There’s a new type of hotel investment analysis that is quickly becoming foundational: using customer intelligence from the social web to add depth to the due diligence process – and validate financial assumptions.
“This changes everything,” a senior executive at one of the world’s leading hotel investment groups told me while examining one of ReviewPro’s information- packed Hotel Analysis Reports for an acquisition target. “In minutes, I have more business intelligence and competitive benchmarking at my fingertips than I could get in a week with a mystery shopping service.”
Hotel investment will always require evaluation of fundamental metrics such as regional economic growth, revenue per available room, capital expenditure and earnings projections. But there’s a new type of analysis that is quickly becoming just as foundational: using customer intelligence from the social web to add depth to the due diligence process – and validate financial assumptions.
So whether you’re in charge of deciding whether or not to acquire an entire chain in Asia or on the team charged with deciding whether or not it’s worth closing an iconic property during a renovation, you have a new source of insight to help you make your decision. And what’s so interesting is that the intelligence comes from publicly available sources that millions of consumers use every day to share open and honest feedback about their hotel experiences.
To create these analysis reports, ReviewPro synthesizes years of guest feedback from hundreds of sources worldwide such as TripAdvisor, Expedia and Yelp to identify trends and provide better answers to questions such as:
- How is this hotel trending in guest satisfaction, in service ratings, in perception of value – among its competitors?
- What additional information from guest feedback trends will give us negotiating leverage in this transaction?
- What capital expenditures do we need to budget for to make this property competitive on the market?
- Do we need a new management company to maximize returns?
- How has Brand X performed vs. Brand Y in this market over the past three years?
- Are there untapped revenue opportunities in this asset?
This is information that directly affects a hotel’s bottom line, which is why it is being rapidly adopted and used on Wall Street, in board meetings and on investor calls around the world.
Because today’s hotel guest can say anything about a hotel – wherever and however they choose – there is both a higher quantity and broader range of feedback online than is collected through traditional channels. By aggregating and extracting this information from the social web, hotel investors and those who advise them have independent, unbiased feedback on what’s working and what’s not.
Here are the four specific reasons why this content is so useful to the hotel transactions community:
1. Social analytics have become an unrivaled benchmarking tool. We saw this trend take off a few years ago as thousands of hotel general managers and brand executives had their bonuses tied to online guest satisfaction performance. With Cornell’s Center for Hospitality Research proving the link between the Global Review IndexTM and revenue, owners are now taking the use of these analytics to a new level. Review analytics play key roles before, during and after a hotel acquisition. They are just as vital in due diligence as they are in regular assessments of management effectiveness.
2. Social analytics are used for demand creation.
Making money isn’t just about price optimization. It’s increasingly about creating demand, too – at the hotel, neighborhood, and city level. This is where we see cooperation among the hotels, analysts and government organizations ReviewPro works with to answer questions such as: How can we attract more business to our area? What separates this destination from another one? Why should someone come visit us?
3. Social analytics are vital to understanding and executing brand strategy.
Branding is becoming more and more an activity of telling the truth. Stretching the truth runs the risk of disappointment, negative publicity and brand damage. As brand positioning guru Al Ries taught us, your brand is what consumers say it is – not what you want it to be. Social analytics help owners understand how their hotel assets are really perceived, and they can make branding decisions based on that information.
4. Social analytics identify opportunity across the hotel – not just in the marketing department.
The beauty of online reviews and social media monitoring is that they are not biased towards any special interest. The data serves as a “virtual focus group” comprised tens of thousands of customers giving details on what they want to buy. The feedback in aggregate could suggest changes in sales messaging, marketing themes, operational processes – or even distribution strategy. And even in those different departments, it’s possible to distinguish between what’s going to require capital expenditure and what’s just an operational process change. If guests want to see better rooms, are they really asking for a change in housekeeping checklists to ensure higher cleanliness standards – or do they want the WiFi or TVs upgraded? This lets hotel investors trust the data – and their customers – when they get out their checkbooks to make improvements.
Online reviews provide unparalleled business intelligence and competitive benchmarking, giving insight into the factors that affect future revenue performance. Owners make their money by providing a product that people want to buy, and now they can gather this information directly from their customers.
Last month, the chairman of several leading hotel investment organizations said he never approves a hotel transaction before analyzing online guest feedback. What process does he use? In my next article, I’ll share details on how REITs and private equity groups we’ve worked with at ReviewPro are using customer intelligence from the social web to supplement and add depth to their due diligence process.