1. to, also has controversial aspects like the

1.  Introduction

 

The sharing economy describes companies
and communities which enable the shared usage of physical and non-physical resources.
Digital platforms, being part of the sharing economy, are one of the newer
types of businesses with a steadily increasing economic importance. They allow
direct supply without a middleman and are therefore cheaper and faster than
conventional means. The strong connection between demand and supply allows real
time interaction. Unlike so called “pipelines”, platforms do not necessarily
have a physical infrastructure or assets, which makes them much cheaper and
more competitive. The platforms and their networks themselves are their most
important asset due to the fact that most platforms are affected by so called
network externalities which describe the fact, that the value of the platform
increases with the number of users as it is based on the interaction between as
much people as possible. Platforms consist of four groups of people to make
them work: Owners, Providers, Producers and Consumers although the boundaries
are not always clear as you will see in the following research paper (Van
Alstyne, Parker & Choudary, 2016, 52-62). As positive as this sounds,
platforms and the so-called sharing economy which they belong to, also has
controversial aspects like the extrusion of more traditional industries. The
size of the economy is estimated to have a capacity of 26 billion dollars which
makes it a considerable industry in comparison to conventional industries (Malhotra
& Van Alstyne, 2014, 24-27). The following research paper, which debates
the question “To what extent does TripAdvisor influence the consumers travel
decisions?”, will debate the effects in this certain case to give a statement
about the whole review-sharing economy. I am interested in this topic as I use
the service myself and I am convinced of the fact that TripAdvisor makes people
change their decisions related to traveling when using it, resulting in
strategic changes of the priorities and behavior of restaurants, hotels and
other tourist attractions. The following paper will discuss TripAdvisors rating
system, its impact on consumers and the resulting changes of the strategy of
executive staff.

 

2. 
Theoretical Background

 

TripAdivsor is a website which provides reviews
for restaurants, hotels and activities

all around the world. It was founded in the year
2000 and has its headquarter in the

United States of America.

 

 

The use of the service is free and most of the
content is consumer-generated. With more than

450 million average monthly users and around 570
million reviews, TripAdvisor is a market

leader in its sector (TripAdvisor log
files, average monthly unique visitors, Q3 2017).

The problem which occurs with online rating
services like Tripadvisor is, that conventional,

traditional and old-fashioned restaurants and hotels
are strongly affected by disadvantages due

to their absence of representation on TripAdvisor
and social media in general.

 TripAdvisor
has been accused of having fake reviews and censorship

which might influence consumers in a negative
way (Schuckert, Liu & Law, 2015, 1-14).

 As it is
part of TripAdvisors business model, hotels and other facilities have the
ability to pay

for extra advertisement and attention. TripAdvisors
success can partly be explained by the fact

that the overwhelming variety of restaurants,
hotels and tourist activities is measured, sorted

and ranked with the help of millions of users.
This division of knowledge makes the service a

trustworthy intermediary for the process of
decision making.

TripAdvisors contracts with certain booking
sites like booking.com makes it easy
for users to

directly book without the need of making
additional steps. The different rankings and filters

enable a diversity which makes the service
attractive regardless of the individuals values (Jeacle

& Carter, 2011, 293-309). The success of this economy and the platforms is often
associated

with disadvantages for employees in the conventional tourism industries, as people
use the

platform instead of contacting travel agencies. Another aspect is the fact that
governments have

a delay in reacting to the changes which might enable the use of legislative
gaps. The platforms

are closer to the action than the government which makes it hard to control
certain processes

(Malhotra & Van Alstyne, 2014, 24-27). On the other hand, governmental
instances have the

possibility to use the platform in order to reveal criminal activities. More
than 80% of the people

research their journey online, which shows the extent of this issue. The common reasons for

bypassing conventional tour agents is the simplicity of getting information in real-time. Due to

different surveys, consumer generated content is seen as more trustworthy although issues like

the manipulation of competitors
happens frequently (Filieri, Alguezaui & Mcleay, 2015, 174-

185). In order to measure the extent of TripAdvisors influence on
consumers, it is necessary to

first of all analyze its rating system and the way people interact on
the platform.

 

 

 

 

2.1       
The
rating system

 

TripAdvisor
uses a star rating system which reaches from 1 to 5 stars, with 5 stars being
the best rating. Users can write short comments on their rating to explain how
they came to their decision. Furthermore, the ranking order is also based on
the popularity of the hotels and the amount of good reviews. Photos and videos
which can be posted by customers as well as by the staff of the premises give
more insight into the facility.

It also offers
a forum for every listed city, in which users can look up additional
information or ask more specific questions about certain premises or the city
in general. This function helps tourists in their process of decision making as
they might need more information than the general information listed beneath
the website entry on TripAdvisor. Users can create topics and any other user
can comment on them which means that the platform offers its users transparent
information. The forum allows tourists to get advice 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 authors are mainly people which
do not know a lot about the destination while the advisors are often
inhabitants or experienced tourists of the certain city and can therefore give
advice and answer the questions. Participating in the forum is completely
voluntary and does not lead to any rewards. Due to the fact that it is
relatively easy to become an advisor, fake reviews and manipulation are very
difficult to prevent. Managers and owners of the facilities are able to answer
on comments on their own page which means that direct communication between the
consumers and the facility is possible. The following part discusses to what
extent consumers are influenced and how managers change their strategy in order
to cope with this change in the most effective way.

 

2.2       
TripAdvisors
impact on consumers and managers

TripAdvisor offers its users a very broad
variety of different restaurants, hotels and activities which means that
consumers have better means for comparison and evaluation of the different
facilities. The fact that people have an overview over almost every premise in
the certain city, explains the higher demand for better quality and the
unlikeliness of users visiting unregistered and lower quality premises.

