Description
Hotel companies are struggling to keep up with the rapid consumer adoption of social media. Although many companies have begun to develop social media programs, the industry has yet tofully explore the potential of this emerging data and communication resource.
Research Article
Social media meets hotel revenue
management: Opportunities, issues and
unanswered questions
Received (in revised form): 21st March 2011
Breffni M. Noone
a
, Kelly A. McGuire
b
and Kristin V. Rohlfs
c
a
The Pennsylvania State University, Pennsylvania, USA;
b
SAS Institute Inc., North Carolina, USA; and
c
Hospitality Consultant, Rochester, New York, USA.
Breffni M. Noone is an assistant professor at the Pennsylvania State University School of Hospitality
Management. She holds a PhD from Cornell University. Her research interests include pricing, forecasting
and distribution channel management for services, with particular emphasis on consumer perceptions of, and
reactions to, revenue management practices.
Kelly A. McGuire leads the hospitality and travel global practice at SAS. She holds a PhDfromCornell University.
Her team is responsible for designing analytic software solutions for the hospitality and travel industries. Her work
focuses in particular on the integration of revenue management with marketing, sales and social media.
Kristin V. Rohlfs is an independent consultant and researcher. She holds a PhD from Cornell University. She
specializes in small-business application of operations management and revenue management principles.
Correspondence: Breffni M. Noone, The Pennsylvania State University, 215 Mateer Building, University Park,
Pennsylvania 16802-1307, USA
ABSTRACT Hotel companies are struggling to keep up with the rapid consumer adoption of social
media. Although many companies have begun to develop social media programs, the industry has yet to
fully explore the potential of this emerging data and communication resource. The revenue management
department, as it evolves from tactical inventory management to a more expansive role across the
organization, is poised to be an early adopter of the opportunities afforded by social media. We propose a
framework for evaluating social media-related revenue management opportunities, discuss the issues
associated with leveraging these opportunities and propose a roadmap for future research in this area.
Journal of Revenue and Pricing Management (2011) 10, 293–305. doi:10.1057/rpm.2011.12;
published online 6 May 2011
Keywords: revenue management; social media; hotels; marketing; pricing; consumer behavior
INTRODUCTION
Social media (SM) refers to a group of Internet-
based applications that allow the creation and
exchange of user-generated content (Kaplan
and Haenlein, 2010). SM expedite conversation
as opposed to traditional media, which delivers
content but does not allow the consumer of that
media, whether reader, viewer or listener, to
participate in the development and dissemina-
tion of the content. SM sites come in a num-
ber of forms, including strictly review sites
(for example, TripAdvisor and Yelp), social
networks and microblogging sites (for example,
Facebook, Twitter), news sites (for exam-
ple, Digg), social sharing (for example, Flickr,
YouTube), social bookmarking (for example,
& 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
www.palgrave-journals.com/rpm/
Delicious, Faves), and purchase/review sites
(for example, Amazon and Travelocity) ( Jones,
2009). The common feature of these diverse
SM applications is that they encourage discus-
sion, feedback, voting, comments and sharing
of information from all interested parties.
SM is moving so quickly that any statistics
provided here will be out of date before long.
That said, as of late 2010, Facebook had more
than 500 million active users, adding 700 000
new members per day, and 50 per cent of active
users log onto the site in any given day. Each
day, more than 3 million photos are uploaded to
Flickr, bloggers post nearly a million new
articles, and 5 million Tweets are sent (Bodnar,
2010). As of May 2010, YouTube exceeded
2 billion views a day, with 24 hours of videos
uploaded each minute (Goldberg, 2010;
Zibreg, 2010).
In response to the rapid adoption of SM, the
popular press is replete with articles encoura-
ging hospitality firms to embrace the opportu-
nity that SM provides to listen to, and
communicate with, consumers. It appears that
the hotel industry is heeding this advice, as
evidenced by the volume of hotel companies
establishing a presence across the various SM
platforms (for example, Twitter, Facebook and
so on). One challenge facing hotels in their
pursuit to engage consumers via SM is the very
personal and individual nature of the SM
environment. Hotels are corporate entities.
Thus, hotel companies have to figure out how
to establish an online personality congruent
with the brand promise, yet interact in a
genuine and transparent manner with consu-
mers such that the consumer is engaged and
trust is built. Some hotel operators are also
reluctant to fully embrace the SM media envir-
onment amidst concerns about the legitimacy
of consumer content. However, the question is
not whether the content is legitimate; rather
how much of that content is perceived as
credible by the consumer. The role that online
consumer reviews can play in hotel selection
alone provides a fundamental reason to pay
attention to SM.
Amidst these concerns regarding engage-
ment, trust and credibility, there remains much
debate regarding how to most effectively en-
gage SM across the enterprise. It is in light of
the debate as to how to best leverage SM that
this article explores the potential that SM holds
specifically for hotel revenue management
(RM). The role and scope of RM is currently
in transition, migrating from a stand-alone
tactical approach to room inventory manage-
ment to a strategic, customer-centric approach
to demand creation, integrated into all aspects
of hotel operations and marketing (Cross et al,
2009). We believe that this functional shift
provides RM a unique opportunity to leverage
the information provided by SM, and become
an early adopter of this new data source and
communication vehicle.
The aim of this article is twofold. First, we
present a framework for evaluating SM-related
RM opportunities. Second, we discuss a number
of issues that are central to assessing the potential
role and scope of SM in RM and propose a
roadmap for future research in the domain.
THE CONTINUING EVOLUTION
OF RM
Cross et al (2009) provide an insightful overview
of the evolution of RM in the lodging industry,
from the inventory-focused role it played in
the late 1980s and 1990s, to the post-9/11 shift
toward a more expansive role within the organi-
zation. Historically, revenue managers were
tasked with opening and closing predefined
room rates based on predicted demand such that
the best combination of occupancy and rate was
achieved for any given night. More recently,
RM has begun to evolve from this tactical
orientation to a more strategic role within hotel
organizations that encompasses marketing, sales
and channel strategy. With this evolution has
come a broader set of responsibilities across a
number of domains including pricing, manage-
ment of the entire revenue stream (total hotel
revenue management), and a customer-centric
approach to developing demand. Figure 1
provides a graphical overview of hotel RM,
Noone et al
294 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
illustrating the augmentation of core RM pro-
cesses with these emerging RM responsibilities.
Pricing
The focus is shifting from inventory optimiza-
tion (that is, what is the right number of rooms
to sell at a given rate?) to price optimization
(that is, is the rate right in the first place?). The
latter focus entails rate setting based on fore-
casted demand, the elasticity of demand and
competitive rates. Thus, this approach requires
a firm understanding of consumers’ willingness
to pay, and the value expected at a given price
point, as well as an ability to effectively position
the product offering vis-a`-vis the competition.
Total Hotel Revenue Management
(THRM)
Broadening the scope and role of RM involves
the management of the entire revenue stream,
rather than managing revenue from room in-
ventory alone. Emerging areas of RM applica-
tion include function space RM, restaurant RM,
spa RM and golf RM (for example, Kimes et al,
1998; Kimes, 2000; Kimes and McGuire, 2001;
Kimes and Schruben, 2002; Noone et al, 2009).
Profit optimization becomes an important
consideration in this regard given the significant
variable costs that are typically associated with
these lines of business. Revenue per available
room may be an adequate performance metric
where profit is largely derived from rooms.
However, profit (for example, gross operating
profit per available room) may be a better metric
to apply when evaluating how well the entire
business is managed.
Customer-centric RM
Another key development in the RM arena is a
shift away from the traditional inventory-centric
Demand Modelling
-product oferings
-competitive practices
-market segmentation
-data collection
-variabliity, uncertainty
Demand Forecasting
-booking patterns
-market factors
-property expectations
Optimization
-overbooking
-quantity-based
-allocation to product and
customer segments
Setting Booking Controls
-physical and non-physical
rate fences
-systems communication
Distribution Channel
Management
-direct
-intermediary
-single image inventory
CORE RM
PROCESSES
Business Strategy
-demand creation
-value proposition
-market positioning
Total Hotel RM
-optimization of ancillary
services
-packaging
-coordination among RM.,
Marketing, Sales and
Operations departments
Interaction with
Customers
-customer-centric
philosophy
-willingness to pay
-price-based optimization
Figure 1: Evolving scope of RM activities.
Social media meets hotel revenue management
295 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
approach to RM to a customer-centric orienta-
tion. A long-standing criticism of RM has been
its focus on short-term revenue maximization.
Under the vision of customer-centric RM,
customer data are used to yield insights into the
organization’s most valuable customers in terms
of profitability and lifetime value. This informa-
tion, coupled with data on consumers’ shopping
patterns and habits, can then be leveraged to
develop strategies (for example, promotions,
preferential treatment) targeted at specific custo-
mers as a means of growing share of wallet and
developing the customer base.
It is in light of the growth and evolution of
RM in these three key areas that this article
examines the opportunities that SM afford RM.
