TripAdvisor Network Effect and the Benefits of Total Engagement
How businesses can take advantage of the TripAdvisor Network Effect to improve and grow.
What is “Network Effect”
The question that most business leaders ask themselves is, “How can we achieve long-term sustained growth?” The answer to that question for many businesses is to build products or services that become increasingly valuable as more consumers use them.
This is called the Network Effect.
In simple terms, a network effect occurs when a product or a service becomes more beneficial to its users as more people use it. In other words, it is a virtuous circle of growth: supply drives demand, which creates more supply and so on, and all the while the product or service becomes increasingly beneficial and integral to the lives of its users.
Classic examples of businesses that have achieved remarkable network effects are Facebook, Uber, WhatsApp and TripAdvisor. Each business started fairly small: as more consumers used them, they contributed content or demand for services which attracted more supply or more content which fuelled growth. The key characteristic of a network effect is, however, usage and not growth. A product could have a spike in growth but a decrease in usage over time and therefore fizzle out rapidly. For example, viral campaigns create an initial strong interest which is often very short-lived due to lack of long-term engagement.
While all of these companies benefited from virality during their histories as a business, this trait is not necessarily a sign that a business is benefitting from a relationship where network effect attributes are present. Long-term usage, driven by a strong value proposition and user engagement, are the true hallmarks of a network effect and the real keys to the sustainable growth.
The TripAdvisor Trinity
TripAdvisor has, over time, managed sustained growth underpinned by usage and engagement, especially as the company has evolved from a hotel reviews site to a place where travelers can plan and book nearly every aspect of their trip.
TripAdvisor currently averages 390 million monthly unique visitors and has amassed 435 million reviews and opinions covering close to 7 million accommodations, restaurants and attractions.
More than 280 traveler reviews and opinions are submitted to the site every minute. The TripAdvisor apps have been downloaded 370 million times. As for inventory, more than 10 thousand businesses are added to its website and app every week. As growth, usage and engagement continue to accelerate, the outcomes for business is significant with $478 billion USD in travel industry revenue influenced by TripAdvisor in 2014.
TripAdvisor is what academics call a heterogeneous network, or a network with more than one class of user; in TripAdvisor’s case there are two clear participants that have enormously benefitted from the exponential growth of the site: business and customers. Consumers leave reviews for accommodations, restaurants and attractions; the best rise to the top and gain more visibility, which in turn drives more bookings. The size of the community – the millions of unique monthly visitors – has permitted TripAdvisor to successfully evolve from a pure network into a marketplace. TripAdvisor’s transition to a marketplace, where travel and dining experiences are booked, had to be achieved by becoming a platform where programmers created new products that help the consumers and businesses alike take advantage of their networked relationships in the most comprehensive way.
TripAdvisor has achieved the Trinity of growing its community, becoming a marketplace and developing the breath of products of its platform. In other words, TripAdvisor is at the same time a network, a marketplace and a platform.
Not only does TripAdvisor experience a network effect of growing community and content, but through the data it has amassed the site’s recommendation algorithms also get smarter. This is what Matt Turck calls Data Network Effect. A data network effect takes place when a product, generally powered by machine learning, becomes smarter as it gets more data from users. In the case of TripAdvisor, the more the site collects content from users the better it becomes at helping other users fulfill their dreams of finding their ideal hotel, restaurant or attraction. In equal measure, the more data reviewers deposit in the site the better it becomes at answering searches with the most relevant list of businesses that clearly match the original search. The benefits to consumers and partners will only grow in time as TripAdvisor continues to leverage data science and machine learning.
TripAdvisor and Benefits
We have discussed in broad terms how consumers and businesses benefit from TripAdvisor’s network effect. Now, let’s consider the details of the holistic benefits TripAdvisor provides to travelers and businesses alike who engage with the platform.
