The idea that a hotel with better guest reviews will likely make more money is not a particularly controversial one. It stands to reason that the more positive an experience guests have at a property, the higher the rate they are willing to pay and the more likely their return will be.
What a 2016 study, based on data obtained monthly between 2013 and 2015 from ReviewPro and Kalibri Labs and conducted by professor Cathy Enz of the Cornell University School of Hotel Administration, revealed is that there is also a correlation between review scores, channel mix and true net revenue performance (revenue after customer acquisition costs). The most interesting kernel of the study: Hotels that receive a higher share of bookings through brand.com tend to have higher online customer review rankings.
The study was conducted by combining monthly channel and revenue performance data from Kalibri Labs to map out individual hotel channel behavior and net revenue performance. This was then combined with hotel-matched aggregated online review data from ReviewPro. The ReviewPro data came in the form of the Global Review Index, an industry-standard online reputation score calculated from reviews aggregated across 175 OTAs and review sites. Professor Enz combined these data points with controls for location, star rating and other hotel characteristics to identify correlations between review scores, review volumes, booking channel share and net revenue performance.
Professor Enz’s core finding supports the basic idea that happier guests translate to more revenue. She found a positive and significant correlation between higher review rankings and Net RevPAR performance. Net revenue per available room, or Net RevPAR, looks at room revenue after direct customer acquisition costs such as commissions, transaction fees and loyalty expenses are removed. Happier guests not only translate to more revenue, that revenue flows through to the bottom line and isn’t consumed by customer acquisition costs.
With regard to channel share, Professor Enz found that 3- and 4-star hotels with a higher proportion of their business booked through brand.com tended to receive generally higher review rankings. For three-star hotels that correlation comes along with better Net RevPAR performance as well. This means that hotels that drive more business through their direct brand.com channel do better in terms of review rankings as well as generate more net revenue in certain segments of the industry, directly improving the bottom line.
One hypothesis for the correlation is that bookings through brand.com can provide a hotelier more opportunity to provide a higher level of service through personalization and other amenities available to direct booking or loyalty guests, leading to a higher level of guest satisfaction and ultimately higher review rankings.
Professor Enz’s study also found that, in the 4-star segment specifically, GDS channel share, in addition to brand.com channel share, correlated positively with higher guest review rankings.
Given this important distinction, shifting guests who arrive from indirect channels to direct channels for future stays is a tactic that hotels should focus on. For example, providing guests with an incentive to book directly on subsequent stays or collecting their email address and/or signing them up for a loyalty program.
There is a clear interplay between positive guest reviews, direct Brand.com, and in some cases GDS, channel share and Net Revenue performance for hotels. Maintaining a positive online reputation and driving direct business are both important goals for which a hotel must strive to maximize profitability.
Contributed by Matt Carrier, director of client engagement, Kalibri Labs, Rockville, Maryland