FRAMEWORK FOR EVALUATING
SM-RELATED RM
OPPORTUNITIES
SM provide hotel operators the opportunity for
real-time, two-way communication, commu-
nication with consumers at a point of need (for
example, communication of promotional rates
for distressed inventory), and the potential to
build awareness, reputation and business (Lanz
et al, 2010). Although these opportunities have
been documented in the popular press and
across various hotel-oriented blogs and web-
sites, discussion has taken place at a general
level and does not provide hotel operators a
structured framework for evaluating the
potential of SM for RM. We propose such a
framework.
The framework classifies SM-related RM
opportunities across two dimensions: (1) infor-
mation flow and (2) time orientation (Table 1).
Information flow can be categorized as inbound
or outbound in nature. Inbound information
flow refers to the customer-generated content,
such as user reviews, ratings, photos, videos and
comments, that is accessible by the organization
via the various SM channels. Dominant sources
of customer-generated content currently in-
clude user-generated content sites (for example,
TripAdvisor and WikiTravel), reviews on on-
line travel agent (OTA) sites (for example,
Expedia), social networks and microblogging
sites (for example, Facebook, Twitter) and media/
video sharing sites (for example, YouTube).
Outbound information flow encompasses
firm-generated content that is communicated
to the consumer using SM. This includes, for
example, promotions, special offers and press
releases via SM channels such as Facebook and
Twitter, firm-sponsored blogs (for example, Bill
Marriott’s ‘On the Move’), video-content (for
example, YouTube), and response to consumer
reviews (for example, via TripAdvisor).
Time orientation refers to the time scope of
the RM activities and decisions that SM have
the potential to support. Short-term orienta-
tion relates to the short-term, tactical RM
Table 1: Framework for evaluating SM-related RM opportunities
Information flow Time orientation
Short term Long term
Inbound
Customer-
generated
content
Inform promotional and pricing decisions
1. Configuration and pricing of
promotions and packages
Inform strategy development
1. Pricing
2. Customer relationship development
3. Distribution channel management
Outbound
Firm-generated
content
Drive demand creation and build brand awareness
1. Execution of push strategies: rooms and
ancillary revenue streams
Drive customer development and retention
1. Development of micro-sites targeted at
specific customer groups
2. Engagement in social blogging
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activities and decisions that SM can support,
while long-term orientation encompasses RM
activities with a long-term, strategic focus.
Inbound, short term
In the short term, user-generated content can
be used by RM to develop targeted push
strategies. Consumer reviews on websites like
TripAdvisor.com and WikiTravel.com provide
insights into what ‘add-ons’ consumers like and
dislike, what add-ons they are willing to pay for
(for example, all-inclusive deals, breakfast in-
cluded rates and so on), and why they are
willing to pay for them. Using consumer-
generated data to inform pricing and pro-
motion decisions fits with the notion of a
customer-centric approach to RM. Rather
than taking price as a given, the emphasis is on
using customer-generated data to enhance the
value proposition and develop prices that cus-
tomers are willing to pay. HKHotels provide a
good example of a value-based approach to
driving revenue. Rather than focus on price
alone, management closely monitors customer
reviews on TripAdvisor and uses those data to
enhance value for the dollar for consumers (for
example, adding items to the breakfast buffet,
an upgraded wine and cheese service in the
evening) (Anonymous, 2010a).
The practice of ‘listening’ to the customer
and using that information to inform decision
making is not new. Hotel companies have long
employed a number of approaches to capture
the voice of the customer, from guest comment
cards to mystery shopper data. The idea here is
to not to replace these traditional data sources,
but to augment them with SM-based customer
feedback. SM offer the organization potential
exposure to feedback from a larger, more
diverse representation of consumers that they
might otherwise not receive feedback from.
Inbound, long term
While customer-generated data can be used to
inform short-term promotional decisions, they
can also serve as an input to long-term,
RM strategy development. Three key areas
that SM-related customer content has the
potential to impact are pricing, customer rela-
tionship development and distribution channel
management.
Pricing
A number of key factors influence pricing
decisions, including the level of customer de-
mand, the price sensitivity of demand and
competitive price positioning. As SM data are
public data, consumer-generated content pro-
vides the greatest opportunity to enhance the
third factor, competitive price positioning. The
rate transparency resulting from the advent of
the Internet has necessitated that hotels position
themselves against the competition on the basis
of price. The addition of competitor-related
customer-generated content provides the op-
portunity to supplement available price data
with customer-generated data that provide in-
sight into the other side of the value equation.
These data can be leveraged to amplify differ-
ences in product attributes such that a hotel is
not competing on the basis of price alone.
Customer relationship development
Although user-generated content regarding in-
dividual customers’ needs and preferences can
be leveraged to develop packages/product of-
ferings that support short-term objectives (that
is, filling rooms during off-peak periods), these
customer-specific data can be collated over time
to provide a richer understanding of an organi-
zation’s customer base. This, along with data
from the organization’s loyalty program and/or
customer relationship management (CRM) sys-
tem, will facilitate a customer-centric approach
to RM. The focus is on the development of
long-term relationships with customers, using
the various data sources to tailor messages to,
and/or provide preferential treatment for, those
customers.
As revenue management moves from
decisions based on the highest room rate, to
total hotel optimization and a longer-term
view incorporating customer relationships, the
Social media meets hotel revenue management
297 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
decision of who to say ‘yes’ and ‘no’ to becomes
more complicated. The value of a customer
includes their room rate, ancillary purchases,
long-term value, and, potentially, their ability
to influence followers through their social net-
work connections. Social network analysis can
be used to identify the influencers within net-
works, and derive an influencer ‘score’ repre-
senting the potential for influence of each
customer. By understanding the relationship
between influencer scores and incremental
bookings, revenue management will be able to
compare the value of an active reviewer to a
guest with expected ancillary purchases to a top
tier loyalty program member, and know which
guest is likely to bring more revenue to the
property.
Distribution channel management
Many hotel organizations have ongoing con-
cerns about distribution channel management,
not least where to dedicate resources and
efforts, and where to promote for maximum
response. The application of analytical tools
to mine customer-generated content and un-
cover distinct preferences and needs provides
the opportunity to gain an understanding of
the type of customer that is interacting with the
organization through the various SM channels.
Review activity and reviewer sentiment, com-
bined with booking information, can help
inform the overall distribution strategy includ-
ing which channels to focus on and how much
inventory to allocate to those channels. These
data can also be used to guide the development
of targeted advertising and promotional mes-
sages for specific SM channels that may provide
a means of driving bookings to the organiza-
tion’s website.
Outbound, short term
From a tactical RM perspective, a key objective
of using firm-generated SM content is to drive
short-term demand in distressed periods. With
the shift in RM emphasis from demand control
to demand creation, revenue managers need to
find efficient and effective ways to build demand
from existing customers and generate trial from
new customers (Anderson and Carroll, 2007).
To that end, SM channels provide the opportu-
nity to execute push strategies to drive short-
term capacity utilization. For example, in 2009,
the High Peaks Resort in Lake Placid (NY) ran
a ‘46’-themed promotion for fans and followers
on Facebook and Twitter: a 46 min a day, 46-
day promotion based on the elevations of the
High Peaks. For example, a rate based on the
4867-foot elevation of Whiteface Mountain
was US$48.67, whereas a rate based on the
4361-foot elevation of Seward Mountain was
$43.61. Although these rates are inarguably
low for a luxury resort, the promotion helped
to fill rooms during a typically slow season and
generated substantial publicity (Anonymous,
2010b).
Stimulating demand via SM channels may
also provide the opportunity to decrease dis-
tribution costs. Providing a link to the hotel’s
website, or direct access to the hotel booking
engine, will encourage fans and followers to
book direct rather than through third-party
distribution channels. For example, Best
Western’s Hotel President Berlin teamed up
with Worklight to develop a booking widget,
fully integrated with their booking systems and
marketing promotions database, which could be
added to Facebook, iGoogle and Netvibes
(Anonymous, 2010c).
The notion of using SM to build demand
also extends to driving ancillary revenues, an
important component of THRM. As revenue
managers become more involved in the man-
agement of food and beverage, function space,
spa and other revenue streams, SM provide the
opportunity to push that inventory during
periods of low demand. The Omni San Diego
provides a good example of how active
monitoring of SM can lead to revenue gain.
Their response to a wedding planner’s tweet
about potential choice of hotel for a wedding
won them the business because they responded
on Twitter and the competition did not
(Lanz et al, 2010).
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Presence across multiple SM channels also
increases the likelihood of converting online
searches into actual bookings. Recent research
from Google has shown that 84 per cent of
travelers use the Internet as a planning resource,
visiting an average of 22 sites before booking
(Torres, 2010). The more information available
through various SM channels, the more likely
travelers will come across a given hotel property
when planning a trip. SM can also play an
integral role in a search engine optimization
strategy. For example, an active presence on
Facebook, Twitter, YouTube and Flickr, with
appropriate tags, can help a hotel to dominate
searches, resulting in five hits in a search
(including brand.com), rather than a sole hit
for the brand website (Aggarwal, 2010).
