Reviews and Revenue: Are They Connected?
It’s that time of year again: budget season! When planning for next year becomes all-consuming. Our goal each Fall is to make that process easier for you by providing data to inform your business planning process and to help you prepare your presentations to leadership. This month, we’re sharing the latest guest research about how reviews can affect your bottom line. Keep reading to see how a few simple actions can make an impact.
A question many hoteliers often wonder is: what impact do reviews have on my hotel? To shed light on an answer, we studied recent research by Womply, a data analysis software company, to better understand the correlation between reviews and revenue for hotels. Their data science team conducted an in-depth analysis of transactions and online review data for more than 4,500 lodging places in every state. As hotels continue to be more sensitive to negative ratings than any other industry, this study drilled down into what many business owners consider the most important part of their online presence - their overall star rating - and how that impacted revenue for hotels in their research.
Sweet Spot is 3.5 Stars – 4.5 stars
The study found that Hotels with ratings between 3.5 stars and 4.5 stars earn more revenue than any other group, with the 3.5 to 3.9 star hotels earning the highest average revenue. What is surprising is that Hotels in their data set with higher than the 4.5 star rating actually earn less than their competition with a lower star rating.
Have You Claimed Your Free Listings - especially Google My Business?
Research also revealed that the more review sites a hotel claims, the bigger the average increase in annual revenue. Hotels that claim their free listings on at least three review sites or more earned 27% more revenue. Hotels that didn't claim their listing on any review sites earned 32% less revenue. What’s interesting is that 20% of the Hotels in their data set had not claimed any review site listings.
When it comes to which review site has the highest correlation to increased sales, Google is the most important of any of the single review sites. Businesses that did not claim their Google My Business listing averaged 24% less in annual review, while those who claimed their Google listing averaged 10% more in annual revenue.
Keep An Eye on Google Reviews and Facebook Recommendations
As we mentioned in an earlier blog post about Google’s impact on the hotel industry, Google is quickly becoming a major force in online reviews. For many consumers, Google is now the review site of choice with 63.6% saying they are likely to check reviews on Google before visiting a business - more than any other review site. And Facebook is not far behind. The 2018 Review Trackers Online Reviews survey showed that Google and Facebook have the highest growth YOY in comparison to sites that focus primarily on reviews such as TripAdvisor.
This trend means that the influence of reviews is transferring to the two most popular websites in the world. With consumers being constantly logged in to their Google or Facebook accounts on their phones, they don’t have to take any other steps to leave a review. Making that process easier equals more reviews. For hoteliers, this means that it will be nearly impossible for potential travelers to do any research about a hotel without immediately running into reviews.
Takeaway for your hotel: Since close to two-thirds of consumers are saying they’re most likely to check Google reviews, make sure you’ve claimed your Google My Business listing and are actively watching those reviews. With the shift of more reviews to Facebook, keep your eye on that growing trend as well.
How Does Review Volume Affect Hotel Revenue?
While it may be natural for hoteliers to want to focus on their star rating, findings from the Womply research suggests that they should focus more on increasing the number of reviews they receive. Hotels in their research averaged a combined 151 reviews per hotel across all review sites, so they analyzed revenue at hotels whose review counts were above and below the average 151 review threshold. They found that the volume of reviews is extremely important and impacts a Hotel's bottom line. Hotels that had more than the average number of reviews (151) earned 62% more in annual revenue than businesses with below-average review counts. Hotels that had 50 reviews or less earned 35% less than hotels with 151 reviews or more. The threshold seems to be at least 100+ reviews to see a positive impact on revenue while reaching 400 reviews will have the greatest impact on revenue.
Takeaway for your hotel: Strengthen your training of Hotel associates to ask guests to leave a review about their stay experience upon departure.
Recent Reviews Are Best
We’ve seen that the number of reviews a hotel has on review sites is certainly important, but how important is the recency of those reviews? The study showed that Hotels with more recent reviews increased revenue by 30%. In comparison, Hotels that did not have more current reviews lost 20% in revenue. Hotels that obtained as little as 1 to 8 new reviews earned 31% more in revenue than the ones with no new reviews and Hotels that consistently received 25+ fresh reviews earned 41% more in revenue. This suggests that future guests may put a premium on more recent reviews and may be more likely to book after reading “fresh” guest feedback.
In addition, Google announced that they are placing more weight on newer reviews vs. older reviews with their algorithms for star ratings, so it is becoming more and more important to continue pushing for guest reviews or feedback in 2020.
Effect of Negative Reviews or Not Responding
Next, the study looked at the ratio of positive to negative reviews and their importance. Here’s where they found an interesting twist. Hotels that had a healthy mix of positive AND negative reviews earned the most revenue. How much is a “healthy mix”, you might ask? Womply’s data showed that it’s anywhere from 20% to 35%. Hotels with 20%-25% negative reviews earned the most revenue while Hotels with 0-5% negative reviews earned 14% less than average. Hotels with 35-50% negative reviews still earn 1% more than the hotels with 0 – 5% reviews.
Takeaway for your hotel: Respond to all negative reviews knowing that future guests are assessing your response. Guests expect to see some negative reviews when browsing review sites and may be suspicious that a hotel is too good to be true if they don’t see any. An honest explanation or attempt to make things right goes a long way. Hotels that show as many authentic reviews as possible will win in the long run.
How Do You Compare?
The Womply study also analyzed online reviews of Hotels in their data set on a state-by-state level to see which ones received the most positive or most negative reviews. Hotels in Vermont averaged a positive review rate of 81% while Hotels in Georgia averaged a positive review rate of only 58%.
Online reviews are the digital equivalent of the printed comment cards that many businesses used to use. However, rather than the one-way communication of leaving a comment card, online reviews give you an opportunity for a dialogue with guests about their experiences. When you respond it demonstrates that you care and that you value input. The research we’ve discussed shows that Hotels that recognize and respond to how guests use the internet to search, evaluate, and choose where to book perform better financially than those that don't.
According to the Womply study, Hotels that do the following experience the best revenue performance:
- Claim all their free business listings on relevant review sites
- Are highly responsive to customer feedback posted on review sites
- Get and maintain a star rating between 3.5 and 4.5 on key review sites
- Receive a steady flow of authentic reviews
- Have a credible review profile, comprised of about 15-35% negative reviews
Do You Need a Strategic Partner?
At iResponze, we know that responding to reviews requires consistent attention and a strategy for developing and maintaining your hotel’s personality. We have helped many clients meet the challenge, and we have learned a lot about how to be successful with your current and future guests. If you apply the action items listed above, you can meet the challenges of responding. Of course, we would welcome the opportunity to show how we can meet the challenge for you and your staff, leaving you all with more time to interact with the guests in front of you. Contact us for a free consultation today.