Mr. van Meerendonk

Revenue Management

Consumer Reviews in the Digital Age: How to Drive Incremental Revenue From Your Guest's Feedback

By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions

Adapted from content provided by Kelly A. McGuire, PhD., Executive Director, Hospitality and Travel Global Practice, SAS and Natalie Osborn Senior Industry Consultant, Hospitality & Travel Global Practice for SAS.

All good hoteliers understand the value of listening to their guests. From hearing what they think of new promotions, to décor and interaction with key customer-facing staff members - opinions of guests are powerful tools and can help align a hotel's offering with its target customers. In the digital age guest feedback is becoming even more important, as recent research suggests that not only does social media have a relationship with lodging performance, but that it also impacts the behavior of consumers. Hoteliers need to make sure they are not only asking their guests for feedback in the traditional manner, though guest surveys to help improve a properties offering, services, but they also need to monitor social media for unsolicited feedback through reviews and ratings so that they can help determine their property's pricing power and pricing strategies in the future.

The Importance of Traditional Guest Feedback

It's easy to get excited about the huge potential social media offers; however, traditional guest survey mechanisms are still important. This is because they ask guests questions about specific items they may not think to mention in tweets, Facebook posts, ratings and reviews. For example, a hotel may want to gain specific feedback on a newly launched service experience, such as a new day spa, to gain insights into how this can be improved and how well it is being received by customers. Or it may want to assess whether specific service experiences, such as speed of service or customer service, are improving or declining, or gain feedback on how current service experiences are being interpreted by the guests to help shape ideas for new service experiences. For example, gauging the satisfaction of the current room service offering, and whether it needs to be improved. To gain these kinds of insights, hotels must ask specific questions, to gain this invaluable feedback.

But as well as making sure the right questions are being asked, it's also important they are asked at the right time. For timely and accurate feedback, it is important to solicit feedback from guests at the point of experience. Generally hotels will get a better range and quality of feedback if they ask for feedback during the guests service experience or immediately after, such as at the end of the meal in the restaurant, or by placing a feedback form on the room service tray for return with the tray, or during the spa treatment, versus waiting for a few days after the guest checks-out before sending them a survey. Often the only guests who respond to the two days later survey are those that are "extremely satisfied" or "extremely dissatisfied". Asking for feedback at the point of experience will give you a better range of feedback between these two extremes.

The Rise of Unsolicited Guest Feedback through Social Media, Ratings and Reviews

Savvy managers realize that a growing proportion of their guests are active on social media and will post to a social media site any positive or negative feedback first before directly engaging with hotel management. This unsolicited feedback has the potential to reach large audiences of potential guests, and can either be a positive reinforcement of the quality of your property and its services, or highlight a guest's negative perception of their stay and dissuade other potential customers from ever booking with your hotel.

Social media posts, as well as trip advisory sites, such as TripAdvisor, give you the ability to find out what customers are saying about multiple aspects of your business, whether it relates to the service, brand, or even the perceived value for money for your hotel. Understanding the perceived value of a hotel is a critical factor in marketing and pricing a hotel, as a customer's value perception of a particular property directly impacts its ability to capture demand. When social media feedback is shared with the right team members it allows hoteliers to quickly understand where they place in the market and at a granular operational level, what is working and where the biggest problems lie - whether it is slow check-in that is a common complaint, over-priced food and beverage service, or even if the décor needs an upgrade.

Hoteliers can also use social media and trip advisory sites to serve as a tool for analyzing the competition, by keeping an eye on common sentiments on competitors' pages, versus their own. It can provide invaluable insights for how well you compete on many levels. For example, does your competitor have more comfortable beds or nicer bathrooms? What aspects of your hotel are a real selling point and should be further promoted as a point of differentiation?

While social media is a great tool for gaining all kinds of feedback about questions hoteliers may not have thought to ask through traditional feedback channels, recent research has highlighted that social media and user generated content influence consumer buying behavior and lodging performance.

