How hotels can benefit from bad reviews

As the level of interaction between businesses and consumers rises in the digital age, hotels are reaping the benefits of soliciting—and responding to—opinions from their customers.

Using data from the popular site TripAdvisor, my recent study, titled “Hotel Performance Impact of Socially Engaging with Consumers,” shows that simply encouraging customer reviews can boost a hotel’s ratings and revenue. Another benefit of these posted reviews is that hotels can address issues raised by consumers in an effort to improve customer satisfaction along with review scores.

The key for hotels is to let consumers know their opinions are valued by soliciting reviews, and to let them know you are listening to their opinions by responding to their reviews.

Management responses to reviews lead to improved sales and revenue, I found, as consumers click through to the hotel’s listing at online travel agents. My results also confirm an earlier estimate that an increase in a hotel’s TripAdvisor rating is reflected in an increase in revenue.

This research expands on my earlier CHR report (“The Impact of Social Media on Lodging Performance“), which showed that individual businesses can capitalize on an improved reputation through some combination of higher occupancy and average daily rate.

I found that revenue growth based on review responses is limited in two ways. First, revenues increase as the number of responses increases, but only to a point. After about a 40-percent response rate, hotels reach a point of diminishing returns, and making too many responses is worse than offering no response at all. In fact, revenues are lower when managers respond to more than 85 percent of reviews than if they don’t respond at all, my findings show.

Second, consumers appreciate responses to negative reviews more than those to positive reviews, with ratings rising more substantially in connection with constructive responses to negative comments than simple acknowledgment of positive comments.

My study suggests that posted reviews are a valuable source of information for prospective customers looking to remove uncertainty around the quality of their stay, as well as for hoteliers looking to improve their product and service.

The bottom line for hotels is that letting consumers know you want their opinion by encouraging reviews using post-stay surveys improves the volume and quality of reviews, I found, and demonstrating that you are listening by responding to those evaluations has a favorable impact on both review scores and revenue.

When replying to consumers it’s important for hotels to keep in mind that they are not only responding to the guest that posted the review; they are responding to future guests who are reading reviews and responses while making their hotel choices.

My research was conducted with online reputation management firm Revinate and involved 80 hotels operated by five different management firms, including review data from TripAdvisor and hotel-performance data compiled by STR and Fairmas, a market-analysis-software provider.