How Yelp Scores Make or Break Restaurants

Smart diners rely on restaurant reviews to find good food. But a new study investigates for the first time the complex relationships between online ratings and real-world success—and reveals that losing just half a star can leave a restaurant in ruin.

The Guardian reports that a team of economists from the University of California, Berkeley, has investigated how 300 restaurants in San Francisco perform, and cross-referenced the results with star ratings from Yelp.com to understand how reviews affect success.

They found that an extra half-star caused a restaurant's 7pm bookings to fill up 20 percent more often. Interestingly, they also managed to disentangle those changes in trade from price differences, food quality and service, suggesting that it was the reviews alone that brought in custom. Writing in the Economic Journal, the economists explain:

"The findings of this study demonstrate that – although social media sites and forums may not generate the financial returns for which investors yearn – they play an increasingly important role in how consumers judge the quality of goods and services."

The research does, however, suggest that some restauranteurs shouldn't be too happy with Yelp's calculations. The researchers point out that when Yelp.com computes a star rating for a business, it it rounds off to the nearest half-star. That means that a restaurant with a 3.74 rating shows up as a 3.5-star venue, while an establishment with an almost-identical 3.76 score appears to have a 4-star rating.

Given the financial impact such ratings have, according to the economists, there's never been more incentive for restaurants to rig reviews. In the meantime, though, the research also suggests that star ratings might not the best predictor of how great your plate of food turns out—so it might be best to take them with a pinch of salt. [The Economic Journal via The Guardian]

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