p.p1 successful source of hotel reviews? To answer this

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Strategic and Tactical Tools for E-Business
Online reviews on TripAdvisor
Submitted by:
Daniela Micu, Monika Blum Khayati, Michael Poprawka, Ruben Dalfovo
Study program: Business Administration and E-Business
Project administrator: Lena Vedel Bechlund Zink
Project examiner: Qiqi Jiang
Deadline: 1th December 2017
Number of pages: 8
Characters count: 16370
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1. Why has TripAdvisor become a successful source of hotel reviews?
To answer this question, we have come up with five different reasons, why we believe TripAdvisor became so
successful. Our first reason is novelty to the market. When TripAdvisor was founded in the year 2000, by the
CEO Stephen Kaufer and three Cofounders, there simply was not any site like TripAdvisor. Their main
motivation was to solve a problem based personal experience, namely to find unbiased travel-related
information on the internet, easy accessible for everyone and not just brochures or polished websites of hotels,
which mostly only offered a function to book a room but did not provide any deeper insight. Thus, to solve the
problem, they had the idea to create a platform where people can exchange their experiences, either positive
or negative ones. Back then there was not really a platform, just single small blogs all over the internet, which
were difficult to find (Gupta and Herman, 2011).
The second reason for their success was their effective revenue model. Originally, they tried to make profit
through banner ads and license content to other websites, which turned out not to be too successful. So, they
implemented the new idea, that online travel agencies (OTAs) can place text-ad links on their website. The site
itself would only contain reviews and ads, and the actual reservations and bookings would be carried out by
the OTAs. This resulted in a great click-through rate of 10%, the industry average back at the time was around
2% (The Search Agency’s State of Paid Search Report, 2013). Therefore by 2002 TripAdvisor was already a
profitable company (Gupta and Herman, 2011). Because of their huge success they were acquired by
InterActive Corporation in 2004, which later established Expedia.
This leads us to the third reason, development and investment. Now with the backing of a huge Corporation
they kept adding new features like tools to search flights in 2009, or listings for vacation rental properties, in
2010. TripAdvisor started to invest into the mobile market by acquiring travel-related mobile application
developers. They purchased Apps like “Where I’ve been” (map and photo scrapbook) (Gruber, 2011) and “Gate
Guru” (information about flights and airports) (Lunden, 2013).
Our fourth reason is their overall business model. It is crucial to highlight that TripAdvisor was free of charge
for regular consumers. They could write, read, and share experiences for free, which was a bold and smart
decision, therefore they were able to gain so much popularity and traffic. In the online gaming industry, there
were few cases, where similar games, followed different approaches, but the free to play game usually gained
far more popularity and won the market in the specific segment, for example like League of Legends.
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TripAdvisor made money through three different services. They made most of their money/revenue with
nearly 80% through click-based advertising, like text-ad links. Hotels or OTAs who used this service, were
charged on a Cost-Per-Click basis, with prices ranging from 0.25$ to 1$ (Gupta and Herman, 2011). 15% of their
revenue was through display-based advertising, for example through banner ads. They were charging their
partners on a Cost-per-thousand-impressions(CPM) basis, and the average CPM was around 15$. Last but not
least, they made roughly 5% through subscriptions, which were business listing services. Business owners could
add their contact information and website URL directly on TripAdvisor. Also, it was possible to advertise sale
prices or special packages. Those business listings cost around 500$ – 10000$ a year, depending of the size of
the business (ibid.).
Finally, we come to our fifth and final reason. You can have the perfect business model or perfect innovation,
but if you cannot get any users to visit your website and make it appealing to them, your business will fail.
Therefore, the probably most important reason TripAdvisor got so successful is because they managed to
create a very high appeal to consumers, which straightly leads us the second question.
2. Why is TripAdvisor so appealing to consumers? Why do users write hotel reviews? Why do
users read hotel reviews?
When trying to answer the question why TripAdvisor is so appealing to customers, one must consider that are
two things customers use the site for. One is to gain information about a service or hotel, and the other is to
share their personal experience with others.
For customers writing reviews TripAdvisor is attractive because it is free of cost, they can register using their
Facebook account which is fast and easy, and they do not need to prove that they stayed in a hotel or used a
service. The motivation to write a review for most customers was to share their personal experience so others
can make an informed decision when choosing, or/and reward the location for good service. Those two things
go hand in hand. Writing a positive review about a hotel you were fully satisfied might convince customer to
stay there, writing a bad review might deter people from doing so and ‘punish’ the business that didn’t make
good on its promise. It is obvious that people intuitively know the importance of the reviews. Since most of the
review writers have consulted reviews to make choices themselves. According to the case 41% have shared
recommendations in the past over email, social media or blog, and more than half claim to have written
reviews on review website.
