In today’s highly competitive hospitality industry, guest experience has evolved from a function of customer service to a key influencer of hotel pricing strategy. As consumers become more informed and online booking environments offer new levels of transparency, hotels will discover that positive guest experiences are not just beneficial—they are essential for maintaining pricing power.
The influence of online reviews on pricing
Guest satisfaction has always been a critical metric for hotels, influencing everything from occupancy rates to brand loyalty. Ideally, a satisfied guest is not just a repeat customer; they are also a brand ambassador, spreading positive word-of-mouth and potentially influencing the willingness of future guests to pay a premium.
The significance of positive guest experiences in a hotel’s ability to raise its prices is evident through research, which demonstrates that for every one-point increase in a hotel’s online reputation score, bookings can rise by over 14 percent. A study by Cornell University’s Centre for Hospitality Research also found that for every single point increase (on a 1-5 scale) in a hotel’s online reputation score can lead to an 11.2% increase in price without affecting occupancy rates. These studies demonstrate that investments in guest experience are not just operational costs, but strategic initiatives to enhance revenue. Guests who receive personalised service, enjoy high-quality amenities, and experience overall satisfaction are more inclined to pay higher prices for their stays.
Guest feedback in a digital world
Online review platforms and social media have become vital tools for collecting feedback and insights on guest experiences, enabling hotels to optimise and improve their processes. For example, if reoccurring feedback on social media highlights issues with a disorganised or congested check-in process, the operations team could respond by deploying additional staff to alleviate bottlenecks, providing a resolution that creates a better guest experience.
Guest feedback on social media and review sites can also be integrated with ongoing competitor analysis to help hotels make informed decisions about their marketing and pricing strategies. For instance, if a hotel consistently receives high ratings, with most positive comments highlighting excellent service, a prime location, and well-designed rooms, the marketing department can leverage these strengths in their campaigns. Additionally, revenue managers can capitalise on this positive online sentiment to reinforce the hotel’s pricing strategy, justifying higher rates based on the strong customer feedback.
Reputation pricing aligns a hotels pricing with guests’ knowledge, expectations, and willingness to pay at the point of purchase. In an online world, user-generated content (like online reviews) acts as a signalling mechanism, allowing the better-informed party to communicate the true qualities of a product to the less-informed party. This dynamic means that a hotel’s online reputation directly impacts guests’ price elasticity: positive user-generated content minimises guests’ perceived uncertainty when making online purchases, and influences their price elasticity, especially as the cost of the decision increases.
By integrating online reputation into pricing analytics, revenue managers can transform online feedback into dynamic inputs that optimise revenue. Graphical tools that help hoteliers visualise their market position in relation to both rate and reputation provide valuable insights, enabling them to measure and understand the impact of their online reputation on performance. These tools empower hoteliers with the data needed to make informed, strategic decisions.
To harness and amplify positive peer reviews, hoteliers may also consider enacting customer advocacy programmes. These programs could incentivise guests to share their experiences online by offering rewards, discounts on future bookings, or even the chance to win a free stay. These incentives are designed to motivate guests to post about their positive experiences, influencing potential travellers to consider becoming future guests.
How personalisation impacts guest experience
The role of personalisation in shaping positive guest experiences is significant and should not be underestimated. New research of 1,749 hotel guests found that 61% of hotel guests are willing to spend more if they receive a customised experience.
To create unique, personalised experiences, hotels must leverage data from their Customer Relationship Management (CRM) systems and property management software. By building an accurate profile of each guest, hotels can offer tailored recommendations and services. For example, if a guest consistently books spa treatments during their stays, offering them a special discount on their favourite treatment before they even ask can make them feel valued, understood, and perhaps more inclined to make this nice-to-have purchase than they would have been without the “nudge”.
Personalising guest communication is equally important. From pre-arrival emails that suggest tailored activities or dining options based on a guest’s previous choices, to post-stay follow-ups that request feedback on specific aspects of their experience, every interaction should ideally feel bespoke. Another key aspect of personalisation is offering guests the ability to customise their in-room experiences. This could include allowing guests to select their preferred room temperature, lighting settings, or even the type of pillow they prefer before they arrive.
With advanced revenue management technologies, guest personalisation can even extend to the pricing of their stay. Guests can select specific components of a room they want and opt out of those they don’t, allowing them to either spend more for additional features or secure a lower rate by selecting only what they need. This customisable approach to pricing enables hotels to dynamically adjust the price of any component based on the customer’s preferences. Not only does this help hoteliers monetise elements of the guest experience, but it also enhances the level of personalisation and choice, ultimately supporting greater guest comfort and satisfaction.
The guest experience begins before check-in
The guest experience doesn’t begin at check-in; it starts the moment someone decides they need to or want to travel and begin searching for a hotel. This means that all public-facing public touch points, from the website to social media, should offer a consistent experience. Pricing should be uniform across all channels, and property information needs to be presented in an informative and appealing manner. Given the growth in popularity and power of social media, showcasing desirable imagery that portrays aspirational guest experiences are crucial, particularly for attracting younger travellers who are heavily influenced by visuals in their decision-making process.
Enhance guest experiences, improve financial outcomes
In an industry where competition is fierce and differentiation is key, the guest experience has emerged as a powerful lever for pricing strategy. Research demonstrates that hoteliers who prioritise and invest in the quality of their guests’ experiences are better positioned to command higher prices and achieve greater financial success.
