If your hotel ranks top on TripAdvisor, are you not charging enough?

By Daniel Edward Craig

This question has come up several times in recent conversations, and I find it so intriguing I thought I’d investigate.

At its root is a rather mercenary idea: if guests are that thrilled with your property, maybe you’re giving away too much?

The theory is comparable to a tenet of revenue management, which basically says that rather than running at high occupancy a hotel may be more profitable if it jacks up rates and takes a hit in occupancy, striking the ideal balance.

Does the same apply to reviews and rankings? All those ultra-luxury, branded hotels being upstaged on TripAdvisor™ by upscale boutiques, are they beside themselves with indignation—or happily sacrificing a few notches in rankings in exchange for higher average rate?

There are also operating costs to consider. To maintain top rankings you must please a broad spectrum of travelers and, particularly in highly competitive markets, be virtually flawless in execution. For many properties that means not only giving away a lot—free wi-fi, breakfast, beverages, phone calls, first-borns—but giving in a lot to avoid even one bad review.

Question is, by not obsessing over reviews, as so many hoteliers do, and simply focusing on running a great hotel, could you charge more, save costs, and drive higher revenue and profit? Or is the demand generated by being on top so strong all the obsessing is justified?

Curious, I conducted a random poll of hoteliers and industry experts, representing everything from independent motels to luxury brands. I asked them, “If a hotel ranks within the top three on TripAdvisor’s Popularity Index, is it not charging enough?”

There was such a diverse range of opinions I had to share them all. Here’s a condensed summary: 

“No, believe me, since that’s where our properties live, you can be in the top three at any price point. If your booking pace is too fast, then that’s how you know your rates are too low. You can charge more if you are in the top three than you would for the same hotel if your service was a mess or even average, since you are delivering a great experience, a great value and not just a bed and a bath. If people say it was a splurge but totally worth it, then you are in the sweet spot.” – Adele Gutman, VP Sales, Marketing and Revenue, Library Hotel Collection, occupying four of the six top rankings of 431 hotels in New York, NY

“Not necessarily. We see many of our hotels in the top 3 as well as some economy hotels in the top 3 depending on the market … I know our hotel partners who are on property absolutely want to rank as high as they can since they see this as a result of providing great service. Many times they are frustrated to see lower rate properties (with higher turnover) rank higher because they know the service is so much different … I think we see ranking as more of a service result than a rate result. We have a high rate but also feel we provide a high level of service for it, so we hope the review scores reflect that.” – Andrew Gillespie, Assistant Director, Reservations Operations, Four Seasons Hotels and Resorts, Toronto, ON

“First, we have to recognize that we are in business to make money.  There is no other reason for our existence. With that being said, there is a direct correlation between price, product and expectation. The less you charge the less expected of you. If guests are too happy, then you’re probably not charging enough for your rooms.” – Steve Busch, Partner, Jefferson Clinton Hotel, ranked #2 of 28 hotels in Syracuse, NY

“Reviews are based on experience, not rate.  There’s no correlation between price and guest rating. We are officially a three-star property, and we’re beating competitors who are four-star and five-star. I’m getting both: rate and volume.” – Stephen Peters, Resort Director, Pacific Sands Resort, ranked #2 of 16 hotels in Tofino, BC

“Hotel pricing is very complex and impacted by numerous factors. A cursory glance at the top hotels in London for popularity indicates that price is a major factor in the hotel gaining this rank. Whilst ranking is a consumer consideration it would be a very brave and naive hotelier who used ranking as a rationale for a price premium. The vast majority of my business is corporate and I have NEVER heard a buyer mention TripAdvisor in an RFP or other negotiations or major travel agents. So it does not matter as much as TripAdvisor would like hoteliers to think.” – Ciaran Fahy, Managing Director, The Cavendish London, ranked #62 of 1,087 hotels in London, UK

“In my opinion, a hotel’s ranking helps a hotel charge more than its competitive set. Certainly the guest must perceive a value for them to rate a hotel highly, but I have found that service is the great motivator for frequent and favorable reviews.” – Jennifer Rota, General Manager, Distrikt Hotel, New York, ranked #4 of 431 hotels in New York, NY

“I don’t think that price is an issue, but rather perceived value for money. In other words, people will happily pay a high rate if they believe that the service/accommodation/etc warrants it. The top 3 hotels on TripAdvisor are not always the cheapest, just those offering the best value for money, according to the reviewers.” – Barbara Pezzi, Director Analytics & Search Optimization, Fairmont Raffles Hotels International, London, UK

