Managing your Online Reputation and Reviews enhance your Profitability How many times have we seen online reviews like “this is not a 5 stars hotel” or worse, “I do not recommend that hotel/restaurant” and “I will never come back!”? Those statements are examples among others comments we can read on numerous travel websites (TripAdvisor, Yelp, Booking.com...). During the last ten years, the clients have become professional travelers as they go places more frequently, for leisure or business purposes, in various destinations more affordable due to new routes opened by low cost airlines. Thus Clients’ expectations have changed along with the apparition of online reviews. But why online reviews have become so important? How do they impact profitability? And how will change online reviews in the future?
The importance of online reviews and the buying process Nowadays, it is even more difficult to convert clients to become loyal customers but you still can lose them easily, the reviews accentuating the competition! The Internet has made possible not only to broadcast ourselves (YouTube, Pinterest, Instagram…) but to share real-time experience with a worldwide audience. And reviews can go viral, either ways across the Medias.
As reported by Market Metrix (see above), the tipping point came in 2010, and the guest experience mentioned in customers’ reviews became the dominant factor in hotel selection. In 2014, online reviews have become a major resource for consumers, providing a huge Intel reading other’s experiences and insights whether they are: Looking for a new restaurant on Yelp or Lafourchette.com Comparing prices for airfares on Skyscanner or Kayak Booking a room on Booking.com or Expedia.com Before making an online hotel reservation, consumers visit on average 14 different travel-related sites with about 3 visits per site, and carry out 9 travel-related searches on search engines.
Roger Godin
+33(0) 658 816 711
roger@rg-lhcc.com
https://www.linkedin.com/in/rogergodin
10/2014
In November 2012, CORNELL (The Center for Hospitality Research) demonstrates another key finding in their study “ROI of Social Media & Reviews”: Guests are visiting TripAdvisor more frequently prior to booking, especially in the 5 days prior to booking.
Following a recent study, word of mouth remain the most trusted source of information for the consumers (92%) which is not really surprising but the study highlight that 70% of the same consumers trust consumer opinions posted online (source Nielsen Global Trust in Advertising Survey - Q3 2011). De facto, the E-WOM (E-word-of-mouth) has emerged. Another study conducted by the Goethe University Frankfurt and the University of Pennsylvania, on referral programs and customer value found that referred customers were both more profitable and loyal than normal customers, with a higher contribution margin, a higher retention rate and were more valuable in both the short and long run.
Are the online reviews trustworthy? How do Hoteliers perceive them? In one hand, according to a July 2011 PhoCusWright survey commissioned by TripAdvisor, 98% of participants found that hotel’s reviews accurately reflect the experience and 95% would recommend Trip hotel reviews to others and 53% of travelers say they will not book a hotel that doesn’t have any reviews. On the other hand, another survey shows that 90% of hotel general managers in the USA said it is ‘important’ or ‘very important’ to monitor and respond to online user review sites like TripAdvisor. Source: Hotel Management Voice of the GM Annual Survey, 2012
Roger Godin
+33(0) 658 816 711
roger@rg-lhcc.com
https://www.linkedin.com/in/rogergodin
10/2014
Hoteliers have understood the importance of a good management of the reviews. 72% of them use the comments for quality management purposes and 50% for staff training. The main objective here is the process improvement to understand customer behavior, how to ensure guests get what they want to reduce the level of service quality uncertainty.
Good service is the foundation of your reputation and management responses to the reviews are a great way for you to build your reputation. According to TripAdvisor data, year-over year, Management responses more than doubled from 2011-2012. Hotels realize the importance of the travel social community representing more than 53 million TripAdvisor members in 2013 (36 million in 2012). The largely positive average score of 4.08 (on a scale of 5) is probably the direct consequence of meeting the expectations of the customers but certainly due to increased responses online to the reviews. Surprisingly, although it is understandable and critical to focus on the quality aspect, not all Hoteliers seem to realize the impact of the online reviews on their bottom lines. In fact, only 15% of them utilize the reviews to increase their ADR and 18% to increase the occupancy. Let’s see why properties with stronger E-reputations across all channels perform better overall.
