Analyzing Conversion Rates in Online Hotel Booking: The Role of Customer Reviews, Recommendations and Rank Order in Search Listings

Abstract

Purpose – The aim of this paper is to examine the impact of three main technologies on converting browsers into customers: impact of review rating (location rating and service rating), recommendation and search listings. Design/methodology/approach – This paper estimates conversion rate model parameters using a quasi-likelihood method with the Bernoulli log-likelihood function and parametric regression model based on the beta distribution. Findings – The results show that a high rank in search listings, a high number of recommendations and location rating have a significant and positive impact on conversion rates. However, service rating and star rating do not have a significant effect on conversion rate. Furthermore, room price and hotel size are negatively associated with conversion rate. It was also found that a high rank in search listings, a high number of recommendations and location rating increase online hotel bookings. Furthermore, it was found that a high number of recommendations increase the conversion rate of hotels with low ranks. Practical implications – The findings show that hotels’ location ratings are more important than both star and service ratings for the conversion of visitors into customers. Thus, hotels that are located in convenient locations can charge higher prices. The results may also help entrepreneurs who are planning to open new hotels to forecast the conversion rates and demand for specific locations. It was found that a high number of recommendations help to increase the conversion rate of hotels with low ranks. This result suggests that a high numbers of recommendations mitigate the adverse effect of a low rank in search listings on the conversion rate. Originality/value – This paper contributes to the understanding of the drivers of conversion rates in online channels for the successful implementation of hotel marketing. © 2016, Emerald Group Publishing Limited.