Hotel Reviews and Objectivity: Oyster Hires Reporters

Posted by: Justin Bachman on June 22

The online hotel reviews business – and this is not a small market, lest you were wondering – gained a new entrant Monday with the launch of Oyster Hotel Reviews. Oyster aims to post objective reviews on some 20,000 hotels in the top 200 cities that attract leisure travelers.

The interesting part about Oyster, however, is how the company obtains its reviews: It’s hiring real reporters to “cover” hotels. Rival sites, Expedia (EXPE)-owned TripAdvisor.com and Sabre’s IgoUgo.com aggregate user-generated opinions on hotels and face periodic allegations that their systems are gamed. Oyster maintains that its reportage sets it apart. It accepts no freebies, “media rates” or payments to do reviews. It aims to be an objective editorial site, not one that sells hotel rooms or markets brands. It hires experienced writers who have worked for publications such as NPR, ESPN, Time Out New York, Radar, the Village Voice, the BBC, and Huffington Post.

“Our reporters also have the experience to actually weigh the both the upside and downside of a stay at every hotel,” the company tells users on its Web site. “We focus on conducting honest reporting and thoroughly investigating each hotel we visit.” All the photos are from the staff, too. There are links to online travel agents like Orbitz (OWW) and priceline (PCLN) to check prices and to book, which is one of the revenue streams.

The company contends that since the hotel bill is often the most expensive part of a leisure trip, travelers are far more cautious about choosing. Hotels also tend to be less of a commodified product compared to other travel businesses, and your personal background/expectations come into play far more when evaluating a hotel experience than it does when you plop down in an airplane seat or compact car. All of which means people spend more time on the research and want to know more about the experience of those who have stayed at a particular hotel. “Hotels are a product you can’t return once you’ve bought it,” says co-founder and CEO Elie Seidman, who helped start a telecom services firm, Epana Networks, in 2000. “We believe the critical thing here is to reduce their risk.”

From the perspective of turning a profit, Oyster’s business model is enough to induce apoplexy: Send a full-time reporter on a two-week trip to sample seven or eight hotels and foot the bill -- which can reach $35,000 -- in exchange for unbiased coverage of the properties. "We’re going to spend about $40 million on this before we break even,” says Seidman. He and a partner have invested some of their own funds, along with Accelerator Ventures, and recently got $6.5 million from Bain Capital Ventures. Additional fundraising is expected later this year or next.

Desperate hotels are shoveling money into marketing and advertising. The sites also sell advertising and can boast impressive claims for how long users spend clicking around reviews and hotel photos. The Expedia unit that holds Trip Advisor is now producing 11% of the entire company’s $636 million revenue. “If you can get users, it hasn’t been that difficult to monetize,” Seidman says.

Likely true. However, Oyster is incurring high costs, which it readily admits, and considers these the price of admission to a decent product. “We have the luxury of having the financial resources to do it right,” Seidman says. Yet part of the cost comes from hiring a unique breed. I know plenty of experienced, middle-aged reporters and they share certain traits: They typically like to travel, tend to be frugal with their own meager funds, if not their employers’, and toil in a career that has paid them a pittance compared to most of their college friends. (Disclosure: You can toss me into this cohort.) Many wield occupational horror stories preceding a swift job loss or employer switch. They will throw themselves into their work, particularly if it involves inspecting the swimming pools at a Four Seasons. They eat and drink with aplomb. They will order cocktails on the flight and tell the boss it was a crucial business expense. (A reasonable contention, to my mind.) In other words, send one of these people to Miami for two weeks to report on the beds, bathroom amenities and cuisine and you’ve found a perfect way to hemorrhage cash.

So yes, there’s plenty of reason for skepticism about this business venture – or even unvarnished snark. Oyster is completely counterintuitive, given the general prospects for media ventures, yet also sits poised to capitalize on the expanded marketing hotels are forced into when recessions hit. It's an interesting experiment.