Recently, several studies have pointed to the impact of user-generated content in the form of traveler reviews as drivers of rate and revenue. Years ago, Expedia Inc. told the industry that through its websites hotels with a full star higher score in guest comments were able to command a 9% higher average daily rate. More recently, Cornell University and ReviewPro published an article showing the correlation between review scores and revenue per available room, with a one point lift in aggregated review score equating to a 1.4% increase in actual RevPAR. Professor Chris Anderson of Cornell stated, “What was remarkable about the study is that positive online reputation doesn’t merely provide higher pricing power for online sales. It is correlated to higher group booking rates and corporate negotiated rates in addition to reservations made over the phone.”
From a distribution channel standpoint, the impact is clear as well. Travelers are becoming more and more attuned to reading reviews or relying on recommendations from friends on where to stay. Embassy Suites by Hilton recently released its 2013 business travel survey and more than 75% of respondents said that online reviews are “critical” when preparing for business travel.
Reviews are impacting channels that many thought were impervious to social media influence. While some loyalty programs are stronger than others, increasingly they are affected by social media, with shared content eventually carrying more weight than a loyalty card in the wallet. While some loyalists will stay true to the brand, casual preferred brand travelers will begin to weigh social media versus brand loyalty and factor price even more as part of their decision criteria. Some travelers will stay at Brand X hotel no matter what, but the ones with superior reviews or social recommendations will begin to trump the flag outside the building for a growing group of travelers.
One revenue-management executive I spoke with recently told me that he can see the almost instantaneous effect of a bad review, with an immediate dip in conversion, which then affects booking windows and channel-shift strategies. Couple this with shifting demographics of the traveling population, as well as the impact of social on other channels, and the impact goes beyond leisure rates booked directly or through OTAs or metasearch sites.