Streamlining tough choices: Applying an optimization approach to hospitality marketing

You have spent your time carefully crafting a number of campaigns for distribution to your various customer segments, and it doesn’t take you much time after that to realize that you probably can’t execute on all of these campaigns. Perhaps it is because you realize that the combination of campaigns that you have planned will exceed customer contact policies, or perhaps they won’t meet mail-house minimums or maybe you just don’t have enough time and resources to complete all of the campaigns. How do you identify which campaigns will get you the results that you both want and need? Enter the analytic-centric approach of Marketing Optimization. Marketing optimization can help you contact the right customers with the right offers at the right time, while staying within the constraints of your budget and channel capacities, all without diluting future sales or exceeding customer contact policies. Marketing optimization helps maximize your economic results by making the most of each individual customer communication.

Marketing Optimization allows you to construct a scenario that balances your objectives with your constraints with your organization’s contact policy and then identify the optimal combination of campaigns for execution. The objectives for a marketing optimization problem can be defined in a variety of ways, depending on the goals you have for your campaigns. For example, if your goal is to increase profitability, you could chose profit as the metric to be maximized. You may also consider setting an objective to minimize as a goal, such as risk or costs.

Constraints enable you to specify key marketing limits such as minimums or maximums for spending. Constraints can be set at the customer segment level and include examples such as setting budget constraints for any or all campaigns. Often, campaigns need to be a certain size to be worth executing. You can create constraints that reflect the real nature of the direct marketing world through minimum or maximum cell sizes. Outbound and inbound channels also may have limits, whether in terms of the total hours a call center can handle or the number of pieces a mail house can send out. Lastly, you may want to place an additional constraint that drives toward a threshold so that a certain return on investment (ROI) is targeted across the campaigns.

Contact policies are important for planning the number of allowable touches that the overall campaigns or brand can have on each individual customer. You can set these in a variety of ways. A limit can be placed on the number of touches per customer for the overall cycle. For example, an organization might say that each customer can be contacted only twice per cycle. This can be maintained at the overall level or the individual customer level. Contact policies can also be constructed so that they allow certain types of communication more leeway, such as limit on a certain type of offer. A contact policy can also be constructed that limits the number of offers in any given time period. So, a customer could be restricted to three communications in January and two in February. A rolling time period can limit that same customer to, for example, four communications over any two-month period.

The benefits of applying optimization techniques to marketing are multiple: enhanced ROI, better adherence to customer contact policies, and improved overall operational efficiency.

  • Return on Investment:  Increasing your targeting effectiveness results in higher response rates, improved channel effectiveness, and reduced spending on campaigns. The math-based approach offered by marketing optimization techniques produce results that are superior to rules-based or segmentation approaches when it comes to prioritizing marketing offers.
  • Contact Strategy: Complex customer contact policies are required to avoid over-saturating customers and violating your organizations corporate governance requirements. Marketing optimization techniques can eliminate uncoordinated and conflicting communications while accounting for customer risk, advertising exposure and house-holding to ensure that customers are receiving the best possible set of communications across every channel.
  • Organizational efficiency: Marketing optimization techniques can show where and how changes in channel usage, target customer segments, campaign budget, and other constraints will affect the business, and highlight financial opportunities and unused capacity.

The complexity of direct marketing has expanded rapidly in recent years, particularly with the growth of digital marketing channels. Hospitality companies today have to make difficult decisions about targeting the right customers with the right offers while staying within budget and channel capacities, all without cannibalizing future sales or saturating customers with too many messages. That is a lot to manage, particularly when multiple campaigns from one company might also be competing for customers’ attention. Marketing Optimization can efficiently help marketers determine who to contact with which campaigns in a complex marketing environment where customers could qualify for multiple or competing offers.

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Cornell Hospitality Research Summit Announces Call for Submissions - Analytic Hospitality Executives, This is your event!

We here at the Analytic Hospitality Executive along with our partners at the Center for Hospitality Research at Cornell, would like to strongly encourage all of you to submit your innovative thoughts, projects  or topics for presentations, panel discussions, tutorials or workshops  to the third Cornell Hospitality Research Summit (CHRS), set for October 12 - 14, 2014, at the Cornell School of Hotel Administration.  The theme of the conference is “The Future of Service Innovation: The New Science of People, Organizations, Data and Technology.”

