1. IntroductionThe sharing economydescribes companies and communities which enable the shared usage of physicaland non-physical resources. The size of this relatively new part of the globaleconomy is estimated to have a capacity of 26 billion dollars, thus being aconsiderable industry in comparison to conventional industries (Malhotra &Van Alstyne, 2014). Digital platforms, being part of the sharing economy, areone of the newer types of businesses with a steadily increasing economicimportance. They allow direct supply without a middleman and are therefore lesscostly to maintain, while being faster than conventional means.
The strongconnection between demand and supply allows real time interaction. Unlike socalled “pipelines”, platforms do not necessarily have a physical infrastructureor assets, which makes them independent of large investments, while being morecompetitive. The platforms inherent networks are their most important asset dueto the fact that most platforms are affected by so called “networkexternalities”, which means that the value of the platform increases with thenumber of users as it is based on the interaction between as much people aspossible. Platforms build on the contribution of fourgroups: Owners, Providers, Producers and Consumers, although the boundaries arenot always clear as the following research paper will show (Van Alstyne, Parker& Choudary, 2016).
As positive as this all sounds, platforms and the sharingeconomy which they belong to, also have controversial aspects, like forinstance the displacement of more traditional industries. The followingresearch paper, which debates the question “To what extent does TripAdvisorinfluence the consumers travel decisions and how do managers cope with theeffect?”, will discuss the effects of TripAdvisor on the travel-industry andwill also give a statement about the whole review-sharing economy. I aminterested in this topic as I use the service myself and I am convinced of thefact that TripAdvisor changes peoples decisions related to traveling, resultingin the need for strategic changes of the priorities and behavior ofrestaurants, hotels and other tourist attractions. The following paper willdiscuss TripAdvisors rating system, its impact on consumers and its effect onmarketing and sales policies.2.
Theoretical BackgroundTripAdivsor is a website which provides reviewsfor restaurants, hotels and activitiesall around the world. It was founded in the year2000 and has its headquarter in theUnited States of America. The use of the service is free and most of thecontent is consumer-generated. With more than450 million average monthly users and around 570million reviews, TripAdvisor is a marketleader in its sector (TripAdvisor log files, average monthly uniquevisitors, Q3 2017). TripAdvisors success can partly be explained bythe fact that the overwhelming variety ofrestaurants, hotels and tourist activities ismeasured, sorted and ranked with the help of millions of users. This division of knowledge makes theservice a direct and trustworthy intermediaryfor the process of decision making forconsumers.
The different rankings and filters enable adiversity which makes the service attractiveregardless of the individuals values (Jeacle &Carter, 2011). TripAdvisors contracts withcertain booking websites like booking.commakes iteasy for users to directly book without the needof making additional steps. More than 80% ofthe people research their journey online, whichshows the extent of this issue. The commonreasons for bypassing conventional tour agentsis the simplicity of getting information in realtime. According to different surveys, consumergenerated content is seen as more trustworthyalthough issues like the manipulation ofcompetitors happens frequently (Filieri, Alguezaui &Mcleay, 2015). The problem which occurs with online ratingservices like Tripadvisor is, thatconventional, traditional and old-fashionedrestaurants and hotels are strongly affected bydisadvantages due to their absence ofrepresentation on TripAdvisor and social media ingeneral. TripAdvisorhas been accused of having fake reviews and censorship which mightinfluence consumers in a negative way (Liu,Schuckert & Law, 2015).
As it ispart ofTripAdvisors business model, hotels and other facilitieshave the ability to pay for extraadvertisement and attention, which means thatthey are listed above the ranking list. This mightgive the impression, that the premise is of higherquality, although it is marked as anadvertisement. This issue represents a conflictof interests, as TripAdvisor wants to keep itsreputation as neutral rating platform but on theother hand gives premises the opportunity to getextra attention by paying for it. The success ofthis economy and the platforms is oftenassociated with disadvantages for employees inthe conventional tourism industries, as peopleuse the platform instead of contacting travel agencies.Another aspect is the fact thatgovernments have a delay in reacting to thechanges which might enable the use of legislativegaps. The platform is closer connected to itsusers than the government which makes it hard to control certain processes (Malhotra & VanAlstyne, 2014).
