TripAdvisor Data: Not Just for Guests Anymore
By Gary Isenberg, President, LWHA Asset & Property Management Services
By now, nearly every type of traveler prepping for a journey scans TripAdvisor for reviews of hotels in their destination city prior to securing a reservation. By perusing prior guest comments, consumers receive unfiltered and unbiased perceptions of specific properties. Travelers want to know before they book for instance if: Are the rooms clean? Is the service top-notch? Most importantly, does a hotel deliver value for the price?
If a property delivers a positive guest experience, it enhances the persuasiveness to attract future guests. If it falters deficits are proclaimed loudly on TripAdvisor and/or other social media channels. In the age of TripAdvisor, hoteliers, who in effect manage daily leasing of guestrooms with dynamic and forever changing pricing, confront risk to their bookings pace.
For all the angst TripAdvisor sometimes causes hotel managers trying to attract reservations, the data found in those guest comments provide a treasure trove of information increasingly utilized not only by potential guests, but by lenders, investors, buyers, marketing executives and even vendors as well.
Guests Data Are no Longer Private
Prior to TripAdvisor and the advent of social media, guest comments or surveys were typically kept private and only seen by hotel and brand managers. Even today, cards are still placed in hotel rooms with a list of multiple-choice questions for guests to check off. These questionnaires ask for a ranking in several areas, such as staff conduct, food services or overall cleanliness. Or after a hotel stay, the franchise company or a private consumer research company such as J.D. Power sends guests a survey in the mail.
Let's be honest about those printed guest surveys. The questions are crafted by hotel managers aiming for a particular response. Rarely do guests write down detailed comments in the three to four lines allotted on such questionnaires. It is great if the scores are high, but is that truly what the guest perceived? Guests could also make their remarks directly to the front desk. But for the most part, whatever those surveys yielded - good or bad - went no further than the hotel walls.
Long gone are the days when those comments passed only between the guest and management. With social media platforms such as TripAdvisor, Facebook, Twitter and Instagram, travelers now possess a very transparent and forever evolving forum to share honest experience observations, and in many cases with photographs included.
The Comments Keep Coming
During the past decade the volume of TripAdvisor reviews has grown exponentially from 6 million to more than 350 million last year. To conclude to specific ratings, TripAdvisor utilizes a proprietary algorithm that searches comments for common threads, which is then data processed to determine a score based on one to five bubbles.
When a hotel matches the room rate with the service and overall guest experience, the TripAdvisor rating soars. And, make no mistake, that high ranking on TripAdvisor translates into higher revenues.
As the TripAdvisor algorithm moves through the comments, it places more weight on the most recent comments and the volume of comments. So, for example, if a hotel is rated 12 out of 20 hotels in its market, it is likely it amassed numerous recent comments. All things being equal, if Hotel A has many good comments, but those responses are six months old, it will receive a lower ranking than Hotel B, which collected a high number of comments in the past month.
The Unbiased Truth
Although comments posted on TripAdvisor and other social media platforms are subjective based on the guest's perceptions, such thoughts nevertheless offer an objective view of an experience such as staying in a hotel. Rather than a management-sponsored customer survey where questions can be contrived to attain a certain result or the data can be manipulated, these reviews represent the unvarnished opinions of guests. Such comments present a truer picture of the hotel.
Now, consider how comments can be used by a potential investor who seeks an objective assessment of a hotel and its operation. Typically, when an owner puts a hotel up for sale, an intermediary designs a glossy brochure complete with staged photographs of an asset. While there is nothing inherently wrong with such a presentation, prospective debt and/or equity sources can now peruse TripAdvisor and Instagram photos to obtain a realistic observation of a property's condition. A guest-posted Instagram photograph is obviously not photo-shopped and a careful analysis of it offers an authentic portrait of a property without having to physically inspect the asset.
Today, financiers, asset managers, and industry advisers now add TripAdvisor reviews on their checklist when contemplating a hotel investment. During their due diligence, TripAdvisor commentary and scores rank in the same category as evaluating a property's market location, franchise affiliation, operating statistics such as ADR and RevPAR, competitive set and standing, and revenue stream during past several years. Once used only by the traveling public, TripAdvisor comments and the data they reveal have expanded in use and now affect hotel financing and operations.