“Not necessarily. The reason it is in the top 3 (a very difficult feat no matter what destination) is because it is providing an excellent experience and a good value for money. Being in the top 3 should help drive more revenue through higher occupancy. Getting greedy could knock a hotel out of the top 3 by decreasing ‘perceived value.’ It is very competitive out there now as hotels develop their own TripAdvisor strategies.” – Madigan Pratt, President, MP&A, digital marketing and advertising agency, Richmond, VA

“The types of hotels that appear in the top 3 or top 10 vary greatly and I think the ranking and score just reflect the clients’ appreciation of their experience at those properties.  Value is definitely one of the criteria, but I think more comes into play.” – Dimitri Antononpoulos, VP Marketing F&B, Antonopoulos Group, with three hotels ranked in the top 10 of 167 hotels in Montreal, QU

“TripAdvisor’s Travellers Choice Award, I believe, has such power that we are slightly undercharging in order to strengthen our ability to win it each year. The recognition we have received over the past four years has allowed us to cement a strong repeat clientele. Granted, as expectations rise due to our reviews it will become more difficult to maintain this award level. But the feeling is by that time we will be less reliant on our TripAdvisor surfers and more loyal to our repeat guests.” – George Freitag, Owner, Elizabeth Lake Lodge, ranked #1 of 26 hotels in Cranbrook, BC

“We have had cases where our client hotels have been charging a premium, based on their TripAdvisor ranking. The problem with turning this into an industry-wide recommendation is as follows: Over 60% of hotel customer reviews now are done on websites outside of TripAdvisor: OTAs, major hotel brands, Google+ Local, etc. Example: many Manhattan hotels popular with Europeans have twice as many customer reviews on Booking.com than on TripAdvisor. In this sense hoteliers must be very careful a) to maintain high review rankings across the distribution spectrum, and b) not to price themselves out of the market.” – Max Starkov, President & CEO, HeBS, hotel digital marketing consultancy, New York, NY

“I don’t think that’s a safe assumption. I interpret popularity as a hotel people love, even if they can’t afford to stay there most of the time, so I’m not sure value plays the highest role in having a hotel ranked popular. Having said that, I usually see lower-tier, higher value hotels placing extremely high on TripAdvisor, but assume that’s because those hotels generally enjoy higher occupancy and therefore have a proportionately higher number of reviews. I’d rather have a higher rating on TripAdvisor than a higher ADR. If a hotel charged more until it was no longer ranked in the top 3, I suspect it’s overall RevPAR would not benefit from the exchange.” – Jil Larson, Corporate Director of Revenue Management, Coast Hotels USA, Seattle, WA

“Top popularity on TripAdvisor says much more to me about a hotel getting it right rather than seeing an opportunity to cash in on the glory … For someone to leave a positive review means the hotel got the balance just right with value for money; service delivery; product; location. Change one of those factors (like value for money – increasing pricing increases high expectations and resentments) and the equilibrium changes and ranking drops. So conclusion – high ranking means keep the balance you have and benefit from the increased demand (= increased revenues).” – Corin Burr, Managing Director, Bamboo Revenue, London, UK

“No. While I do think that value is certainly part of the equation … I also believe that if you charge a lot AND live up to the value proposition then you will still get good reviews. Case in point: Abigail’s Hotel at #1, about the highest priced hotel in Victoria and continuing to push their rates. They are small enough to pull off the amazing service even at a great price. Our hotel as well at #2 – We have the #2 ADR of major hotels in Victoria and have made strong gains in rate share over past 2 years.  I push rate as hard as the market will allow, and maintain our rank.” – Bill Lewis, General Manager, The Magnolia Hotel & Spa, ranked #2 of 70 hotels in Victoria, BC

“If a hotel ranks #1 to #3 on TripAdvisor, it normally has more confidence to sell ‘slightly higher’ than its competitors. Similar impact goes even up to top 10 rank! I strongly believe the hotel’s reputation on TripAdvisor may seriously drive business … not only from individual travelers but from offline travel agents and tour operators.” Eko Purwanto, Director of Operations, Jatra Hotels & Resorts, Bali, Indonesia

“It’s possible they may not be charging enough, but there would be other factors that must be examined such as the relative balance in their market indices, market performance overall and the actual score for the singular value question. With that info and the verification of the validity of the comp set…the strategic pricing question should be answered with some clarity.”  – Bonnie Buckhiester, President, Buckhiester Management, Hospitality Revenue Management Consultancy

So the consensus is … there’s no consensus. But clearly, at least among the top-ranked hotels I polled, the majority feels that the benefits far outweigh any costs.

What do you think? Share your comments here.

Posted By Daniel Edward Craig

 

Print Friendly

16 Responses to “If your hotel ranks top on TripAdvisor, are you not charging enough?”

Read below or add a comment...