On the other hand, governmentalinstances have the possibility to use theplatform in order to reveal criminal activities, whichinclude the creation of fake reviews and competitivedistortion. In order to measurethe extent of TripAdvisors influence on consumers, it is necessary toanalyze its rating system and the way peopleinteract on the platform. 2.1 The rating systemTripAdvisor uses a star rating system which reaches from 1 to 5 stars,with 5 stars being the best rating.
Users can write comments on their rating toexplain how they came to their decision. Managers and owners of the facilitiesare able to answer on comments on their own page which means that directcommunication between the consumers and the facility is possible. Furthermore,the ranking order is also based on the popularity of the hotels and the amountof good reviews. Photos and videos which can be posted by customers as well asby the staff of the premises give more insight into the facility.
TripAdvisor also offers a forum for every listed city, in which userscan look up additional information or ask more specific questions about certainpremises or the city in general. This function helps tourists in their processof decision making as they might need more information than the generalinformation listed beneath the website entry on TripAdvisor. Users can createtopics and any other user can comment on them which means that the platformoffers its users transparent information. The forum allows tourists to getadvice on very specific topics which are not dealt with on the general page.Authors and advisors can be distinguished by the look of their profile.
The authorsare mainly people which do not know a lot about the destination while theadvisors are often inhabitants or experienced tourists of the certain city andcan therefore give advice and answer the questions. Participating in the forumis completely voluntary and does not lead to any rewards. Due to the fact thatit is relatively easy to become an advisor, fake reviews and manipulation arevery difficult to prevent. The following part discusses to what extent consumersare influenced and how managers change their strategy in order to cope withthis change in the most effective way.2.2 TripAdvisors impact on consumers and managersTripAdvisor offersits users a very broad variety of different restaurants, hotels and activitieswhich means that consumers have better means for comparison and evaluation ofthe different facilities. The fact that people have an overview overalmost every premise in the certain city, explains the higher demand for betterquality and the unlikeliness of users visiting unregistered and lower quality premises.
Due to differentsurveys, tourists choose user-generated advice over professional advice, whichmight cohere with the general adoption, that like-minded people have a betterunderstanding of the own interests and values (Casaló, Flavián, Guinalíu &Yuksel, 2015). Casaló et al. (2015) compare different tourism platforms inorder to show how users rate the credibility of a platform in relation to itsoverall popularity. TripAdvisor is seen as more trustworthy than smallerplatforms which can be connected to its success.
This proves that not everyplatform in the tourism sector has the ability to influence users in the sameway. Due to the change in behavior ofthe consumers, managers have to adapt in order to retain their position on themarket. A more offensive strategy regarding social media is necessary to keepup with competitors. Due to the fact that competitors will also strive for abetter strategy, managers are under constant pressure to fit the steadilyincreasing demands.
Traditional and conservatively managed facilities need tochange their strategy in order to avoid displacement into the background.Social media is a way to attract new customers and can be seen as an advantageor as a problem, depending on the reaction of the executive staff. Higher classhotels are more likely to include response management into their daily business(Liu, Schuckert & Law, 2015). Response management has the intention toadapt to the consumers wishes and process the constantly changing demands. Thefacility has the possibility to contact unsatisfied customers in order to askquestions about their experience and how it can be improved.
The creation of agood reputation is harder for smaller premises, as they are not able to handleas much customers at the same time as bigger ones, which means that it isdifficult to keep up with the amount of good reviews, which poses an evenstronger pressure to perform services of high quality. TripAdvisor allows direct interaction betweenthe customers and managers, which has not been possible before the occurrenceof social platforms in the tourist sector. Nevertheless, TripAdvisor is notable to avoid manipulation on its website which comes in form of consumermanipulation as well as the manipulation of competitors in order to damage theirreputation (Liu et al., 2015). Managers can use the platform to have a look inwhich way their strategy differs from competitors and react on it. TripAdvisor has theadvantage to have strong network effects which will be dealt with in the next paragraph.2.3 The NetworkeffectThe network effect describes the increase in value of a good or servicein relation to the number of people using it (Aggarwal & Yu, 2012).