Sorting through TripAdvisor comments provide an opportunity to uncover certain themes or trends that inform investment decisions. While these reviews do not necessarily impact a hotel's valuation - many factors play into that equation - such comments indicate areas where owners and/or investors may have to allocate monies to position a hotel for durable profits.
It is worth noting that not all comments are created equal. Investors, lenders and consultants should emphasize the recent comments as reviews from several years ago are most likely not relevant anymore. Take note of how often comments are made on certain aspects of a hotel. Reviews that frequently make mention of similar operational and/or physical qualities of a property clearly illustrate property specific trends.
For instance, guests noting the wear on upholstered furniture or a malfunction of the air conditioning system indicates a property might have deferred maintenance issues that need to be addressed through a renovation. If guests complain about a lack of food outlets in a hotel and/or the surrounding neighborhood, an opportunity to enhance revenues may be possible by converting an underutilized meeting room into a grab-and-go restaurant.
Not a Deterrent to Sales
Owners who desire to sell a hotel should not fear the impact of negative TripAdvisor reviews. In my experience, most investors and/or managers believe they can operate a property better than prior regimes. Unless a property is physically in bad condition, negative comments on TripAdvisor do not necessarily sway potential buyers away from a purchase. In fact, TripAdvisor reviews can actually assist in marketing an asset for sale by steering the seller and buyer to the proper price point.
The comments suggest value enhancement opportunities for potential investors. Comprehending negative trends help identify where a physical property and/or its operations require a capital infusion. Brokers can utilize such comments to market a hotel for sale as a value-add opportunity to prospective buyers. Capital markets providers and advisors now possess the ability to discover whether or not a hotel is well-operated and/or well-maintained. If it is, lenders know the property has enough income stream to support the loan. Conversely, if the TripAdvisor commentary illuminates where capital is required, lenders then formulate financing based on that and the overall business plan of incoming ownership.
TripAdvisor commentary has uses beyond investment decisions. Hotel sales and marketing professionals targeting group business can capitalize on a competitor's less-than-complimentary TripAdvisor reviews to convince corporate travel executives to book at their hotel. Sales managers peruse Trip Advisor pages of their competitors searching for an edge, and exploit any any negativity found.
Furthermore, supply vendors can scrutinize TripAdvisor comments to ascertain good and/or services that a property would be well served obtaining. One of our clients recently received a call from a vendor stating that his company could assist with the poor connectivity the hotel had been experiencing. In fact, the sales person quoted past guest comments noted on social media sites.
TripAdvisor comments offer limitless data that hotel owners, investors, lenders, vendors and marketing officers can utilize for all different facets of hotel operations. From investment decisions and renovations to food service and winning group business, TripAdvisor reviews are now ingrained into the lodging market beyond merely helping the traveling public select a hotel.
The influence of TripAdvisor is vast and will only continue to grow. The rise of TripAdvisor underscores the importance of not only good service and property maintenance, but in addition, reputation management. Hotel owners and operators should encourage guests to make favorable remarks on TripAdvisor.
Further, hotel managers should always respond to TripAdvisor comments - whether good or bad -as doing so indicates hotel staff has empathy for its customers and are willing to interact with guests, even if it's just a simple thank you. Because it is not just future guests who read reviews, it is investors and advisers as well. Certainly, as social media sites expand their users, then the uses of such data will grow exponentially. The world of big data is here, and the hotel industry is no exception.
Gary Isenberg is President of LWHA® Asset & Property Management Services. Mr. Isenberg’s expertise includes third party asset management, serving as an owner’s rep, due diligence for real estate investors, and development services to negotiate management or franchise agreements. His asset management specialties include capital budgeting, PIP costing, and internal control and accounting. A graduate of Fairleigh Dickinson University with a Bachelor of Science in Business Management and minors in Corporate Finance and Information Systems, Mr. Isenberg started his career with ITT Sheraton as a Corporate Trainee. He was rapidly promoted over a series of increasingly responsible positions, mergers and acquisitions, at both the corporate and property level. Mr. Isenberg can be contacted at 212-300-6684 x108 or firstname.lastname@example.org Please visit http://www.lwhadvisors.com for more information. Extended Bio...
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