While SM-based promotional activity can
build short-term demand for distressed inven-
tory, it also offers the opportunity to foster
brand interest and awareness, not least via the
mainstream media coverage that the promo-
tional activity can generate. The mainstream
media coverage of the Twitter-based promo-
tional giveaways by the Westin Bonaventure
(CA), for example, generated nearly 20 million
consumer impressions (Lanz et al, 2010).
Enhanced brand awareness increases the likelihood
of subsequent brand choice, and the potential to
positively impact future revenue streams.
Outbound, long term
The notion of RM integration into all aspects
of hotel operations, in particular marketing, is
especially salient in this quadrant. Outbound,
long-term activity is focused on customer
development and retention. Balancing short-
term revenue maximization and long-term
customer development has been identified as
a key issue facing revenue managers (Cross
et al, 2009). Consistent with the notion that
RM is moving from demand control to
demand creation, SM provides RM the oppor-
tunity to work together with marketing to
reach out and build relationships with targeted
customer groups. This may be through the
development of micro-sites, which can serve as
the vehicle to drive purchase, as well as provide
feedback to inform RM strategy. Wyndham
Hotels and Resorts, for example, have devel-
oped a micro-site targeted at female travelers
(www.womenontheirway.com). The site pro-
vides a vehicle for promoting female-friendly
packages and the opportunity to gain insights
into the services and amenities that matter to
female travelers. Wyndham has used the feed-
back generated through this program to devel-
op appropriately priced, and packaged, product
offerings for that customer segment.
Social blogging also provides an opportunity
to connect with the customer, develop the
brand voice and instill trust in the customer.
Research suggests that trust plays a key role in
loyalty, to a brand (for example, Morgan and
Hunt, 1994; Garbarino and Johnson, 1999).
Blogging about topics that are relevant to the
reader, such as things to do near the hotel or tips
for travelers, provides the opportunity to build
consumers’ trust. In other words, give the
customer relevant information and they will
trust you as a source of information. As trust is
built, more direct information on product
and service offerings can be incorporated into
the blogging strategy to build awareness and
increase revenues.
In summary, SM provide access to customer-
generated data that can be deployed to support
the development of RM strategies, both short-
and long-term in orientation. Then, during the
strategy execution phase, SM present the op-
portunity to yield desired outcomes by provid-
ing the vehicle to communicate firm-generated
content to the consumer. It is evident that many
hotel companies are active in the outbound,
short-term quadrant. However, in order to fully
leverage the breadth of opportunities that SM
afford, and moving beyond the tactical, day-
to-day management of SM programs, hotel
firms need to consider developing a holistic,
systematic approach to exploiting the opportu-
nities across all four quadrants. This holistic
approach will require an integrated and strategic
approach to a revenue management strategy,
including working cross-departmentally with
Social media meets hotel revenue management
299 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
sales and marketing. In the following section we
discuss a number of pertinent issues that need to
be considered when evaluating the scope of SM
opportunities for RM.
ISSUES TO CONSIDER
There are a number of key issues that hospitality
managers need to consider when developing a
strategy to exploit SM-related RM oppor-
tunities. These encompass ownership of SM-
related RM activities, inbound data capture and
analysis, and the reach and scope of outbound
communication with consumers.
Ownership of SM-related RM
activities
It is evident from our discussion of the oppor-
tunities that SM present for RM, that success,
in terms of revenue generation, will be a
function of the ability of RM, marketing and
sales to work in a coordinated manner to
execute strategy. This raises an important ques-
tion: which functional area – RM, sales, or
marketing – should house the RM-related SM
responsibilities? Regardless of where they are
housed, effective and timely communication
and collaboration among RM, sales, and mar-
keting personnel will be instrumental to the
success of an SM strategy.
As hotels consider areas of responsibility, they
should also consider whether there should be a
separate strategy and structure for SM and
RM-related SM activities at the property level
versus the brand, owner, or corporate level.
Clearly, staff at the property level understands
the property, market and location better than
corporate, and therefore, might be more quali-
fied to handle day-to-day questions, comments
and concerns as well as location-specific
marketing. However, not all locations might
require a dedicated resource or strong SM
personality. As SM is a public forum, commu-
nications at all levels should conform to a
corporate standard, while maintaining enough
freedom so that it continues to be genuine and
natural. Setting and enforcing such standards is
another challenge.
The role of outsourcing in the management
of SM also merits consideration. Should data
collection and analysis be outsourced or mana-
ged in-house? Equally, might it be more effec-
tive to outsource outbound communication
rather than assign internal resources to this task?
Issues such as cost, control and the availability of
internal expertise will play a role in outsourcing
decisions.
Inbound data capture and analysis
The application of SM-related user-generated
data in RM decision making and strategy
development requires the collection and analy-
sis of those data. Decisions have to be made
regarding the SM channels to track, the type of
data to capture, in addition to the tools to
employ in, and frequency of, data capture.
The initial step in the data capture and
analysis process is identifying the overall goal of
data collection. For example, if the goal is to
enhance understanding of the needs a specific
customer segment, the capture and analysis of
customer reviews, and their associated satisfac-
tion ratings, from SM sites such as TripAdvisor
will likely be the focus. On the other hand, if
the goal is to gauge the success of a specific
SM-based promotional campaign, tracking
consumer responses and positive comments on
Twitter and Facebook, in addition to tallying
the number of actual bookings made using the
campaign’s promotion code, may constitute
appropriate metrics.
A significant array of tools is available for
SM-related data capture and analysis. Web-
based tools such as HootSuite and Google
Analytics can be used to capture usage statistics
and metrics. Customer metrics can also be
tracked via user-review sites (for example,
TripAdvisor’s customer satisfaction index).
Some tools also enable competitor benchmark-
ing. For example, TripAdvisor provides the
capability to benchmark a property’s customer
satisfaction rank against a competitor and
the aggregate rank of its market. Tools like
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ReviewAnalyst, used by a number of hotel
companies including Starwood Hotels and
Resorts, can be used to track and aggregate
customer reviews and ratings from TripAdvisor,
Expedia, Priceline and other major OTAs. Text
analytics, primarily text mining and sentiment
analysis, such as SAS
s
Social Media Analytics,
can also be employed to quantify the content of
unstructured text. These algorithms understand
how language is used in context, and can
compare word and phrase usage within text
documents either to each other or to a standard
such as positive or negative sentiment.
1
Man-
agement needs to establish which tools will
effectively capture data and make these data
accessible in a user-friendly and timely manner.
The extent to which SM user-generated
content has the potential to augment an orga-
nization’s existing knowledge base should be
considered. What are the data capture capa-
bilities of existing systems (for example, loyalty
program and CRM databases) and can SM-
related customer-generated data be incor-
porated with those data in a meaningful way?
For example, unstructured feedback from
internal surveys can be analyzed and compared
with satisfaction and value ratings both from
internal surveys and from review sites for a
more detailed understanding of the elements
that contribute to satisfaction and value. CRM
databases can be augmented with information
from social media channels providing a richer
profile of the customer.
Reach and scope of outbound
communication
A number of pertinent questions arise in terms
of the management of outbound communica-
tion. Should the same promotions and messages
be pushed through all SM channels or should a
different strategy be designed for each channel?
For example, Park City Mountain Resort has
created different skier personas and each is
marketed separately through their various SM
channels. Their snow mamma’s community
caters to the family ski vacation, whereas their
PC Ride community caters to the adventurous
snowboarder (the Shawn White-type). Each has
their own micro-site, blogs, Twitter accounts
and Facebook pages, monitored by staff who
understands the needs of the community. If
such a strategy is employed, hotel managers
need to ensure that the operation is set up to
handle diverse and potentially conflicting mar-
ket segments, and that fencing is setup properly
so that the channels do not cannibalize each
other.
The frequency and timing of promotions
through SM channels is also a concern. For
example, the Las Vegas Hard Rock Hotel and
Casino runs weekly promotions on Twitter,
‘Twitter Tuesday’. Customers have come to
expect this weekly promotion, and may begin
to question if the Tweet does not come through
in time. Further, branded properties have the
added consideration of the joint effect of brand-
level and property-level SM strategies. Is a
consistent outbound communication message
emanating from both sources? Is promotional
activity coordinated such that promotions do
not lose their effect (for example, excessive
exposure)? As with other marketing efforts,
SM promotions should be carefully planned,
tested and monitored. RM involvement in the
planning process for promotions launched
through SM channels will ensure that the
promotions are timed and fenced appropriately
to prevent displacement. Dedicated promotion
codes should be used to ensure that all bookings
generated are tracked back to the appropriate
channel. Test and control methodologies should
be applied to validate the effectiveness of the
promotion in generating incremental bookings.
