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Review Ratings Make a Direct Impact on Revenue
By Nicholas Scott Johnson
Thursday, 23rd May 2019
 

Guest ratings are more valuable than brand: Although a strong statement to make, recent third-party research confirms that travelers are willing to pay more for hotels with high ratings.

This supports various studies on the topic, including our own research, which revealed that travelers are 3.9 times more likely to book a hotel with a higher rating. What makes this new research truly stand out is the relationship between Guest Ratings, Brand Value, and Price.

In “The Big Decision: How travelers choose where to stay” conducted by the Expedia Group, researcher Abhijit Pal determined just how big of an impact guest ratings have on how much a guest is willing to spend on a hotel.

The relative pricing premium works in both ways - and according to this research, even a “Good” score might be driving down a hotels ADR (Average Daily Rate) and therefore compromising revenue.

Price Vs. Brand Value

As this research resulted in various substantial conclusions, let’s first look at the hypothetical research that combined pricing with brand value. Researchers created a model pricing scheme (based on the Van Westendorp Price sensitivity method) to apply to a selection of hotels.

A sample of six hotels varied between bargain and upscale hotel brands ranging from different official hotel star categories. To test independent hotels, one non-branded example to also included.

The results display the relative acceptable pricing differences compared to a mid-scale hotel, in this research that example is a Courtyard hotel.

*Example of an Independent Hotel

Guest Rating Vs. Price

The relationship between guest ratings and pricing is the backbone of feedback management. Increasing RevPAR is a top priority of any hotel, meaning efforts to increase the ADR can have significant effects.

Expedia’s research used posterior probability models to evaluate the most important attributes included in most hotel results, determining that Guest Rating is the most important determinant after price. This also reflects our own research, “Consumer Research Uncovers Travelers’ Online Search and Booking Behaviors.”

Using the same example as the previous test, the acceptable pricing for Courtyard varies as following in terms of guest ratings.

Comparing the new research from Expedia against our previous study, 88% of travelers would automatically sort out hotels with review scores under 3-Stars and 33% would sort out hotels under 4-Stars. This means that regardless of the pricing above, one-third of all travelers would only see hotels with higher reputation scores, and are therefore willing to pay more.

Brand Value Vs. Guest Rating (TrustYou’s Conclusions)

Building on the research from Expedia and TrustYou, all results seem to prove that guest reviews are the most important factor travelers use to choose a hotel after price. “...an increase in guest ratings is much more valuable than the perceived improvement in brand” (Pal, Expedia 2019).

To break this down, we’ve used Expedia’s research to create a hypothetical model that makes it simple to understand why to invest in feedback management platforms. Assuming that Brand Value and Guest Ratings have a cumulative correlation to their effects on price, we’ve calculated the following pricing model based on the acceptable pricing premiums.

While this model has not been statistically tested, it illustrates the importance that guest ratings have on price. Just having a look at the table, one can see the impact that reviews have on the acceptable pricing premium. A hotel’s pricing based off of brand value is difficult to calculate, and even more static than other factors, whereas a hotel’s reputation online makes a significantly higher impact on price.

Takeaways:

The results from Expedia’s research reconfirm the high value of guest ratings for a hotel, with quantifiable impacts on a hotel’s price. The first recommendation from this research is that Independent Hotels can compete against brands by delivering a better guest experience as the most cost-effective solution (and therefore improving their guest ratings). Peer reviews and guest ratings have the highest influence on price.

If you’ve gotten this far, you’re probably a believer in the importance of guest ratings impacting your revenue, but how does this translate into useful information that can benefit you today?

Step 1: Evaluate your hotel’s current reputation
Sounds easier said than done? Start a free trial with TrustYou’s feedback platform to start listening to your guests. Our review summaries evaluate over 220 review sources, more than anywhere else on the web. Even Google trusts our data to power its Review Summary section of your hotel’s listing.

Step 2: How do you stack up against the competition
Perform competitor analysis. Generate one with minimal effort by setting up (up to six) hotels in your Comp Index within the platform. This will give you all of the detailed insight into your competitors that you have for your hotel.

Taking it further, TrustYou’s platform calculates Impact Scores, which is done by automatically analyzing the human-written comments, to determine which areas impact your guest rating most positively or negatively. If your Wifi is driving down your score 15%, it might be worth it to invest in new hardware before that next remodel.

Step 3: Collect more reviews: increase rating
Statistically, the more reviews you collect, the higher your guest rating. When you take on an active strategy to collect reviews through guest surveys, these surveys are more likely to be higher. By asking all of your guests to leave a review through a survey on-site or post-stay, they are more likely going to give you a higher review.

Additionally, every negative review that you might receive via a different channel will not impact your score as much if you have more positive reviews to outweigh them. But if you do receive a poor review, even lower ratings give you more insight into your hotel experience and in which areas to concentrate your improvement resources.

Step 4: Re-evaluate your price: generate more revenue
Utilize your competitor analysis, higher ratings, and determine how much of a premium is acceptable to charge. Reference the model above, see where your hotel fits compared to the brands mentioned, and test your new pricing strategy. Even if you’re just on a trial, our experts are available to advise you - our customer service is consistently reviewed exceptionally and we work tirelessly to help you get the most out of our platform.

Nicholas Scott Johnson is an expat, transplanted from Los Angeles to Munich. Building on degrees in marketing and international tourism, he applies a unique perspective throughout his storytelling. Nicholas has an obsession for visuals and design, contributing to the face of TrustYou.

www.trustyou.com

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