Everybody likes a deal and when it comes to selecting hotels and most consumers say they choose based on price. But a new study from software company SAS shows that the reviews left by previous guests can be even more important than price in shaping a consumer’s decision.
That means hotels need to step up their efforts to monitor what guests say about them and their competitors on review sites and social media, said Kelly McGuire, executive director of the Hospitality and Travel Global Practice at SAS.
“There’s a lot of talk of social media in the (hospitality) industry but no one is talking about how that social media is having an impact on price,” she said.
McGuire, who has a Ph.D in revenue management, conducted the study with Pennsylvania State University Hospitality Management Professor Breffni Noone. The study consisted of setting up a scenario to mimic the online purchase of a hotel room. The mock site resembled travel sites, such as Expedia or Travelocity. Study participants saw varying prices and elements such as user reviews. After viewing the site, participants were then asked their reaction and how likely they were to make a purchase based on the elements that were presented to them.
The results showed that consumers did not view price as an indication of quality, nor was price the most important factor. Consumer decisions were impacted most by the reviews of other consumers. The results also suggest that hotels that counter poor reviews with lower prices could find that strategy backfire. In the minds of consumers, low prices and poor reviews add up to an inferior hotel.
SAS studies aspects of consumer behavior because among the Cary company’s array of software offerings are tools that analyze social media. The company also has software that helps the hospitality industry forecast demand and determine pricing. The study could help SAS develop ways to bring those capabilities together. When a hotel has more information about the impact of reviews – of a competitor or itself – that hotel can make better pricing decisions, McGuire said.
While McGuire acknowledged that the study findings could also shed light on consumer behavior in other businesses, such as restaurants or retail, only hotels were studied for this report. McGuire said the report findings show just how far social media has come in its importance in shaping business behavior. A few years ago, social media was seen as a way to engage consumers, she said. But the vast amount of data produced by social media can find another purpose. Businesses need ways to mine the data and analyze it in order to find what is useful to them. McGuire said that analysis will have implications beyond helping hotels set prices. Analysis can also help hotels assess their overall operations, as well as the effectiveness of employee training.
“There’s applications all across the business and not just from an engagement perspective,” McGuire said. “The more that we find from those unstructured text documents, the more it can help hoteliers take advantage of the investments that they made.”
[SAS ARCHIVE: Check out more than a decade of SAS stories as reported in WRAL Tech Wire.]
