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The "TripAdvisor" Effect and the New Normal in Hospitality



By Marc Shuster, Esq. and James Gassenheimer, Esq.
December 20, 2012

In the past couple of years, it’s become common knowledge that hoteliers and restaurateurs, together with their respective managers and franchisors/franchisees, have to stay on constant or even “hyper-alert” to counter, or with some skill, conquer, what is generally known in the hospitality industry as the “TripAdvisor” effect.  Simply put, this effect is marked by a few weak or negative online reviews damaging, or even sinking, a business.  With apologies to Google+, Yelp, Zagat, Chowhound and the like (sites that each, in their own right, compound the utter fever with which owners are attempting to catch the social media balloon), TripAdvisor has become the undisputed symbol of online ratings in the hotel space, while Zagat has become the most influential site in the restaurant world.  These sites have become so influential that Yelp recently ran a “sting,” investigating and exposing operators who paid individuals to write positive reviews about their properties. 
 
“The overall credibility of these social media sites has skyrocketed,” says Scott Berman, Global Head of Hospitality for PWC.  “Compare today to five years ago, when the industry didn’t take these websites seriously, and you can now see both owners and management paying very close attention to the various review sites.”  Even more foretelling, says Mr. Berman, is the fact that, “investors and litigators are using these tools in their respective crafts.  Today, in hotel disputes, able trial lawyers seize on the ‘TripAdvisor’ effect to make their cases.”  On the other side of the reservation desk, lawyers for the hotel operators are increasingly brought in to protect the reputation of the property, principally by getting false reviews taken down.
 
If all of that wasn't headache enough, these operators continue to be confronted with new types of advertising hurdles.  The intersection of the hospitality business, online/mobile advertising, social media, and technology is moving so fast that, beginning this past fall, and continuing through this winter, hotel and restaurant operators have been forced to make strategic advertising moves – ones that didn't even exist this time last year.  They are suddenly forced to utilize sites like Yelp and Localeze to ensure that their properties are optimized for the new Apple Maps.  Furthermore, it’s now become almost a necessity to join Google+ for Business, while building up loyal followers with a passion for reviewing hotels and restaurants.  With the current alignment of Google Search, operators can get stuck with one bad Zagat review that defines their establishments.  The review of a Google+ member, however, displaces that Zagat review and drops it down a level.
 
One might naturally question how marketing personnel within a hotel or restaurant can manage all of these new concerns, while simultaneously juggling budget considerations such as Google mobile click-to-call ads, online booking services, group discount deals, social media sites, and, in the all-too near future, location-based advertising costs. “Anyone who hasn’t assigned a full-time watchdog to monitor all of these sites and take proactive steps will undoubtedly lose out,” says Victor Lopez, a thirty-year Hyatt officer who is now a Senior Vice President of The Services Company.  “The trend is to expend resources in this bucket ahead of, or to the exclusion of, traditional advertising dollars.”
 
In support of this proposition, one doesn’t have to look beyond the latest studies.  A recent Harvard Business School study showed that a one-star increase on Yelp can lead to a 9% increase in sales.  After running click-to-call ads for one month, Starwood Hotels’ mobile bookings increased 20%.   With “recommendation marketing” and other online tools overtaking traditional advertising as the prevailing force in the hospitality industry, operators need to take a hard look at their marketing budgets. 
 
Given these figures, it would not be surprising to see some operators – finding ‘brand’ to be less and less relevant – jettison traditional advertising altogether.  While the larger conglomerates may not have that luxury, savvy operators across the board will have to significantly reduce their traditional advertising spend, and develop an online/mobile marketing program – one that goes beyond social media and public relations reputation management, and includes ‘online compliance’ for their employees, as well as a legal reputation management strategy, which may include defamation lawsuits over false negative feedback.  In the correct circumstance, this has been an effective countermeasure, and also a method for dissuading false reviews in the future. 
 
“Protecting your hotel or restaurant’s online reputation has become so critical that it may be exceeding pre-emptive trademark litigation as a business survival tool,” says Berman.  To his point, a recent lawsuit by a developer, seeking $750,000 in damages from a woman who left false reviews, led to an initial ruling that the woman had to remove certain accusations and is barred from reiterating them in new posts.
 
Operators who take these steps will effectively manage threats to their online reputations, such as false reviews, and even sabotage from competitors.  They will also stay apprised of new technological shifts they cannot ignore, maximize the financial opportunities provided by these new vehicles, align their marketing “spends” with the direction of the industry, and, most importantly, protect their hotels and restaurants by counteracting sites which have given an inordinate amount of power to a few individuals who may have actually had a bad experience.
 
In regard to reviews and the social media space, Mr. Lopez adds some sage advice: “Show some humility and take the ‘customer is always right’ approach – especially in this new environment where those customers’ opinions are amplified to the masses.”


About the authors:
Marc Stephen Shuster and James D. Gassenheimer are partners at the Berger Singerman law firm in Miami.  Shuster is a business attorney who focuses his practice in commercial real estate transactions and advises both traditional hospitality conglomerates and Internet advertising sites serving the industry.  He can be reached at mshuster@bergersingerman.com.  Gassenheimer is a trial lawyer whose practice includes real estate related litigation, complex commercial litigation, bankruptcy litigation, director and officer liability, and a wide variety of complex tort litigation.  He advises one of the country's largest resort development and property management firms, and can be reached at jgassenheimer@bergersingerman.com.

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Contact:

Marc Stephen Shuster
mshuster@bergersingerman.com

James D. Gassenheimer
jgassenheimer@bergersingerman.com

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