The Yelp Factor and Independent Businesses

I recently read a good study at the Harvard Business School site entitled “The Yelp Factor” (ok, I actually just read the summary of the study, here). The research is asking a simple question that has enormous potential in the world of ecommerce and, increasingly, brick and mortar commerce: Do online reviews influence business? And, if “yes” by what margin? Since they first have come into play, I think that most marketplace participants have a gut “yes” on this.  Michael Luca has brought in real data points via Yelp, however, to help quantify what we assume to be true. 

One significant observation that the study yielded was that local businesses are most affected by reviews while chain venues (think Burger King) are the least affected. This means that if they provide good quality and establish some sort of review optimization effort, independents can gain ground against the big guys. This is a strong insight, but why is it occurring? McDonalds (and all those who followed) became such an enormous success because consumers came to learn that a McD's cheeseburger in Ithaca, NY will taste exactly the same as in Tuscaloosa, AL. While some people really love McDonalds for what it is, most people go to McDonalds because they know what to expect. They have enough information on McDonalds to enable a decision. With Yelp and all other online reviews, nearly that same level of information is available for local (ie: “unknown”) venues, too. End result: small guys can compete with big guys b/c they are known quantities now. 

This "tilting of the scales" towards independent venues also aligns well with a significant cultural shift in America that has been trending towards "connoisseurism". That is, our shift towards treating everything like people have traditionally done wine. Think micro-brew beers, OXO utensils, specific types of cow for steak, narrowcast popular music…  You know, long tail stuff making it a little more big-time. The connoisseurism trend shows a growing native preference for unique services of high quality, and online reviews are enabling this via a virtuous cycle that also yields more reviews.

While these reviews are certainly opening up opportunity for independent venues, Mr. Luca seemed challenged by the fact that the reviews might not necessarily represent actual quality. That is, there can be a gap between actual quality and described quality (via reviews). Where Mr. Luca sees fog, however, I see opportunity: It means that operators have the opportunity to control described quality (to a certain extent) or otherwise become victim to it. It makes a very strong case, again, for Review Optimization and largely puts the power in the hands of those who run quality operations.

Beyond these major points, the study confirms a lot of what we know and preach already at DSS: Review Optimization is a must. More reviews are better. Ratings affect revenue. Have a look at the study; if you see other thoughts in there (perhaps regarding Yelp’s rounding rules?), let’s discuss!

Starwood's Reviews, Part 2: Publish Reviews, Don't Host Them

In yesterday's post, I declared that "Starwood has made what will prove to be a seminal move in the hospitality space". When making this statement, I was focused mainly on Starwood's decision to publish reviews within their website, as opposed to their decision to host their own reviews. I talked with Jack a little today and we both realized that I had glossed over this important distinction.  Let's define the two strategies right away, so that we can then get to analyzing pros/cons of each...

• Reviews Posted to Brand.com: This strategy uses a product like Revinate's Buzz or even standard products from TripAdvisor to publish 3rd party reviews on a property's website. Shoppers go to the hotel's site to read reviews and can continue to shop from there. 
• Hosted Reviews: This strategy involves a solution like Customer-Alliance or BazaarVoice to generate proprietary reviews that live on a brand's website and nowhere else (or at least on no other third party review sites). 

So which is the better strategy? Well, regardless of which one hoteliers might be considering, the objectives for Review Optimization fall along these major points:

• Let's start with the basics: Hoteliers must bring reviews to their own websites. See yesterday's post for more detail.
• At all costs, hoteliers must promote and ensure authenticity and unbiased publication of reviews. This holds true for "hosted reviews" as well as "third party reviews on brand.com"
• To the greatest extent possible, hoteliers and 3rd parties must offer greater utility in filtering and searching reviews vs the review sites. (Again, see yesterday's post for more.)
• Enabling social sharing of reviews is a good idea and worthy of testing and learning. I very much applaud Starwood for their features in this area. In my opinion however, it is not a strategy that will yield significant results at this time. It will in the future, but there are more immediate goals to reach first, like...
• Reviews must be leveraged for optimization in TPIs/OTAs and search engines. Even if these channels are not necessarily preferred, they cannot be ignored.
• Above all else, hotels must optimize for Google maps/places. They must do it now. This includes driving reviews to Google. The Android mobile platform is growing too quickly and Google Hotels will be a viable player in this space within 24 months. This advice is most urgent for limited service and urban hotels that are most likely to be booked last minute, but is still valid for vacation destinations as well. Of course this is tied deeply to natural/paid Google search too.

