The global hotel industry generated $457bn last year, with $163bn of that coming from the US alone. In 2016, the hotel industry is projected to bring in $550 billion in revenue. Millions of travelers pass through hoteliers’ doors every day, and there are a number of challenges in keeping them happy throughout their stay, maximizing the amount they spend, and attracting new guests.
The rise of digital technologies has brought with it innumerable benefits to the hotel industry, but it has also introduced a number of new problems. TripAdvisor reviews, for example, can be both a gift and a curse, providing an excellent promotional tool, but also a weapon that guests abused to try and get freebies and demand attention that outweighs their value to the hotel. The rise of Airbnb has also meant the introduction of another competitor, and forced hotels - already operating under incredibly narrow margins - to further drive down prices.
The rise of digital has, however, also brought with it an explosion in the amount of information that hotels hold about their customers. This can be utilized to overcome many of challenges they are facing - from providing customers with the perfect experience, to setting room rates.
Improving Customers’ Stay
The most important challenge faced by hoteliers is providing a great experience, and ensuring that guests leave satisfied. This is more important than ever, as review websites and recommendations are now the key consideration for many when booking a hotel.
Analytics can be used to improve every aspect of a guest’s stay, helping to personalize the experience and make them feel special. For example, the concierge can find out which local sights to recommend to individual guests based on their past behavior. It can also help identify trends in what people are looking for from their rooms, so that they can be designed to best suit customers’ desires. Boutique hotel operator Denihan Hospitality Group, for one, uses IBM’s analytics technology to comb all sorts of customer information, but one of the primary ways they are using it is to dissect guest feedback and guest profile data. By doing this, they uncovered a demand for flexible spaces that can be used for a variety of different needs. Subsequently, Denihan introduced different zones to each of their hotel’s rooms, including a relaxation zone, a work zone and a sleep zone. Feedback also revealed that women and family travelers wanted more storage in the bathroom, and they changed the vanity design accordingly so as to accommodate extra counter and shelving space, as well as additional drawers.
What a customer wants from their hotel stay varies from person to person. Many are simply looking for somewhere to sleep while they stay in an area, while others are looking to spend a larger portion of their time, and money, in the hotel. Data analytics can help distinguish between the two, enabling staff to invest more time in ensuring the happiness of the person likely to spend more, and thus care more about their overall experience. By targeting guests likely to spend money taking advantage of the facilities - spa services, golf, restaurants, etc - as opposed to guests who only generate room nights, they are able to significantly increase revenues and profitability.
Hotels operate under incredibly tight margins, and they cannot afford to be offering their rooms on the cheap. Craig Weissman, CTO and co-founder of revenue strategy solutions startup Duetto, and former CTO of Salesforce.com, notes that: ‘The industry has become a little too focused on filling rooms at any cost. They've gotten obsessed with filling rooms but not with raising price when it's appropriate. The profit in the industry is not so good. They sell out too early on too many discount channels. It takes a certain amount of trust in the system to withhold rooms and trust that you're going to fill out at a higher price point. Those types of decisions can make a massive difference to your bottom line.’
Data can help ensure that each hotel room attracts the optimal price by analyzing all the factors that could impact demand, such as events taking place in the local area, seasonal peaks and troughs in demand, and weather. By looking at key data points, probability metrics and real-time data feed analytics fed in from external sources — reservation systems bring together all the hard work to interpret exactly how much a customer is willing to pay for a room before they book it, and provide them with that price in real time.
Another area that analytics can provide hotels with a boost is marketing. Hotels can apply analytics to segment guests according to booking trends, behavior and a variety of other factors in order to reveal their likelihood to respond to promotions and emerging travel trends.
US economy hotel chain Red Roof Inn is one firm who used analytics to determine their marketing strategy. They found that hotels close to major airports at a time when flight cancellation rate was around 3%. The chain’s marketing and analytics team joined forces to pinpoint openly available public datasets on weather conditions and flight cancellations, and targeted their marketing campaign towards mobile device users in the geographical areas most likely to be affected by adverse weather conditions and have flights cancelled. This led to a 10% increase in business in areas where the strategy was deployed.