Sunday, 3 November 2013

Rankings up = Revenue up - confirmed in a major Cornell report




At the end of last year Cornell (ranked one of the top 20 universities in the world) University Center of Hospitality Research conducted an in depth study of the 'Impact of Social Media on Lodging Performance'. This report is now available online direct from Cornell and we commend it to all our clients.


Here we will extract the key findings; if you have any questions at all please do not hesitate to contact your Karen or one of her team.

The core finding:

"The analysis finds the following. First, the percentage of consumers consulting reviews at TripAdvisor prior to booking a hotel room has steadily increased over time, as has the number of reviews they are reading prior to making their hotel choice. Second, transactional data from Travelocity illustrate that if a hotel increases its review scores by 1 point on a 5-point scale (e.g., from 3.3 to 4.3), the hotel can increase its price by 11.2 percent and still maintain the same occupancy or market share."

And...
  
"Third, to measure the impact of user reviews on hotel pricing power, consumer demand, and revenue performance the study uses matched-sample data from ReviewPRO and STR. By matching ReviewPRO’s Global Review IndexTM with STR’s hotel sales and revenue data, a regression analysis finds that a 1-percent increase in a hotel’s online reputation score leads up to a 0.89-percent increase in price as measured by the hotel’s average daily rate (ADR). Similarly this
1-percent increase in reputation also leads to an occupancy increase of up to 0.54 percent. Finally, this 1-percent reputation improvement leads up to a 1.42-percent increase in revenue per available room (RevPAR)." 

Other key findings...

User Generated Content During Consumers’ Hotel Search

TripAdvisor is by far the dominant source for online reviews in the hospitality space, with more than 75 million reviews generated by some 32 million users.4 In terms of the hotel choice process, as reported by Market Metrix,5 the tipping point came in 2010, as shown in Exhibit 1. At this point, the guest experience mentioned in customer re- views became the dominant factor in hotel selection, with 51 percent of survey respondents indicating they factored guest experience factors into their hotel selection decision"

  
"The close proximity (to the purchase) of consumer visitation to TripAdvisor perhaps indicates that user reviews are some of the final and potentially pivotal criteria in the hotel selection process."
  
"More generally, OTA reviews, their quality and numbers, lead to increased conversion rates and improved pricing power 

"Better reviews lead to higher prices, while lower reviews force prices lower at the OTA." 

"Hotel operators have suspected that the effect of social media and user generated content on hotel performance has been strengthening. This paper provides a numerical confirmation and estimate of those effects. Reviews and review sites continue to be in the forefront when consumers are planning a hotel room purchase." 

"...a 1-point increase in user review score (on an OTA’s 5-point scale) would allow a property
to increase price by 11.2 percent and maintain the same purchase probability or market share."
 
In Summary:
  • Rankings and scores are critical to increasing profitability
  • Negative reviews must be minimised
  • Positive reviews must be maximised
  • Pure volume of reviews is critical; more (positive) reviews = higher profitability 
  • The OTAs' capacity to influence GoPPAR continues to increase

For our clients:
  • You're doing everything right! But the more email addresses you can harvest, the more successful (and profitable) you will be

 

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