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Free add-on services and perceived value in competitive environments: Evidence from online hotel reviews

Author

Listed:
  • Shan Liu

    (EM - EMLyon Business School)

  • Baojun Gao
  • Michael Gallivan
  • Yeming Gong

Abstract

This study investigates how free add-on services affect customers' perceived value in horizontal and vertical competition. We collected 349,879 reviews about over 3000 hotels in 25 U.S. cities from TripAdvisor. Using three balanced data sets generated by coarsened exact matching, the ordered logistic regressions show that free hotel add-on services (including free breakfast, parking, and WiFi) positively affect consumers' perceived value. However, increased horizontal and vertical competition differentially weakens the positive effects of free add-on services. We not only observe a negative moderating effect of horizontal competition, but also identify three patterns of the marginal effects of these three add-ons in horizontal competition. The moderating effect of vertical competition exists from the higher-grade hotel segment to a lower-grade hotel, but such an effect is insignificant from the lower-grade hotel segment to a higher-grade hotel. Therefore, hotel managers should consider diverse external competitive environments and design appropriate differentiated service strategies.

Suggested Citation

  • Shan Liu & Baojun Gao & Michael Gallivan & Yeming Gong, 2020. "Free add-on services and perceived value in competitive environments: Evidence from online hotel reviews," Post-Print hal-03188230, HAL.
    • Handle: RePEc:hal:journl:hal-03188230
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    Cited by:

    1. María D. Illescas-Manzano & Sergio Martínez-Puertas & Gema M. Marín-Carrillo & María B. Marín-Carrillo, 2023. "Dynamics of agglomeration and competition in the hotel industry: A geographically weighted regression analysis based on an analytical hierarchy process and geographic information systems (GIS) data," Oeconomia Copernicana, Institute of Economic Research, vol. 14(1), pages 213-252, March.

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