Ratings and reviews are changing everything; and independent hotels that are getting great reviews are finding that in today’s world they can be more successful than ever before. Why? According to a new UCLA study, independent hotels that become fan favorites in the online review space are making more than ever before, and these hotels are successfully closing the gap between the rates they can charge and their branded brethren. That means hotels expertly delivering great service have opportunity to reap even more revenue rewards.
The study, spearheaded by Brett Hollenbeck, an assistant professor at the UCLA Anderson School of Management, examined 15 years of data in the form of 1.5 million reviews from multiple platforms. He concluded that while hotel chains may still be eking out more rooms sales, the margin between those properties and non-branded independent hotels is narrower than ever before. The reason? Online reviews and ratings are boosting consumer confidence, and thereby leveling the playing field as independent hotels garner more pricing power.
In an article appearing in the Wall Street Journal, Hollenbeck believes “brand recognition doesn’t carry nearly the same weight” as it did before the explosive growth of the internet, especially for hotels in the midscale and economy segments.
According to the article, branded hotels simply aren’t capturing nearly the revenue differential as they were prior to the internet era. The report says branded hotel’s revenue advantage sits at about 19% as of 2015, a precipitous drop from the 32% advantage enjoyed in 2000. Most important, Dr. Hollenbeck’s research discovered online reviews had a large effect in narrowing that gap.
Here’s how the differential gap is closing. The study notes that overall, an independent hotel getting 10 reviews on average translates to about 1.7% higher revenue. For a branded “chain” hotel the revenue bump accounts for just a 0.7% increase; a full one percent advantage for independent hotels. Website reviews had the greatest impact on hotels with a long-term low-quality rating—as measured by AAA’s diamond ratings— the WSJ article says.
In urban markets, the disparity was less pronounced falling to 25.9% from 34.5%, according to the study, while small markets saw the biggest differential drop between brands and independents. In those markets, branded hotels saw revenue differential drop from 25% to 6.9% while mid-sized and suburban markets saw a drop from 33.4% to 13.7%.
Hoteliers still utilizing a premise-based property management system, for example, can likely make up more of the difference by upgrading to a cloud-based PMS such as the SkyTouch Hotel OS®. The system is designed to assist independent minded hoteliers run their business more effectively. That translates into better customer service and higher resulting reviews and ratings. A cloud-based PMS such as the SkyTouch Hotel OS® has an uptime of 99.4%, giving hoteliers constant access to the tools needed to make every guest stay exceptional.
The SkyTouch Hotel OS® also features an intuitive interface taking as little as two shifts to learn. That means even the newest employees are empowered to focus on delivering great customer service, rather than wondering how to operate the cloud based property management system.