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Since guest experience is ranked together with price and location as the most important factor when choosing
a hotel, reading unbiased and independent reviews is important to the customer. Studies have shown that 72%
of consumers trust an internet review as much as recommendation from family or friends. Reading only
reviews is an important part of the decision-making process when it comes to hotels or services. TripAdvisor, I
seen as an unbiased and independent sources of hotel reviews, since they are not directly trying to sell a
package deal, which is in stark contrast to reviews of travel agencies or the hotel website and advertising
material. Because it is so easy for customers to write reviews on TripAdvisor there is a plethora of different
reviews. And since consumers instinctively follow statistical principles in this instance, the more reviews there
are the more believable and reliable an overall positive or negative assessment becomes. This makes
TripAdvisor so appealing to customers making a choice.
3. How can major hotel chains influence online reviews? Should they even try to? Why?
Hotel can incentivize their guests to write online reviews by taking a variety of different actions. They can
display review marketing materials in the hotel lobby, such as hanging on the wall Trip Advisor certificates or
other visual images of online appraisal companies. Receptionists may remind guests to give a feedback about
their experience as they are checking-out or after a few days from the check-out by sending them an email.
Additionally, the staff can be trained to actively respond to online comments, either positive or negative ones
(Teixeira and Kornfeld, 2016). Going through online opinions is particularly important for Hotel managers,
because they can gain awareness of upsides and downsides of their business from customers’ perspective.
Especially when the review is a negative one, an active response from the Hotel’s management explaining the
reasons behind that unpleasant situation, might been seen by the online review platform’s users as a no-longer
existing problem. Therefore, the consequences entailed in terms of damage in reputation among the online
community are reduced or even eliminated. This might implicate the Hotel staff and managers to take followup
actions in order to recover the pitfall(s) highlighted in the review. In the long term, repeated recovery
actions positively affect the quality of service and facilities provided and it is likely to increase the Hotel GRI
ranking.
This powerful new marketing tool can be leveraged by adopting the above-mentioned actions as well as
implementing unexplored and pioneering strategies. Due to its strong impact on customers’ choices, online
reputation management will become a key pillar of marketing strategies. According to a 2010 study provided
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by McKinsey and Co., word of mouth generates more than twice the sales of paid advertising in diverse
industries, especially in the hospitality sector (ibid.). Review apps are not perceived by customers as annoying
or intrusive as traditional marketing campaign. Indeed, consumers value them for their functionality and the
service provided is viewed as useful and trustworthy in most of the cases (Laudon and Traver, 2017).
Nowadays, only a few companies employed appropriate proportion of marketing budget in boosting their
“word-of-mouth reputation”. Even though an increasingly number of firms are realizing the importance of
doing so, the ones that implement a consistent strategy to leverage the potential of online reviews can surely
boast a competitive advantage. To support this claim, we can take as an example the study provided by a
researcher at Cornell in 2010, analyzing the impact of GRI (global review index, an average Hotel rating based
on different online review sites), on prices, occupancies and revenues per room. According to the study, an
increase of 10% in GRI generates an increment of 8% for prices, 2% for occupancies and 9,6% for revenues per
room (Cornell Hospitality Report, 2012). Contributing to the continued growth and success of online reviews
platforms is the rapid adoption of such marketing tool by medium-small hotels in their marketing strategies.
For this category, positive comments are a powerful and inexpensive mean to compete with the million-dollars
marketing budgets of branded Hotel chains.
Nonetheless, it is important to underline that businesses aiming to prosper in future should try to influence
online reviews, as long as they behave accordingly with the rules set out by the platform’s policy and do not
take advantage of the relative easiness of creating fake reviews. In fact, many analysists have arisen doubts and
concerns with respect to the lawful nature of certain reviews, especially the top and bottom ones, consisting in
extreme good or bad assessments (Laudon and Traver, 2017). Good or bad opinions should result exclusively
from the customer’s experience and not being fake or biased or given in exchange of money (or any other kind
of incentive) (Teixeira and Kornfeld, 2016).
Furthermore, there are some broader and more general trends that contribute to the success of peer-to-peer
online reviews. For instance, increasingly people access the Internet from mobile devices, such as smartphone
and tablets. This enable and make it easier for customers to read and create reviews, because they can access
“review-app” at any time and in any place. In addition, it has become a common practice to give a feedback
online and therefore it may be perceived as “normal” by most of the population. These trends facilitate
companies’ ability of getting a numerous user-base. As with every social network, the more individuals utilize
one platform, the more valuable and attractive is the platform for additional users. Therefore, it is very likely
that this will be a growing trend in the following years. In conclusion, the benefits of implementing a marketing
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campaign that take into account online reviews appear evident. The question now is: how long should we wait
to see companies finally realizing the potential of this amazing marketing tool?
