Reputation Blog
Data Analytics

Reputation Pricing – Knowing What You’re Worth Is Worth It


Reputation and revenue management go together like…analytics and automation.

The rampant rise of social media and consumer review platforms has given hotel guests an immediate and amplified voice in the hospitality marketplace—with the potential to directly impact bottom line. In fact, it has been reported that for every point increase in a hotel’s online reputation score, bookings increase over 14 percent and average daily rate (ADR) goes up over 11 percent.

Most reputation management programs help hotels not only identify operational advancement opportunities for improving guest experiences but also increase the effectiveness of their marketing operations by leveraging their reputation performance.

The next era in utilizing online reputation for hotels is to take reputation management beyond operations and marketing and use it to identify profitable pricing opportunities and make smarter revenue management decisions. And today’s top automated revenue management systems (RMS) allow hoteliers to evaluate opportunities to influence purchases at the point of decision-making and identify new ways to increase guest satisfaction.

Reputation pricing aligns your hotel’s rate-setting strategy with guests’ knowledge, expectations, and willingness to pay—at the point of purchase. In the age of big data and the abundance of social channels, user-generated content acts as a signaling mechanism by the better-informed party to the less-informed party to communicate the true characteristics of a product or service. 

But how should hotels enact successful reputation pricing practices? And, more specifically, how can hotels set pricing strategies for demand as a function of price when demand is also a function of reputation?

The answer has to do with how online reputation impacts guests’ price elasticity: user-generated content minimizes guests’ perceived cost of uncertainty when making online purchases, and influences their price elasticity, especially as the cost of the decision increases. According to industry studies, user generated content influenced guests more than the importance of location, price, and loyalty programs in luxury, upscale, and timeshare categories.

The technology to integrate online reputation into pricing analytics empowers revenue managers to keep up with their guests’ technology consumption and turn them into dynamic revenue-optimizing inputs. Graphical tools that help hoteliers visualize their market position in relation to both rate and reputation will arm them with additional insights and data to measure the impact on their online reputation performance.

Revenue managers worldwide must integrate the impact of guest ratings and reviews into their optimally and competitively priced offerings. In the age of data proliferation and value transparency, it is absolutely imperative hotels utilize their reputation performance to enhance their pricing capabilities to realize new revenue opportunities and drive rates. Guest-centric pricing not only introduces reputation management into the revenue management realm but also provides an avenue to promote collaboration between operations, marketing, and revenue management teams.

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