The Role of Cybermediaries in Reputation Building and Price Premiums in the Online Hotel Market

Abstract

The advent of the Internet has changed the way in which buyers and sellers interact. Although access to information seems unlimited, nonexpert agents find it difficult to identify the information they can use with confidence. A third-party expert, or cybermediary (online intermediary), can help sort out the information for the potential buyers. In this article, we study the case of the online hotel market. We claim that online travel agents (OTAs) such as Booking.com play an important role in building hotel reputation and encourage hoteliers to put effort into service quality. We provide empirical evidence that information supplied by past guests through the OTA generates a price premium for hotels with good reputations.