TripAdvisor has worked to quantify the benefits it provides in a simple, immediate and measurable format for customers that helps explain how small investments often have a great total return because of the network effect reaction associated with the relationship. Three recently commissioned surveys have helped to shed some light on putting a number behind the perception that TripAdvisor is enormously beneficial to its users on both the reviewer/traveler side and the business side.
How Travelers Use TripAdvisor to Plan and Book
We asked comScore to help us answer the question: Do TripAdvisor’s users research differently from non-TripAdvisor users?
ComScore measures the online activity of a panel in excess of 2 million people, representing a cross-section of worldwide regions and countries. Once the comScore meter is downloaded and installed on more than 200 countries panelist’s machines, comScore sees everything they do online. TripAdvisor asked comScore to monitor any panelist that had made travel searches and visited travel sites between April and September 2016.
The survey came up with six key findings:
- TripAdvisor is the largest online travel site, recording nearly 300 million unique visitors in July 2016
- An estimated 1 in 10 internet users visited TripAdvisor in July 2016
- TripAdvisor reached 62% of all worldwide users examined who started their decision process and subsequently booked travel online in Q2 & Q3 2016
- 79% of buyers who visit TripAdvisor take longer than 4 weeks to complete their purchase
- Travel buyers who use TripAdvisor engage with more sites making their path to purchase journey 19% longer than non-TripAdvisor user
- Travel buyers who use TripAdvisor are considerably more active during the path to purchase than buyers who don’t use TripAdvisor
TripAdvisor provides businesses with the biggest travel audience made of customers who research for a longer period and engage with more sites during their path to purchase. Having a bigger audience that researches longer and deeper is the perfect opportunity for businesses to market their product to a strong and attentive customer base and provides a greater opportunity for a business to get discovered.
TripAdvisor Reviews Are Trusted
Oxford Economics was asked to quantify the economic impact and measure the added value generated by TripAdvisor for consumers and for the travel industry.
Oxford Economics compiled a panel dataset covering more than 100 countries for the years 2009 through 2014 to test the relationship between TripAdvisor metrics and travel behavior. Extensive economic testing by Oxford Economics shows that TripAdvisor’s reviews and other content are not only heavily influencing much of the world’s travel activity, but are in fact the cause of travel activity. In other words, not only is TripAdvisor a major factor in any travel activity, it also increases it in two different ways:
- The trust created by TripAdvisor’s reviews, the transparency of listings, and the ease
of comparison results in more trips per traveler per year
- The variety and clarity of content on TripAdvisor and the high number of listings for attractions and restaurants in every destination result in longer stays
In analyzing the reasons behind the casual effect of TripAdvisor on increasing travel activity, Oxford Economics identified four key functions that the site performs:
- Transparency: consumers are clear about the positives and negatives of the hotels, restaurants or attractions they’re considering
- Trust: TripAdvisor’s content is reliable and trustworthy
- Content Breadth: travelers see an enormous amount of information and reviews about accommodations, restaurants and attractions all over the world
- Search & Booking: travelers can easily find and compare prices and make a booking
The four functions performed by TripAdvisor together help to deliver a much better traveler experience which in turns aids more frequent travelling, for longer periods and delivered at the most competitive price. Consumers can get a nicer place for less money and spend the money saved by prolonging their stay and booking extra activities. At the same time, businesses gain valuable insight into customers’ views and are rewarded for providing quality. Businesses that engage with customer’s feedback and respond by making related changes to their business are rewarded with improved ratings which then delivers more customers.
In engaging with the site the two group of participants benefits in many ways which can be summarized with:
- Transparency and trust encourage consumers to make more trips and venture further afield
- Amount of content and simplicity of use provide consumers with greater value for money which allows them to take longer breaks and spend more on activities
- Well reviewed businesses gain greater exposure and stronger pricing power
Customer feedback provides businesses with a chance to improve service and customer relations which delivers higher ratings and more customers
Oxford Economics study quantified the added value provided by the site and concluded that the estimated travel industry revenue increase that can be directly attributed to TripAdvisor is $64 billion USD for 2014. The travel industry revenue increase that has been influenced by TripAdvisor in 2014 is $478 billion USD.
