Do Travel Reviews Have An Impact on Hotel Conversion Rates and Pricing?

Anecdotally, most hoteliers will agree that reviews and online user-generated content are important for business. Quantifying this importance, however, is often difficult.

We recently developed a study together with Donna Quadri-Felitti, Academic Chair and Clinical Associate Professor at NYU, Preston Robert Tisch Center for Hospitality and Tourism to better understand the effect that online reviews have on hotel conversion rates and pricing at the point of purchase. The study is the first of its kind using simulated booking engines and heat mapping technology to determine consumers’ hotel choices.

The findings reveal that reviews do indeed have a significant impact on both hotel conversion rates as well as the rates that travelers are willing to pay. Among the findings:

• Given equal prices, travelers are 3.9 times more likely to choose a hotel with higher review scores
• When hotel prices are increased for hotels with better review scores, travelers are more likely to book the hotel with the higher score despite the higher rate
• When asked, 76% of travelers were willing to pay more for a hotel with higher review scores

The study provides evidence that a strong focus on online reviews and reputation management can indeed lead to increased revenue, both from improved conversion rates as well as optimizing pricing.

Improved Conversion Rates, Holding Other Factors Constant

The first booking engine displayed three hotels, all with the same daily room rates ($100/night), but different average review scores (80, 85, 90, on a 1-100 point scale). In this simulation, 72% of respondents chose hotels with higher average review scores.

Price Optimization

In the remaining three simulated booking engines, respondents were presented hotel results with adjusted prices, based on review scores (i.e., the higher the review scores, the higher the price). Despite raising rates up to 20%, the hotel with the highest review scores averaged the highest clickthrough rates.

Finally, respondents were explicitly asked if they would be willing to pay more for hotels with higher review scores. More than three-fourths (76%) said that they would pay more for a hotel with better reviews.

Hotels will find the details of the report useful in considering their immediate online reputation management and rate strategy as well as in determining how to allocate funds for 2015.

The full white paper can be downloaded here.