Quotes of the Day

Thanks to the consumer reviews on TripAdvisor.com, by the time I walked into my London hotel room, some 5,357 miles from home, I knew that I would be stepping my bare feet onto a heated green marble tile floor in the bathroom. Never having visited this small boutique hotel, I also knew the soap and bath products were Molton Brown, the names and expertise limits of each front desk staff, and that I should make the counter-intuitive move to pass on the scones at breakfast and head straight for the croissants.

With the amount of detail available to us through consumer-generated reviews, have we reached a state of perfect information?

Economic theory states that perfect information leads to perfect competition. Assuming that buyers and sellers of goods and services act rationally on that information (a big assumption), decisions will be made based purely on value when all of the facts are present. In reserving a hotel room, if I can ascertain the detail, quality and price of every available hotel, my lodging choice is a matter of logic. Factors such as advertising and brand suddenly become irrelevant to my decision.

Online user reviews have been around over a decade. In 1995, Amazon.com began offering its visitors the ability to post reviews on available books, setting in motion a new phenomenon where everyone can easily become a critic. Other sites quickly followed, expanding reviews into music, products and services. Some of those sites, like TripAdvisor, which is dedicated to user hotel reviews, are demonstrating that this new wave of consumer empowerment is now mainstream.

Claiming over 5 million reviews on 250,000 properties, TripAdvisor has risen to be the second most popular site, after Hotels.com, receiving over 3.7% of visits to the 5,307 hotel and destination websites in the U.S. Yet hotel reviews rank in 7th place among types of reviews searched for behind movie reviews, book and digital camera reviews.

Online review activity has become so popular that several new sites have appeared that center around the consumer-empowered voice. Yelp.com, a new social network, joins user reviews with the ability to network, rate and share critiques. Still in its growth phase, Yelp reviews are becoming popular in major metropolitan areas. Visits to the site have grown over 340% in the last year. Based on the search terms sending visitors to Yelp, reviews are sought on topics ranging from restaurants and bars to furniture stores, doctors, dentists and even reviews on "piercing parlors" and "bay area pot clubs."

In the quest for perfect information, the most important and most often asked question is how trustworthy are user reviews? A quick scan of reviews on various sites reveals that the majority of entries appear to be honest and insightful critiques, while others seem misguided and, in the worst case, appear to be textual vendettas or shill assessments posted by biased reviewers. But as is the case with any information posted with anonymity, veracity and the risk of misinformation are always in question. Caveat emptor rules apply.

Given this weakness, professional restaurant critics and other review sources will continue to thrive as trusted sources to help guide us through the explosion of consumer commentary. But harnessed in the right way, this new phenomenon can swing the balance of power in favor of the consumer.

My London hotel choice was right on the money; weeks in advance of arriving in the U.K., I knew exactly what I was paying for. Of course at the end of my trip I posted my own terse review: "The croissants rocked."

Bill Tancer is general manager of global research at Hitwise.

• Bill Tancer
• Websites like Tripadvisor that offer consumer-generated reviews are gaining in popularity, but their information is not always perfect