8 THE AMERICAN ECONOMIC REVIEW SEPTEMBER 2013
two sites. As of December 2011, TripAdvisor derived 35 percent of its revenues
from click-through advertising sold to Expedia.
9
Thus, 35 percent of TripAd-
visor’s revenue derived from customers who visited Expedia’s site immediately
following their visit to the TripAdvisor site.
Some hotels are not listed on both sites, and some hotels do not have reviews on
one of the sites (typically, Expedia). At each site, we obtained the text and star
values of all user reviews, the identity of the reviewer (as displayed by the site),
and the date of the review. We also obtained data from Smith Travel Research, a
market research firm that provides data to the hotel industry (www.str.com). To
match the data from STR to our Expedia and TripAdvisor data, we use name and
address matching. Our data consist of 2931 hotels matched between TripAdvisor,
Expedia, and STR with reviews on both sites. Our biggest hotel city is Atlanta
with 160 properties, and our smallest is Toledo, with 10 properties.
Table 1 provides summary statistics for review characteristics, using hotels as
the unit of observation, for the set of hotels that have reviews on both sites.
Unsurprisingly, given the lack of posting restrictions, there are more reviews on
TripAdvisor than on Expedia. On average, our hotels have nearly three times the
number of reviews on TripAdvisor as on Expedia. Also, the summary statistics
reveal that on average, TripAdvisor reviewers are more critical than Expedia re-
views. The average TripAdvisor star rating is 3.52 versus 3.95 for Expedia. Based
on these summary statistics, it appears that hotel reviewers are more critical than
reviewers in other previously studied contexts. For example, numerous studies
document that eBay feedback is overwhelmingly positive. Similarly, Chevalier
and Mayzlin (2006) report average reviews of 4.14 out of 5 at Amazon and 4.45
at barnesandnoble.com for a sample of 2387 books.
Review characteristics are similar if we use reviews, rather than hotels as the
unit of observation. Our data set consists of 350,485 TripAdvisor reviews and
123,569 Expedia reviews. Of all reviews, 8.0% of TripAdvisor reviews are 1s,
8.4% are 2s, and 38.1% are 5s. For Expedia, 4.7% of all review are 1s, 6.4%
are 2s, and 48.5% of all reviews are 5s. Note that these numbers differ from the
numbers in Table 1 because hotels with more reviews tend to have better reviews.
Thus, the share of all reviews that are 1s or 2s is lower than the mean share of
1-star reviews or 2-star reviews for hotels. Since the modal review on TripAdvisor
is a 4-star review, in most of our analyses we consider “negative” reviews to be
1- or 2-star reviews.
We use STR to obtain the hotel location; we assign each hotel a latitude and
longitude designator and use these to calculate distances between hotels of var-
ious types. These locations are used to determine whether or not a hotel has a
neighbor.
Importantly, we use STR data to construct the various measures of organiza-
tional form that we use for each hotel in the data set. We consider the ownership,
9
Based on information in S-4 form filed by Tripadvisor and Expedia with SEC on July 27, 2011 (see
http://ir.tripadvisor.com/secfiling.cfm?filingID=1193125-11-199029&CIK=1526520)