Revenue managers have been trying to understand the relationship between review sentiment and rates. Hotels with better reviews than the competition would like to charge the most for their product, but revenue managers also know that guests pay close attention to price.

In this exclusive interview, EyeforTravel’s Ritesh Gupta talks to Kelly McGuire, executive director, Hospitality and Travel Global Practice, SAS about how revenue management executives can leverage social media data and channels and strengthen their decision-making.

EFT: How is the RM department making the use of social media data?

KM: I think revenue management has a tremendous opportunity to lead the charge within the organisation to incorporate social media data and channels into their strategic and tactical decision making. The research I have done in this area clearly indicates that consumers are influenced by user-generated content (UGC) when making travel purchase decisions. It’s more than just having the most ‘attractive’ price.

Companies must consider their ‘social’ position compared to their competitors.

In fact, my research has shown that a low price will not overcome the impact of a negative review. Consumers will look at the review sentiment first, eliminating any choice with negative UGC, and then move on to evaluate price and other attributes. This is not to say that a low price is not attractive, but rather, that consumers are value conscious, rather than simply price conscious, and they will look at the whole package. User-generated content, in the form of ratings and reviews, have become a key part of this value equation.

EFT: So what do consumer prefer?

KM: The reality is that consumers will always prefer to pay a lower price, all things being equal. However, consumers do use social media to inform value perceptions. Our research provides insight into this problem in two areas: first, a low price will not overcome the impact of negative reviews, so if a hotel happens to be in the position of having very negative social sentiment, they need to fix the problem instead of worrying about their prices.

Secondly, we’ve seen that consumers will look to the review sentiment first, then pick the best price option. You won’t even be in the choice set if your review position is not comparable or better than the competitive set.

This means that revenue managers must pay attention to social sentiment when determining pricing strategies.

The challenge that revenue managers face is that given the volume of social data across a myriad of channels, it is incredibly difficult to analyse all of this social data manually, and then build that relationship with price.

EFT: How can the RM team prepare itself for gathering and analysing this data?

KM: Revenue managers need to first think strategically about how they plan to use social data. The most important piece of advice I can give is for revenue managers to first think about the business problem they are trying to solve and then figure out how social data can contribute to the analysis. Like any sound statistical analysis, if you don’t start with the problem first, you could end up chasing your tail instead of finding insights in the data.

Once the business problems are defined, revenue managers should educate themselves about what data gathering and analysis options are available, and the pros and cons of each (as one would do when embarking on any new initiative involving technology).

Questions to consider include:

1.  How many sources are collected (just the big names like Facebook and TripAdvisor, or anywhere conversations are happening)?

2.  Is the software using advanced analytics like natural language processing, or just business rules?

3.  How many languages does the application handle natively?

4.  How do the results get stored and accessed?

5.  How flexible are the unstructured text analysis options (are you restricted to a set of words or concepts or can you build your own)?

Revenue management must have a seat at the table to ensure that whatever solution that is chosen is flexible and extensible enough to be deployed and used across the enterprise (instead of just in marketing, or just for monitor and respond applications).

EFT: How can social media data contribute in RM decision making?

KM: There is clearly a relationship between review sentiment and rates. As revenue managers explore the ways that consumers develop value perceptions during the purchase process, their pricing strategies will change.

Looking at the relationships by channel can also help inform the distribution strategy, as revenue managers negotiate contracts, and think through price, allocation and placement strategies.

I think there’s also an opportunity for hotels to use influence scores as part of the customer value equation.

Social influence is a method of calculating a consumers actual influence within a social network. This is not just the number of friends and followers, but is this network actually listening and responding to the content that is produced. If you can quantify that influence score into the potential value of future bookings, then you have a means of comparing a guest with 100,000 Twitter followers to a guest who will pay a high room rate, to a guest who is forecasted to spend in ancillary outlets.

EFT: What results can be expected from such initiative?

KM: As hotels begin to leverage opportunities afforded by social media, I think we’ll see improvements in competitive positioning, increases in market share, and higher revenue.

Social media is simply another data source and channel available to revenue management. As such it provides the same opportunities as any new data source, better information to drive better decisions.

Social data won’t be a magic bullet by any means, but if hotels are strategic about how they apply it, and smart about what results can actually be expected, they will see tremendous advantage.