The influence of online reviews for hotels and other tourism businesses on the purchase decision has been accepted for some time.
Less known however is the financial impact of a bad review or, lack of response from a business to a negative review.
A study from Barclays entitled the Feedback Economy puts it a different way. UK firms could stand to gain more business and therefore more revenue by recognising the growing power of online reviews and dealing with them appropriately.
The company has put some figures on how much this could be worth in the next 10 years.
Barclays has looked at the potential growth of the hospitality sector and says economic modelling shows that a rise in the use of feedback sites by consumers, combined with the sector becoming more responsive on these sites, would be worth an additional £3.2bn to the economy.
The report says:
"Our model is based on sector growth forecasts for economic output (GVA) for the period 2015 to 2030. The baseline forecast, which assumes business-as-usual in regard to business and consumer behaviour, predicts that GVA will grow by an average of 2.6% over the next 10 years."
It goes on to say that "greater responsiveness to the increase in feedback" means GVA could grow by an additional 0.07% annually.
Barclays says this equates to an output of £555m per year by 2026, compared to business- as-usual growth rates.
For the purpose of the Feedback Economy study, Barclays also carried out some consumer research and gauged the opinions of hospitality businesses.
Key consumer highlights include:
- 59% of consumers say online feedback already helps them decide where to visit and 45% say they're more likely to leave a review today than 18 months ago.
- Younger age groups use reviews most with 70% of Millennials saying they are a part of the decision-making process.
- Almost a third (29%) of 18-24s and a quarter (27%) of 25-44s rate online reviews as one of the three most important factors influencing their decision on where to stay – alongside elements such as value for money and customer service This compares to 18% of those aged 65 and over.
Feedback from the businesses shows:
- 57% are able to explicitly correlate online feedback with more business. They say there has been an improvement of 12% on average in customers numbers over the past 18 months.
- Businesses (hotels, restaurants, clubs, bars) also say they are benefitting from online reviews in a number of ways - more repeat business (63%) or the identification of issues within the business (61%).
- However, the majority (63%) admit they are not managing feedback longer term or keeping records in a customer relationship management system.
The total sample for the research was 2006 UK consumers and 541 business-to-business decision makers.