Cathy Enz and Rohit Verma, the conference co-chairs, describe this year’s event as follows: “Innovation is essential to the continued health and well-being of hospitality and related service industries now and in the future. We believe the time has arrived for innovation in services to be discussed and explored rigorously. The goal of this conference is to examine service innovation in a new light, focusing on what new ideas, tools, techniques, technologies, processes and structures hospitality firms need to prosper in a time of accelerated global change.  The focus of the conference is multidimensional, including data analytics, a deeper understanding of customers and approaches to engaging employees, the role of technology, service delivery systems, and new product development, to name but a few areas for possible exploration.”

I have attended both of the previous conferences, and this is probably my favorite conference of all of the ones that I regularly attend.   Bringing together academia and industry in a forum that allows for interaction, discussion and debate is a unique format that inspires creative thinking.  Both groups benefit from discussing cutting edge research, and how that can be applied to the industry’s practical business problems.

SAS has always been a supporter of this event, and I must say I’m particularly excited to participate this year, as Cathy and Rohit have been putting a lot of thought into shaking up the traditional conference format – creating an environment for discussion, debate and inspiration.   The conference sessions types will include:

Big question – in which presenters or moderators propose a “big question” for discussion and the attendees work together with the presenters to answer the question.

Show & Tell – an opportunity for your organization to preview an innovation, demonstrate a new product, or teach a new technique to spark discussion and feedback from the audience.

Presentation Plus – Traditional presentation approach, but with the opportunity to creatively encourage interaction with the audience.

Point/Counterpoint – Propose a topic or issue to debate with panelist and the audience.

More details can be found in the submission guidelines here: http://www.hotelschool.cornell.edu/research/chr/events/chrs/submissions.html, and Summit details are found at: http://www.hotelschool.cornell.edu/research/chr/events/chrs/.

Submissions will be accepted between now and March 31, 2014. Submissions will be reviewed and accepted on a rolling basis so early submission is highly recommended as slots will likely fill up before the deadline.

If you have any questions about the event, contact the conference chairs Cathy Enz: cae4@cornell.edu or Rohit Verma rohit.verma@cornell.edu.

Even if you do not submit a session idea, I would encourage you to attend the conference.  It should be inspirational – and provide that much needed chance to take a step back from day to day and think creatively about your business!

Hope to see you up in Ithaca in October!!!

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Forecasting digital outcomes for hospitality

In a big data panel at the HSMAI Digital Marketing Strategy conference held recently in New York, Peter Kim from start-up MightyHive commented that all of your competitors have access to the same third party data you do, and that your own data is much more valuable. Peter’s comment really struck me as I considered digital behavior data for hotels. Many hotel companies don’t even own their own digital behavior data stream, having outsourced it to web analytics providers. What would it take to justify bringing that data back in house? What new analytic capabilities could emerge from access to this detailed data? For my answers I spoke to Suneel Grover, senior solutions architect for digital intelligence at SAS about how to harness digital behavior data and what kinds of new analytic capabilities are available once that data is captured.

Why aren’t more hospitality organizations using predictive analytics with digital behavior data?

Suneel explained that typical web and digital analytics tools primarily aggregate and report on historical information and do not enable predictive analysis. “While data-driven marketers and analysts have used powerful advanced analytics for many years to perform sophisticated analyses – such as regression, decision trees, or clustering – they have been limited to using offline data, primarily due to restrictions on access rights to online data from third-party technology vendors,” he said. The challenge facing the marketing industry today is progressing beyond the multi-channel analytic limitations of aggregated data collection methods used by traditional web analytics, he explained.

The opportunity is to have a digital data collection framework that enables both business intelligence and predictive analytics, Suneel said. “This methodology requires organizations to collect and OWN the data to allow the analysis of the “who,” “what,” “where,” “when,” and most importantly, the “why” of digital experiences.” This data, if collected and prepared appropriately (e.g. considerations for data integration, quality, and governance), can be merged with your company’s first-party (or company-owned) customer data, and then streamed into your analytics, visualization, and marketing automation systems.

Once you have this data collected, what analytic capabilities can you use?

Suneel told me about a digital analytic capability that focuses on search marketing that leverages onsite behavioral data. He explained that one of the common questions debated in digital marketing is how increasing the paid search ad budget will impact website traffic and hopefully conversions. “When you reflect on this question, it touches on the ability to accurately predict not only what website visitation will look like in the future two week time period, but also have the ability to ask “what if I do this”, or “what if I do that,” Suneel said. “In business and visual analytics, this is known as forecasting, and scenario (or what-if) analysis,” he explained. The unique twist comes when you apply this set of analytic techniques to a digital marketing challenge.

