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The Impact of Social Media on Lodging Performance

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November 15, 2012

The Impact of Social Media on Lodging Performance

Executive Summary:

Social media has been touted as having an increasingly important role in many aspects of the hospitality industry, including guest satisfaction and process improvement. However, one of the more intriguing aspects of social media is their potential to move markets by driving consumers? purchasing patterns and influencing lodging performance. In the absence of a comprehensive attempt to quantify the impact of social media upon lodging performance as measured by bookings, occupancy, and revenue, this report uses the unique position of Cornell?s Center for Hospitality Research to combine data from three CHR research partners (ReviewPro, STR, and Travelocity), and two other data providers (comScore and TripAdvisor) in a first attempt at determining ROI for social-media efforts. The analysis finds the following. First, the percentage of consumers consulting reviews at TripAdvisor prior to booking a hotel room has steadily increased over time, as has the number of reviews they are reading prior to making their hotel choice. Second, transactional data from Travelocity illustrate that if a hotel increases its review scores by 1 point on a 5-point scale (e.g., from 3.3 to 4.3), the hotel can increase its price by 11.2 percent and still maintain the same occupancy or market share. Third, to measure the impact of user reviews on hotel pricing power, consumer demand, and revenue performance the study uses matched-sample data from ReviewPRO and STR. By matching ReviewPRO?s Global Review IndexTM with STR?s hotel sales and revenue data, a regression analysis finds that a 1-percent increase in a hotel?s online reputation score leads up to a 0.89-percent increase in price as measured by the hotel?s average daily rate (ADR). Similarly this 1-percent increase in reputation also leads to an occupancy increase of up to 0.54 percent. Finally, this 1-percent reputation improvement leads up to a 1.42-percent increase in revenue per available room (RevPAR).

Source: Center for Hospitality Research - Cornell School of Hotel Administration

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