At an Inside Cornell event simultaneous to the International Motel, Hotel and Restaurant Show earlier this week in New York City, Associate Professor Chris Anderson presented a study that confirmed, and then quantified, what many savvy hoteliers already know: social media review sites really matter.
The Cornell Center for Hospitality Research combined data from partners ReviewPro, STR, IHG.com and Travelocity and data providers comScore and TripAdvisor in an attempt to determine if there is a measurable ROI for social–media efforts. The answer was yes, to the tune of a 1.42% increase in revenue per available room for every 1% increase in online reputation for midscale hotels.
To get to that figure, Anderson, an associate professor at the Cornell School of Hotel Administration, led an audience of travel journalists through this analysis:
• 75% of consumers visit an OTA prior to booking on a brand.com site and 83% perform a search (on a site like Google) prior to booking, and 65% do both. Only 10% go directly to book at brand.com without doing either.
• The percentage of consumers consulting TripAdvisor prior to booking a hotel room has increased, from 26% in 2008 to 35% in 2010.
• Using transactional data from Travelocity, Anderson shows if a hotel increases its review scores by one point (on its five-point scale), it can increase rate by 11.2% without losing market share or occupancy.
• By matching ReviewPro’s Global Review Index with STR’s revenue data, Cornell used a regression analysis to show the 1% increase in reputation leads to a .89% increase in ADR and a .54% increase in occupancy, equaling the 1.42% increase in RevPAR for midscale hotels.
“That’s not trivial,” Anderson said about the measurable boost in revenue. “Reviews matter.”
Interestingly, the revenue increase lessens as the chain scale moves up the ladder, with a 1.13% boost for upper midscale, .83% for upscale, .74% for upper upscale and just .49% luxury. The average among all the scales was a .96% increase in RevPAR. Anderson theorized higher-end consumers pay less attention to review sites because they already assume the hotel, by nature of being classified as luxury, is of a certain quality level.
“Hotel operators have suspected the effect of social media and user generated content on hotel performance has been strengthening,” the Cornell report reads in summary. “This paper provides a numerical confirmation and estimate of those effects. Reviews and review sites continue to be in the forefront when consumers are planning a hotel room purchase.”
The end result, that reviews matter and can increase revenue, is not surprising. But putting actual numbers to it, and as significant as a 1.42% increase in revenue, hopefully opens the eyes of those hoteliers still resistant to managing their hotel’s online reputation. They’re missing the boat. And revenue.