TripAdvisor, the leading hotel and travel reviews site, will be spun out from its parent Expedia this month, and shareholders are giddy. With 50 million reviews and counting, the site is shaking the travel industry to its core.
Underlying TripAdvisor’s success is a powerful long-term trend: ratings websites threaten to make many brands irrelevant.
Historically, brands were built on the assumption of limited information. As mass production made it possible to sell soap and soup nationwide, companies developed brands to represent quality and cultivate product loyalty. Brands were a natural fit for radio and TV advertising, and brands thrived with the proliferation of cable channels, which kept advertising costs down while offering unprecedented demographic targeting.
With the rise of user-generated content, however, brands have faced challenges. People are talking about brands on social media sites in ways that brand managers can’t control and often can’t even detect. Facebook and Twitter get most of the attention for brand disruption, but the biggest problems for brands are in search and e-commerce.
Take this Google search for Super 8 Motels, for example. On the front page, you’ll see ratings that hotel guests have written about particular Super 8s on TripAdvisor, Yahoo Travel and Yelp. Importantly, the reviews vary widely. When I checked, a New Mexico location was rated 4.5 stars, while a Los Angeles location was at 3.5 stars and one in British Columbia had only 2 stars. Such location-specific information undermines brands’ ability to affect consumers’ purchasing decisions with 30-second TV spots and gives TripAdvisor a powerful position.
TripAdvisor is ahead of other travel sites thanks in part to their use of Facebook-connected recommendations, which help websites make sales by establishing instant trust with visitors. As a potential hotel guest, I am interested in the consensus among previous guests, but I am especially interested in what my friends have said. Reviews can be intensely personal — for example, here’s my TripAdvisor review of a beach resort in Mexico — and if you know the author, it makes a huge difference in how reliable you consider the review.
For the Super 8 brand, the end game could be scary: as TripAdvisor accumulates more and more trusted reviews, the best-performing Super 8s, all of which are independent franchises, may eventually realize that their business is suffering from their association with lesser motels. At that point, we might see a “brand run,” wherein the best locations leave the chain, lowering the brand’s value and ultimately leading to its collapse.
For brand managers, it’s going to get tougher before it gets easier, but our advice is simple:
For everyone else, sit back and enjoy the ride. The loss of some familiar brands is a small price to pay for more informed purchasing decisions and fewer unpleasant surprises.
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