  1. Martin says:

    I wouldn’t say a hotel on the top isn’t charging enough but if you want to charge more you had better get to the top.

  2. Larry Mvoi says:

    TripAdvisor Ranking should not necessarily affect you daily average rate but rather value for money the fact that you are getting good reviews reflects that guests are getting value for money and the moment you increase you pricing based on TripAdvisor rather than the value of your offering then l think you are bound to take flack and see a downturn on occupancy’s and guests

  3. John Williams says:

    It’s a two way game. Hotels are free to charge what the market can stand. Consumers have a choice and don’t have to spend their money with any hotel that they think is overcharging.
    Hotel star ratings are based on specifications, (lifts, swimming pools etc). Personally I buy on budget so if I look for a Three Star hotel I will pick up the best rated in my budget range. I can’t see how it would help a Three Star Hotel by raising its prices to Four Star levels..

    • Daniel Edward Craig says:

      Good points, John. The only thing I’d add is that many travelers don’t pay much attention to traditional star classifications these days, especially the younger ones. They are more focused on traveler ratings. Which means a hotel traditionally rated three-star by a government or tourism associations system like AAA could be rated five stars on TripAdvisor. In which case, theoretically at least, it could charge higher rates than if it were merely categorized as three stars under the traditional rating system. If that makes any sense …

  4. Olery says:

    Great discussion! It seems like the conclusion can be drawn that in general hotels don’t agree.

    I think that during stay, once the guests’ money is out of pocket already, they mainly focus on the value they’re getting for it. Value dominates over money as time passes.

  5. Katerina Cronstedt says:

    Agree with Olery “Value dominates over money”

    I run 2 hotels in Moscow:
    – Katerina CITY – central location – #8 on Tripadvisor
    – Katerina PARK – outskirt location – #4 on Tripadvisor!

    – Service is the same
    – Rates at the central one can be twice as high

    Good reviews show percieved good value – which gives higher occupancy.
    Higher occupancy – possibility to increase rates – but that can decrease percieved value…
    Bad perceived value – bad rating – low occ – low rates…?

    A good TA rating is always important!

    Would be interesting to combine STR statistics with ReviewPro GRI.

    /Katerina Cronstedt
    Managing Director Katerina Hotels Moscow Russia
    http://www.katerinahotels.com

    • Daniel Edward Craig says:

      Funny you should say this, Katerina, as Cornell and ReviewPro are about to release results from a study in which they compared STR stats with ReviewPro’s Global Review Index. We’re planning a webinar to review the results on Oct 30. Details will be announced on the ReviewPro blog this week. Stay tuned!

  6. Hhotelconsult says:

    Top ranking means you are doing revenue management well. You rank at the top by being good at it, so it doesn’t come as a surprise when you are there, it’s “as it should be”. The idea of all of a sudden waking up and realizing you are on top, and “wow, maybe we should charge more?” seems a bit flip, and out of synch with how operations really works.

    You get to the top by doing operations, which includes rev management, well. You do not start doing revenue management, all of a sudden, because you popped to the top of TA rankings. A top ranking is simply indicative that you have pricing correct. To react that it might mean you can charge more is possibly missing the point.

    This is a feedback loop… a moebius strip. If you are starting operations or revenue management at Tripadvisor, you’r property is in big trouble. Tripadvisor isn’t the captain steering the ship… it’s the guy in the crow’s nest giving you feedback.

    • Daniel Edward Craig says:

      Ah Michael, only you could get in references to a moebius strip and a crow’s nest in a blog comment concerning the hospitality industry. Always enjoy hearing your perspective.

  7. Chris Patridge says:

    Every hotel’s goal should be to surprise and delight every guest! A high rating on Trip Advisor shows that you have your service and amenity levels RIGHT, not your pricing strategy WRONG!

  8. Rajesh says:

    some valid points and cant agree less that if one is on top in the ratings consistently over a period of time that goes to show that there is already good practices on rev mgmt being practised.

  9. Margherita says:

    This is a very interesting point to investigate, but in many cases our client properties have been in the top ten of TA usually charging more than competitors. Guests are happy for a great service, and a great service is great if it is linked to a right price. Obviously those who rank so well have not only a great service, but also a right price. The problem is when your service is good but it is linked to a too high price. Price is not the point, relationship between price and quality is the point. And when that’s good, you can even dare to have higher rates!

    • Daniel Edward Craig says:

      Nicely put, Margherita. I agree: it’s all about the “relationship between price and quality.”

  10. Kingly says:

    To build management ship to run hotel…
    http://www.bantinghouseinn.com/

Leave A Comment...

*

* Copy This Password *

* Type Or Paste Password Here *