TripAdvisor is strongly dependent on network effects, as theparticipation of its users is essential to its business model. The amount ofpeople actively participating is crucial for the broad and detailed ranking ofthe certain facilities. A high number of participants makes TripAdvisor a moretrustworthy and reliable source, as manipulative ratings are outweighed by theparticipation of honest users. People are more likely to do whatever mostpeople have done, which means that facilities which already have a goodreputation can easily maintain it (Cowen & Tabarrok, 2014). These directeffects of network externalities are also followed by indirect effects, as alarger number of users does not only lead to more interaction but indirectlyalso leads to an increase in the incentive for managers to represent theirfacility on TripAdvisor which attracts new users. This dynamic spiral effectautomatically leads to an increasing user base.
TripAdvisor might make it hardfor facilities to get a second chance due to the fact that bad reviews stay onthe page and will lead to less attention. The network effect can be dividedinto a same-side and a cross-side effect. The same-side effect describes anincrease in value of the platform due to an increase in people on the sameconsumer side. In case of TripAdvisor this means that an increase in the numberof consumers leads to more forum entries and ratings. The cross-over effect isan increase in value due to the increase of consumers on the other side, likean increase in represented restaurants and hotels which leads to a broadersupply and range of products (Eisenmann, Parker & Van Alstyne, 2006).TripAdvisors strong network effects contribute to my hypothesis, that consumersas well as managers are clearly influenced by consumer-generated reviewsresulting in changed behavior on both sides. The service offers a closer interactionwith the other consumer side, helping tourists to find what they desire andmanagers to effectively adapt to the changed interests.
ConclusionTripAdvisor makes user-generated content its main tool for rating and recommendingpremises in order to give its users the feeling of honesty and transparency.TripAdvisors success and value is built on the continuous addition of newcontent by attracting users, who are willing to provide more information anduse the platform for their process of decision making (Fang, Ye, Kucukusta& Law, 2016). TripAdvisors compatibility with mobile devices gives it the ability tobe used as a digital traveling companion, keeping the user up-to-date withreal-time advice. This research paper provides evidence for the growingimportance of social media and the division of knowledge in the tourismindustry, which cannot be reached by conventional tourist agents and expertsand is therefore of increasing importance for the whole industry. The platform provides new insights for the tourism and travel industryby showing how the digitization benefits both consumer sides. The restaurants,hotels and other facilities have to adapt to the change and become more activeon online platforms like TripAdvisor, in order to retain or even improve theircurrent situation.
With the use of the right strategy, managers can see socialmedia as free advertisement on an international level, which might attract newcustomers. This strategy comes in form of response management, which has theintent to implement ideas and improvement proposals in order to match the customers’expectations and improve the overall quality. The division of ratings intodifferent user groups, like families or couples, gives managers the ability tooptimize their performance by implementing customized improvements for theparticular user group. Users are evidentially influenced by ratings onTripAdvisor and see consumer-generated content as more trustworthy and reliable.Conventional and traditional facilities need to change their strategy andbecome more active on social platforms in order to stay competitive. Review-sharing platforms in the tourism sector like TripAdvisor have asteadily increasing impact on the travel and tourism industry, which means thatuser-generated content will be of central importance for the decision making oftourists (Baha’is, 1998). This tendency of increasing importance gives anoutlook on the future, in which conventional means of travel planning become subordinate,leading to changes in the strategy of travel agencies, which might appear inform of better representation on social media. The character of traveling hasbeen changed as people are not willing to try something out by themselvesanymore but rather have a look at ratings to avoid risks.
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