The Site’s Impact on the Global Travel Economy
Phocuswright was asked to conduct a survey on behalf of TripAdvisor which targeted only users of the website. The survey was carried out in April 2015 in 14 key countries.
The survey provided answers to key questions like:
Why do people write reviews?
- 73% of TripAdvisor users wrote a review in the past year because they wanted to share a good experience with travelers
- 70% of TripAdvisor users wrote a review in the past year because they received good advice from reviews and wanted to pay it forward/give back to the community
- The majority of TripAdvisor’s global users will not book a hotel which does not have any reviews (54%)
Why do people read reviews?
- 8 in 10 users agree that TripAdvisor helps them to plan better trips (82%)
- The majority of TripAdvisor users want one place where they can read reviews, compare prices and book (63%)
- The two most important things for TripAdvisor users when reading reviews are recency (42%) and quantity (30%). Travelers want to know that what they are reading is current and they want lots of reviews to help them form an overall sense of people’s opinions
- 83% of TripAdvisor global users will “usually” or “always” reference TripAdvisor reviews before making a booking decision on a hotel
- 96% of global TripAdvisor users consider reading reviews important when planning and booking hotels
- 93% of TripAdvisor users globally find the hotel reviews to be accurate of the actual experience
- The majority of TripAdvisor users will read at least 6-12 TripAdvisor reviews before choosing a hotel (79%)
Why responding to reviews matters?
- 85% of TripAdvisor users agree that a thoughtful Management Response to a bad review improves their impression of a hotel (an increase of 53% since 2013)
- 8 in 10 of TripAdvisor users agree that seeing hotel Management Responses to reviews makes them believe that the hotel cares more about their guests (80%)
- The majority of TripAdvisor users are more likely to book a hotel which responds to traveler reviews versus a comparable hotel which doesn’t provide Management Responses (65%)
TripAdvisor and Engagement
We have described how in the network effect the benefits to the users is directly proportional to the increase in their numbers. We have also explained how TripAdvisor facilitates a mutually beneficial relationship between the two distinct groups of users. We have then looked at three different studies that have managed to show the size and the characteristics of TripAdvisor’s community, to quantify the beneficial effect of TripAdvisor for the travel industry in terms of increased revenue, and to shed some light on the reasons behind users’ engagement and the depth of their involvement. All the studies point to the fact that interaction between the two main participants in the TripAdvisor’s network creates a virtuous circle that benefits in equal measure both sides of the divide. Businesses gain a better understanding of how to improve their offering and increase revenue whilst customers gain access to reviews that help them make a better-informed choice.
Let’s now look at a study that tries to quantify the positive effects of engagement for businesses.
We asked Atmosphere Research Group, an independent travel industry research firm, to verify whether engaging with TripAdvisor improves the performance of a property.
The study was based on data from over 12,000 properties located in the top 25 traffic markets on TripAdvisor, as well as interviews with executives from four global hotel chains.
