Moderating Effects of Product Heterogeneity between Online Word-of-mouth and Hotel Sales

In online markets, Word-of-Mouth (WOM) plays a very important role in shoppers’ online purchasing decisions, especially for experience goods. Hotels, as a form of service product, are intangible and cannot be evaluated before consumption, which makes WOM even more important. Several studies focus on the influence of online WOM on business performance. However, little attention has so far been paid to the asymmetric effect of WOM resulting from product heterogeneity in service industries. Hotel products can be classified by star ratings, with their services heterogeneous across different classifications. This study investigates the moderating effect of hotel star rating on the relationship between WOM and sales performance. To address the challenge of missing data, we conduct our empirical study using the difference-in-difference approach. Data about 1,689 hotels were collected from two major online travel agencies in China. We show that both the average rating of online WOM and rating variance have a significant impact on sales, and this effect is significantly moderated by hotel star rating. WOM has more impact on sales for hotels with lower rather than higher star ratings. The findings will help researchers and practitioners to understand more about the asymmetric impact of online WOM on service products.