Positive Yelp Ratings Can Boost a Restaurant's Nightly Reservations by 19%

Customer reviews travel far in the age of tweets and mobile check-ins. As more foodies come to rely on word-of-mouth reviews, Yelp's system of ratings can make or break a restaurant.

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Economists at the University of California, Berkeley published the results of a study, examining the effects of Yelp's online ratings in this month's Economic Journal. The study shows a slight half-star improvement in ratings can increase a restaurant's business during peak dining hours by 19%.

Berkeley professors Michael Anderson and Jeremy Magruder found that "Yelp ratings affect both customer flows and the probability of booking a reservation." The researchers compared the digital word-of-mouth reviews on Yelp of 328 San Francisco eateries with the frequency of nightly reservations at each establishment.

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Anyone can be a critic on Yelp. Since launching in 2004, the online reviews website sees an average of 78 million unique visitors per quarter. It's become a crowdsourced guide to cities worldwide. Users are encouraged to add new locations to the directory as they pop up. Patrons can come on the site and find the best-reviewed places to eat, shop and relax locally. Visitors base real-life purchasing decisions on the star ratings and reviews.

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Users can assign local businesses and restaurants up to five whole stars. Yelp rounds up scores to the nearest half-star. A restaurant with a rating of 3.24 will show 3 stars. A restaurant with five more positive reviews and a slightly higher average of 3.26 rating will display 3.5 stars. A half-star improvement means it's 19% more likely the restaurant will completely book out its evening seats for dinner, the study says.

"Our results indicate that Yelp ratings have substantial effects on restaurant customer flows," the study states. "Our estimates imply that restaurants face strong incentives to manipulate their Yelp ratings by leaving fake positive reviews."

Currently, Yelp reports there are nearly 30 million reviews online. However, critics point to a high number of inauthentic reviews on the website. There are even companies offering to write fake positive reviews for small businesses to increase ratings to 4 or 4.5 stars. The researchers believe the study's findings give restaurants a high incentive to falsify positive ratings.

How much do you rely on online customer viewers? Tell us in the comments.

Image courtesy of iStockphoto, gmutlu

This story originally published on Mashable here.

Source: http://news.yahoo.com/positive-yelp-ratings-boost-restaurants-nightly-reservations-19-211318159.html

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