How Hotels and Restaurants Benefits From Positive Online Reviews

How Hotels and Restaurants Benefits From Positive Online Reviews

Nowadays, availing products and services, especially those that are non-basic such as hotel stays, and fine dining, rely on online reviews. Consumers usually browse through third party review sites, website feedback, and social media reviews on a certain service provider before availing of the services that they offer.

The hotel and restaurant industry largely benefits from online reviews simply because these feedback pertain to real experiences of customers who may or may not have enjoyed their services. And whether the review is positive or negative, the establishment still benefits from it because reviews, as long as they are truthful and authentic, provide raw feedback that is needed to help improve service levels. Hotel Reputation Management

A study published by the International Journal of Information Management entitled “Are customers’ reviews creating value in the hospitality industry? Exploring the moderating effects of market positioning,” has concluded that indeed online reviews are creating an impact on the hotel and restaurant industry. The study in essence answered how hotels and restaurants benefits from positive online reviews.

How Hotels and Restaurants Benefits From Positive Online Reviews

Hotels and restaurants benefit from online reviews whether these are positive or negative. (Photo Credits)

“The results from fixed effects regression models show that online ratings from user-generated reviews on TripAdvisor have a positive effect on hotel revenue growth that is outweighed by a negative effect on gross profit margins. Thus, the increasing importance of user-generated reviews in online communities for travellers is shifting hotel competition from unit profit margin to volumes and to higher room occupancy rates, with online retailers capturing most of the value created in online transactions through social media features and with a limited effect brought on net profitability. However, hotels with higher star-rating, with a lower degree of local competition and localized outside popular destinations were found to obtain more benefits from online visibility on their gross and net profitability.” eEndorsements Restaurant Review Management

Download the whole study here.

As for restaurants, The Guardian quoted a study conducted by two economics professors from the University of California – Berkeley which aimed to measure the relationship between online ratings and the potential customer’s decision to avail of the services of the rated restaurant.

In their conclusion, the economists said social media influences the consumer’s perception of the quality of the services provided by an establishment.

“They found that a restaurant with a rating improved by just half a star – on a scale of 1 to 5 – was much more likely to be full at peak dining times. Indeed, an extra half-star rating caused a restaurant’s 7pm bookings to sell out on from 30% to 49% of the evenings it was open for business. Significantly, the two economists found that the increase in trade happened without any change in prices or the quality of food and service, confirming that it was the reviews that brought in the new customers.”

Read the whole article here.

The Wall Street Journal also published an article pertaining on the effects of online reviews to the income of hotel and restaurant operators. The write-up focused on the findings of a study conducted by an economist from Microsoft Research and a Marketing Professor from The Boston University Questrom School of Business. eEndorsements Corporate Reputation Management

“The component of the study that convinced the researchers that the reviews caused the increases was a natural experiment that allowed them to examine abrupt changes in hotel ratings. Expedia and Hotels.com combined their review collections in 2013 so that hotels on the sister sites displayed the same rating. After scores were averaged across both platforms, some rose, some fell and some were unchanged. Demand rose by 26% to 29%, on average, for each additional ratings star. Hotels whose ratings fell lost market share.”

The original published write-up can be found here.

Online reviews indeed play a huge part in the Hotel and Restaurant Industry.

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