ROADMAP FOR FUTURE
RESEARCH
The four quadrant framework presented in this
article provides an indication of the scope of the
potential opportunities that SM afford RM.
However, the preceding discussion provides
an indication of the breadth of questions
that warrant examination in order to fully
assess the true potential of SM. Using one
Social media meets hotel revenue management
301 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
metrics-related, and three consumer-related,
categories, we outline a number of avenues for
future research. These do not represent an
exhaustive list of research questions. Rather,
they provide a starting point for research in the
domain.
Relationship to operating metrics
Although it seems likely that SM, and in
particular, traveler reviews, have a relationship
with key operating metrics, these relationships
have yet to be determined. Many operators are
concerned with showing a return on invest-
ment (ROI) on SM programs, so these relation-
ships, if indeed significant, could finally prove
out the value of the investment in SM. As a first
step, the choice of appropriate operating me-
trics needs to be evaluated. Suppose, for exam-
ple, that a hotel decides to evaluate the impact
of sentiment on average daily rate (ADR).
ADR is a function of all rates paid by guests
during a specific time period, including nego-
tiated rates (for example, corporate or group
rates) that are not offered in SM-influenced
channels. Once rates have been negotiated, for
example at the start of a calendar year by a
corporate account, review activity will have no
effect on the rate paid by that client throughout
the year. Thus, if a hotel property has a
significant amount of negotiated business, this
effect has to be accounted for in any analysis of
the sentiment–ADR relationship. Time frame
must also be taken into account. It is the
sentiment that prevailed at the time of booking
that is key to understanding the relationship, if
any, between sentiment and ADR, not senti-
ment on the day of arrival. As these examples
illustrate, the determination of appropriate me-
trics and time frame for examination is not
uncomplicated, yet is an essential starting point
for the evaluating of the ROI on SM programs.
Questions that arise in this arena include: Is
there a relationship between overall sentiment
and rate, or does sentiment at an individual
attribute level (that is, specific amenities (for
example, bed, breakfast buffet), service level
and so on) impact rate? In other words, what is
it about sentiment that has an impact on rate, if
any? What attributes have the greatest influence
on likelihood to book (for example, positive or
negative reviews about bed, location, amenities
and so on)? What is the interaction between
price, placement, star rating and review senti-
ment on likelihood to book? Can hotels with
‘happier’ customers get a price premium above
the competitive set? Is there a relationship
between customer loyalty and sentiment? How
can hotels use influencer scoring to place a
‘value’ on influence as part of the customer
value calculation? Is there a relationship be-
tween customer satisfaction, as measured on
internal surveys, and sentiment?
Consumer characteristics
At the core of the SM debate within many
organizations is defining the SM customer. The
rapid adoption of SM has resulted in an ‘every-
one is doing it, so we have to too’ attitude
toward SM from some, whereas others have
embraced the medium as an essential compo-
nent of their marketing strategy. Some hotel
companies are certain that their demographic
does not participate in SM, and therefore
it is inappropriate or incongruous for them to
participate. Hotel companies, such as Ritz-
Carlton, and independent properties, such as
the Hay-Adams in Washington DC and The
Adolphus in Dallas, are associated with catering
to older, luxury travelers, who might not be as
influenced by social media. However, according
to the president of Ritz-Carlton, customer
mixes have been changing, and customer bases
growing, and therefore this association may no
longer be true (Leo, 2009). In addition, demo-
graphic factors may differ among various social
networks and thus influence the strategic way
in which each SM outlet, whether Twitter,
Facebook, or TripAdvisor is used. A deeper
understanding of the characteristics of custo-
mers who use specific SM channels, including
the purposes for which they interact on
these channels, will help hotels better assess
the revenue opportunities that the various SM
channels provide.
Noone et al
302 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
Questions that arise in this arena include:
Do SM sites represent a distinct market segment
or an alternate communication channel for
existing segments? Do demographic factors
differ among the different SM channels and
how does that influence strategy? Does the
information contained in conversations change
or enhance segmentation strategies?
Consumer preferences and
expectations
Many opinions have been posited regarding the
sales tactics that should be used on SM channels.
Soft-selling has been touted as the proper
mechanism for building trusting relation-
ships with consumers, with service providers
cautioned to avoid hard-sales techniques like
announcements of sales and direct links to
booking options (Evans, 2010). However, a
number of hotel companies have gone down
the hard-sell route (Callari, 2010). Trump
Hotels, for example, have installed a booking
widget on their Facebook page so that the
consumer does not have to leave Facebook to
book a room. The question of consumer pre-
ference, soft- versus hard-selling, particularly in
terms of access to booking engines, via SM
channels remains unanswered. Yet, consumer
preference in this domain will ultimately impact
booking behavior. On a related note, hotel ope-
rators need to understand the potential impact
of outbound SM-related activity on consumer
expectations, not least the effect of promotional
activity on consumers’ reference price.
Questions that arise in this arena include:
How are SM outlets perceived when used as a
selling mechanism? Are there ‘deal-seeking’
expectations in certain SM channels (for exam-
ple, Twitter), or is awareness building equally
effective? Could exposure to promotional
activity from the hotel industry as a whole,
both in terms of volume and frequency, have
a negative effect on the consumer’s reference
price? What are the revenue and reputation
consequences of delayed responses to consumer
inquiries or inactive firm pages, profiles or
accounts?
Consumer behavior
Assessing the merit of investing in, and
developing, a strategic approach to managing
SM-related RM opportunities requires an un-
derstanding of the impact of SM on consumers’
purchasing habits. This includes an understand-
ing of the types of promotional activity that
consumers best respond to, the channels that are
most likely to drive buying behavior and influ-
ence the consumer’s impression of a brand, and
the sources of SM-based information that
consumers value when making a purchase
decision (for example, the weight placed on
other consumers’ reviews).
Questions that arise in this arena include:
What type of SM-based promotional activity do
consumers respond best to? What level of orga-
nizational activity (for example, frequency of
promotional activity) is optimal in terms of
booking behavior? Is the efficacy of a given
promotional strategy, in terms of increased
bookings or brand awareness, contingent on the
SM channel used? Are there differences in the
influencer effect across different SM channels? Is
there a difference in how consumers use the
information on SM channels through varying
stages in the buying process? To what degree do
reviews influence bookings (that is, relationship
between sentiment and booking volume/pace)?
How do consumers evaluate the accuracy and
credibility of reviews? Are there differences in
the way that customers evaluate ‘peer’ reviews
versus editorial content (that is, hotelchatter
.com)? Is there a breaking point where volume
of bad reviews or a star rating would shift
customers away from booking at a property that
otherwise appeared to meet their needs? Is the
influence of reviews different when customers are
booking at an ‘unknown’ brand versus a known
brand? To what degree do reviews/video/pictures
influence ancillary purchases at the property, and,
at what point does this happen (that is, at the
initial booking, or post-booking, stage)?
CONCLUSION
The rapid adoption of SM comes at a perfect
time for RM. As RM evolves from a tactical to
Social media meets hotel revenue management
303 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
strategic discipline, SM provides the ideal plat-
form and data source to support RM’s efforts to
build a business strategy, expand RM into other
revenue-generating assets and become more
customer-centric. Inbound communication
can help the firm identify short-term opportu-
nities to push pricing and promotions, as well as
long-term opportunities to learn more about
customers, identify new market segments and
position against competition. Tactically, out-
bound communications push offers to sell dis-
tressed inventory in the short-term, or
strategically build trust, increase the economic
value of the customer and increase retention.
At this early stage, discussions centering on
SM’s role within the hospitality industry can raise
more questions than answers. We have devel-
oped a framework for categorizing SM-related
opportunities, discussed the issues associated
with incorporating SM into RM decision mak-
ing, and identified a roadmap for future research.
This is intended to organize thinking and guide
future work in this area, as we begin to tackle the
crucial questions that need to be explored in
order to successfully leverage SM.
SM offer a tremendous opportunity for hote-
liers, but they need to be integrated into existing
operational, marketing and branding strategies.
Given the relative newness and rapid adoption of
SM, many hotels are just beginning to scratch
the surface of the potential this new resource
holds. However, hoteliers should keep in mind
that when it comes to leveraging SM across the
enterprise, it should be treated as an integral
component of the overall business, marketing
and operations strategy, not as a separate strategic
initiative. This article provides an example of
how one department within the hotel can
integrate SM into their business process, but as
this area evolves, there will be many more.
NOTE
1 The validity of customer reviews is a legit-
imate concern for hotel organizations. On
the one hand, it could be argued that, unless
some means is employed to identify false
reviews and discount them from a sentiment
analysis, this analysis will yield erroneous
results. However, it could also be argued that
it is what consumers believe, their ‘reality’
(whether based on false reviews or not), that
really counts. If consumers regard false
reviews as credible, then management needs
to understand the content of those reviews
such that appropriate strategies can be
deployed to offset any negative consumer
reaction they may engender.
