hotel bell cash
644 days ago
 

Online reputation directly affects revenue per room in hotels – so what to do about it?

Want to get some hard numbers as to how influential a hotel’s reputation can be to the bottom line? Well, here you go.

A one-point increase in a hotel’s 100-point Global Review IndexTM (GRI), for example, leads up to a 0.89% increase in price (ADR), a 0.54% increase in occupancy, and a 1.42% increase in revenue per available room (RevPAR).

This seminal study, by Chris Anderson at Cornell University’s Center for Hospitality Research, based on more than 31,000 monthly observations over 2.5 years on mid-scale, up-scale, and luxury hotels in 11 cities in the North America and Europe, used review data from ReviewPro and reporting from STR to quantify the impact of online reputation on rates, occupancy, and RevPAR.

According to Anderson:

“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.”

The industry has needed this research for a long time. While hoteliers instinctively understand that happy guests are key to success, until now they’ve only had anecdotal data from OTAs that quantified the difference guest satisfaction makes on sales.

New technology is fun to discuss. But implementing innovation requires more than a visionary plan – it requires making the technology play a central role in growing revenue for your organization.

I’ve written before on how new technology pioneers can demonstrate ROI for social media participation, but this new research makes a strong business case for focusing on improving customer experience.

Reputation drives revenue – but now what?

The basic conclusion of this research is intuitive. But the exhaustive scope of this study provides hotel executives with the confidence they need to invest in providing their guests with better service.

A few practical steps to act on these findings:

1. Track your reputation against others

This is especially important to do in relation to your competitive set – which are the places your potential guests check while they’re shopping.

Note when satisfaction drops or surges, dig deeper to understand the forces driving those trends, and then make changes based on what you learn.

2. Invest in experience design and better service

But hold those investments accountable for making a difference in guest satisfaction and revenue growth.

Semantic analysis of online feedback for a property can reveal opportunities for targeted improvements that make the biggest, fastest impact on guest satisfaction. Doing this for a competitive set will help build a stronger unique value proposition for that hotel.

3. Create reputation goals for your team

Thousands of hotel managers and executives in organizations we work with at ReviewPro have part of their bonus compensation tied to reaching guest satisfaction goals.

Since the financial success of a hotel is linked to its online reputation, this is a smart way to align objectives with daily actions.

NB: Download the full report from the Cornell Center for Hospitality Research. And ReviewPro’s take.

NB2: Hotel bell cash image via Shutterstock.

 
 
Josiah Mackenzie

About the Writer :: Josiah Mackenzie

Josiah Mackenzie is a contributing Node to Tnooz and works as director of business development at ReviewPro to provide hotel executives with customer insights and business intelligence through online reviews and social media analytics.

ReviewPro reporting provides valuable insight for action in the areas of marketing and PR, quality & operations, sales, revenue & distribution.

By moving social media engagement from a marketing tactic to an operational tool, they are changing the way the hospitality industry can use and profit from the social web.

 

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  1. Aaron Zwas

    Great post, as usual, Josiah-

    Mr. Anderson does a great job in demonstrating how reviews impact bookings more for economy hotels. That doesn’t mean, however, that reviews matter less for luxury resorts and high-end urban hotels. They simply have a different purpose: Positive reviews of amenities like bars, restaurants, spa, golf, etc can increase the usage of those services and therefore increase per-guest revenue.

    Increasing onsite spend should be a core objective of any resort’s review program. Have a look here to learn more: http://goo.gl/zSEpV
    -Aaron Zwas

     
  2. Daniele Beccari

    Academic view here.
    Correlation is not causation.

    I would not go as far as saying that “Online reputation directly affects revenue per room in hotels”.

    I would rather say: hotels who provide good service are able to generate higher revenue/revPAR/occupancy and this also translates into good online reputation.

    In all cases, Josiah’s next steps remain valid.

     
  3. Karmveer Rathore

    With increasing competition within hoteliers in a destination and competition within OTAs fighting a price war/best rates, a marketing plan built on “word of mouth” function [reviews] certainly helps hotelier have a control over room tariffs.

     
  4. Mark Calpin

    Do agree with the sentiment in the report and have long had a belief in the correlation between how your hotel is perceived by the public, and the rate at which you can sell your rooms, as everyone of us is seeking value, and a large part of that value equation will include the quality and price aspects.

    To finally get some numbers that show this relationship is worthwhile and shows how important it is to maintain the overall profile of your business.

    My hotel is in Hamilton, Scotland, where the use of review sites is an important factor, although I would say that the significance isn’t as high as in North America, so it’s good to have these things re-inforced,

    Mark

     
 
 

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