Travel Review Sites: Moral Hazard Ahead

By Russ Hearl, CEO and Co-Founder, Sherpa Travel Exchange, LLC

"Trust me." "To be honest with you."

Have you ever noticed that these prefacing statements are often precursors to a tall-tale? Well, when it comes to endorsements (or indictments, for that matter) of travel experiences it becomes equally difficult to separate fact from fiction.

User generated and social travel review sites such as TripAdvisor and HotelChatter have become mainstream options for travelers seeking a third-party review of airlines, car rental companies, tour operators, hotels, and vacation rentals, to name a few. Millions of people use these sites to obtain a less biased review than they would get by looking at a travel services supplier website or brochure.

But, how un-biased are these sites in reality?

It's a question that we should all ask ourselves. After all, many of these sites are supported by advertising revenues. This applies a not-so-insignificant amount of pressure on the site operators/businesspeople to make sure the people paying the bills are happy. I know this may sound cynical, but as a former advertising executive myself, I can tell you that there is a significant moral hazard present in advertising supported businesses. Lest we think that the big, colorful real estate section in our local newspaper is there because the editor just couldn't wait to tell you about the new sub-division opening up on the other side of town.  I have friends in the newspaper business that tell me a meaningful portion of the content is written to garner paid advertisements. So ask yourself - Is it real news or bait to lure-in advertisers?

When it comes to review sites, how trustworthy is the 5-star aggregate score for the service provider in question? Case in point, Yelp was hit with a class action lawsuit alledging that they are really running an extortion scheme. The lawsuit was filed on behalf of a collection of local businesses that alledge Yelp promises to remove negative comments about their businesses only if they agree to pay a monthly advertising fee. Whoa. If that's true it really makes you wonder whether you're actually getting reviews of real exerpeinces or just the positive ones. Anyone that has used Yelp knows that there's no shortage of inflammatory reviews of service providers.  Many of the negative reviews are actually really funny, but most are plain outrageous and could be considered libelous in some jurisdictions.

Forrester Research examined the motivations of travelers that read and wrote reviews of travel experiences. The research found that 21% of travelers had read reviews on travel review sites like TripAdvisor in the previous 12 months in order to make travel purchase decsisions. The research also found that:

• 19% of the travelers who responded said that they left a review because they were told they would be entered into a drawing for a prize or would receive some form of compensation for submitting a review.
• 27% said they wanted to warn others about a bad experience.
• 48% said they wanted to share a good experience with others.

Overall, more than 6 in 10 U.S. leisure travelers were found to regularly participate in travel-focused social media activities like rating a hotel. Clearly, travelers like to tell almost anyone about our experiences (witness the 50,000+ travel blogs).

Indeed, many marketers would argue that the revolutionary impact of the social networks and user generated content sites (like travel review sites) is embodied in the ability to inspire, monitor and, (cough, ahem!) control word of mouth marketing.  Of course, the transparency offered by social networks can cut both ways.  As travelers, we ought to question the credibility and integrity of some of the advertising supported review sites. Perhaps a more faithful representation of travel experiences could be gained by polling your own social networks using a Facebook poll or some sort of survey. But even then it would be difficult to gain a large enough sample size or let alone locate anyone within your network that has purchased or consumed services from a provider in your intended destination.

Despite the moral hazard, review sites might still over the best solution in the market for obtaining fast background checks on potential service providers. 

How about you?  Do you trust these review sites?

Russ

Russ Hearl
CEO & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave., Suite E208
San Francisco, CA 94012
http://www.staysherpa.com/

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The real unemployment rate

Today, the U.S. Bureau of Labor Statistics reported that the U.S. economy lost a paltry 11,000 jobs. With all the fanfare, you would have thought that there was some reason to celebrate. Far from it.

Sure, we're no longer losing jobs at the same pace as at the beginning of the Great Recession, but one in ten people in the labor force is still out of work. Of the 165 million people in the labor pool, that's 16.5 million people that are out of work that are looking for a job and just can't find one. But it's a lot worse than that... The Bureau of Labor Statistics doesn't count people who are employed in part-time jobs to make ends meet or people who are considered to be "discoraged job seekers" and have stopped looking for work altogether - presumably because any family of four can eat off of the $800 subsidy paid twice a month. Yeah, that is, if you like to feed your kids ramen noodles three times a day.

The reality is that our economy, and our labor market, is in shambles. The real unemployment rate is closer to 17.5% when you factor in all the people that have stopped looking or have taken on part-time work just to make a few extra bucks. That's another 12 million people that can't find suitable full-time work. At a "full-employment" rate of 5% unemployment, our economy would have about 8 million unemployed people. There's nearly 20 million more people unemployed than there was when our economy was at full employment a couple years ago. That's freightening.

So, what's one to do if they can't find full-time work or refuses to don the orange apron at Home Depot or the blue apron at Wal-Mart for 25 hours a week and no benefits? Well, many people have turned to eBay to sell there stuff. In the last year, the number of online auctions on eBay has more than doubled. The average daily auction volume in August, 2008 was 15 million auctions. In November, 2009 it was close to 35 million. eBay is as popular as ever because it's a great place for people to make some extra cash. People are selling their stuff in droves.

The unemployed and underemployed are also turning to direct selling and Multi-Level marketing companies in droves. Amway, Tupperware and Avon have all experienced record growth in the ranks of their agents/salespeople. When times are tough, Americans become ultra resourceful. Door to door selling is even making a comeback. Who would've thought? I guess if people aren't at a job, then they're at home, so why not...

Speaking of resourceful, people are also getting into the hospitality business. I recently counted the number of short-term rooms for rent posted on Craigslist. These are rooms for rent by the day - not by the month or by the year. These are people looking to make a few extra bucks by providing lodging services to travelers. I found that on a typical weekday there are more than 1,000 new ads posted for short-term rooms for rent. This is more than double the number from just a year ago. Craigslist lacks essential security features to make it a fully functioning lodiging classifieds site, yet people are willing to take the risk to make a few extra bucks by renting out their extra space to travelers.

Americans possess an unprecendented amount of unused space in their homes. Resourceful people all around the country are learning that they can monetize their unused living space by getting into the hospitality/lodging business. People are running make-shift B&Bs as a way to avoid foreclosure. Not a bad idea if you ask me...

Mint.com posted a humorous video that discusses the real unemployment rate on YouTube.

Russ Hearl
Head Sherpa & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave, Suite E-208
San Francisco, CA 94102

415-997-9925 Google Voice
russ.hearl@staysherpa.com
www.sherpatravelexchange.com

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