The influence of Social Media on Revenue Management in Hotels

07th Jun 2015

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Modul University Vienna | HousingAnywhere

Bachelor Thesis for Obtaining the Degree
Bachelor of Business Administration in
Tourism and Hospitality Management
Submitted to Dr. Florian Aubke
Anna Beneder

Social Media: Problems and Potential

2018 is a fascinating juncture for revenue managers to address the issue of social media. Recent years have seen the use of platforms like Facebook, Twitter and Instagram become a norm for communicative transactions between many businesses and customers.

Customers increasingly use the experiences of others across social media platforms to inform their decision making, in what has been described as ‘electronic word of mouth’.

Recent research has consistently shown that online reviews and social media can change consumers’ initial travel plans. Feedback can be instant and widely disseminated: a customer can tweet a review of their experience before they have finished their dessert, or before their suitcases have left the lobby.

Likewise, businesses can engage and react with customers faster than ever: they can respond to complaints, promote brand awareness, attempt to drive direct sales through engagement with customers via social media platforms.

At the same time, the gloss is fading a little from the perceived unequivocal benefits of social media. Whilst it was once heralded as a panacea for any customer-focussed business, events such as the Cambridge Analytica scandal and the decision of Wetherspoons to abandon the use of all social media platforms, suggests that now is an appropriate time for revenue managers to take a more objective and evidence-based approach to the use of social media and its specific effect on revenue management.

After all, if it does not improve hotel revenue, is it worth the resources that are used maintaining an active social media presence? Is it time to re-evaluate what we think we know about social media?

Social Media and Hotel Revenue Management

The challenge for hotel revenue managers is to calculate exactly where social media adds value to the pricing strategy and what is the exact return on investment for resources allocated to social media engagement.

Whilst the technological engagement of customers is an evolving landscape, objective analysis of the impacts can be like shooting a moving target.

Studies do indicate that reputational increase does lead to an increased RevPAR, occupancy and ADR (average daily rate)

Therefore, revenue managers must be concerned with increasing online reputation in order to drive revenue improvement as part of the broader strategy: increasing an average 3 star review to a 4 star review has been shown to add double digit percentage increases to the ADR.

Social media can be a potent tool for managing reputation, but the wrong strategy can be costly and the internet is awash with ‘social media fails’ where businesses have gone viral for the wrong reasons: social media is not without risks.

As discussed in a previous blog, driving direct sales can also add to revenue by removing commissions to OTAs, but it can only work as part of a broader strategy.

There is little to be gained by driving customers directly to a poorly maintained website. Social media strategies should support existing revenue management strategies, not seek to replace them.

Strategies for effective use of social media

Revenue managers can advise businesses on how to integrate social media use with pricing strategies for maximum impact and strategic synergies. Some general strategies that are widely held to be successful are:

• Aim for the broadest appeal. Avoid divisive subjects like politics and commenting on controversial news items: reputation can go down as well as up.
• Do not over post. Limit the amount of promotional posts and aim for impact over quantity of content.
• Consistency. Post on a schedule and be consistent and plan the posts to leverage events and seasonal factors.
• Engage with current customers. Getting current customers to follow you can improve repeat business.

Social media is no longer simply another form of advertising or public relations, but offers the chance to support revenue management strategies with a strategic focus on driving sales and increasing revenue.

The importance of social media is clearly identified for various forms of businesses. Intangibility and high involvement of customers in the hospitality industry are crucial factors of adaptation. The new way of communication supports the hotels in identifying the customer’s needs and wants in order to achieve high guest satisfaction. This new open data can not only be used for marketing purposes but also to support strategic decisions in the area of revenue management. In order to identify opportunities of the new media and also challenges, interviews with revenue managers of hotels in Vienna were conducted. The previous studies and the qualitative research will help us to understand possible ways of integrating social media into strategic planning.

Facebook, Twitter & co. are a fix part of our everyday life. Everybody with an internet connection is able to participate in various ways. This part of the online world also influences the hospitality industry and their guests. A connection to Revenue Management (hereafter referred to as RM) cannot be drawn easily and is looking for investigation.
The different forms of Social Media (hereafter referred to as SM) platforms can be grouped by content or activities, such as social news (e.g. Digg, Sphinn, Newsvine), social sharing (e.g. Flickr, YouTube), social networks (e.g. Facebook, LinkedIn, Twitter), social bookmarking (e.g. Pinterest, Delicious), social review sites (e.g. TripAdvisor, Yelp), social purchase/review sites (e.g. Amazon, Booking) and blogs (Jones, 2009; Noone, McGuire & Rohlfs, 2011). Due to the technological development we do recognize a shift to online communication also described as electronic word of mouth (hereafter referred to as eWOM) (Nieto, HernándezMaesro, Muñoz-Gallego, 2014). Moreover, it is proven that we trust the recommendations of friends and family the most and, with eWOM, this scope gets broader as it is, thus, possible to read the opinion of other unknown consumers (Lee and Youn, 2009; Nieto, Nernández-Maesro and Muñoz-Gallego, 2014).

The new way of communication is important for the hotel product as it is intangible in nature. People have to rely on the information they get via various offline and online sources (Sigala, Christou and Gretzel, 2012). Hotels can use SM as a marketing tool which has lower costs than traditional media. Furthermore, this new two-way communication makes it possible to build up brand awareness and loyalty and to learn about the guests’ needs and wants (Jones, 2009). Complaining or commenting on their experiences as well as sharing them via SM platforms is more convenient for customers. More guest feedback can help to improve and to increase customer satisfaction. TripAdvisor is one of the most popular platforms when it comes to reviews on travelling (Sigala, Christou and Gretzel, 2012). Comparing various comments supports the decision making process in a more holistic way rather than only comparing prices. People try to find the best value for their money (Schegg et al, 2008).