New study shows dropping price won't overcome bad reviews; online travel agencies have long made it easy to compare hotel room prices.
Now, using online review sites like TripAdvisor, consumers are gauging value, too. New research from SAS and The Pennsylvania State University, "Pricing in a social world: The influence of non-price information on hotel choice," reveals that reviews trump price as the decisive factor in consumer choice. In fact, negative reviews will eliminate a hotel from consideration, regardless of price.
"This study proves hotels must proactively manage their online reputation," said Kelly McGuire, PhD, Executive Director of the Hospitality and Travel Global Practice for SAS. "Hotels should monitor all key social media channels using keyword searches, and analyze conversations for trends. If many people are saying the same thing about your brand, pay attention. Sometimes the things you don't want to hear are the ones that help you avert a crisis or turn a trend around."
Reviews and price are most influential: Positive reviews are the primary factor in choice. While consumers read ratings and Trip Advisor rank, reviews contributed the most to their decisions, followed by price.
Negative reviews remove hotels from the running: In the minds of the consumer neither low prices nor high ratings overcome negative reviews. Consumers focused on reviews as indicators of a hotel's current performance, saying they would trade a lower price for a hotel with better reviews.Dropping the price won't help
: A low price isn't enough to overcome negative reviews. In other words, if your reviews are negative, you are removed from the consumers' choice set, periodAll other things equal, consumers still prefer a low price
: Unsurprisingly, while consumers will opt for a higher-priced hotel when the lower-priced hotel has negative user-generated content (UGC), they still prefer to pay the lowest price possible. So, hotels need to pay attention to how their reviews compare to competitors when setting price.Consumers only notice high ratings and rankings
: When deciding where to stay, consumers only consider ratings and rankings if they are higher than other choices in the set. They don't value comparisons between low and mid-level ratings and rankings. Nor did content or language of reviews matter – only whether reviews were positive or negative.Brand name does play a role
: When choosing among alternatives, brand name did have a positive effect on quality perceptions.
While this and other studies suggest that better UGC translates into increased pricing power, revenue managers should not take this as a license to raise prices," said Breffni Noone, PhD, Assistant Professor at the Pennsylvania State University School of Hospitality Management. "Many factors go into a pricing strategy, including demand patterns, business mix, strategic goals, value proposition and competitive position. Revenue managers must consider UGC as only one factor among many."
With the advent of social media, word of mouth is now a global conversation where opinions travel as fast as they are formed. Good or bad, accurate or misinformed – guests' opinions are broadcast on social networks, microblogs, video-sharing websites and message boards for the world to see. SAS Social Media Analytics can help hotels turn social data into meaningful, usable information such as identifying influential consumers, answering questions about guests' needs and desires, and quantifying the impact of promotions, new offerings and strategic partnerships on reputation and the bottom line.
BM Noone and KA McGuire "Pricing in a social world: The influence of non-price information on hotel choice", Journal of Revenue and Pricing Management (2013) 12, 385–401. doi:10.1057/rpm.2013.13; published online 5 July 2013About SAS
SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions, SAS helps customers at more than 65,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world The Power to Know® .