ESSAYS ON ONLINE PRESENCE AND BUSINESS PERFORMANCE

Abstract

This dissertation focuses on interdisciplinary topics related to Industrial Organization, Environmental Economics, and Real Estate Economics. The first chapter of my dissertation studies the impact of going green on business performance. For this study, I show that a firm can adopt green practices in order to differentiate itself from its competitors. Competition in a market drives down prices, but a firm can be less affected by the competition when its products are differentiated. Hence, going green can have economic implications for businesses. Employing multiple empirical strategies, I find a hotel’s location plays a determining role in the effect of going green on its performance (i.e., occupancy rate, price, and revenue). My results suggest while green hotels in small towns and resorts enjoy a price and a revenue premium, with no significant effect on their occupancy rates, green hotels near interstates, airports, and in big cities do not get the economic benefits of adopting green practices. Further investigation reveals that the hotels in less popular cities enjoy the most benefit from becoming green. The results of this study thus point out to the need for asking “when” or “where” going green pays off, instead of “whether” going green pays off.

The second chapter of my dissertation investigates the economic implications of online reviews. I use review data from a leading travel website, TripAdvisor.com, and revenue data for the hotel industry in Texas to examine the causal impact of online customer reviews on hotel revenue. On TripAdvisor.com, the star-rating displayed for each hotel represents a rounded average rating for all the submitted reviews, which results in a hotel having a 0.5-star increase in its displayed rating when its actual average rating crosses a threshold. This allows me using a quasi-experimental approach, regression discontinuity, to study the impact of a 0.5-star increase on the revenue of hotels. My findings show that a 1-star increase in the star-rating of a hotel on TripAdvisor.com leads to approximately a 2.2 - 3 percent increase in monthly revenue. This is equivalent to a range of additional $4,593 - $6263 monthly revenue or $55,117 - $75,159 yearly revenue for an average hotel.

The third chapter investigates the financial implications of brand affiliation for businesses. Using a sample of hotels in the state of Texas that had a change of ownership between 2014 and 2017, I explore how a change in brand-affiliation that coincides with the ownership change is associated with hotel revenue. For the sample of hotels included in this study, we find after an independent hotel obtains brand-affiliation, its monthly revenue per available room (RevPAR) increases by 28.8%, on average; but I do not find any statistically significant improvement of monthly RevPAR for hotels that give up their affiliation status and become independent hotels.