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Hotel companies are struggling to keep up with the rapid consumer adoption of social media. Although many companies have begun to develop social media programs, the industry has yet tofully explore the potential of this emerging data and communication resource.
Research Article
Social media meets hotel revenue
management: Opportunities, issues and
unanswered questions
Received (in revised form): 21st March 2011
Breffni M. Noone
a
, Kelly A. McGuire
b
and Kristin V. Rohlfs
c
a
The Pennsylvania State University, Pennsylvania, USA;
b
SAS Institute Inc., North Carolina, USA; and
c
Hospitality Consultant, Rochester, New York, USA.
Breffni M. Noone is an assistant professor at the Pennsylvania State University School of Hospitality
Management. She holds a PhD from Cornell University. Her research interests include pricing, forecasting
and distribution channel management for services, with particular emphasis on consumer perceptions of, and
reactions to, revenue management practices.
Kelly A. McGuire leads the hospitality and travel global practice at SAS. She holds a PhDfromCornell University.
Her team is responsible for designing analytic software solutions for the hospitality and travel industries. Her work
focuses in particular on the integration of revenue management with marketing, sales and social media.
Kristin V. Rohlfs is an independent consultant and researcher. She holds a PhD from Cornell University. She
specializes in small-business application of operations management and revenue management principles.
Correspondence: Breffni M. Noone, The Pennsylvania State University, 215 Mateer Building, University Park,
Pennsylvania 16802-1307, USA
ABSTRACT Hotel companies are struggling to keep up with the rapid consumer adoption of social
media. Although many companies have begun to develop social media programs, the industry has yet to
fully explore the potential of this emerging data and communication resource. The revenue management
department, as it evolves from tactical inventory management to a more expansive role across the
organization, is poised to be an early adopter of the opportunities afforded by social media. We propose a
framework for evaluating social media-related revenue management opportunities, discuss the issues
associated with leveraging these opportunities and propose a roadmap for future research in this area.
Journal of Revenue and Pricing Management (2011) 10, 293–305. doi:10.1057/rpm.2011.12;
published online 6 May 2011
Keywords: revenue management; social media; hotels; marketing; pricing; consumer behavior
INTRODUCTION
Social media (SM) refers to a group of Internet-
based applications that allow the creation and
exchange of user-generated content (Kaplan
and Haenlein, 2010). SM expedite conversation
as opposed to traditional media, which delivers
content but does not allow the consumer of that
media, whether reader, viewer or listener, to
participate in the development and dissemina-
tion of the content. SM sites come in a num-
ber of forms, including strictly review sites
(for example, TripAdvisor and Yelp), social
networks and microblogging sites (for example,
Facebook, Twitter), news sites (for exam-
ple, Digg), social sharing (for example, Flickr,
YouTube), social bookmarking (for example,
& 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
www.palgrave-journals.com/rpm/
Delicious, Faves), and purchase/review sites
(for example, Amazon and Travelocity) ( Jones,
2009). The common feature of these diverse
SM applications is that they encourage discus-
sion, feedback, voting, comments and sharing
of information from all interested parties.
SM is moving so quickly that any statistics
provided here will be out of date before long.
That said, as of late 2010, Facebook had more
than 500 million active users, adding 700 000
new members per day, and 50 per cent of active
users log onto the site in any given day. Each
day, more than 3 million photos are uploaded to
Flickr, bloggers post nearly a million new
articles, and 5 million Tweets are sent (Bodnar,
2010). As of May 2010, YouTube exceeded
2 billion views a day, with 24 hours of videos
uploaded each minute (Goldberg, 2010;
Zibreg, 2010).
In response to the rapid adoption of SM, the
popular press is replete with articles encoura-
ging hospitality firms to embrace the opportu-
nity that SM provides to listen to, and
communicate with, consumers. It appears that
the hotel industry is heeding this advice, as
evidenced by the volume of hotel companies
establishing a presence across the various SM
platforms (for example, Twitter, Facebook and
so on). One challenge facing hotels in their
pursuit to engage consumers via SM is the very
personal and individual nature of the SM
environment. Hotels are corporate entities.
Thus, hotel companies have to figure out how
to establish an online personality congruent
with the brand promise, yet interact in a
genuine and transparent manner with consu-
mers such that the consumer is engaged and
trust is built. Some hotel operators are also
reluctant to fully embrace the SM media envir-
onment amidst concerns about the legitimacy
of consumer content. However, the question is
not whether the content is legitimate; rather
how much of that content is perceived as
credible by the consumer. The role that online
consumer reviews can play in hotel selection
alone provides a fundamental reason to pay
attention to SM.
Amidst these concerns regarding engage-
ment, trust and credibility, there remains much
debate regarding how to most effectively en-
gage SM across the enterprise. It is in light of
the debate as to how to best leverage SM that
this article explores the potential that SM holds
specifically for hotel revenue management
(RM). The role and scope of RM is currently
in transition, migrating from a stand-alone
tactical approach to room inventory manage-
ment to a strategic, customer-centric approach
to demand creation, integrated into all aspects
of hotel operations and marketing (Cross et al,
2009). We believe that this functional shift
provides RM a unique opportunity to leverage
the information provided by SM, and become
an early adopter of this new data source and
communication vehicle.
The aim of this article is twofold. First, we
present a framework for evaluating SM-related
RM opportunities. Second, we discuss a number
of issues that are central to assessing the potential
role and scope of SM in RM and propose a
roadmap for future research in the domain.
THE CONTINUING EVOLUTION
OF RM
Cross et al (2009) provide an insightful overview
of the evolution of RM in the lodging industry,
from the inventory-focused role it played in
the late 1980s and 1990s, to the post-9/11 shift
toward a more expansive role within the organi-
zation. Historically, revenue managers were
tasked with opening and closing predefined
room rates based on predicted demand such that
the best combination of occupancy and rate was
achieved for any given night. More recently,
RM has begun to evolve from this tactical
orientation to a more strategic role within hotel
organizations that encompasses marketing, sales
and channel strategy. With this evolution has
come a broader set of responsibilities across a
number of domains including pricing, manage-
ment of the entire revenue stream (total hotel
revenue management), and a customer-centric
approach to developing demand. Figure 1
provides a graphical overview of hotel RM,
Noone et al
294 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
illustrating the augmentation of core RM pro-
cesses with these emerging RM responsibilities.
Pricing
The focus is shifting from inventory optimiza-
tion (that is, what is the right number of rooms
to sell at a given rate?) to price optimization
(that is, is the rate right in the first place?). The
latter focus entails rate setting based on fore-
casted demand, the elasticity of demand and
competitive rates. Thus, this approach requires
a firm understanding of consumers’ willingness
to pay, and the value expected at a given price
point, as well as an ability to effectively position
the product offering vis-a`-vis the competition.
Total Hotel Revenue Management
(THRM)
Broadening the scope and role of RM involves
the management of the entire revenue stream,
rather than managing revenue from room in-
ventory alone. Emerging areas of RM applica-
tion include function space RM, restaurant RM,
spa RM and golf RM (for example, Kimes et al,
1998; Kimes, 2000; Kimes and McGuire, 2001;
Kimes and Schruben, 2002; Noone et al, 2009).
Profit optimization becomes an important
consideration in this regard given the significant
variable costs that are typically associated with
these lines of business. Revenue per available
room may be an adequate performance metric
where profit is largely derived from rooms.
However, profit (for example, gross operating
profit per available room) may be a better metric
to apply when evaluating how well the entire
business is managed.
Customer-centric RM
Another key development in the RM arena is a
shift away from the traditional inventory-centric
Demand Modelling
-product oferings
-competitive practices
-market segmentation
-data collection
-variabliity, uncertainty
Demand Forecasting
-booking patterns
-market factors
-property expectations
Optimization
-overbooking
-quantity-based
-allocation to product and
customer segments
Setting Booking Controls
-physical and non-physical
rate fences
-systems communication
Distribution Channel
Management
-direct
-intermediary
-single image inventory
CORE RM
PROCESSES
Business Strategy
-demand creation
-value proposition
-market positioning
Total Hotel RM
-optimization of ancillary
services
-packaging
-coordination among RM.,
Marketing, Sales and
Operations departments
Interaction with
Customers
-customer-centric
philosophy
-willingness to pay
-price-based optimization
Figure 1: Evolving scope of RM activities.
Social media meets hotel revenue management
295 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
approach to RM to a customer-centric orienta-
tion. A long-standing criticism of RM has been
its focus on short-term revenue maximization.
Under the vision of customer-centric RM,
customer data are used to yield insights into the
organization’s most valuable customers in terms
of profitability and lifetime value. This informa-
tion, coupled with data on consumers’ shopping
patterns and habits, can then be leveraged to
develop strategies (for example, promotions,
preferential treatment) targeted at specific custo-
mers as a means of growing share of wallet and
developing the customer base.
It is in light of the growth and evolution of
RM in these three key areas that this article
examines the opportunities that SM afford RM.