“If your organization owns the digital behavior data stream that captures your website’s traffic behavior, this data can be fed into a forecasting model to first predict what will happen in the next two weeks,” Suneel said. Then, marketers can see how overall site traffic might increase or decrease at varying velocities – by week, day, or even by hour – all wrapped up in a 95% upper and lower confidence interval to highlight the most likely, best case, and worst case scenarios. “Given this information, marketers can determine the impact on predicted traffic patterns of allocating more ad dollars to one channel (such as paid search), versus another (email),” Suneel explained. He told me that by using scenario analysis in conjunction with forecasting, marketing analysts can easily inflate the potential impact of a 10%, 20% or 30% increase in paid search traffic, and then view how this will modify the forecasted prediction of overall site visitation.

“You can end up with takeaways that look like this,” Suneel said:

- A 10% increase in Paid Search visitors would provide a 13% increase in overall site traffic in the forecasted time period (Incremental 3% lift)

- A 20% increase in Paid Search visitors would provide a 28% increase in overall site traffic in the forecasted time period (Incremental 8% lift)

- A 30% increase in Paid Search visitors would provide a 56% increase in overall site traffic in the forecasted time period (Incremental 26% lift)

Access to this data, and the use of predictive analytics can help you understand how adding just a little bit more into one digital channel can have varying, and sometimes, dramatic changes in overall digital traffic.

Every hospitality company could use the results of this type of analysis, but just how difficult is it to perform?

Suneel explained that the emergence of visual analytics in the data visualization technology space makes leveraging these approaches much easier to achieve. “We are living in a time period where analytics cannot be meant for only a select few data scientists,” he said. “The opportunities are too many, and the democratization and accessibility of analytics has begun.”

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Multi-channel marketing in hospitality starts with data management

On reviewing Kelly’s recent post on the 14 actions for hotels in 2014, one of the most important take-away comes in the form of multi-channel marketing. Kelly touched on strategies for offline data in the form of a guest profile and loyalty program data, and online data comprising of social, mobile, and web channel data. Multi-channel data provides an enormous opportunity for hoteliers to gain new insights about their customers, but integrating data from offline and online channels is not easy for a couple of reasons.

First, it is no small feat to understand the emerging channels that comprise online data and bring together the data from multiple sources to make sense of it. Where should you start? Can you link data from your mobile platform back to your customer relationship management system? What about social data? Second, even traditional channels such as guest profile and loyalty program data can be fraught with problems in the form of missing and duplicated data. Just think of every time a brand new profile is created for an existing guest when they reserve through a new channel. Or how many of your guest profiles are missing an email address. Or how many of your guest profiles have no contact information whatsoever.

No hotel company wants to base their marketing strategies on unsound data, but to overcome these challenges, hotel companies need a way to pull all of the data related to their guests into one system. Using data integration and data quality capabilities is a great place to start. Data integration helps you consume the online data you have coming in and data quality helps you match the online data with your offline customer profiles. You can use the same approach with your offline data sources, bringing together data from disparate sources across your portfolio regardless of the kinds of systems they are held in. Robust data quality routines can ensure that you are never in the position where you have a database full of guests that you cannot effectively communicate with.

Once you have a solid data management in place, you can start to bring in new sources of data and analytics. For example, you can match what you know about a customer from social media with offline data and blend this with web or mobile data. The common denominator is to have the data quality and data matching in place to maintain an accurate profile of your guests.

To take this a step further you could also consider putting together a preference center which spans the channels where you interact with your guests. Preference centers can help you understand important information about your guests, such as email address or social media profile. Preference center information can help you make the connection between online and offline guest data, as well as give you direction on how your guests would like to be communicated with. Of course – data privacy needs to be at the center of any effort to collect information on your guests, and a preference center can also help you respect your guest’s wishes in this area.

At the convergence of data quality, data integration and data management is data governance. Data governance is a set of processes that manage data assets across the enterprise. Whether you consider online and offline data solely for marketing or use it to benefit your entire organization, since the data gathered is touched by so many departments, it is critical to appoint a cross-functional data governance team to manage your data as an asset.