Defining the objectives for review optimization helps us to define a best-possible review solution and to rank existing options. With the above points in mind, my thoughts on these strategies are...

• I strongly support "reviews posted to brand.com": it enables all optimization strategies while still drawing traffic to your own site. While this strategy lacks social sharing functionality, the opportunities for optimization in third parties and Google are simply too big to ignore at this time. Yes, it's true that readers can still be tugged away to TripAdvisor by navigating deeply into the reviews, but I think it is a current fair tradeoff for having the reviews on brand.com to begin with. 
• I am less enthusiastic regarding "hosted reviews". While this strategy does have the current advantages of social sharing  and better "review browsing" features, I think the cost is too dear in terms of lost optimization in the third party world. Plus, I cannot vouch for this first-hand, but I have to assume some onerous business process work for matching up reviews with actual reservations. 

In the near future, we will see products evolve to meet the overall set of best-practice features and functionality. I think there is a place for hosted reviews, particularly in their ability to replace current guest-sat surveys. They simply cannot be deployed at the full expense of 3rd party reviews. At least not yet... Anyone have a patent on the idea of a reverse TripAdvisor yet? It aggregates all "hosted reviews" into a single public site...

Starwood's Seminal Decision to Include Reviews on Their Websites

Starwood Hotels announced on Friday that they will now begin including user reviews on their websites. I very much support this strategy and congratulate Starwood on being first to market with what will prove to be a seminal move in the hospitality space. Here’s why…

In a few short years, user-generated reviews have become an immutable third element of the hotel shopper’s experience, along with the traditional “price” and “location”. It is important, however, to view the development of user reviews within the larger context of online shopping for hotels. Consider that, from roughly 1997 through 2005 (or possibly later), TPIs/OTAs thoroughly ate hotel brands’ collective lunch by realizing and leveraging the power of online reservations. Hotel brands eventually caught on and have since been involved in a carefully orchestrated turf war with Travelocity et al. While TPIs/OTAs certainly form an important channel, hoteliers have lured shoppers to their own sites in the past seven years by offering “best rate guarantees” a more robust shopping experience (hopefully including rich photo and video content), and more. 

As a category, however, TPIs/OTAs continue to evolve and innovate much faster than hotel brands. This is particularly true with mobile (and tablet) web and apps and especially true with reviews. Even as they otherwise optimize their websites for best-possible experiences that will draw traffic from the OTAs, hotel brands have been losing out on brand.com revenue because reviews --that must have information for nearly all hotel shoppers-- are not available on hotel brand websites! The end result is that even brand loyalists are forced to browse reviews on TripAdvisor or any other review site of their choice before attempting to book at the brand site. And of course, a good many of them are lured into the bookings paths of these others sites instead... Whether the reviews or good or bad, shoppers are going to read them. Hoteliers should do like Starwood has done and bring those reviews to their own sites, where they are more likely to convert shoppers in a direct channel and to gain ancillary data points (like time spent reading reviews, etc) to boot.

So while we can congratulate Starwood on bringing reviews to their site, we must ask ourselves the next question: How will they change the habits of a market that has been taught for the past 15 years to read reviews on independent and objective sites like TripAdvisor? Including user reviews on a website is an important first step, but not enough to change market behavior. There has to be something else that will draw users to the site for one-stop reviewing+booking. The trick to changing this engrained user behavior is to evolve the review experience and make it more useful to guests than it is today. If --and only if-- they succeed on this front, will shoppers use this new functionality on Starwood’s website in any meaningful quantity.

To Starwood’s credit, this is where their new solution shows great potential. They include new filters for reviews like Loyalty Members (or not), Purpose of Travel, and Frequency of Travel.  While l would like to see additional filters (average review score by authors or "travelling with children", for example), this is a great start and will certainly evolve in time to help people see scores that correspond with their general tastegraphs.

Overall, I think that Starwood have done a great job in anticipating challenges and by simply being brave enough to be the first to dive into the pool. The rest of us can watch carefully for market signals regarding willingness to believe the authenticity of reviews that are hosted by the brand. I’ll be looking, too, for any signs of operational strain that could be caused by having to vet reviews and validate that the authors actually stayed. We should also be on the lookout for evidence of new search strategies that might be deployed: Will Starwood always link to the homepage or booking engine? Or would review pages make for a more appropriate first stop in some cases?

How about you? Are you willing to trust Starwood reviews?

Edit: Despite my enthusiasm in this post, Starwood's solution is not perfect.  See next post for more thoughts...