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Euromonitor International is pleased to present an interview examining the impact that user generated content has on hotel purchasing decisions for both business and leisure travellers. Euromonitor International Travel and Tourism Research Manager Michelle Grant spoke with Kelly McGuire, Ph.D. Executive Director, Hospitality and Travel Global Practice for SAS.
I run the hospitality and travel global practice at SAS. My role is to drive the strategic direction for the practice at SAS. My team provides domain expertise to our sales teams, ensures that SAS’s products meet the needs of the market by working with SAS R&D, and evangelizes the value of analytics to the hospitality and travel industries.
We used choice modeling to understand which attributes of a hotel purchase are used in business travelers’ decision making, and how influential those attributes are in value assessments. Participants were told that they had a meeting in a major city center and needed to book a hotel. We showed them three hotels that were equivalent on location, class of service and amenities (all “business friendly”), but varied on the following attributes: price, brand, review sentiment, review language, review content, aggregate rating and TripAdvisor Rank. We asked them to indicate the hotel they would book. They did that three times, and by tracking the pattern of choice across the sample, we could statistically determine the value placed on each attribute level and each combination of attributes.
My research partner, Dr. Breffni Noone, Assistant Professor, The Pennsylvania State University, and I are revenue managers by training – we went through the PhD program at Cornell Hotel School together. We have always been interested in the intersection of the consumer and revenue management pricing practices. As we have watched the market evolve over the last few years, we recognized that there was new and different information available at the point of purchase that might influence consumers’ reaction to price – and therefore, change the way revenue managers needed to think about pricing.
The key results of this study were that business travelers pay attention to reviews, and negative reviews significantly impact value perceptions. They want to know what the experience will be like, positive or negative, so they value reviews that are descriptive as opposed to emotional in nature. Loyalty program affiliation is also very important to business travelers – they will put up with a hotel that’s just “OK” if they can get their loyalty points. Interestingly, business travelers noticed, and valued, a “deal”. They responded to the lowest price in the market, but were indifferent (not price sensitive) among any other price levels. It appears that there is something about human nature that likes that “deal” even if they aren’t spending their own money. However, even that low price did not overcome the negative impact of a negative review.
Business travelers rely on user generated content strongly to assess value. They rely on all forms of UGC to assess whether the hotel is “OK”. They are highly influence by negative reviews. Aggregate ratings also matter. In fact, the study showed that business travelers valued a hotel that was OK as opposed to terrible more than they valued a hotel that was great instead of OK.
There were some very interesting differences in behavior between leisure and business travelers. For leisure travelers, negative reviews removed the hotel from the choice set, period. Leisure travelers simply would not consider a hotel with negative reviews, no matter the price or any other attributes. They were also highly price sensitive, with value perceptions decreasing dramatically as the price went up. These two attributes were driving factors for leisure travelers. They used ratings and TripAdvisor rank to asses that the hotel was “great” as opposed to “OK”, but didn’t associate any value of a hotel that was “OK” over “terrible”. There was small amount of value associated with a known brand over an unknown brand, but that was the least salient attribute to the leisure traveler, whereas it was the second most salient to the business traveler.
This study confirmed that the hotelier’s job is not getting any easier. They must manage reputation position and price position relative to the competitive set, but they also need to clearly understand their business mix to build effective pricing and positioning strategies. While this series of studies does help to explain some of the forces at work in the market place, it is nearly impossible in today’s complex market, for a hotelier to keep track of all this manually. They need a revenue management system that accounts for all these impacts to make the day to day pricing decisions, and a reputation management system that can synthesize all the UGC into an actionable format, freeing up the hoteliers to make the more strategic decisions that will sustain revenue growth into the long term. They also need to work closely with their counterparts in marketing and operations to ensure that the voice of the customer is incorporated across the organization.
Absolutely. These effects will certainly vary depending on industry –so I wouldn’t want to extend what we found here to other related industries without testing. I would hypothesize, however, based on the strong reaction in this study – that reviews will be important to consumers in most cases.
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