A report prepared by Cornell's Center for Hospitality Research, 'The Impact of Social Media on Lodging Performance'(2) underlined the financial impact the rise in commentary on social media is having in the hotel sector. The report stated, "A regression analysis finds that a 1 percent increase in a hotel's online reputation score leads up to a 0.89 percent increase in price as measured by the hotel's average daily rate (ADR). Similarly this 1 percent increase in reputation also leads to an occupancy increase of up to 0.54 percent. Finally, this 1 percent reputation improvement leads up to a 1.42 percent increase in revenue per available room (RevPAR)." This suggests that if a hotel can improve their ratings scores, they can gain pricing power without losing occupancy.

However, in order to use this pricing power, you need to understand how your customers use social media reviews and ratings when they are evaluating your hotel for purchase. Another study from SAS and The Pennsylvania State University(1) showed that consumers use reviews and ratings, not price, to set their perceptions of quality, and that reviews are more important than ratings in setting consumers perceptions of both quality and value. Importantly for revenue managers, while consumers prefer to pay the lowest price possible when booking a room, low price will not overcome negative reviews online.

While it is vital that hoteliers gather structured feedback from guests and monitor unsolicited feedback from social media outlets in relation to the service experiences within their hotel, it is also important that you ensure that ratings and reviews are at their optimal level, because bad ratings and reviews will have an effect on your revenue.

Driving Revenue Through Guest Feedback

When a hotel is effectively engaging its customers through direct staff interactions, has traditional mechanisms for structured feedback and is monitoring unsolicited feedback via social media channels in place, it can begin to use this feedback to shape future marketing initiatives and promotions to attract new clientele and also use the feedback to improve a hotels facility, services and even shape staff training. It sounds simple, but a hotel property that is offering guests what they want is more likely to see return customers and attract new business than one that does not listen to or act on what their guests are telling them.

As previously indicated through the research mentioned above, consumers use reviews online and, to a lesser extent, aggregate ratings form a critical part of a hotel guest's decision making process and a low price will not overcome negative reviews online. For revenue managers this does mean that hotels with higher ratings can gain pricing power, but this should not be considered a mandate to raise price. Revenue managers should look to use pricing power responsibly. The research indicates that pricing power is only achieved at mid to high movements in ratings and rankings - not at the low end.

Revenue managers know that many factors go into the consideration of how a hotel should be priced within a market and relative to the competitive set. Guest feedback on social media channels is one more factor to consider in building a pricing strategy, but it is up to the revenue manager and hotel management to evaluate all relevant factors before determining a pricing strategy.

In today's hotel environment, hoteliers need to understand the importance of guest feedback and how this can impact a hotels ability to attract guests. Additionally, hotels need to be using all the tools available to continually adapt their service offerings to what their guests want, while also driving revenue growth. There is no one in a better position to tell you what you need to improve upon, than your customers. Therefore, hoteliers need to make sure they are asking the right questions, at the right time, through the right channels, so this feedback is used to the greatest advantage and help drive revenue, by enabling hoteliers to better determine their property's pricing power and pricing strategies in the future.

References:

(1) Anderson, C. (2012) "The Impact of Social Media on Lodging Performance," The Center for Hospitality Research Reports, No. 15Vol. 12
(2) Noone, B and McGuire, K. (2013) "Effects of Price and User-generated Content on Consumers' Prepurchase Evaluations of Variably Priced Services," Journal of Hospitality & Tourism Research, 1096348012461551, first published on February 27, 2013

As Director of Advisory Services for IDeaS Revenue Solutions, Paul van Meerendonk leads a global team of revenue management advisors focused on hotel revenue optimization projects. Mr. van Meerendonk is responsible for global development, management and operations of the Advisory Services team. He oversees the hiring, training and management of industry-leading consultants located in London, Beijing, Singapore and Atlanta. Mr. van Meerendonk also represents IDeaS on industry thought-leadership initiatives related to trends and best practices within revenue management, including authoring a number of white papers, conducting public speaking engagements, as well as leading key client webinars with an average audience of over 200 global representatives. Mr. van Meerendonk can be contacted at +44 (0) 118-82-8100 or Extended Bio...

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