The Relationship between Higher Review Scores and Net RevPAR

09 Mar 2017 by ReviewPro in Best Practices

A recently published study conducted by professor Cathy Enz of the Cornell University School of Hotel Administration has revealed the correlation between review scores, channel mix and revenue performance after customer acquisition costs. The findings indicate that there is a clear link between all three and that guest reviews impact net revenue performance dynamics.

ReviewPro’s Global Review Index (GRI™), the industry-standard online reputation score calculated from review data from 175 OTAs and review sites, was used in conjunction with monthly channel and revenue performance data from Kalibri Labs. Professor Enz combined all of the data points to identify correlations between review scores, review volumes, booking channel share and net revenue performance.

Findings included:

1. A positive correlation between a higher GRI™ and higher net revenue per available room (Net RevPAR) performance. Net RevPAR is calculated by subtracting direct customer acquisition costs such as commissions, transaction fees and loyalty expenses from room revenue.

2. Hotels that receive a higher share of bookings through tend to have higher online customer review rankings.

One hypothesis for this correlation is that bookings made through give the hotelier more opportunity to provide a higher level of service through personalization and other amenities, which leads to a higher level of guest satisfaction and ultimately higher review scores.

Previous studies by Cornell University and ReviewPro unveiled other aspects of this connection between online guest satisfaction scores and the financial performance of hotels.

One landmark study, conducted by Associate Professor Chris Anderson, shows that a 1-point increase in a hotel’s 100-point ReviewPro Global Review Index™ (GRI) leads up to a 0.89% increase in price (ADR), a 0.54% increase in occupancy, and a 1.42% increase in Revenue per Available Room (RevPAR).

The findings of these studies reinforce a view that is widely accepted in the industry today – online reviews impact hotel revenue. It therefore goes without saying that effectively managing and improving a hotel’s online reputation is crucial for success.