Impact of guest reviews on hotels’ profitability Matching of offer & expectations is a critical success factor for hotels and can have a considerable positive financial impact, especially since consumers are willing to pay more for a product that they are confident will meet expectations. This statement, whether the offer is online on using traditional marketing tools will remain pertinent. We identified the process and path that conduct the consumers to purchase online the desired service or not: Online reviews -> decision making process -> purchasing decisions -> guest experience -> online reviews
But what is the probability they will purchase? As for Xavier Dalloz’ acronym trademark ATAWAD (Any Time, Any Where, Any Device), it is difficult to say. But one sure is certain, you cannot influence the choice of the location, but you can on the reviews. And positive reviews will help you make the difference. The answers are provided by a study made by Cornell compiling data from STR Global (ADR, Occupancy and RevPar) and ReviewPro’ s GRI for more than two and half years (January 2010 through June 2012) establishing 3 regression models to estimate impact of reputation upon: Demand (fair share or Occupancy Index) Pricing Power (ADR Index) Performance (RevPar Index)
Roger Godin
+33(0) 658 816 711
roger@rg-lhcc.com
https://www.linkedin.com/in/rogergodin
10/2014
The results clearly demonstrates that online reputation and guest satisfaction as measured by guest review score, directly impact the financial performance of hotels as the chains scale is decreased and that properties with stronger reputation across all channels perform better overall, by increasing its pricing power = higher revenue. Probability of purchase If review score increase by 1 point, let’s say from 3.3 to 4.3, the probability of purchase increase by 13.5% with the possibility of increasing the prices by 11.2% and still maintain the same occupancy or market share. Financial Impact of positive guest reviews This study, conducted by Associate professor Chris K. Anderson shows, no matter what the channel distribution is, that for 1% increase in ReviewPro GRI (Global Review Index) and STR cross data leads to: + 0, 89% ADR + 0, 54% Occupancy Rate + 1, 41% RevPar
(Source: The Impact of Social Media on Lodging Performance - Chris K. Anderson, Cornell University. November 2012)
GRI have a much stronger effect on lower-end chain scales (midscale an upper scale), the expectations being lower in that market versus the Luxury scale where the effect is still positive but lower.
The table entries represent the percentage impact upon pricing, demand, and performance given a 1% change in online reputation as measured by GRI. Looking at the first row, a 1% increase in a hotel’s GRI score, say from 80 to 80.8 aligns with a 0.96% increase in RevPAR.
Roger Godin
+33(0) 658 816 711
roger@rg-lhcc.com
https://www.linkedin.com/in/rogergodin
10/2014
What’s next then? The different studies of the impact of User Generated Content (UGC) have as a common point the reviews scores influencing directly the revenue of hotels and restaurants negative reviews removing you from the Travelers’ choice, highlighting that your ratings must not only be “ok” but great enough to be noticed by the consumers. Consulting reviews is now a day-to-day logical step in the purchasing cycle of services and it is important to remember at which point in the buying cycle reviews come into play: by the time the consumers have started reading reviews, they have identified a need they have and now want to select where to buy it and the business who will benefit from it. So, the path from reading online reviews to purchasing from a business is short, which means it’s crucial for local businesses to have a positive online reputation so they can convert ‘searchers’ into customers. And that daily action plan is simple: make service your priority No. 1. A better relationship with your customers will get you closer to the 5 stars score synonymous of excellent online reputation and more profits. Sources: -
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Roger Godin
World Tourism Organization (2014), Online Guest Reviews and Hotel Classification Systems – An Integrated Approach, UNWTO “The Impact of Social Media on Lodging Performance” - Chris K. Anderson, Cornell University. November 2012 Reviews, reputation and ROI – Steven Paganelli, Head of Destination Marketing Sales at TripAdvisor Americas Hotel & Motel Management, Market Metrix, January 13, 2010 Hotel Management “The Voice of the GM” Annual Survey 2012 Nielsen Global Trust in Advertising Survey - Q3 2011 study conducted by the Goethe University Frankfurt and the University of Pennsylvania, on referral programs and customer value
+33(0) 658 816 711
roger@rg-lhcc.com
https://www.linkedin.com/in/rogergodin
10/2014