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s2 {font: 6.0px Helvetica}Strategic and Tactical Tools for E-BusinessOnline reviews on TripAdvisorSubmitted by:Daniela Micu, Monika Blum Khayati, Michael Poprawka, Ruben DalfovoStudy program: Business Administration and E-BusinessProject administrator: Lena Vedel Bechlund ZinkProject examiner: Qiqi JiangDeadline: 1th December 2017Number of pages: 8Characters count: 1637021. 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 sosuccessful.

Our first reason is novelty to the market. When TripAdvisor was founded in the year 2000, by theCEO Stephen Kaufer and three Cofounders, there simply was not any site like TripAdvisor. Their mainmotivation was to solve a problem based personal experience, namely to find unbiased travel-relatedinformation 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 theproblem, they had the idea to create a platform where people can exchange their experiences, either positiveor negative ones. Back then there was not really a platform, just single small blogs all over the internet, whichwere difficult to find (Gupta and Herman, 2011).The second reason for their success was their effective revenue model. Originally, they tried to make profitthrough banner ads and license content to other websites, which turned out not to be too successful.

So, theyimplemented the new idea, that online travel agencies (OTAs) can place text-ad links on their website. The siteitself would only contain reviews and ads, and the actual reservations and bookings would be carried out bythe OTAs. This resulted in a great click-through rate of 10%, the industry average back at the time was around2% (The Search Agency’s State of Paid Search Report, 2013). Therefore by 2002 TripAdvisor was already aprofitable company (Gupta and Herman, 2011). Because of their huge success they were acquired byInterActive Corporation in 2004, which later established Expedia.This leads us to the third reason, development and investment. Now with the backing of a huge Corporationthey kept adding new features like tools to search flights in 2009, or listings for vacation rental properties, in2010. TripAdvisor started to invest into the mobile market by acquiring travel-related mobile applicationdevelopers.

They purchased Apps like “Where I’ve been” (map and photo scrapbook) (Gruber, 2011) and “GateGuru” (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 chargefor regular consumers. They could write, read, and share experiences for free, which was a bold and smartdecision, therefore they were able to gain so much popularity and traffic. In the online gaming industry, therewere few cases, where similar games, followed different approaches, but the free to play game usually gainedfar more popularity and won the market in the specific segment, for example like League of Legends.3TripAdvisor made money through three different services.

They made most of their money/revenue withnearly 80% through click-based advertising, like text-ad links. Hotels or OTAs who used this service, werecharged on a Cost-Per-Click basis, with prices ranging from 0.25$ to 1$ (Gupta and Herman, 2011). 15% of theirrevenue was through display-based advertising, for example through banner ads. They were charging theirpartners on a Cost-per-thousand-impressions(CPM) basis, and the average CPM was around 15$. Last but notleast, they made roughly 5% through subscriptions, which were business listing services. Business owners couldadd their contact information and website URL directly on TripAdvisor. Also, it was possible to advertise saleprices or special packages.

Those business listings cost around 500$ – 10000$ a year, depending of the size ofthe 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 tocreate 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 dousers read hotel reviews?When trying to answer the question why TripAdvisor is so appealing to customers, one must consider that aretwo things customers use the site for. One is to gain information about a service or hotel, and the other is toshare their personal experience with others.For customers writing reviews TripAdvisor is attractive because it is free of cost, they can register using theirFacebook account which is fast and easy, and they do not need to prove that they stayed in a hotel or used aservice. The motivation to write a review for most customers was to share their personal experience so otherscan make an informed decision when choosing, or/and reward the location for good service. Those two thingsgo hand in hand. Writing a positive review about a hotel you were fully satisfied might convince customer tostay there, writing a bad review might deter people from doing so and ‘punish’ the business that didn’t makegood on its promise.

It is obvious that people intuitively know the importance of the reviews. Since most of thereview writers have consulted reviews to make choices themselves. According to the case 41% have sharedrecommendations in the past over email, social media or blog, and more than half claim to have writtenreviews on review website.

4Since guest experience is ranked together with price and location as the most important factor when choosinga 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 onlyreviews is an important part of the decision-making process when it comes to hotels or services. TripAdvisor, Iseen as an unbiased and independent sources of hotel reviews, since they are not directly trying to sell apackage deal, which is in stark contrast to reviews of travel agencies or the hotel website and advertisingmaterial. Because it is so easy for customers to write reviews on TripAdvisor there is a plethora of differentreviews. And since consumers instinctively follow statistical principles in this instance, the more reviews thereare the more believable and reliable an overall positive or negative assessment becomes.

This makesTripAdvisor 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 candisplay review marketing materials in the hotel lobby, such as hanging on the wall Trip Advisor certificates orother visual images of online appraisal companies.

Receptionists may remind guests to give a feedback abouttheir 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 thereasons behind that unpleasant situation, might been seen by the online review platform’s users as a no-longerexisting problem. Therefore, the consequences entailed in terms of damage in reputation among the onlinecommunity are reduced or even eliminated. This might implicate the Hotel staff and managers to take followupactions in order to recover the pitfall(s) highlighted in the review. In the long term, repeated recoveryactions positively affect the quality of service and facilities provided and it is likely to increase the Hotel GRIranking.This powerful new marketing tool can be leveraged by adopting the above-mentioned actions as well asimplementing unexplored and pioneering strategies.

Due to its strong impact on customers’ choices, onlinereputation management will become a key pillar of marketing strategies. According to a 2010 study provided5by McKinsey and Co., word of mouth generates more than twice the sales of paid advertising in diverseindustries, especially in the hospitality sector (ibid.).

