Noisy signals: Does rating volatility depend on the length of the consumption span?

Abstract

This study investigates the informational content of online reviews. Unlike other studies that have explored the drivers of average rating scores, we examine the factors explaining the variance in individual ratings for the same goods. In particular, we focus on how the length of stay at a hotel, as a measure of consumption span, influences the variance of rating scores. We conduct an empirical analysis using approximately 522,000 individual hotel reviews on Booking.com from five major European cities. Results indicate that the volatility of individual ratings decreases with stay duration, implying that online ratings from short-stayers (short consumption episodes) are noisy signals of the underlying hotel quality. We also present preliminary evidence that greater volatility negatively correlates with perceived usefulness by subsequent consumers. Our findings offer relevant insights for platform design operators about the drivers of rating volatility and how it affects social learning.