FRAMEWORK FOR EVALUATING
SM-RELATED RM
OPPORTUNITIES
SM provide hotel operators the opportunity for
real-time, two-way communication, commu-
nication with consumers at a point of need (for
example, communication of promotional rates
for distressed inventory), and the potential to
build awareness, reputation and business (Lanz
et al, 2010). Although these opportunities have
been documented in the popular press and
across various hotel-oriented blogs and web-
sites, discussion has taken place at a general
level and does not provide hotel operators a
structured framework for evaluating the
potential of SM for RM. We propose such a
framework.
The framework classifies SM-related RM
opportunities across two dimensions: (1) infor-
mation flow and (2) time orientation (Table 1).
Information flow can be categorized as inbound
or outbound in nature. Inbound information
flow refers to the customer-generated content,
such as user reviews, ratings, photos, videos and
comments, that is accessible by the organization
via the various SM channels. Dominant sources
of customer-generated content currently in-
clude user-generated content sites (for example,
TripAdvisor and WikiTravel), reviews on on-
line travel agent (OTA) sites (for example,
Expedia), social networks and microblogging
sites (for example, Facebook, Twitter) and media/
video sharing sites (for example, YouTube).
Outbound information flow encompasses
firm-generated content that is communicated
to the consumer using SM. This includes, for
example, promotions, special offers and press
releases via SM channels such as Facebook and
Twitter, firm-sponsored blogs (for example, Bill
Marriott’s ‘On the Move’), video-content (for
example, YouTube), and response to consumer
reviews (for example, via TripAdvisor).
Time orientation refers to the time scope of
the RM activities and decisions that SM have
the potential to support. Short-term orienta-
tion relates to the short-term, tactical RM
Table 1: Framework for evaluating SM-related RM opportunities
Information flow Time orientation
Short term Long term
Inbound
Customer-
generated
content
Inform promotional and pricing decisions
1. Configuration and pricing of
promotions and packages
Inform strategy development
1. Pricing
2. Customer relationship development
3. Distribution channel management
Outbound
Firm-generated
content
Drive demand creation and build brand awareness
1. Execution of push strategies: rooms and
ancillary revenue streams
Drive customer development and retention
1. Development of micro-sites targeted at
specific customer groups
2. Engagement in social blogging
Noone et al
296 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
activities and decisions that SM can support,
while long-term orientation encompasses RM
activities with a long-term, strategic focus.
Inbound, short term
In the short term, user-generated content can
be used by RM to develop targeted push
strategies. Consumer reviews on websites like
TripAdvisor.com and WikiTravel.com provide
insights into what ‘add-ons’ consumers like and
dislike, what add-ons they are willing to pay for
(for example, all-inclusive deals, breakfast in-
cluded rates and so on), and why they are
willing to pay for them. Using consumer-
generated data to inform pricing and pro-
motion decisions fits with the notion of a
customer-centric approach to RM. Rather
than taking price as a given, the emphasis is on
using customer-generated data to enhance the
value proposition and develop prices that cus-
tomers are willing to pay. HKHotels provide a
good example of a value-based approach to
driving revenue. Rather than focus on price
alone, management closely monitors customer
reviews on TripAdvisor and uses those data to
enhance value for the dollar for consumers (for
example, adding items to the breakfast buffet,
an upgraded wine and cheese service in the
evening) (Anonymous, 2010a).
The practice of ‘listening’ to the customer
and using that information to inform decision
making is not new. Hotel companies have long
employed a number of approaches to capture
the voice of the customer, from guest comment
cards to mystery shopper data. The idea here is
to not to replace these traditional data sources,
but to augment them with SM-based customer
feedback. SM offer the organization potential
exposure to feedback from a larger, more
diverse representation of consumers that they
might otherwise not receive feedback from.
Inbound, long term
While customer-generated data can be used to
inform short-term promotional decisions, they
can also serve as an input to long-term,
RM strategy development. Three key areas
that SM-related customer content has the
potential to impact are pricing, customer rela-
tionship development and distribution channel
management.
Pricing
A number of key factors influence pricing
decisions, including the level of customer de-
mand, the price sensitivity of demand and
competitive price positioning. As SM data are
public data, consumer-generated content pro-
vides the greatest opportunity to enhance the
third factor, competitive price positioning. The
rate transparency resulting from the advent of
the Internet has necessitated that hotels position
themselves against the competition on the basis
of price. The addition of competitor-related
customer-generated content provides the op-
portunity to supplement available price data
with customer-generated data that provide in-
sight into the other side of the value equation.
These data can be leveraged to amplify differ-
ences in product attributes such that a hotel is
not competing on the basis of price alone.
Customer relationship development
Although user-generated content regarding in-
dividual customers’ needs and preferences can
be leveraged to develop packages/product of-
ferings that support short-term objectives (that
is, filling rooms during off-peak periods), these
customer-specific data can be collated over time
to provide a richer understanding of an organi-
zation’s customer base. This, along with data
from the organization’s loyalty program and/or
customer relationship management (CRM) sys-
tem, will facilitate a customer-centric approach
to RM. The focus is on the development of
long-term relationships with customers, using
the various data sources to tailor messages to,
and/or provide preferential treatment for, those
customers.
As revenue management moves from
decisions based on the highest room rate, to
total hotel optimization and a longer-term
view incorporating customer relationships, the
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decision of who to say ‘yes’ and ‘no’ to becomes
more complicated. The value of a customer
includes their room rate, ancillary purchases,
long-term value, and, potentially, their ability
to influence followers through their social net-
work connections. Social network analysis can
be used to identify the influencers within net-
works, and derive an influencer ‘score’ repre-
senting the potential for influence of each
customer. By understanding the relationship
between influencer scores and incremental
bookings, revenue management will be able to
compare the value of an active reviewer to a
guest with expected ancillary purchases to a top
tier loyalty program member, and know which
guest is likely to bring more revenue to the
property.
Distribution channel management
Many hotel organizations have ongoing con-
cerns about distribution channel management,
not least where to dedicate resources and
efforts, and where to promote for maximum
response. The application of analytical tools
to mine customer-generated content and un-
cover distinct preferences and needs provides
the opportunity to gain an understanding of
the type of customer that is interacting with the
organization through the various SM channels.
Review activity and reviewer sentiment, com-
bined with booking information, can help
inform the overall distribution strategy includ-
ing which channels to focus on and how much
inventory to allocate to those channels. These
data can also be used to guide the development
of targeted advertising and promotional mes-
sages for specific SM channels that may provide
a means of driving bookings to the organiza-
tion’s website.
Outbound, short term
From a tactical RM perspective, a key objective
of using firm-generated SM content is to drive
short-term demand in distressed periods. With
the shift in RM emphasis from demand control
to demand creation, revenue managers need to
find efficient and effective ways to build demand
from existing customers and generate trial from
new customers (Anderson and Carroll, 2007).
To that end, SM channels provide the opportu-
nity to execute push strategies to drive short-
term capacity utilization. For example, in 2009,
the High Peaks Resort in Lake Placid (NY) ran
a ‘46’-themed promotion for fans and followers
on Facebook and Twitter: a 46 min a day, 46-
day promotion based on the elevations of the
High Peaks. For example, a rate based on the
4867-foot elevation of Whiteface Mountain
was US$48.67, whereas a rate based on the
4361-foot elevation of Seward Mountain was
$43.61. Although these rates are inarguably
low for a luxury resort, the promotion helped
to fill rooms during a typically slow season and
generated substantial publicity (Anonymous,
2010b).
Stimulating demand via SM channels may
also provide the opportunity to decrease dis-
tribution costs. Providing a link to the hotel’s
website, or direct access to the hotel booking
engine, will encourage fans and followers to
book direct rather than through third-party
distribution channels. For example, Best
Western’s Hotel President Berlin teamed up
with Worklight to develop a booking widget,
fully integrated with their booking systems and
marketing promotions database, which could be
added to Facebook, iGoogle and Netvibes
(Anonymous, 2010c).
The notion of using SM to build demand
also extends to driving ancillary revenues, an
important component of THRM. As revenue
managers become more involved in the man-
agement of food and beverage, function space,
spa and other revenue streams, SM provide the
opportunity to push that inventory during
periods of low demand. The Omni San Diego
provides a good example of how active
monitoring of SM can lead to revenue gain.
Their response to a wedding planner’s tweet
about potential choice of hotel for a wedding
won them the business because they responded
on Twitter and the competition did not
(Lanz et al, 2010).
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Presence across multiple SM channels also
increases the likelihood of converting online
searches into actual bookings. Recent research
from Google has shown that 84 per cent of
travelers use the Internet as a planning resource,
visiting an average of 22 sites before booking
(Torres, 2010). The more information available
through various SM channels, the more likely
travelers will come across a given hotel property
when planning a trip. SM can also play an
integral role in a search engine optimization
strategy. For example, an active presence on
Facebook, Twitter, YouTube and Flickr, with
appropriate tags, can help a hotel to dominate
searches, resulting in five hits in a search
(including brand.com), rather than a sole hit
for the brand website (Aggarwal, 2010).
