Review Ratings, Sentiment in Review Comments, and Restaurant Profitability: Firm-Level Evidence

Abstract

This article examines the effect of user review ratings and sentiment in review comments on restaurant profitability. In addition, the effects of sentiment in review comments in a local versus a foreign language are compared. User sentiments are mined from 63,904 Dutch and 42,980 English TripAdvisor review comments for restaurants in Flanders (the Dutch-speaking region of Belgium). The article exploits the availability of detailed firm-level financial reports, which are mandatory for all Belgian companies. This facilitates the investigation of bottom-line profitability, which is the ultimate measure of success, and at the same time, the inclusion of firm-specific control variables in the regression analyses. Findings suggest positive sentiment toward restaurants in general and that variations in sentiment impact profitability. Sentiment in review comments is highly significant and has a larger impact than review ratings. In addition, comments in the local language (Dutch) are more impactful than comments in a global language (English). Overall results suggest that, rather than focusing solely on quantitative ratings, restaurateurs should focus on users’ qualitative review comments, actively managing them to help drive restaurant performance. To the authors’ knowledge, this is the first study to empirically assess how review ratings, sentiment in review comments, and language of review comments impact bottom-line restaurant performance, adding to the literature supporting proactive online reputation management.