This question has come up several times in recent conversations, and I find it so intriguing I thought Id investigate. At its root is a rather mercenary idea: if guests are that thrilled with your property, maybe youre giving away too much?
This question has come up several times in recent conversations, and I find it so intriguing I thought I’d investigate.
At its root is a rather mercenary idea: if guests are that thrilled with your property, maybe you’re giving away too much?
The theory is comparable to a tenet of revenue management, which basically says that rather than run at high occupancy a hotel may be more profitable if it jacks up rates and takes a hit in occupancy, striking the ideal balance.
Does the same apply to reviews and rankings? All those ultra-luxury, branded hotels being upstaged on TripAdvisor™ by upscale boutiques, are they beside themselves with indignation—or happily sacrificing a few notches in rankings in exchange for a higher average rate?
There are also operating costs to consider. To maintain top rankings you must please a broad spectrum of travelers and, particularly in highly competitive markets, be virtually flawless in execution. For some properties that means not only giving away a lot—free wi-fi, breakfast, beverages, phone calls, first-borns—but giving in a lot to avoid even one bad review.
Question is, by not obsessing over reviews, as so many hoteliers do, and simply focusing on running a great hotel, could you charge more, save costs, and drive higher revenue and profit? Or is the demand generated by being on top so strong all the obsessing is justified?
Curious, I conducted a random poll of hoteliers and industry experts, representing everything from independent motels to luxury brands. I asked them, “If a hotel ranks within the top three on TripAdvisor’s Popularity Index, is it not charging enough?”
Here’s a condensed version of some of the responses I received. For the full list visit www.reknown.com/blog.
“No, believe me, since that's where our properties live, you can be in the top three at any price point. If your booking pace is too fast, then that's how you know your rates are too low. You can charge more if you are in the top three than you would for the same hotel if your service was a mess or even average, since you are delivering a great experience, a great value and not just a bed and a bath. If people say it was a splurge but totally worth it, then you are in the sweet spot.” – Adele Gutman, VP Sales, Marketing and Revenue, Library Hotel Collection, occupying four of the six top rankings of 431 hotels in New York, NY
“Not necessarily. We see many of our hotels in the top 3 as well as some economy hotels in the top 3 depending on the market … I know our hotel partners who are on property absolutely want to rank as high as they can since they see this as a result of providing great service. Many times they are frustrated to see lower rate properties (with higher turnover) rank higher because they know the service is so much different … I think we see ranking as more of a service result than a rate result. We have a high rate but also feel we provide a high level of service for it, so we hope the review scores reflect that.” – Andrew Gillespie, Assistant Director, Reservations Operations, Four Seasons Hotels and Resorts, Toronto, ON
“First, we have to recognize that we are in business to make money. There is no other reason for our existence. With that being said, there is a direct correlation between price, product and expectation. The less you charge the less expected of you. If guests are too happy, then you're probably not charging enough for your rooms.” – Steve Busch, Partner, Jefferson Clinton Hotel, ranked #2 of 28 hotels in Syracuse, NY
“Reviews are based on experience, not rate. There’s no correlation between price and guest rating. We are officially a three-star property, and we’re beating competitors who are four-star and five-star. I’m getting both: rate and volume.” – Stephen Peters, Resort Director, Pacific Sands Resort, ranked #2 of 16 hotels in Tofino, BC
“Hotel pricing is very complex and impacted by numerous factors. A cursory glance at the top hotels in London for popularity indicates that price is a major factor in the hotel gaining this rank. Whilst ranking is a consumer consideration it would be a very brave and naive hotelier who used ranking as a rationale for a price premium. The vast majority of my business is corporate and I have NEVER heard a buyer mention TripAdvisor in an RFP or other negotiations or major travel agents. So it does not matter as much as TripAdvisor would like hoteliers to think.” – Ciaran Fahy, Managing Director, The Cavendish Hotel, ranked #62 of 1,087 hotels in London, UK
“I don’t think that price is an issue, but rather perceived value for money. In other words, people will happily pay a high rate if they believe that the service/accommodation/etc warrants it. The top 3 hotels on TripAdvisor are not always the cheapest, just those offering the best value for money, according to the reviewers.” – Barbara Pezzi, Director Analytics & Search Optimization, Fairmont Raffles Hotels International, London, UK
“Not necessarily. The reason it is in the top 3 (a very difficult feat no matter what destination) is because it is providing an excellent experience and a good value for money. Being in the top 3 should help drive more revenue through higher occupancy. Getting greedy could knock a hotel out of the top 3 by decreasing ‘perceived value.’ It is very competitive out there now as hotels develop their own TripAdvisor strategies.” – Madigan Pratt, President, MP&A, digital marketing and advertising agency, Richmond, VA
“TripAdvisor’s Travellers Choice Award, I believe, has such power that we are slightly undercharging in order to strengthen our ability to win it each year. The recognition we have received over the past four years has allowed us to cement a strong repeat clientele. Granted, as expectations rise due to our reviews it will become more difficult to maintain this award level. But the feeling is by that time we will be less reliant on our TripAdvisor surfers and more loyal to our repeat guests.” – George Freitag, Owner, Elizabeth Lake Lodge, ranked #1 of 26 hotels in Cranbrook, BC
“We have had cases where our client hotels have been charging a premium, based on their TripAdvisor ranking. The problem with turning this into an industry-wide recommendation is as follows: Over 60% of hotel customer reviews now are done on websites outside of TripAdvisor: OTAs, major hotel brands, Google+ Local, etc. Example: many Manhattan hotels popular with Europeans have twice as many customer reviews on Booking.com than on TripAdvisor. In this sense hoteliers must be very careful a) to maintain high review rankings across the distribution spectrum, and b) not to price themselves out of the market.” – Max Starkov, President & CEO, HeBS, hotel digital marketing consultancy, New York, NY
So the consensus is … there’s no consensus. But clearly, at least among the top-ranked hotels I polled, the majority feels that the benefits far outweigh any costs.
Daniel Edward Craig is a former hotel general manager and the founder of Reknown, a consultancy specializing in social media strategy and online reputation management. He collaborates with ReviewPro as Industry Advisor, Engagement. Visit www.reknown.com.
Copyright ©2012 Daniel Edward Craig
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