If you are just getting started on the road to multi-channel marketing, take a small, answerable problem like one section of your data universe, and focus on that. Then, you can evaluate how to add additional sources of data as they make the most sense. Over the next few posts, we will be exploring the digital multi-channel challenge and how it relates to hotels. I hope that you will join us!

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The 14 actions for hotels in 2014

Here are my 14 actions that our analytic hospitality executives should put on their “to do list” in 2014.  Five are higher-level – helping you to build that strategic analytic culture we’ve been talking about.  The remaining nine are more tactical – but they will help you stay on top of trends I’ve been tracking that I think will have a major impact on the industry in the years to come.

  1.  Think more strategically: This is probably something we say to ourselves every year, but it’s easy to get bogged down in day to day analyses or job tasks.  It is important to take time to think strategically about where you and your team are, and where you want to go.  Do you understand your organizations business strategy?  Do your goals line up with this business strategy? Do you have an opportunity to take on a project that will demonstrate your commitment to the organization’s business strategy (and get you some positive attention while you are at it?)? Build these activities into your plan now so that they stay on your radar when you get slammed.  
  2. Encourage cross-departmental decision making: We’ve been talking about integrated revenue management and marketing for a while now.  With digital marketing coming into the forefront and the recognized value of review and ratings data across multiple departments, cross-departmental thinking will be even more of a focus in 2014.  If you haven’t established regular communications with your counterparts in other departments (think marketing, operations, finance, revenue management), you are behind.  You should already be bringing your best information to the table, and making decisions as a team.  Next step – integrated data and analytics to automate some of that routine decision making.  On that note…
  3.  Develop a common business language: Many companies have started data visualization projects to pull together data from across the organization and provide “single version of the truth” reporting for executives and managers.  These projects will fail without first establishing a cross functional team to come to agreement on definitions of key metrics, data access and data acquisition rules.  You would be surprised how much disagreement there can be about even the most “core” operating metrics.  I think we’ll see much more focus on data management in 2014 as these initiatives get underway
  4. Carefully evaluate new data sources: There are plenty of new data sources out there – more every day.  It can be tempting to gravitate towards all that is new and shiny, but adding new data sources can be time-consuming and resource intensive.  You need to fully understand what the data is and how it can contribute to decision making.  Can the data enhance or augment existing analyses or business insights?  Do you have resources available that can understand the data and be able to use it in analyses?  What actions could you take with insights gained from that data source?  If the answers to these questions aren’t clear, then it’s probably not worth the effort at this time.
  5. Tell a story with your data: If you want to get your point across to a wide range of personas within your organization, you have to think carefully about how you use data in your presentation material (this includes both presentations and written materials, by the way).  Rows upon rows of numbers, mathematical formulas or complex graphs will not grab the attention of any but the geekiest of audiences.  Instead, distill all that information down into the couple of “pictures” that makes your point with the most impact..  Wrap that in a compelling set of real-world, relevant examples, end it with a solid call to action, and you’ll get the attention you need from your peers and executives. 
  6. Build an accurate guest profile:  We’ve been talking about this for a while now, but along with your other data management efforts, focusing on building an accurate guest profile is the crucial first step to many other initiatives that will keep your company profitable in 2014 and beyond.  The technology is here, and most companies have started to collect this information – but it’s time to focus on augmenting that profile with as much actionable information as possible.
  7. Use ratings and reviews beyond “monitor and respond”: The hospitality industry has recognized the importance of ratings and reviews in many aspects of our business.  We’ve gotten good at the “monitor and respond” processes.  Now is time to think about other ways that this data can be used - including integrating it with internal guest satisfaction measures. We should be looking at augmenting guest profiles with activity from social channels.  IDeaS, our revenue management subsidiary, is working on incorporating reputation metrics into pricing algorithms.  In addition to price influences, there are other opportunities to forecast trends and anticipate issues using these sources, like predicting service problems or forecasting PR effects. 
  8. Watch distribution costs:  The buzz in industry lately is about the rising cost of distribution.  This will rapidly become a problem for the industry as more players move into this space.  We need to start managing this more closely – and finding opportunities to drive guests to more profitable channels.  This leads me to my next set of items.  
  9. Leverage the mobile presence: As more and more activity moves to the mobile device, hotel companies need to carefully evaluate their mobile presence, and leverage that channel not just for bookings, but also as an engagement tool.  Hoteliers should think creatively about how they can provide value through their mobile app, or risk losing consumers who prefer the integrated mobile experience they can get from a third party, like an online travel agent.
  10. Understand how your website is performing: As competition heats up for the online consumer – between third party distribution channels and meta-search (and so on, and so on), how does your website stack up to the competition?  Is it easy for consumers to find it?  To navigate through it?  Does if effectively represent your brand? Does it show up in search? 
  11. Evaluate the cross-channel experience: I talked about mobile and web, but there are many channels through which a potential guest can reach you.. Are you delivering the same experience through all of these channels?  Does the brand look and feel the same (adjusting for channel demographics etc., of course)?  Are they recognized or treated the same through all channels?  Consumers are using multiple points of contact during the booking process, so the experience needs to be consistent across all of those points of contact.   
  12. Simplify the booking process: Closely related to #8 & #9, we need to be sure that we are making it as easy as possible for our guests to do business with us.  This is not always the case.  Is the booking link buried in the page?  How hard is it to find the exact product/price they are looking for?  How many screens do they have to go through to enter their information?  Are fields labeled carefully?  The easier the booking process, the more likely they will be to complete their transaction, and use your site next time as well!  (And hold your booking engine provider accountable for ensuring that the booking process if as efficient for the customer as possible!)
  13. Start on the path to personalization: As you’ve worked your way through items 8-11, think about strategies for personalizing the guest experience.  With all the data that you collect at each interaction point, and an accurate and complete guest profile, you have the opportunity to predict what content you should surface at each interaction point that will encourage them to take the action you desire.  You don’t necessarily have to “know” who is browsing your website or mobile device.  You can use what you observe about them to predict the right content to surface, and then update their profiles once they identify themselves.  Personalization doesn’t stop at the website either.  You have an opportunity to provide personalized service at every touch point on premise as well – surfacing key pieces of information about the guest, and analytically-driven recommendations of what to offer or recommend.  If you are not already thinking about how to set up your organization for this, you should start. Personalization provides an important opportunity for you to differentiate your brand in a vastly commoditized marketplace.
  14. Re-evaluate your loyalty program: The loyalty program is the best way to capture information about guests, and ensure that you are recording all of their activities with you.  As long as you are taking the time to update guest profiles and evaluate the guest experience, take the opportunity to see if the loyalty program is doing everything it could be for you.   Mike McCall, Research Fellow at the Center for Hospitality Research has done some work in this area that could guide your thinking.  We’ve talked to Mike before, on the impact of enrollments in customer loyalty programs, and his thoughts on how to leverage the explosion of customer data.

