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The pre-pandemic role of customer online satisfaction in price determination: evidence from hotel industry

Author

Listed:
  • Palić Irena

    (Faculty of Economics and Business, University of Zagreb, Croatia)

  • Palić Petra

    (Catholic University of Croatia, Croatia)

  • Banić Frane

    (Croatian National Bank, Zagreb)

Abstract

This study examines the importance of online reviews for price determination in the hotel industry in the pre-pandemic period. The research is conducted for Croatian small open economy with a developed tourism sector. The paper fills the gap in existing literature by using multivariate principal component analysis to group various customer satisfaction categories in the hotel industry and assessing the relationship between customer satisfaction and hotel price. The conducted empirical analysis points to a positive statistically significant relationship of guest satisfaction and hotel prices. Moreover, linear regression modelling is conducted separately for four-star and five-star hotels. The estimated impacts are statistically significant and positive, but the effects are twice as strong in five-star hotels then in four-star hotels. The obtained results indicate that hotel star rating impacts the strength of the relationship between hotel prices and guest satisfaction. Recognizing the link between hotel ratings, online reviews and pricing is essential both for hotel managers and customers. Hence, the paper provides valuable conclusions from the aspect of supply and demand side in the hotel industry.

Suggested Citation

  • Palić Irena & Palić Petra & Banić Frane, 2021. "The pre-pandemic role of customer online satisfaction in price determination: evidence from hotel industry," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 7(2), pages 50-60, December.
    • Handle: RePEc:vrs:crebss:v:7:y:2021:i:2:p:50-60:n:1
    DOI: 10.2478/crebss-2021-0009
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    References listed on IDEAS

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    1. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer;The Psychometric Society, vol. 39(1), pages 31-36, March.
    2. J.M. Espinet & M. Saez & G. Coenders & M. FluviÃ, 2003. "Effect on Prices of the Attributes of Holiday Hotels: A Hedonic Prices Approach," Tourism Economics, , vol. 9(2), pages 165-177, June.
    3. Ida Vajčnerová & Jakub Šácha & Kateřina Ryglová, 2012. "Using the principal component analysis for evaluating the quality of a tourist destination," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(2), pages 449-458.
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    More about this item

    Keywords

    customer satisfaction; hotel pricing; hotel star rating; multivariate analysis; principal component analysis; regression analysis;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z3 - Other Special Topics - - Tourism Economics
    • Z32 - Other Special Topics - - Tourism Economics - - - Tourism and Development

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