Reading the Stars - Do Guests Value What the Hotel Classification Ensures? : An empirical analysis of the relationship between objective classification outcomes and subjective online guest ratings for hotels in Switzerland

The increased transparency in the market for hotel accommodation, due to the emergence of review websites, as well as changing guest needs, such as a greater focus on experiential value and customization instead of standardization, have triggered a debate on the continuing relevance and adequacy of traditional hotel classification systems. Against this background, a master thesis at the Department of Economics has aimed at collecting some evidence on the relationship between objective classification and subjective guest ratings as two quality signals in the hotel industry. Concretely, these ratings were used to evaluate the guest orientation of the expert-based hotel classification by means of multivariate linear regression analyses. The effects of aggregate classification outcomes, namely star category, supplement “superior” and supplementary points achieved through criteria fulfilment, on guest perceptions of quality were analysed. Additionally, the relationship of specific hotel quality components as covered by classification criteria with guest ratings was investigated to find out which assessment areas of the classification are actually relevant for guests. The empirical analysis was carried out for the hotelleriesuisse classification of Switzerland. For the analysis, a rich dataset containing internal hotel-level classification audit data and guest ratings, aggregated by TrustYou and Booking.com, was compiled. The 238 classification criteria that exhibit variance in their fulfilment by hotels were bundled into 14 quality indices for different service areas. The analysis revealed that given the star category and various controls, guests are moderately more satisfied with hotels that fulfil more of the classification criteria. Given objective quality differences, hotels with more stars have a harder time pleasing their guest, probably due to higher expectations. Not all quality components that are covered in the classification contribute to guest satisfaction. It is especially the criteria related to core service areas, such as room or bathroom, sleeping comfort and quality management, that turn out to be relevant. Extensive room service tends to be less valued. Looking at the midscale and luxury segment separately indicates that there is a hierarchy of guest needs, which starts with room quality. In sum, the findings suggest that hotel classification outcomes have a moderately positive relationship with guest perceptions of quality. As an implication of the analysis, classification systems might narrow down their focus and concentrate on criteria in the core service areas of a hotel to carry out market segmentation. Specifying too many requirements, e.g. concerning the provision of add-on services, curtails the entrepreneurial freedom of hotel operators. Furthermore, the availability of guest reviews has reduced information asymmetries in the market and thereby decreased the need to define comprehensive hotel quality standards. *In den CRED-Berichten werden Ergebnisse von Forschungsarbeiten und anwendungsrelevanten Projekten publiziert.