For hotels guest reviews wield significant influence over revenue management strategies, after all, in today’s market, where reputation is paramount, understanding and leveraging the impact of reviews is essential for hoteliers seeking to optimize revenue streams and maintain competitiveness in the market.
NB: This is an article from Aggregate Intelligence, one of our Expert Partners
Understanding the power of reviews
For many hotel bookers, one of the first things they look at when booking a hotel is the reviews. They look to the opinions of previous guests to ascertain whether it is a viable option for them to book. They use reviews to gauge the quality of a hotel’s services, amenities, and overall experience before making a booking decision.
So, it goes without saying that positive reviews can attract new customers, while negative ones can deter potential guests and harm a hotel’s reputation. But, what is the real impact of reviews on booking decisions?
Studies have consistently shown the strong correlation between reviews and booking decisions. According to research by TripAdvisor, 97% of travellers read reviews before booking a hotel, and 49% won’t book a property without reviews.
Furthermore, a one-point increase in a hotel’s review score (on a five-point scale) can lead to an 11.2% increase in room rates, highlighting the direct impact of positive reviews on revenue potential.
The Impact on Revenue Management Strategies
With a single point increase in reviews impacting room rates so dramatically, it comes as no surprise that reviews play a pivotal role in modern hotel revenue management strategies.
Positive reviews can enhance a hotel’s perceived value, allowing hoteliers to justify higher room rates. Conversely, negative reviews may necessitate lower prices to attract guests and compensate for perceived shortcomings. Dynamic pricing algorithms often incorporate sentiment analysis of reviews to adjust rates in real-time, ensuring optimal pricing strategies that align with guest perceptions.
Critically, it’s not just your hotel’s reviews that have an impact on pricing strategy. Your competitors reviews are also key. For example, if your nearest competitor has poor reviews, whilst you maintain consistently high reviews, there is an opportunity to increase your rates, whilst maintaining competitiveness with the assumption that many guests would rather pay a little more, for a better experience.
