The impact of review sentiments on occupancy: Evidence for signalling theory from peer-to-peer accommodation

Abstract

Using data from 16,144 peer-to-peer properties in London, we study the impact of the two components of user-generated content – rating and sentiment – on occupancy rate. Our methodology is innovative because, firstly, we control for price variation when estimating these review-occupancy effects and secondly, we estimate interaction and curvilinear effects. We find that sentiment and rating have significant positive effects on occupancy rate; there is some evidence that sentiment and rating interact, one reinforcing the other; for a typical property among those analysed, an outstanding review increases occupancy by a fifth in relative terms. Thus, we interpret these associations as evidence that rating and sentiment signal value, and we estimate the strength of the signal in the peer-to-peer accommodation sector.