Social Media as a Revenue Management Tool



Social Media has had a major impact in the hospitality industry. It has changed the way consumers research and book travel and how they share their experiences during and after a trip. Immediate access to user-generated content such as customer ratings, reviews, photos, and videos has become a key element in hotel selection. Access to this information is also becoming an invaluable tool for revenue management.

Three basic categories of analysis can be very useful when combining use of social media with “Revenue Management” are: (1) descriptive statistics, (2) Social Network Analysis and (3) content mining. In this article, we will focus on descriptive statistics and how it can be used to improve hotel performance.

Descriptive Statistics

Descriptive statistics provide a snapshot of historical and current hotel performance. It answers questions like: how many fans the hotel has? How many reviews have been posted over the last six months? What the hotel average review rating on each of the Online Travel Agents (OTAs)? What are the demographic characteristics of the hotel´s followers?

Descriptive statistics derived from Social Media can be very useful for Revenue Managers. There are three main uses we want to highlight:

  1. Customer insights
  2. Price setting and competitive analysis.
  3. Prioritization of efforts in social media to improve hotel performance.


Customer insights

As described in previous articles, customer segmentation and acquiring an in-depth understanding of each segment is one of the main Revenue Management pillars. This enables the design of successful price and inventory strategies targeted specifically a customer segment. The strategies must adapt to the customers’ characteristics, likes and preferences. However, acquiring such knowledge is not easy. Social media and its descriptive statistics tools can contribute greatly to this objective.

By consulting descriptive statistics, provided for example by “Trip Advisor”, about travelers who left comments for hotel, one can start getting more familiar with its customers. In the chart below we can see that this establishment has two main segments: couples and families. However, business and solo travelers also visit the hotel. This is a great starting point that can generate interesting questions:

What are we doing to attract and support couples? How about families? Why do we have only small percentage of business travelers? Can we increase it?

Price setting and competitive analysis

Another important area for “Revenue Management” where social media can be useful is Price setting and competitive analysis. Competitors’ rates are very important to consider when making pricing decisions. However, there are other factors too. The price a traveler is willing to pay for a hotel is directly related to his / her perception of quality. And, this perception of quality is strongly impacted by review ratings and customer comments on social media. In the following table, we can see a competitive set and different metrics that help us to evaluate customers´ perception of quality.

Assuming all hotels have similar characteristics as location, stars, and facilities, tt will be difficult for Hotel C to compete with A or B with higher prices. Hotel A and B customer ratings on Expedia, TripAdvisor, and Booking are much higher than C. As owners or representatives of Hotel C is hard to admit, but the perception of customers in general will be that A and B are of better quality or offer a better service. On the internet, perception becomes reality.

To compete, Hotel C must set a price whose differential is sufficiently relevant for customers to sacrifice the perceived additional quality offered by hotels A and B. The other option for hotel C is to offer a differentiating element that customers of a certain segment prefer and are willing to pay a premium for it.

Prioritization of efforts in social media to improve hotel performance

Hotels use different social media platforms ranging from professional (LinkedIn), friends (Facebook), microblogging (Twitter) or travel (Trip Advisor). Using statistics to compare them can help focus the hotel efforts on the most relevant ones. For example, a hotel may realize that most of its clients make comments or questions about the hotel on Facebook and not Google +. Then, it can focus promotions and posts on the first social network and not on the second one.

Today social media has become the driving force behind travel planning. It has also evolved as an ideal tool to understand and get in touch with travelers. Hotels that manage to link social media with Revenue Management and find ways to incorporate this intelligence into their business plans will be at the forefront of the hospitality market.

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