Gone are the days of planning a trip to a new city and choosing where to stay based on personal recommendations or a guide book. In a connected world, it takes only a few seconds to pull up reviews of the hotel that you are thinking about staying in. With quick and easy access to a multitude of opinions, we can make an informed decision by reading reviews left by previous customers.
As consumers, this is a real boon. For hotel managers, it can present both challenges and opportunities. In the hospitality industry, we intuitively know that happy customers are good for business. In this blog, we are putting intuition aside to take a look at the data which proves that the online reputation of a property impacts its revenue per available room (RevPAR).
Direct correlation between online reputation and hotel revenue
Given the important role that review sites play in the booking process, it is unsurprising that there is a direct correlation between online reputation and hotel revenue. The simple premise is that consumers will pay more for a highly-rated hotel than a lower-rated property. A well-respected and often referenced study carried out by the School of Hotel Administration at Cornell University shows that reviews on TripAdvisor can cause rate swings of up to 10%. In other words, properties with good reviews can charge 10% more than those with worse reviews.
In addition, the interest in RevPAR isn’t purely academic. A survey carried out on the OTA Insight website shows that RevPAR is the most important performance metric for hoteliers. More than 53% of respondents said that RevPAR is more important than occupancy, ADR, GoPPAR, or other metrics.
As we have outlined above, more positive reviews means increased RevPAR. However it can be a challenge getting customers to leave reviews. Human nature dictates that people are most likely to post if their experience is significantly different from their expectation, whether favourably or unfavourably. We could criticise therefore that most online reviews involve extremes. Research using Tripadvisor data shows however that encouraging guests to review your hotel is positively related to the number of reviews posted, and that these reviews are typically better than those posted without incentive.
