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A Cornell University study confirms what hospitality operators have long suspected—social media reviews drive hotel reservations. Moreover, they boost hotel pricing power.
Customer reviews play a major role in customers' determination of a hotel's quality. Price used to be the criterion for that, but customers now put greater weight on user-generated content on social media sites.
"Anecdotally, we suspected that good reviews would allow hotels to sell more rooms at better rates, other things being equal," said Anderson, who is an associate professor at the Cornell School of Hotel Administration. "I analyzed hotel-related data from ReviewPro, STR, Travelocity, and TripAdvisor to quantify the effects of social media reviews and reputation on the hotel industry. The results showed that social media commentaries do move markets, and it makes sense for hotel operators to pay attention to their online reputation."
ReviewPro, STR and TripAdvisor are among numerous partners of the Cornell Center for Hospitality Research (CHR) at the School of Hotel Administration.
Anderson's study is the first comprehensive effort to quantify the impact of social media upon lodging performance as measured by bookings, occupancy, and revenue. First, he documented the increasing influence of TripAdvisor, as the number of reviews consulted by consumers prior to booking a hotel room has steadily increased over time. Second, an analysis of transactional data from Travelocity illustrated that a 1-point increase on Travelocity's 5-point scale allows the hotel to increase its price by 11.2 percent and still maintain the same occupancy or market share. Third, by matching ReviewPRO's Global Review IndexTM with STR's hotel sales and revenue data, Anderson's analysis finds that a 1-percent increase in a hotel's online reputation score leads up to a 0.89-percent increase in a hotel's average daily rate (ADR), as well as an occupancy increase of up to 0.54 percent and up to a 1.42-percent increase in revenue per available room (RevPAR).
Related reading: Cornell Software Able to ID Fake Hotel Reviews