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Tourist Tax and Ratings of Online Reviews

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  • Antonio Marsi
  • Emanuela Randon

Abstract

Tourist taxes represent one of the principal sources of revenue for a number of local authorities. Using a dataset of more than 300 thousands reviews on TripAdvisor, we analyze the effect of tourist taxes on online ratings posted by hotel costumers. Online ratings are strategic variables for the competitiveness of hotels and local destinations and so the assessment of the impact of tourist taxes on online reviews is important to design suitable strategies and policies both for firms and local municipalities. We show that the share of complaints about the tax increases with the tax rate, but the relationship gets weaker as the hotel quality increases, suggesting that low-quality costumers are more sensitive to tax increases. Tax mentioning reviews have on average a 20% lower rating and this difference becomes smaller and not significant for high quality hotels. We disentangle the different sources of complaining, finding that the lack of information and the cash payments weight more negatively on the average rating (respectively less 27% and 21%). Using a random-effects logit model we show that what matters for costumers is the percentage tax on the room price and not the absolute amount of the legal tax rates based on the hotel stars. This effect is present only for hotel stays with an average double room price under 100 Euros. Our results provide public authorities with useful suggestions to change the actual tax system by setting the tourist tax as an ad valorem tax on room price and assessing optimal tax rates accordingly to their incidence on the price of the stay.

Suggested Citation

  • Antonio Marsi & Emanuela Randon, 2021. "Tourist Tax and Ratings of Online Reviews," Working Papers wp1168, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp1168
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    References listed on IDEAS

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    1. Kuang-Cheng Andy Wang & Ping-Yao Chou & Wen-Jung Liang, 2018. "Specific versus ad valorem taxes in the presence of cost and quality differences," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(5), pages 1197-1214, October.
    2. Vincenzo Denicolo & Massimo Matteuzzi, 2000. "Specific and Ad Valorem Taxation in Asymmetric Cournot Oligopolies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 335-342, May.
    3. Gao, Baojun & Li, Xiangge & Liu, Shan & Fang, Debin, 2018. "How power distance affects online hotel ratings: The positive moderating roles of hotel chain and reviewers’ travel experience," Tourism Management, Elsevier, vol. 65(C), pages 176-186.
    4. Stefan F. Schubert, 2010. "Coping with Externalities in Tourism: A Dynamic Optimal Taxation Approach," Tourism Economics, , vol. 16(2), pages 321-343, June.
    5. Timothy Besley & Anne Case, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 769-798.
    6. do Valle, Patrícia Oom & Pintassilgo, Pedro & Matias, António & André, Filipe, 2012. "Tourist attitudes towards an accommodation tax earmarked for environmental protection: A survey in the Algarve," Tourism Management, Elsevier, vol. 33(6), pages 1408-1416.
    7. Ana Pinto Borges & Elvira Vieira & Sofia Gomes, 2020. "The Evaluation of Municipal Tourist Tax Awareness:The Case of the City of Porto," Tourism and Hospitality Management, University of Rijeka, Faculty of Tourism and Hospitality Management, vol. 26(2), pages 381-398, December.
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z3 - Other Special Topics - - Tourism Economics

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