|OTAs, Reviews and the New Comp Set: A Case Study for Hotels.|
By Daniel Edward Craig
Thursday, 10th October 2013
|New York’s 155-room Distrikt Hotel was performing well on the major online travel agencies in terms of booking volume, but its default ranking was low, and management wanted greater visibility. |
“New York City has about 430 hotels competing to be on the first page of the major OTA sites,” general manager Jennifer Rota told me during a recent ReviewPro webinar, Optimizing Reviews, Ratings and Revenue on OTAs.
“Traditionally, we are given an algorithm stew from OTA market managers to explain why we are not in those coveted spots,” she said. “But internally, we were convinced that placement is determined by how much inventory hotels are willing to give OTAs and how much marketing dollars they’re willing to spend. Unless you’re a big house with lots of inventory to dump, it’s the back of the line for you.”
So she started playing the OTA game, committing extra commissions, more inventory and discounted rates. But still her property was buried well below other New York hotels. “On Booking.com, we seldom found ourselves in the top five pages,” she said, “and on Expedia and Hotels.com we typically ranked 300 to 400.”
And yet booking-wise, the Distrikt was a top performer.
“We thought that the extra marketing and discounted rates were driving our great results. But we wanted to know for sure—were we leaving money on the table? We needed to test our theory about how people were finding us in that haystack. So we stopped.”
To her surprise, “Our placement slid further, but our booking pace didn’t miss a beat. Why? How were travelers finding us?” Upon closer examination, she realized the reason was there the whole time. “Travelers were searching by reviews. And when they sorted hotels by guest ratings Distrikt consistently appeared on Page 1.”
As paid media like cost-per-click, banner advertising and premium positioning on OTAs becomes increasingly dominated by big brands with big budgets, more hotels are turning to a more effective, less costly marketing solution: driving earned media by getting guests talking about and recommending their brand.
As Nielsen’s 2011 Global Trust in Advertising survey demonstrated, consumers trust recommendations from people they know and consumer opinions posted online more than any other advertising source. This in part explains the popularity of TripAdvisor, which allows travelers to tap into the collective wisdom of other travelers. OTAs offer similar capabilities that are often overlooked by hotels—though not, it appears, by travelers.
In The Impact of Social Media on Lodging Performance, Chris Anderson, associate professor at Cornell’s School of Hotel Administration, reported the results of his 2012 study that found that if a hotel increases its rating by one point on Travelocity’s five-point rating system, the odds of being booked increase by 14.2% and rate can be increased by up to 11.2% without affecting demand.
Further, using data from ReviewPro and STR, Anderson found that a 1% increase in a hotel’s online reputation score, as defined by ReviewPro’s Global Review Index, leads to up to a 1.42% increase in RevPAR. It’s important to note that the index includes OTA reviews, which collectively surpass TripAdvisor in volume.
And yet by all indications, hotels obsess over TripAdvisor reviews but pay little attention to OTA reviews, choosing instead to focus on rates and positioning.
Like other hotels, Distrikt Hotel, which consistently ranks within New York’s Top 10 hotels on TripAdvisor, observed early on the benefits.
“The financial boon from this position, quite frankly, redefined our revenue management and marketing strategy,” Rota said. “Our success on TripAdvisor was leading to revenue, and naturally we wondered if this review philosophy would have the same effect on other channels, especially our OTA partners.” Once the hypothesis proved correct, Distrikt’s management “immediately started treating OTA sites as we would TripAdvisor.”
The power of reviews is redefining the traditional hotel competitive set. In addition to rates, classification and location, hoteliers must now take into account review performance when identifying their comp set. Market share of guest satisfaction can now be measured like rate, occupancy and revPAR indexes by combining STR data with review data to produce metrics like ReviewPro’s Competitive Quality Index.
“A great thing about that success was that it came through spending less money,” said Rota, explaining that the hotel reduced OTA commissions even despite growing ADR by 16%. “In this case, it’s about the company you keep—and our company has higher rates. When you are a three-star hotel and your reviews rank you with four- and five-star hotels charging twice the rate, you can raise rates and still appear as a value.
“Our pricing started to naturally increase based on a new idea of competitive set. Instead of neighboring hotels [by location], it was ‘review’ neighbors,” Rota said. “All the more reason to monitor and respond to the OTA reviews just like on TripAdvisor.”
Distrikt Hotel’s key strategies for review success
When Distrikt Hotel opened in 2010 as part of the Ascend Collection, then a relatively new marketing vehicle under Choice Hotels International, it faced plenty of competition as one of nine hotels built within a one-block radius within a two-year span. I asked Rota to describe the most important factors behind the hotel’s success.
1. Make service the No. 1 priority. At the time of opening, says Rota, “Ownership and management hoped that it would be the clean design and high-end amenities that would set it apart from its three-star brethren. Though they did not hurt, it was service that grabbed out guests’ attention and has driven the hotel to lead in rate. It sounds like a poster in the back office, but it’s not—service is our culture.” A quick glance at the many OTA reviews citing “friendly staff” shows that guests overwhelmingly agree.
2. Engage your guests. Rota has instilled in staff an intense focus on engaging guests even before they walk through the door. “How significant is someone ‘liking’ you on Facebook?” she asks. “Huge. It kills me how many hotels waste that opportunity to learn about this person who is now your ‘friend’. I don’t know about you, but I give my friends a little more leeway than strangers when they mess up. I also tell my friends when there is spinach in their teeth. Believe me, we mess up, but most of the time our guests point out the spinach and we can apologize and make it right before they leave.”
3. Listen closely to your guests. “We are always learning, and our guests are the educators,” she said. “If you really pay attention to your reviews, you will learn what guests want and what they could care less about. You will find out who [among staff] is carrying the weight and who is letting you down. And you had better do something about it or it will be too late.”
Finally, Rota stressed the importance of responding to reviews. “When someone gives you a compliment, you say ‘thank you,’” she said. “Why wouldn’t you write that? Why wouldn’t you let other people who have no idea who you are see how engaged you are with guests by the way you respond? It’s not just polite, it’s smart.”
Special thanks to Jennifer Rota and Distrikt Hotel. Click here to view the webinar.
Daniel Edward Craig is a former hotel general manager and the founder of Reknown, a consultancy specializing in social media strategy and online reputation management for hotels and the travel industry. He collaborates with ReviewPro as Industry Advisor. Visit www.reknown.com.
Copyright: © 2013 Daniel Edward Craig. Repinted with permission.