There used to be a time when hotel revenue managers simply had to look at predicted demand and keep an eye on competitors\u2019 rates to optimize pricing. <\/p>\n\n\n
When travelers booked a hotel room, they had no way of knowing the quality of the <\/span>guest experience<\/span><\/a> unless they had stayed at the hotel before or knew someone who had. For them, the primary quality indicator was price.\u00a0<\/span><\/p>\n All that changed when online reviews came along.\u00a0<\/span><\/p>\n Online reviews bridged that information gap, creating value transparency and replacing price as the only quality indicator. <\/span>For revenue managers, that meant adding a new strategy (and a new skill) to their decision-making: reputation pricing.\u00a0<\/span><\/p>\n In this article, we explore reputation pricing, strategies for improving reputation and rates, and technology to help.\u00a0<\/span><\/p>\n \n Reputation pricing uses your hotel\u2019s online reputation as one of the factors influencing rates. As <\/span>IDeaS explains<\/span><\/a>, reputation pricing aligns your hotel\u2019s room rates with three elements: your guests\u2019 knowledge about the level of experience you offer, their expectations about the value they can get for their money, and their willingness to pay for that value. <\/div>\n\n \n\n<\/span><\/p>\n Your online reputation has a significant impact on occupancy and profitability.\u00a0<\/span><\/p>\n Research shows<\/span><\/a> that the more positive reviews a property has, the higher it will rank in search results. This, in turn, leads to more visitors, conversions, and, finally, higher occupancy rates.\u00a0<\/span><\/p>\n Additionally, if guests believe (based on reviews and ratings) that they will get more value from staying at your property, they\u2019ll be willing to pay more for it. Pablo noted during Cloudbeds Live that as long as a hotel fits within a traveler\u2019s budget and is in the right location, they\u2019re likely to splurge and pay a little bit extra to guarantee a positive guest experience. That\u2019s when reputation pricing comes in, allowing revenue managers to increase metrics like ADR (average daily rate) and, ultimately, RevPAR (<\/span>revenue per available room<\/span><\/a>).<\/span><\/p>\n Several research studies have confirmed the connection between reputation and rates. One study by <\/span>Cornell University<\/span><\/a> estimated that a 1-point increase in user review score (on an OTA\u2019s 5-point scale) would allow a property to increase prices by 11.2% without harming its occupancy rates.<\/span><\/p>\nWhat is reputation pricing?<\/h2>\n
How your online reputation impacts pricing strategies<\/h2>\n
The connection between reputation and rates<\/h3>\n