So, there’s your year all planned out!  We’re going to be talking about these themes and more at The Analytic Hospitality Executive this year.  Stay tuned! 

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What will 2014 Bring? Thoughts from the Research Faculty at Cornell’s Hotel School

Through our blog co-sponsor, the Cornell Center for Hospitality Research (CHR), we had the opportunity to interact with some of the research faculty at the Cornell School of Hotel Administration at the end of 2013 to find out what they’ve been working on, and how they see things shaping up for the hospitality industry in 2014 and beyond.  If you are interested in learning more about these individuals, I’ve provided a link to their bios through a hyperlink on their names.

Since the economy has been such a huge factor in industry predictions recently, I asked for another lesson in economics and finance from Pamela Moulton (see my blog on her research into “post earnings announcement drift” from earlier in 2013), who described the conditions in 2013 that will lead to continued confidence (and economic growth) in 2014.  Pamela told me that 2013 was a record year for issuance of corporate bonds (debt, for those of us unfamiliar with this instrument), and this is projected to continue into 2014.  The reason for this record breaking performance is twofold.  Corporations are taking advantage of the relatively low interest rates to raise capital through issuing debt.  Investors like corporate bonds because they tend to have a higher yield than treasury bonds, and they are willing to invest in corporate bonds because signs are pointing to an improving economy, so corporations are not likely to default on these obligations.  The Federal Reserve may raise interest rates slightly in 2014, but not by much, so this condition is likely to continue through 2014, (although Pamela doesn’t think that 2014 will break 2013’s records).  These same signals that the economy is strengthening are making the market more attractive for companies to raise capital by issuing stocks (equity) as well.  2013 was the busiest year for IPOs since the downturn (including several major hotel IPOs, with more on the way).  With all this activity continuing into 2014, hospitality companies are well positioned to raise capital for new projects, so we can expect to see some continued activity in this area through 2014.

