Answers to your questions from the Reputation Drives Revenue Webinar

Answers by Daniel Edward Craig

During last week’s webinar, Chris Anderson, Associate Professor at Cornell’s School of Hotel Administration, released preliminary results of ground-breaking research he is conducting regarding the correlation between online reviews and hotel pricing power.

In the first study, compiled from 13,000 Travelocity reservations in nine U.S. cities during July 2012, Anderson found that an increase in review score of one point (eg, from 3.8 to 4.8 out of 5.0) increases the odds of being booked by 13.5%. Further, the study found that hotels can increase rate by up to 8% without decreasing the probability of purchase.

In the second study, Anderson analyzed 2 1/2 years of monthly hotel performance data provided by STR Global and compared it with review data provided by ReviewPro. He found that a 1% increase in ReviewPro’s Global Review index™ (an aggregate score taken from all major review sites, with 100% being a perfect score) led to an average increase of 1% in revPAR. (See graph below for a breakdown by segment).

Next up was Victoria Edwards of Buckhiester Management who discussed how hotels can take advantage of new opportunities by integrating review metrics into revenue management decisions.

Finally, Fernando Vives Soler, Global Director of Revenue Management at Meliá Hotels International, showed us how his company uses review analytics for every hotel and brand within its group to analyze performance, to identify opportunities for growth in rate and market share, and to guide overall revenue strategy.

Given the progressive nature of the material covered it’s no surprise that we received lots of questions during the webinar. Here are our answers to select questions from participants.

With regard to the Travelocity study, would you expect similar results for other online travel agencies like Expedia and Hotels.com? Would you consider these conclusions to be applicable worldwide?

During the webinar Chris Anderson said he would expect the effect to be similar on other online travel agencies. He cited a study by Expedia a few years ago that found that a one point increase in a review score equated to a 9% increase in average daily rate. As for whether the effect would apply worldwide, Anderson said that there are many variables to be taken into consideration, some of them regional, but overall his feeling is that the results would be universal.

What if you already have a 5 out of 5 points? How can you use that to increase revenue?
Every hotel should be so lucky! If you have a high or perfect score on Travelocity (or any OTA for that matter), then you can focus efforts on leveraging the popularity of your hotel. Anderson also looked at the effects of other variables in the study, including screen placement and volume of reviews, and found similar correlations with pricing power.

Of course, travelers won’t know about your hotel if they can’t find it, so to leverage your high rating work with the OTA to optimize visibility with high rankings, which will likely involve paying for premium placement. You’ll also want to make efforts to increase review volume while at the same time upholding your high rating. And be sure to take advantage of the added pricing power engendered by high ratings. Keep an eye on conversion rates, however, to make sure don’t push too hard on rate.

What kind of tools and resources are there out there for revenue managers who want to develop their strategic and analytical skills?
During the webinar Victoria Edwards talked about the evolution of the revenue manager position from reservations manager to next generation: responsible for demand creation, capture and management and requiring strong strategic, tactical and analytical skills.

Edwards said there are numerous training options available. To sharpen your strategic skills she recommends Cornell’s Certificate in Revenue Management program and the Certified Revenue Management Executive from HSMAI. Recommended tools include reputation management for hotels applications like ReviewPro and demand forecasting modules and training, which her company, Buckhiester Management, offers. Finally, she recommends getting a mentor in the industry for guidance and inspiration.

When is the Competitive Quality Index™ going to be available?
During the webinar we announced that ReviewPro is in the process of rolling out a new measure of hotel performance called the Competitive Quality Index (CQI™). This is a measure of the Global Review Index™ relative to comp set performance. Just as hotels measure market share of rate, occupancy and revPAR against competitors in terms of indexes, with 100 being fair market share, ReviewPro clients will soon be able to compare review performance with using the same metrics.

The Competitive Quality Index will start appearing on the ReviewPro dashboard for clients in the coming weeks, with additional features to be rolled out early next year. Here’s a peek of how it will look.

Where can I find more details about this research?
This was just a sneak peek at the research, which is ongoing and expected to be released by Cornell within the next two weeks. According to Anderson, you’ll be able to download it for free by registering on The Center for Hospitality Research website. Be sure to subscribe to the ReviewPro blog too, as we’ll also announce it here and plan to share more related content in the coming weeks.

Also, don’t forget to see our interview with Fernando Vives Soler: How Melia Hotels International uses Review Analytics to Make Better Revenue Management Decisions.