Review apps are not perceived by customers as annoyingor intrusive as traditional marketing campaign. Indeed, consumers value them for their functionality and theservice 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 ofdoing so, the ones that implement a consistent strategy to leverage the potential of online reviews can surelyboast a competitive advantage.

To support this claim, we can take as an example the study provided by aresearcher at Cornell in 2010, analyzing the impact of GRI (global review index, an average Hotel rating basedon different online review sites), on prices, occupancies and revenues per room. According to the study, anincrease of 10% in GRI generates an increment of 8% for prices, 2% for occupancies and 9,6% for revenues perroom (Cornell Hospitality Report, 2012). Contributing to the continued growth and success of online reviewsplatforms 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-dollarsmarketing budgets of branded Hotel chains.Nonetheless, it is important to underline that businesses aiming to prosper in future should try to influenceonline reviews, as long as they behave accordingly with the rules set out by the platform’s policy and do nottake advantage of the relative easiness of creating fake reviews. In fact, many analysists have arisen doubts andconcerns with respect to the lawful nature of certain reviews, especially the top and bottom ones, consisting inextreme good or bad assessments (Laudon and Traver, 2017). Good or bad opinions should result exclusivelyfrom the customer’s experience and not being fake or biased or given in exchange of money (or any other kindof incentive) (Teixeira and Kornfeld, 2016).

Furthermore, there are some broader and more general trends that contribute to the success of peer-to-peeronline reviews. For instance, increasingly people access the Internet from mobile devices, such as smartphoneand 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 feedbackonline and therefore it may be perceived as “normal” by most of the population. These trends facilitatecompanies’ ability of getting a numerous user-base. As with every social network, the more individuals utilizeone platform, the more valuable and attractive is the platform for additional users.

Therefore, it is very likelythat this will be a growing trend in the following years. In conclusion, the benefits of implementing a marketing6campaign that take into account online reviews appear evident. The question now is: how long should we waitto 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 theFour Seasons, or the Homewood Suites approach? Why?First, let’s look at what WOM marketing is: a marketing communications method to disseminate a brand’smessage through peer to peer recommendations, influenced and encouraged by organizations. Or as theFinancial Times defines is, “Word-of-mouth (WOM) marketing refers to promotional activities that leveragesocial interactions and word of mouth between consumers”1. In the digital world, it uses the followingchannels: social networks, blog posts, and seeding.The communication needs to be passed from one person to his friends or community, each one of them doingthe same, and so the information would travel from one to another gaining credibility that classic advertisingmisses so much. This is what makes WOM marketing so valuable to companies and why people are influencedby this form of communication to high extent: they receive the brand message from a peer, not from TV or abanner ad.Second, TripAdvisor, as already discussed, has been a significant source of reviews and positive feedback, butmany times also negative and unreliable.

However, the 2 hospitality brands that took advantage of it – FourSeasons Hotels and Homewood Suites by Hilton – were very satisfied with the results. To compare theirapproaches, 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 byfranchisees. Their customer is mid-tier as income, probably having other characteristics such as family, a smallcompany, a pet or on long business stays. For their target group, Homewood Suites concluded that good onlinereviews and a high rating were among the most important factors that influenced the buying decision, notadvertising or even promotions on Facebook. Consequently, they implemented this strategy by investing in thisarea and making sure that every online review receives a response from the company, and many times thereviewers posted afterwards a positive feedback. Therefore, their ranking on TripAdvisor improved, and they1 The Financial Times, Definition of word-of-mouth marketing: www.ft.

com/lexicon7also received certificates and various cards to give to their customers and remind them to write a review whenthey leave.Four Seasons Hotels and Resorts has 92 hotels in 38 countries around the globe, and they are all designed todelight the high-end customer segment (and so are their prices). The brand allocated half of the marketingbudget to digital campaign and in 2012 they launched their new website that displayed reviews fromTripAdvisor for each location. Advertising was very little used, and an example of outreach would be the winetasting 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 placeon Twitter. Even now Four Seasons Hotels invite wine connoisseurs, entrepreneurs or simply organize smallevents to keep the wine community engaged and having their brand linked to the experience of enjoying aglass of wine in a top, high end hotel and a room with a nice view.

This is the way they generate WOM, getgood 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 managesWOM by being helpful and trustworthy, while Four Seasons Hotels practices WOM marketing by creating brandattachment and loyalty. As mentioned, TripAdvisor is used in both cases as a source of credibility andreputation 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 theirstrategies is not very easy. However, I would like to underline the fact that Four Seasons is using WOMmarketing strategies besides simply managing reviews, like Homewood Suites does, i.e.

creates directed WOMcampaigns that have as objective brand building. In my opinion, although offers on Facebook were not thateffective, I believe Homewood Suites can find smarter WOM marketing strategies and promotions ideas todelight their customers and build their brand. For example, they could start building an after-sale loyalty andadvocacy strategy, or an influencers outreach promotion to generate reviews from travel bloggers by givingthem free trips to test a location. However, the case study is somewhat outdated, and such WOM methodsmay have not been used yet.8ReferencesLiterature: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 eMarketerdatabase.Online sources:Cornell Hospitality Report, November 2012: www.chr.cornell.eduhttps://techcrunch.com/2013/06/19/tripadvisor-continues-its-acquisition-spree-buys-gateguru-mobile-appfor-real-time-travel-information/; Posted June 19, 2013 by Ingrid Lundenhttps://tech.co/tripadvisor-acquires-where-ive-been-2011-07; Posted July 11, 2011 by Frank GruberThe Financial Times, Definition of word-of-mouth marketing: www.ft.com/lexicon