By all accounts the recovering global economy in 2013 has prompted a return to optimism, and also accelerated trends that will impact the industry well into 2014.  The faculty identified three areas to watch in 2014: technology, guest experience, and human resource management.

Technology

Bill Carroll suggests three areas of technology impact: “(1) the relentless migration of dreaming, shopping, booking, and modifying travel arrangements on mobile devices; (2) the merger of search and social in the planning and buying of travel services; and (3) relentless improvement in the prospects of cloud based support of travel and hospitality applications for hospitality service consumers, suppliers and intermediaries.”  He suggests that this activity will result in some sizeable mergers and acquisitions in the search, meta-search and social marketing areas - “the big will get bigger!”

Mike McCall has seen diverse firms across hospitality and travel embracing technology, and integrating it into their daily operations – from mobile apps to providing iPads in airport waiting areas (with a customer-friendly interface to airport services).  These advances in technology are creating an explosion in the amount of customer data firms can collect and use to develop better relationships with our guests.  Mike predicts that Big Data will continue to be a topic of discussion, and a competitive advantage for those firms that can take advantage of it.

Rohit Verma with Glenn Withiam from the CHR talked about several technology trends in their outlook article for the Hotel Yearbook.  They predict the industry will continue to be impacted by the evolution of distribution channels, and the crucial importance of SEO.  Web analytics, and in particular social sentiment mining will be an important method to understanding guest attitudes towards hotel properties and brands.  They also suggest that the industry keep an eye on the expansion of mobile proximity and GPS-based services – they predict that the mobile phone will soon become the gateway to accessing services across the hotel – and wonder if this will mean that the best service is no personal service at all?  This provides a good segue into the next area to watch – the guest experience.

Guest Experience

Stephani Robson predicts trends in guest experience that will also be influenced by advances in technology and the hyper-connected consumer: “Guests do not want cookie-cutter in any form – not in design, service, or amenities – which means each hotel is going to have to identify features or services that offer a strong sense of place, and provide a flexible environment to support them.  Lobbies will need to become not only social spaces for guests to work “alone together” but need to be designed in ways that allow hotels to engage in guests in ways that are not transactional such as cooking demonstrations, flash-style fundraisers, gadget test drives, or fitness coaching. I predict that this will translate into bigger lobbies at all price points.”

Rob Kwortnik also talked about the intersection of technology and the guest experience.  He is interested to see how the move towards personalization driven by the SoLoMo (social, local and mobile) movement will actually be received by the consumer: “[There’s] the fundamental question: …. Do guests really want to provide hotel companies—or have hotel companies gather this information from social media—such personal information as demographic characteristics, likes, preferences, behaviors, purchase history, etc.? Do guests really want to be followed via geo-location devices when they check-in to a hotel using a mobile app? Do guests really want push-marketing offers sent to them via their mobile phones? I’ve yet to see hotel companies effectively execute a Social-Local-Mobile (SoLoMo) program that engages guests and drives business—without making guests wary.”

Human Resource Management

Increasing demands for improvements in guest experience will put pressure on the hospitality workforce as well.  Bruce Tracey suggests that aggressive growth plans many of the top hospitality companies have been publicizing will make effective HR management practices, particularly recruitment and training, crucial for driving business results.  “This is an especially salient concern in highly competitive markets.  Similarly, meeting and exceeding the ever-evolving customer expectations will require substantial investments in training and development.  As such, it is imperative that focused attention and substantive resources be dedicated to implementing rigorous procedures and systems for finding top talent, and offering a wide-array of learning and development efforts to facilitate consistent and high-quality service performance.”

Kate Walsh, along with Cathy Enz and Susan Fleming, worked on a Women in Leadership Study in 2013, sponsored by Carlson Hotels.  They suggests that organizations are going to have to pay more attention to long term career development for their top talent. “We recommend that executives protect their organization’s distinct advantage by re-examining their succession planning programs and plans.  It’s critical that they have conversations with their up and coming talent to identify the types of support and challenges they need as they move through various career and family stages.  Surprisingly organizations do not have long term development plans (for their professional talent) tied to their top-level succession plans.  To keep crucial organizational talent (and client knowledge) from walking out the door, executives need to take a harder look at this softer issue, especially for their female professionals.”

