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).
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 (PDF) 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.
As with many aspects of life, it’s one thing being aware of a correlation and quite another making sure that it works for you. This is especially tough for general managers who have to juggle a whole range of responsibilities at their property, rather than focusing solely on revenue management.
With that in mind, we have drawn up a few actionable tips that can help you turn good online review scores into higher RevPAR. Here’s how you can go about building an online reputation that improves the bottom line for your property:
A hotel with negative reviews is charging $400 per room per night, and a competitor with positive reviews is asking for $440. Each hotel has 100 rooms, which means the hotel with positive reviews could make $28,000 more per week than the one with negative reviews.
Project these figures for a year and the difference could be as much as $1.456 million. Who wouldn’t want to add that much money to their bottom line?
In summary, better reputation management can have huge benefits for revenue. However you can only use reputation metrics to make strategic decisions if you integrate rate, demand, and competitor rate with review analytics such as ranking and scores. At OTA Insight, we provide the hospitality industry with the tools to do all that and more.
Get in touch to request a demo of OTA Insight and find out how we can help you improve your bottom line today.
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