Results from a new study show that the review valence (positive or negative) had the most significant impact on choice behavior, followed by price, then aggregate rating, then TripAdvisor rank.
With the advent of the Online Travel Agents (OTA’s), prices became transparent, and hotels were forced to pay close attention to how they were priced relative to the competition in the market. Now with the growing popularity of online ratings and reviews, consumers have additional information to use to evaluate the value of your hotel relative to your competitors’ properties. In order to continue to make profit-maximizing price and positioning decisions, hotel managers must understand how consumers use this new information with price to make a purchase decision.
A recent study by SAS and The Pennsylvania State University was designed to evaluate how consumers make tradeoffs between price and non-price attributes of a hotel when making a purchase decision. There are four major takeaways from this study for hotel managers:
- Reviews and price are the most important influencers of choice. While consumers did pay attention to aggregate ratings, TripAdvisor rank and to a lesser extent, brand, positive reviews contributed the most to consumer choice behavior followed by lower price.
- Negative reviews remove you from the choice set. Period. Lower price or higher ratings do not overcome the impact of negative reviews. Consumers simply will not choose a hotel with negative reviews. Hotels that are in this unfortunate situation should focus energies on improving their reputation.
- Consumers prefer to pay a lower price. While consumers would go for a higher-priced hotel when the reviews and ratings were better than the alternatives, all things being equal, they will look for the lowest price. Hotels need to understand their position relative to their competition both on reputation and on price in order to take advantage of any pricing power associated with positive UGC.
- Consumers only notice high ratings and rankings. Our results showed that consumers only notice ratings and rankings when they are high as compared to other choices. Consumers do not place any value on the comparison between low and mid-level ratings and rankings.
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