First of all, Atmosphere defined the meaning of “engage.” Atmosphere discovered four common actions that properties take when they plan to engage with the site:
- Take ownership of the property’s page on TripAdvisor by registering in the TripAdvisor Management Center
- Publish at least 10 Management Photos to their listing on TripAdvisor
- Respond to at least 25% of reviews on TripAdvisor
- Add direct contact information to the property’s TripAdvisor page
Atmosphere highlighted three key findings:
1 – Highly engaged hotels perform better on TripAdvisor
In analyzing TripAdvisor data, Atmosphere found that highly engaged hotels on the site saw:
- More page views*: hotels with higher engagement receive nearly four times more page views on TripAdvisor
- Higher market visibility: the average Popularity Ranking for highly engaged hotels was 63% higher than their non-engaged counterparts. As a result, highly-engaged hotels could be seen by two of every three travelers searching that market
- More revenue: the study revealed that subscribing to paid-for management products on TripAdvisor delivers hotels 30 to 40% more traveler interaction
2 – Successful hotels employ a “virtuous circle” of guest engagement
In addition to hotel engagement, Atmosphere found that the most successful hotels follow a “virtuous circle” approach to engage their guests:
- The hotel commits to systematically encouraging reviews from guests after their stay
- Review feedback is constantly monitored and analyzed
- The hotel makes improvements based on those insights
- These improvements lead to greater guest satisfaction, better reviews and ultimately more visibility on TripAdvisor
- This enhanced visibility results in more traveler bookings, which causes the cycle to repeat again
Earlier in this report, we talked about network effect acting as a virtuous circle, and here there is a clear example of it. Engagement of a property with the network delivers benefits which then in turns leads to more engagement and more benefits in a long-term upward spiral of growth.
3 – Systematically encouraging new guest reviews drives results
As part of the study, Atmosphere analysed data from properties that used TripAdvisor’s Review Collection Platform (RCP) to systematically request reviews from each guest. The results clearly demonstrate the importance of engagement:
- More guest reviews: when properties launched a solution like RCP, they saw an increase in reviews of 30 to 80% over pre-launch numbers
- More page views*: highly engaged properties using RCP saw 40% more page views than highly engaged properties that did not have a similar solution in place
- Improved revenue-driving performance: these properties saw a 32% increase in conversion rate, when compared to those that did not use it
*Note: To help better measure the quality of the traffic visiting your page, we enhanced the way we report on this information in Q2 2017 – evolving from page views to unique visits.
TripAdvisor and Total Engagement
Consumers are spending more money on travel than ever before. ComScore found that TripAdvisor influenced 62% of all worldwide users that researched their trip online. Businesses are eager to gain a piece of that market share. For accommodations, engaging with TripAdvisor results in business improvements, better customer satisfaction, revenue increase and continuous growth fuelled by a virtuous circle of more reviews=more customers=more revenues. So how does a property owner set the wheel into motion?
The answer is total engagement. Businesses need to take care of every aspect of their listing on the site in order to unleash the benefits of TripAdvisor. From Contact Details to Announcements, from Special Offers to list of photos, from reviews management to analytics. A property listing is the first page a potential customer sees when landing on a business. Having clear contact details surrounded by the best possible photos and embedded into well-managed reviews can go a long way into delivering more booking.
TripAdvisor offers an array of free tools and subscription-based products to help properties take full advantage of the potential the site offers. Business Advantage is a brand new paid solution for accommodations, empowering subscribers to attract and engage with potential customers on the world’s largest travel site, influence their booking decisions, and access in-depth analytics and enhanced reputation management features. The properties using Business Advantage have a lot of control over their property’s listing. They can manage photos and choose which ones will be used as Cover Photos; they can place their favourite review in a prominent position; they can access in-depth analytics that gives them historical data about their reputation, ratings, ranking, unique visits; they can access demand trends data on visitor origin and searches which provides properties with crucial information on where their TripAdvisor visitors are coming from – and what they’re looking for; they can create competitor sets to activate comparative benchmarking across the Analytics Suite. All the data can be easily downloaded to perform additional analysis or augment other reporting.
Business Advantage has been designed and developed to place businesses in full control of their strategy with a vast list of features that secure the perpetual motion of the virtuous circle.
We have explained how total engagement with TripAdvisor makes perfect financial sense. Businesses are rewarded with revenue gains, service improvements, marketing advancements and growth opportunities. The small financial investment and time dedication required by the platform are greatly surpassed by the clear benefits on offer. TripAdvisor is committed to remaining at the forefront of travel innovation by serving the travel community with the most complete travel experience. Our desire is to remain a driving force for improvements towards excellence.
Last Updated: January 13, 2017