While SM-based promotional activity can
build short-term demand for distressed inven-
tory, it also offers the opportunity to foster
brand interest and awareness, not least via the
mainstream media coverage that the promo-
tional activity can generate. The mainstream
media coverage of the Twitter-based promo-
tional giveaways by the Westin Bonaventure
(CA), for example, generated nearly 20 million
consumer impressions (Lanz et al, 2010).
Enhanced brand awareness increases the likelihood
of subsequent brand choice, and the potential to
positively impact future revenue streams.
Outbound, long term
The notion of RM integration into all aspects
of hotel operations, in particular marketing, is
especially salient in this quadrant. Outbound,
long-term activity is focused on customer
development and retention. Balancing short-
term revenue maximization and long-term
customer development has been identified as
a key issue facing revenue managers (Cross
et al, 2009). Consistent with the notion that
RM is moving from demand control to
demand creation, SM provides RM the oppor-
tunity to work together with marketing to
reach out and build relationships with targeted
customer groups. This may be through the
development of micro-sites, which can serve as
the vehicle to drive purchase, as well as provide
feedback to inform RM strategy. Wyndham
Hotels and Resorts, for example, have devel-
oped a micro-site targeted at female travelers
(www.womenontheirway.com). The site pro-
vides a vehicle for promoting female-friendly
packages and the opportunity to gain insights
into the services and amenities that matter to
female travelers. Wyndham has used the feed-
back generated through this program to devel-
op appropriately priced, and packaged, product
offerings for that customer segment.
Social blogging also provides an opportunity
to connect with the customer, develop the
brand voice and instill trust in the customer.
Research suggests that trust plays a key role in
loyalty, to a brand (for example, Morgan and
Hunt, 1994; Garbarino and Johnson, 1999).
Blogging about topics that are relevant to the
reader, such as things to do near the hotel or tips
for travelers, provides the opportunity to build
consumers’ trust. In other words, give the
customer relevant information and they will
trust you as a source of information. As trust is
built, more direct information on product
and service offerings can be incorporated into
the blogging strategy to build awareness and
increase revenues.
In summary, SM provide access to customer-
generated data that can be deployed to support
the development of RM strategies, both short-
and long-term in orientation. Then, during the
strategy execution phase, SM present the op-
portunity to yield desired outcomes by provid-
ing the vehicle to communicate firm-generated
content to the consumer. It is evident that many
hotel companies are active in the outbound,
short-term quadrant. However, in order to fully
leverage the breadth of opportunities that SM
afford, and moving beyond the tactical, day-
to-day management of SM programs, hotel
firms need to consider developing a holistic,
systematic approach to exploiting the opportu-
nities across all four quadrants. This holistic
approach will require an integrated and strategic
approach to a revenue management strategy,
including working cross-departmentally with
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sales and marketing. In the following section we
discuss a number of pertinent issues that need to
be considered when evaluating the scope of SM
opportunities for RM.
ISSUES TO CONSIDER
There are a number of key issues that hospitality
managers need to consider when developing a
strategy to exploit SM-related RM oppor-
tunities. These encompass ownership of SM-
related RM activities, inbound data capture and
analysis, and the reach and scope of outbound
communication with consumers.
Ownership of SM-related RM
activities
It is evident from our discussion of the oppor-
tunities that SM present for RM, that success,
in terms of revenue generation, will be a
function of the ability of RM, marketing and
sales to work in a coordinated manner to
execute strategy. This raises an important ques-
tion: which functional area – RM, sales, or
marketing – should house the RM-related SM
responsibilities? Regardless of where they are
housed, effective and timely communication
and collaboration among RM, sales, and mar-
keting personnel will be instrumental to the
success of an SM strategy.
As hotels consider areas of responsibility, they
should also consider whether there should be a
separate strategy and structure for SM and
RM-related SM activities at the property level
versus the brand, owner, or corporate level.
Clearly, staff at the property level understands
the property, market and location better than
corporate, and therefore, might be more quali-
fied to handle day-to-day questions, comments
and concerns as well as location-specific
marketing. However, not all locations might
require a dedicated resource or strong SM
personality. As SM is a public forum, commu-
nications at all levels should conform to a
corporate standard, while maintaining enough
freedom so that it continues to be genuine and
natural. Setting and enforcing such standards is
another challenge.
The role of outsourcing in the management
of SM also merits consideration. Should data
collection and analysis be outsourced or mana-
ged in-house? Equally, might it be more effec-
tive to outsource outbound communication
rather than assign internal resources to this task?
Issues such as cost, control and the availability of
internal expertise will play a role in outsourcing
decisions.
Inbound data capture and analysis
The application of SM-related user-generated
data in RM decision making and strategy
development requires the collection and analy-
sis of those data. Decisions have to be made
regarding the SM channels to track, the type of
data to capture, in addition to the tools to
employ in, and frequency of, data capture.
The initial step in the data capture and
analysis process is identifying the overall goal of
data collection. For example, if the goal is to
enhance understanding of the needs a specific
customer segment, the capture and analysis of
customer reviews, and their associated satisfac-
tion ratings, from SM sites such as TripAdvisor
will likely be the focus. On the other hand, if
the goal is to gauge the success of a specific
SM-based promotional campaign, tracking
consumer responses and positive comments on
Twitter and Facebook, in addition to tallying
the number of actual bookings made using the
campaign’s promotion code, may constitute
appropriate metrics.
A significant array of tools is available for
SM-related data capture and analysis. Web-
based tools such as HootSuite and Google
Analytics can be used to capture usage statistics
and metrics. Customer metrics can also be
tracked via user-review sites (for example,
TripAdvisor’s customer satisfaction index).
Some tools also enable competitor benchmark-
ing. For example, TripAdvisor provides the
capability to benchmark a property’s customer
satisfaction rank against a competitor and
the aggregate rank of its market. Tools like
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ReviewAnalyst, used by a number of hotel
companies including Starwood Hotels and
Resorts, can be used to track and aggregate
customer reviews and ratings from TripAdvisor,
Expedia, Priceline and other major OTAs. Text
analytics, primarily text mining and sentiment
analysis, such as SAS
s
Social Media Analytics,
can also be employed to quantify the content of
unstructured text. These algorithms understand
how language is used in context, and can
compare word and phrase usage within text
documents either to each other or to a standard
such as positive or negative sentiment.
1
Man-
agement needs to establish which tools will
effectively capture data and make these data
accessible in a user-friendly and timely manner.
The extent to which SM user-generated
content has the potential to augment an orga-
nization’s existing knowledge base should be
considered. What are the data capture capa-
bilities of existing systems (for example, loyalty
program and CRM databases) and can SM-
related customer-generated data be incor-
porated with those data in a meaningful way?
For example, unstructured feedback from
internal surveys can be analyzed and compared
with satisfaction and value ratings both from
internal surveys and from review sites for a
more detailed understanding of the elements
that contribute to satisfaction and value. CRM
databases can be augmented with information
from social media channels providing a richer
profile of the customer.
Reach and scope of outbound
communication
A number of pertinent questions arise in terms
of the management of outbound communica-
tion. Should the same promotions and messages
be pushed through all SM channels or should a
different strategy be designed for each channel?
For example, Park City Mountain Resort has
created different skier personas and each is
marketed separately through their various SM
channels. Their snow mamma’s community
caters to the family ski vacation, whereas their
PC Ride community caters to the adventurous
snowboarder (the Shawn White-type). Each has
their own micro-site, blogs, Twitter accounts
and Facebook pages, monitored by staff who
understands the needs of the community. If
such a strategy is employed, hotel managers
need to ensure that the operation is set up to
handle diverse and potentially conflicting mar-
ket segments, and that fencing is setup properly
so that the channels do not cannibalize each
other.
The frequency and timing of promotions
through SM channels is also a concern. For
example, the Las Vegas Hard Rock Hotel and
Casino runs weekly promotions on Twitter,
‘Twitter Tuesday’. Customers have come to
expect this weekly promotion, and may begin
to question if the Tweet does not come through
in time. Further, branded properties have the
added consideration of the joint effect of brand-
level and property-level SM strategies. Is a
consistent outbound communication message
emanating from both sources? Is promotional
activity coordinated such that promotions do
not lose their effect (for example, excessive
exposure)? As with other marketing efforts,
SM promotions should be carefully planned,
tested and monitored. RM involvement in the
planning process for promotions launched
through SM channels will ensure that the
promotions are timed and fenced appropriately
to prevent displacement. Dedicated promotion
codes should be used to ensure that all bookings
generated are tracked back to the appropriate
channel. Test and control methodologies should
be applied to validate the effectiveness of the
promotion in generating incremental bookings.
