The power of good reviews quickly shows up in the cash register, producing a virtuous circle in which business owners bend over backwards to keep them coming.
But bad write-ups can take a big bite out of a business – and give frustrated customers a taste of revenge served cold.
Small businesses who cannot afford advertising seem to be the biggest beneficiaries as review sites allow them to compete with well-known, and well-funded, brands.
“It is absolutely phenomenal how it has worked for us,” said Adele Gutman, vice president of sales and marketing for the Library Hotel Collection, which runs four boutique hotels in New York.
Gutman first noticed the impact of positive reviews in 2004, when one of the hotels got ranked seventh among those in the Big Apple on TripAdvisor and bookings jumped through the roof.
“We decided this is going to be our primary focus – we’re going to sparkle sunshine on all our guests, find out what pleases them, and look in our reviews for any problems and fix them,” Gutman said.
The chain’s most recent reviews are peppered with praise for the friendly staff and free amenities such as breakfast, cheese and wine happy hours, snacks and WiFi.
All four of their hotels are currently ranked among the top eight in New York, and the Casablanca – which is consistently in the top spot – gets between 100,000 and 180,000 views a month on TripAdvisor.
“When you have that kind of viewership, you don’t need anything else to drive business to your hotel,” Gutman said, noting that the collection has annual occupancy rates of 89 to 94 percent.
It is not only clued-in hotels that are benefiting – a Harvard University study found that independent restaurants in Seattle saw revenues increase by five to nine percent when their Yelp ratings increased by a star.
And another research paper – from the University of California, Berkeley – found the chance of a San Francisco restaurant filling all its tables increased by about 20 points for every additional half-star on Yelp.
The impact of negative reviews was harder to measure, but the results can be scathing.
“I am sure in the homeless kitchens they cook tastier meals and are more happy to serve their lice-ridden ‘customers,’” a Texas tourist who goes by Aldo D. wrote on Yelp about one of the worst-rated restaurants in downtown Chicago.
“Poor tourists, they are probably the reason why this dump remains open,” added a local who goes by Daniela H.
Both studies found that reviews had no impact on large, better-known chain eateries.
“There are a lot of chain restaurants in the United States and I think a lot of people don’t think they’re particularly good but what they are is consistent,” said economist Michael Anderson, who authored the Berkeley study.
“That’s one of the reasons chains are so successful.”
Online reviews, however, help the less adventurous feel comfortable trying something new and also spread the word about places they might not otherwise find.