4. Which online WOM (word-of-mouth) approach do you prefer: The one practiced by the
Four Seasons, or the Homewood Suites approach? Why?
First, let’s look at what WOM marketing is: a marketing communications method to disseminate a brand’s
message through peer to peer recommendations, influenced and encouraged by organizations. Or as the
Financial Times defines is, “Word-of-mouth (WOM) marketing refers to promotional activities that leverage
social interactions and word of mouth between consumers”1. In the digital world, it uses the following
channels: social networks, blog posts, and seeding.
The communication needs to be passed from one person to his friends or community, each one of them doing
the same, and so the information would travel from one to another gaining credibility that classic advertising
misses so much. This is what makes WOM marketing so valuable to companies and why people are influenced
by this form of communication to high extent: they receive the brand message from a peer, not from TV or a
banner ad.
Second, TripAdvisor, as already discussed, has been a significant source of reviews and positive feedback, but
many times also negative and unreliable. However, the 2 hospitality brands that took advantage of it – Four
Seasons Hotels and Homewood Suites by Hilton – were very satisfied with the results. To compare their
approaches, one must start by comparing their customer segment.
Homewood Suites owned by Hilton is a long-stay chain of more than 300 hotels, mostly independently run by
franchisees. Their customer is mid-tier as income, probably having other characteristics such as family, a small
company, a pet or on long business stays. For their target group, Homewood Suites concluded that good online
reviews and a high rating were among the most important factors that influenced the buying decision, not
advertising or even promotions on Facebook. Consequently, they implemented this strategy by investing in this
area and making sure that every online review receives a response from the company, and many times the
reviewers posted afterwards a positive feedback. Therefore, their ranking on TripAdvisor improved, and they
1 The Financial Times, Definition of word-of-mouth marketing: www.ft.com/lexicon
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also received certificates and various cards to give to their customers and remind them to write a review when
they leave.
Four Seasons Hotels and Resorts has 92 hotels in 38 countries around the globe, and they are all designed to
delight the high-end customer segment (and so are their prices). The brand allocated half of the marketing
budget to digital campaign and in 2012 they launched their new website that displayed reviews from
TripAdvisor for each location. Advertising was very little used, and an example of outreach would be the wine
tasting action in 2010: wine lovers had the opportunity to enjoy a wine tasting at hotels in selected locations,
not simply buy the wine, but also taste it and read the description themselves at home. The action took place
on Twitter. Even now Four Seasons Hotels invite wine connoisseurs, entrepreneurs or simply organize small
events to keep the wine community engaged and having their brand linked to the experience of enjoying a
glass of wine in a top, high end hotel and a room with a nice view. This is the way they generate WOM, get
good reviews and high rating on TripAdvisor and publish these reviews on their websites.
Both hotel chains have a good online strategy, adapted to their customer segment: Homewood Suites manages
WOM by being helpful and trustworthy, while Four Seasons Hotels practices WOM marketing by creating brand
attachment and loyalty. As mentioned, TripAdvisor is used in both cases as a source of credibility and
reputation building, and it seems the hotel chains are very happy with the results.
Since there are no specific data available of the 2 companies’ approaches, making a choice between their
strategies is not very easy. However, I would like to underline the fact that Four Seasons is using WOM
marketing strategies besides simply managing reviews, like Homewood Suites does, i.e. creates directed WOM
campaigns that have as objective brand building. In my opinion, although offers on Facebook were not that
effective, I believe Homewood Suites can find smarter WOM marketing strategies and promotions ideas to
delight their customers and build their brand. For example, they could start building an after-sale loyalty and
advocacy strategy, or an influencers outreach promotion to generate reviews from travel bloggers by giving
them free trips to test a location. However, the case study is somewhat outdated, and such WOM methods
may have not been used yet.
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References
Literature:
Gupta, S and Herman, K. “TripAdvisor”. HBS No. 511-004 (Boston: Harvard Business Publishing, 2011).
Laudon, K and Traver, C. “E-commerce. Business. Technology. Society”. Global Edition. Pearson, 2017.
Teixeira, T and Kornfeld, L. “Managing online reviews on TripAdvisor”. Harvard Business School, 2016.
The Search Agency’s State of Paid Search Report: Q3 2013, cited in eMarketer, October 2013, via eMarketer
database.
Online sources:
Cornell Hospitality Report, November 2012: www.chr.cornell.edu
https://techcrunch.com/2013/06/19/tripadvisor-continues-its-acquisition-spree-buys-gateguru-mobile-appfor-
real-time-travel-information/; Posted June 19, 2013 by Ingrid Lunden
https://tech.co/tripadvisor-acquires-where-ive-been-2011-07; Posted July 11, 2011 by Frank Gruber
The Financial Times, Definition of word-of-mouth marketing: www.ft.com/lexicon

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