera, for being in my corner to care for our son I would like to thank my parents and grandmother for their love and encouragement My family has been a strong group of supportive individuals 243 Finally, I would like to dedicate this dissertation to my son, John Louis Bagnera, for all that he has taught me in the most important role of my life, as mother I can only hope that he too will find a way to accomplish all of his dreams and goals .. .An examination of online ratings on hotel performance indicators: An analysis of the Boston hotel market by Suzanne D Markham-Bagnera A dissertation submitted to the graduate... decision outcome (Schiffman & Kanuk, 2009) 38 eWOM often takes the form of online reviews, online recommendations, or online opinions The emergence of these new technology tools has gained importance... information The purpose of this study was to determine the influence of these online ratings on hotel performance, specifically that of TripAdvisor rating attributes on the financial performance of