Your online reputation has a significant impact on occupancy and profitability. Research shows that the more positive reviews a property has, the higher it will rank in search results. This, in turn, leads to more visitors, conversions, and, finally, higher occupancy rates.
NB: This is an article from Cloudbeds, one of our Expert Partners
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Additionally, if guests believe (based on reviews and ratings) that they will get more value from staying at your property, they’ll be willing to pay more for it. As long as a hotel fits within a traveler’s budget and is in the right location, they’re likely to splurge and pay a little bit extra to guarantee a positive guest experience. That’s when reputation pricing comes in, allowing revenue managers to increase metrics like ADR (average daily rate) and, ultimately, RevPAR (revenue per available room).
The connection between reputation and rates
Several research studies have confirmed the connection between reputation and rates. One study by Cornell University estimated that a 1-point increase in user review score (on an OTA’s 5-point scale) would allow a property to increase prices by 11.2% without harming its occupancy rates.
In a paper published by the Universidad de Murcia, researchers compared the rates of the hotels ranking #1 on Tripadvisor in four Spanish cities with those of their three direct competitors. The results showed that, in most cases, the top-ranking hotels applied considerably higher rates than competitors for the same room type.
| MADRID | VALENCIA | SEVILLA | BILBAO | AVG | |
| Hotel ranking #1 | 181,29 € | 87,35 € | 182,46 € | 137,99 € | 147,27 € |
| Avg rate of three competitors | 125,10 € | 86,84 € | 168,81 € | 101,07 € | 120,46 € |
| Avg difference in € | 56,20 € | 0,51 € | 13,64 € | 36,92 € | 26,82 € |
| Avg difference in % | 44,92% | 0,59% | 8,08% | 36,53% | 22,26% |
| Max difference | 93,27 € | 59,01 € | 114,84 € | 83,93 € | 93,64 € |
The impact of negative reviews
While positive reviews will increase your hotel’s expected value, negative ones will have the opposite effect. However, trying to offset that with lower rates is not that simple.
A study by Kelly A. McGuire and Jeannette Ho—included in their book Hotel Pricing in a Social World: Driving Value in the Digital Economy—showed that: “lowering the price of a badly rated and negatively reviewed property provides no additional value in the minds of consumers.” If you have negative reviews, the authors say, you should keep the price up and try to fix the issues that generated them instead.
6 ways to improve reputation and increase rates simultaneously
The goal of reputation pricing is to understand your perceived value and increase it over time. This process involves not only revenue managers but also marketing and operations teams.
Here are six steps to follow to increase your reputation and rates:
