Hotel Performance Impact of Socially Engaging with Consumers

Abstract:  User reviews have become a critical aspect of the travel research process, as evidenced, for instance, by TripAdvisor having over 350 million unique monthly visitors. One benefit of these posted reviews is that hotels can address issues raised by consumers in an effort to improve consumer satisfaction along with review scores. Given the importance of consumer reviews, one goal for hotels is to find ways to improve their social media performance (with a goal of boosting financial outcomes). In this report we examine the effects of reviews posted on TripAdvisor to look at non-operational and relatively inexpensive ways in which hoteliers can improve their performance, both on the review sites themselves and in terms of actual hotel revenue and sales performance.

In a previous CHR Report, co-author Chris Anderson illustrates the positive relationship between user-generated content and hotel performance.2 He calculates online reputation elasticity (percentage change in hotel performance given a percentage change in online reputation) using data from ReviewPRO and hotel performance data from STR. The study found substantive impacts of online reputation on overall hotel performance as measured by revenue per available room (RevPAR), with individual firms capitalizing on their improved reputation through some combination of higher occupancy and average daily rate. Using a second point-of-purchase or transactional dataset from Travelocity, he shows the positive impact of both online reputation and the number of reviews on the purchase likelihood. That study indicated that online reputation (review scores) and the number of reviews are positively related to hotel performance as measured by price, occupancy, and total revenue. There’s no doubt that service providers will want to address consumer issues and improve the quality and value of their service offering based on consumer reviews. However, what we outline here are other, less capital intensive approaches to improve a property’s reputation. In particular, we focus on more direct engagement with consumers by specifically encouraging them to post reviews on TripAdvisor.com, which so far remains the dominant source for hospitality-related reviews. Looking further at reviews, we compare the hotel’s financial performance and online reputation in a series of before-and-after tests, in which the after stage occurs once the hotel starts to encourage consumer reviews via post stay surveys. We show that once reviews are actively encouraged not only does the number of reviews posted to TripAdvisor increase, but so does the review score and hotel rank on TripAdvisor.com.

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