Online voice of customer data adds to complexity of hotel pricing
Which is more influential when choosing a hotel room? Is it guest reviews and ratings or price? In a highly competitive market factors influencing consumer’s buying decisions are important for revenue managers to understand when setting room rates. New information from a recent study from SAS and The Pennsylvania State University, “Effects of Price and User-Generated Content on Consumers’ Pre-purchase Evaluations of Variably Priced Services1”, looked at how user-generated content (UGC) works alongside price to affect perceptions of quality and value, which influence purchase behavior.
Key findings from the study include:
Social media is part of a powerful shift in consumer buying patterns in the hospitality industry. So how should revenue managers account for UGC in their pricing decisions?
“The power of the consumer review cannot be underestimated in today’s market,” said Kelly McGuire, PhD, Executive Director of the Hospitality and Travel Global Practice at SAS. “Hospitality managers need to pay particular attention to the sentiment, and content, of reviews, not just for their own service offerings but for their competitors too. Applying SAS Text Analytics to UGC data will help managers evaluate how a service offering compares to its competition in terms of consumer perception. It’s clear from this research that UGC is not just the domain of marketing. This intelligence can also be used to help develop pricing and operations strategies to gain competitive advantage.”
“Social media has added another layer to the already complicated job of pricing hotel rooms,” said Breffni Noone, PhD, Associate Professor at the School of Hospitality Management at The Pennsylvania State University. “The advent of online travel agents (OTAs), such as Travelocity.com and Expedia.com, ushered in an era of price transparency, forcing revenue managers to pay close attention to their price position relative to competitors. With reviews and ratings readily available at the point of purchase another element is interacting with price to influence the purchase.
“Predictive analytics can factor UGC into pricing decisions such as whether to match or undercut competitors’ rates on the OTAs. Insights yielded from analyzing the effects of price and UGC on pre-purchase evaluations can inform channel-wide pricing and positioning strategies,” added McGuire.