How do online reviews impact revenue for lodging places?

It's clearly important for lodging places to claim their listings on as many review sites as possible, but they shouldn't just stop there. Our analysis reveals that, perhaps even more than other industries, lodging places should prioritize engaging with their customers by responding to reviews.

64% of all lodging places in our analysis haven't responded to a single review, which is quite a bit less than the 75% of businesses across all industries that haven't responded to any reviews, an early indicator that lodging places may need to be particularly sensitive to responding to complaints online.

The charts above appear to confirm the hypothesis that lodging places should be even more focused on responding to online complaints than other businesses. Lodging places that don't respond to any reviews earn 10% less than the average lodging business.

Once lodging businesses engage with their customers online by replying to more reviews, though, revenue starts to go up. Those that respond to reviews up to 25% of the time earn 9% more each year.

Lodging places that reply to more than 25% of their reviews earn a whopping $180,000 more each year than the average lodging place.

As reply rate climbs to more than 50%, revenue dips slightly. This is likely because lodging places with a large number of total reviews are very popular and well-established, and may be likely to earn more money than average, but may also be more likely to have a much lower review response percentage.

This becomes clear when you look at lodging business revenue by total number of review responses:

Among lodging places who have responded to reviews, the average total number of responses per location is 51.

Lodging places that respond to just one review see an increase in revenue compared to those who don't respond at all, but still earn less than the average lodging place. And, as you can see, lodging places who post the most review responses earn more.

Lodging places who had posted just above the average number of review responses (52 to 100), earn 53% more than the average lodging place in our study. And by the time you get to lodging places who had more than 200 review responses, they're earning well over two times the industry average.

It's clear that lodging places, perhaps more than any other industry, should focus on engaging with their guests on online review sites by posting thoughtful responses to both positive and negative reviews.

Lodging business owners often stress about their star rating, but as you can see in the section above, average star rating isn't necessarily the clearest indicator of financial success for local lodging places.

On the other hand, our findings suggest that lodging business owners should perhaps focus much more on increasing the amount of reviews than almost anything else.

Lodging places in our analysis average a combined 151 reviews per business across all review sites, so we started by analyzing revenue at lodging places whose review counts fall above and below that average 151 review threshold.

As suspected, total number of reviews is indeed extremely important for local lodging businesses.

Those who have more than the average number of reviews earn 62% more in annual revenue than businesses with below-average review counts, while those with less than 151 total reviews earn 25% less than the average lodging place.

Looking closer at the numbers helps clarify the relationship between the number of reviews and an increase in average revenue.

Lodging places with fewer than 50 reviews earn 35% less than average, while those with between 51 and 100 reviews earn 29% less. Once lodging places climb near the average range, with review counts between 101 and 151 reviews, revenue climbs to 5% more than average.

Then, as you can see, the more reviews a lodging business gets, the more money they earn. Annual revenue at hotels, motels, inns, and bed and breakfasts with more than 400 reviews is a whopping $454,000 more than the average lodging place—strong evidence that when a curious traveler searches for a place to stay, a large number of reviews outweighs a high star rating.

Once again Google is clearly the most important review site for lodging places, as those with an above-average review count on the site earn 65% more than the average lodging place.

Regardless of the platform, local lodging places would be well-advised to get as many reviews on as many sites as possible. Even if some of those are negative reviews (which isn't necessarily a bad thing, as we'll clarify below), there's little question that customers value the number of reviews (or other factors) more than they do a 5-star rating.

It's clearly important to get a steady stream of fresh reviews, but how important is the ratio of positive to negative reviews?

We analyzed the total number of reviews each lodging shop in our study received, and on average, 31% of the reviews posted about a given lodging business were negative.

This makes lodging places the most negatively reviewed small business root category in our study. So what does this mean for local lodging businesses? Let's find out.

As you can see in the charts above, lodging places appear to be more likely to get a large number of negative reviews than the average business across all industries. But, as is the case with all other industries, the lodging places that earn the most money are those with a healthy mix of positive and negative reviews.

Lodging places with 10 to 35% negative reviews earn more than average, with lodging businesses whose reviews fall between 20 and 35% negative earning the most.

Even lodging businesses whose reviews are 35 to 50% negative earn more than those whose reviews are only 0 to 5% negative.

This is likely due to a number of factors, including lodging businesses in that sample having a larger total number of reviews, but it's clear that a business owner shouldn't be overly concerned about getting a bad review.

When customers browse lodging business listings on review sites, they likely expect to see some negative reviews. A business with little or no negative reviews might appear untested or even a little "too good to be true."

Our takeaway: lodging places that focus on getting as many real reviews as possible reap the rewards.

Next we looked at which states' lodging places were the best at managing their online presence. We started by analyzing the percentage of lodging places in each state that had claimed at least one review site listing.

An impressive 95% of North Dakota lodging places had claimed at least 1 review site listing, which earned them the top spot on our list. Rhode Island, Massachusetts, Wyoming, Connecticut, and Utah also had 90% or more of their lodging places claim at least 1 review site listing.

On the other end of the spectrum, 34% of lodging places in Alabama haven't claimed a single listing, putting them at the bottom of the list. Delaware, Arkansas, and Kentucky join Alabama at the bottom of the list, with over 30% of lodging places in each state also not having claimed a single review site listing.

Lastly, we looked at how frequently businesses in each state responded to reviews.

53% of North Dakota's lodging places responded to at least one review, making them the most engaged state. Nevada lodging places came in second, with more than half of their businesses having responded to at least one review.

Delaware lodging businesses were the least engaged, with only 17% having responded to at least one review. Perhaps most surprisingly, Rhode Island, despite 94% of businesses having claimed at least one listing, had only 18% of their lodging places respond to at least one review.