Online hotel reviews hit bottom lines: report

Reviews becoming “important” information source


By Allie Sanchez

Customers who vent online may actually have a say on hotel bottom lines, for better or worse.

A new study on which The Wall Street Journal reported said that better reviews resulted in increased demand, and consequently, a boost in prices. However, research also discovered that the positive feedback was directly related to an increase in prices.

“Even if only 20% of people bother to read the reviews and then stay in places on the basis of the reviews, they’re moving the entire market around,” Greg Lewis, a Microsoft Research economist said in The Wall Street Journal report.

The study examined financial data from nearly 45% of the hotels in five states over a span of 10 years, as provided by Smith Travel Research.

Lewis, and co-author Georgios Zervas, a marketing professor at the Boston University Questrom School of Business, found that in 2014, when a hotel’s rating rose one star, demand rose by 25% and prices went up by 9%.

Another experiment involving Expedia and reviews from 2013 revealed the same trend. Demand for hotels rose from 26% to 29% when a hotel earned another star rating, but those that lost stars also lost market share, the report pointed out.

“We’re starting to see reviews become important sources of information,” Harvard School of Business faculty Michael Luca also said in the report.

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