 

Due to different surveys, tourists choose
user-generated advice over professional advice, which might cohere with the
general adoption, that like-minded people have a better understanding of the
own interests and values (Casaló, Flavián, Guinalíu & Yuksel, 2015, 28-36).
Casaló et al (2015, 28-36) compare different tourism platforms in order to show
how users rate the credibility of a platform in relation to its overall
popularity. TripAdvisor is seen as more trustworthy than smaller platforms
which can be connected to its success. This proves that not every platform in
the tourism sector has the ability to influence users in the same way.  Due
to the change in behavior of the consumers, managers have to adapt in order to
retain their position on the market. A more offensive strategy regarding social
media is necessary to keep up with competitors. Due to the fact that
competitors will also strive for a better strategy, managers are under constant
pressure to fit the steadily increasing demands. Traditional and conservatively
managed facilities need to change 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 advantage or as a problem, depending on the reaction of the
executive staff. Higher class hotels are more likely to include response management
into their daily business (Liu, Schuckert & Law, 2015, 1-12). Response
management has the intention to adapt to the consumers wishes and process the
constantly changing demands. The facility has the possibility to contact
unsatisfied customers in order to ask questions about their experience and how
it can be improved. TripAdvisor allows direct interaction between the customers
and managers, which has not been possible before the occurrence of social
platforms in the tourist sector. Nevertheless, TripAdvisor is not able to avoid
manipulation on its website which comes in form of consumer manipulation as
well as the manipulation of competitors in order to damage the reputation (Liu
et al., 2015, 1-14). Managers can use TripAdvisor to have a look in which way
their strategy differs from competitors and react on it. TripAdvisor has the
advantage to have strong network effects which will be dealt with in the next
paragraph.

 

2.3 The Network effect

The network
effect describes the increase in value of a good or service in relation to the
number of people using it (Aggarwal & Yu, 2012, 142-151). TripAdvisor is
strongly dependent on network effects, as the participation of its users is
essential to its business model. The amount of people actively participating is
crucial for the broad and detailed ranking of the certain facilities.

A high number
of participants makes TripAdvisor a more trustworthy and reliable source, as
manipulative ratings are outweighed by the participation of honest users. People
are more likely to do whatever most people have done, which means that
facilities which already have a good reputation can easily maintain it (Cowen
& Tabarrok, 2014, 307-314). These direct effects of network externalities
are also followed by indirect effects, as a larger number of users does not
only lead to more interaction but indirectly also leads to an increase in the
incentive for managers to represent their facility on TripAdvisor which
attracts new users. This dynamic spiral effect automatically leads to an
increasing user base. TripAdvisor might make it hard for facilities to get a
second chance due to the fact that bad reviews stay on the page and will lead
to less attention. The network effect can be divided into a same-side and a
cross-side effect. The same-side effect describes an increase in value of the
platform due to an increase in people on the same consumer side. In case of
TripAdvisor this means that an increase in the number of consumers leads to
more forum entries and ratings. The cross-over effect is an increase in value
due to the increase of consumers on the other side, like an increase in
represented restaurants and hotels which leads to a broader supply and range of
products (Eisenmann, Parker & Van Alstyne, 2006, 1-11). TripAdvisors strong
network effects contribute to my hypothesis, that consumers as well as managers
are clearly influenced by consumer-generated reviews resulting in changed
behavior on both sides. The service offers a closer interaction with the other
consumer side, helping tourists to find what they desire and managers to
effectively adapt to the changed interests.

3.  Conclusion

TripAdvisor
makes user-generated content its main tool for rating and recommending premises
in order to give its users the feeling of honesty and transparency.
TripAdvisors success and value is built on the continuous addition of new
content by attracting users, who are willing to provide more information and
use the platform for their process of decision making (Fang, Ye, Kucukusta
& Law, 2016, 498-506). TripAdvisors compatibility with mobile devices gives
it the ability to be used as a digital traveling companion, keeping the user
up-to-date with real-time advice. This research paper provides evidence for the
growing importance of social media and the division of knowledge in the tourism
industry, which cannot be reached by conventional tourist agents and experts
and is therefore of increasing importance for the whole industry. The platform
provides insight for the whole tourism and travel industry by showing how both
sides can profit. The restaurants, hotels and other facilities have to adapt to
the change and become more active on online platforms like TripAdvisor, in
order to retain or even improve their current situation. With the use of the
right strategy, managers can see social media as free advertisement on an
international level, which might attract new customers. This strategy comes in
form of Response Management, which has the intent to implement ideas and
improvement proposals in order to match the customers expectations and improve
the overall quality. The division of ratings into different user groups, like
families or couples, gives managers the ability to optimize their performance
by implementing customized improvements for the particular user group. Users are
evidentially influenced by ratings on TripAdvisor and see consumer-generated
content as more trustworthy. Conventional and traditional facilities need to
change their strategy and become more active on social platforms in order to
stay competitive.

Review-sharing
platforms in the tourism sector like TripAdvisor have a steadily increasing
impact on the travel and tourism industry, which means that user-generated
content will be of central importance for the decision making of tourists (Buhalis,
1998, 409-421). This tendency of increasing importance gives an outlook on the
future, in which conventional means of travel planning become subordinate, leading
to changes in the strategy of travel agencies, which might appear in form of
better representation on social media. The character of traveling has been
changed as people are not willing to try something out by themselves anymore
but rather have a look at ratings to avoid risks. The fact that social networks
have proved to be of high importance on consumer behavior, hotels, restaurants
and other facilities have to change their way of marketing, as missing the step
towards digitization might have fatal consequences (Kozinets, 1999, 252-264) (Wang, Yu & Fesenmaier, 2002, 404-417).