Competing with the Sharing Economy: Incumbents’ Reaction on Review Manipulation

The emergence of the sharing economy has provided the market with an untapped wealth of supplies, posing a threat to incumbents. In response to competition from the sharing economy, incumbents must adjust their competitive strategies. In this paper, we focus our investigation on a nascent competitive strategy—consumer opinion manipulation—in the lodging sector of the hospitality industry. We examine two types of opinion manipulations through online reviews: promoting oneself and demoting one’s competitors. Combining data from Airbnb, Expedia, TripAdvisor, AirDNA, the Texas Comptroller’s Office, and Smith Travel Research, we estimate the impact of a new sharing economy entrant, Airbnb, on conventional hotels’ manipulation strategies by exploring the supply variation of the competing Airbnb listings around each hotel. We find that, intriguingly, hotels tend to reduce mutual demotion when facing the common “enemy” of Airbnb competition. However, there is considerable heterogeneity among hotels in response to Airbnb competition. Low-end hotels tend to not increase their review manipulation activities for purposes of either self-promotion or demotion, while high-end hotels tend to demote competing hotels less and promote themselves more in the presence of higher levels of Airbnb competition.