ROADMAP FOR FUTURE
RESEARCH
The four quadrant framework presented in this
article provides an indication of the scope of the
potential opportunities that SM afford RM.
However, the preceding discussion provides
an indication of the breadth of questions
that warrant examination in order to fully
assess the true potential of SM. Using one
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metrics-related, and three consumer-related,
categories, we outline a number of avenues for
future research. These do not represent an
exhaustive list of research questions. Rather,
they provide a starting point for research in the
domain.
Relationship to operating metrics
Although it seems likely that SM, and in
particular, traveler reviews, have a relationship
with key operating metrics, these relationships
have yet to be determined. Many operators are
concerned with showing a return on invest-
ment (ROI) on SM programs, so these relation-
ships, if indeed significant, could finally prove
out the value of the investment in SM. As a first
step, the choice of appropriate operating me-
trics needs to be evaluated. Suppose, for exam-
ple, that a hotel decides to evaluate the impact
of sentiment on average daily rate (ADR).
ADR is a function of all rates paid by guests
during a specific time period, including nego-
tiated rates (for example, corporate or group
rates) that are not offered in SM-influenced
channels. Once rates have been negotiated, for
example at the start of a calendar year by a
corporate account, review activity will have no
effect on the rate paid by that client throughout
the year. Thus, if a hotel property has a
significant amount of negotiated business, this
effect has to be accounted for in any analysis of
the sentiment–ADR relationship. Time frame
must also be taken into account. It is the
sentiment that prevailed at the time of booking
that is key to understanding the relationship, if
any, between sentiment and ADR, not senti-
ment on the day of arrival. As these examples
illustrate, the determination of appropriate me-
trics and time frame for examination is not
uncomplicated, yet is an essential starting point
for the evaluating of the ROI on SM programs.
Questions that arise in this arena include: Is
there a relationship between overall sentiment
and rate, or does sentiment at an individual
attribute level (that is, specific amenities (for
example, bed, breakfast buffet), service level
and so on) impact rate? In other words, what is
it about sentiment that has an impact on rate, if
any? What attributes have the greatest influence
on likelihood to book (for example, positive or
negative reviews about bed, location, amenities
and so on)? What is the interaction between
price, placement, star rating and review senti-
ment on likelihood to book? Can hotels with
‘happier’ customers get a price premium above
the competitive set? Is there a relationship
between customer loyalty and sentiment? How
can hotels use influencer scoring to place a
‘value’ on influence as part of the customer
value calculation? Is there a relationship be-
tween customer satisfaction, as measured on
internal surveys, and sentiment?
Consumer characteristics
At the core of the SM debate within many
organizations is defining the SM customer. The
rapid adoption of SM has resulted in an ‘every-
one is doing it, so we have to too’ attitude
toward SM from some, whereas others have
embraced the medium as an essential compo-
nent of their marketing strategy. Some hotel
companies are certain that their demographic
does not participate in SM, and therefore
it is inappropriate or incongruous for them to
participate. Hotel companies, such as Ritz-
Carlton, and independent properties, such as
the Hay-Adams in Washington DC and The
Adolphus in Dallas, are associated with catering
to older, luxury travelers, who might not be as
influenced by social media. However, according
to the president of Ritz-Carlton, customer
mixes have been changing, and customer bases
growing, and therefore this association may no
longer be true (Leo, 2009). In addition, demo-
graphic factors may differ among various social
networks and thus influence the strategic way
in which each SM outlet, whether Twitter,
Facebook, or TripAdvisor is used. A deeper
understanding of the characteristics of custo-
mers who use specific SM channels, including
the purposes for which they interact on
these channels, will help hotels better assess
the revenue opportunities that the various SM
channels provide.
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Questions that arise in this arena include:
Do SM sites represent a distinct market segment
or an alternate communication channel for
existing segments? Do demographic factors
differ among the different SM channels and
how does that influence strategy? Does the
information contained in conversations change
or enhance segmentation strategies?
Consumer preferences and
expectations
Many opinions have been posited regarding the
sales tactics that should be used on SM channels.
Soft-selling has been touted as the proper
mechanism for building trusting relation-
ships with consumers, with service providers
cautioned to avoid hard-sales techniques like
announcements of sales and direct links to
booking options (Evans, 2010). However, a
number of hotel companies have gone down
the hard-sell route (Callari, 2010). Trump
Hotels, for example, have installed a booking
widget on their Facebook page so that the
consumer does not have to leave Facebook to
book a room. The question of consumer pre-
ference, soft- versus hard-selling, particularly in
terms of access to booking engines, via SM
channels remains unanswered. Yet, consumer
preference in this domain will ultimately impact
booking behavior. On a related note, hotel ope-
rators need to understand the potential impact
of outbound SM-related activity on consumer
expectations, not least the effect of promotional
activity on consumers’ reference price.
Questions that arise in this arena include:
How are SM outlets perceived when used as a
selling mechanism? Are there ‘deal-seeking’
expectations in certain SM channels (for exam-
ple, Twitter), or is awareness building equally
effective? Could exposure to promotional
activity from the hotel industry as a whole,
both in terms of volume and frequency, have
a negative effect on the consumer’s reference
price? What are the revenue and reputation
consequences of delayed responses to consumer
inquiries or inactive firm pages, profiles or
accounts?
Consumer behavior
Assessing the merit of investing in, and
developing, a strategic approach to managing
SM-related RM opportunities requires an un-
derstanding of the impact of SM on consumers’
purchasing habits. This includes an understand-
ing of the types of promotional activity that
consumers best respond to, the channels that are
most likely to drive buying behavior and influ-
ence the consumer’s impression of a brand, and
the sources of SM-based information that
consumers value when making a purchase
decision (for example, the weight placed on
other consumers’ reviews).
Questions that arise in this arena include:
What type of SM-based promotional activity do
consumers respond best to? What level of orga-
nizational activity (for example, frequency of
promotional activity) is optimal in terms of
booking behavior? Is the efficacy of a given
promotional strategy, in terms of increased
bookings or brand awareness, contingent on the
SM channel used? Are there differences in the
influencer effect across different SM channels? Is
there a difference in how consumers use the
information on SM channels through varying
stages in the buying process? To what degree do
reviews influence bookings (that is, relationship
between sentiment and booking volume/pace)?
How do consumers evaluate the accuracy and
credibility of reviews? Are there differences in
the way that customers evaluate ‘peer’ reviews
versus editorial content (that is, hotelchatter
.com)? Is there a breaking point where volume
of bad reviews or a star rating would shift
customers away from booking at a property that
otherwise appeared to meet their needs? Is the
influence of reviews different when customers are
booking at an ‘unknown’ brand versus a known
brand? To what degree do reviews/video/pictures
influence ancillary purchases at the property, and,
at what point does this happen (that is, at the
initial booking, or post-booking, stage)?
CONCLUSION
The rapid adoption of SM comes at a perfect
time for RM. As RM evolves from a tactical to
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303 & 2011 Macmillan Publishers Ltd. 1476-6930 Journal of Revenue and Pricing Management Vol. 10, 4, 293–305
strategic discipline, SM provides the ideal plat-
form and data source to support RM’s efforts to
build a business strategy, expand RM into other
revenue-generating assets and become more
customer-centric. Inbound communication
can help the firm identify short-term opportu-
nities to push pricing and promotions, as well as
long-term opportunities to learn more about
customers, identify new market segments and
position against competition. Tactically, out-
bound communications push offers to sell dis-
tressed inventory in the short-term, or
strategically build trust, increase the economic
value of the customer and increase retention.
At this early stage, discussions centering on
SM’s role within the hospitality industry can raise
more questions than answers. We have devel-
oped a framework for categorizing SM-related
opportunities, discussed the issues associated
with incorporating SM into RM decision mak-
ing, and identified a roadmap for future research.
This is intended to organize thinking and guide
future work in this area, as we begin to tackle the
crucial questions that need to be explored in
order to successfully leverage SM.
SM offer a tremendous opportunity for hote-
liers, but they need to be integrated into existing
operational, marketing and branding strategies.
Given the relative newness and rapid adoption of
SM, many hotels are just beginning to scratch
the surface of the potential this new resource
holds. However, hoteliers should keep in mind
that when it comes to leveraging SM across the
enterprise, it should be treated as an integral
component of the overall business, marketing
and operations strategy, not as a separate strategic
initiative. This article provides an example of
how one department within the hotel can
integrate SM into their business process, but as
this area evolves, there will be many more.
NOTE
1 The validity of customer reviews is a legit-
imate concern for hotel organizations. On
the one hand, it could be argued that, unless
some means is employed to identify false
reviews and discount them from a sentiment
analysis, this analysis will yield erroneous
results. However, it could also be argued that
it is what consumers believe, their ‘reality’
(whether based on false reviews or not), that
really counts. If consumers regard false
reviews as credible, then management needs
to understand the content of those reviews
such that appropriate strategies can be
deployed to offset any negative consumer
reaction they may engender.
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