In today’s digital service landscape, customers actively shape service quality by transferring experiential knowledge through online reviews. Drawing on 515,920 hotel reviews and 341,761 management responses from TripAdvisor, this study examines how customers’ prior experiences at higher-rated hotels influence their evaluations of subsequent stays within the same region. Econometric analyses show that such experienced customers tend to be more critical, prompting service improvements that ultimately raise a hotel’s overall ratings over time. Guided by knowledge transfer theory and construal level theory (CLT), we also investigate how psychological distance-temporal and spatial-moderates the knowledge transfer process. Furthermore, we examine the dynamic role of customer reviews and management responses, highlighting how customers with regional experience influence expectations and prompt service adjustments. This research presents a dynamic framework for customer-mediated knowledge transfer, providing actionable insights for service providers seeking to improve quality and competitiveness in localized markets.