Michael Sturman suggests that even though the economy is improving, organizations will be maintaining a sharp focus on costs – particularly in labor costs. “Small salary increases, with raised budgets at or under 2 percent, are the new normal.  To motivate staff, companies will be increasingly adopting other pay-for-performance systems—bonuses, scorecards, profit sharing, and so forth—that limit fixed costs but still provide extrinsic incentives.  These incentives are becoming increasing common at all levels of organizations, but how employees respond to these incentives is not well understood.  Companies will need to see if putting an increasing amount of pay at risk has the sort of effects on performance and turnover they are hoping to see.”

Future Research

Several researchers previewed projects they are excited about working on in 2014:

  • Michael Giebelhausen will be looking at sustainability in 2014.  He thinks the conversation about sustainability is shifting.  “Until recently, the discussion has primarily focused on developing green standards and figuring out the best ways to reduce a property’s carbon footprint. It seems to me that forward thinking hospitality organizations are now focusing on how these efforts should be integrated with the brand and presented to guests. This is a challenging task.”
  • Kate Walsh will continue work inspired by the Women in Leadership study, expanding it to look more broadly at what career management means for organizational longevity.  The Women in Leadership study will be available through the CHR in 2014.
  • Rob Kwortnik-  is excited to study the role of guest-facing technology – how far are guest going to allow hotels to go in collecting and using their information to personalize the stay experience before we cross the line into creepy…
  • Stephani Robson has been working with Breffni Noone at Penn State on a project about how guests balance firm-generated content (property descriptions, images, local area information) and user-generated content (ratings, reviews, and uploaded photos) against price during the online hotel purchase decision.  (the findings from their initial exploratory study will be available through the CHR in the coming year)
  • Andrey Ukov will continue a research project on the Preferred Stock issued by Real Estate Investment Trusts (REITs), and the role this asset class plays in investor portfolios.
  • Mike McCall is looking forward to continuing his work on loyalty programs, leveraging “big data” sets to gain insights into what makes loyalty programs effective, and how companies should design their loyalty programs for maximum value.
  • Pamela Moulton is continuing her investigation of behavior of the stock markets.  She’s going to look at how investors react when they get “early” (legal!) access to information, such as changes in ratings from analysts. Her assumption is that certain investors who pay for access to analysts receive information about ratings changes several days before the analyst issues a press release.  Those that do not pay for the information would receive it via the press release.  She wants to look at trading behavior, understanding who trades (institutions or individuals) and when they trade (before, at or after public release).

So, what will set up our Hospitality Executives for success in 2014?  Bill Carroll suggests helping educational institutions like Cornell deliver knowledge to your current and potential management staff. “We will need more analytically and digitally competent managers to cope with an increasingly complex marketing and service experience creating industry.”  Along these lines, Michael Sturman advocates for using evidenced-based management.  There is a lot of research out there that can inform your business operations, like that produced by the Center for Hospitality Research.  Mike McCall agrees, most companies are sitting on vast amounts of data, but lack the resources to turn that data into meaningful actionable information.  He says itis past time for the industry to invest in analytic talent and the technology to support them.  Maybe 2014 will be the year of the hospitality analyst??  I think that is good news for our Analytic Hospitality Executives.

Stay tuned throughout 2014 for more research from Cornell!

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The Analytic Hospitality Executive: 2013 – A year in review

The overarching theme for the Analytic Hospitality Executive this year was “Building a Strategic Analytic Culture”.  We strove to help our Analytic Executives set the foundation for an organization built on fact-based decision making, aligned across the organization, rather than siloed by department.  I wrote a roadmap for building that strategic analytic culture in her post: “Creating a Strategic Analytic Culture from the Ground Up”.

Here’s a quick review of our year:

Analytics as a Game Changer

Natalie kicked us off this year with a discussion about achieving the balance in hospitality with analytics, describing how analytics can shore up the delicate balance between delivering a great customer experience, and meeting revenue and profit obligations.  I talked about how to leverage “Big Analytics” to get insight from “Big Data” in a series of posts:  Defining Big Analytics and “Big Analytics for Hospitality”.   Natalie also talked about how to make analytics more approachable with Data Visualization.

Can’t have good analytics without good data, so we spent some time talking about issues in information management as well.  Natalie interviewed a number of industry leaders about their view of the importance of good data for hospitality organizations, helped us understand how to manage for big data, and discussed how information management is the foundation for a strategic analytic culture.

Integrating Departmental Analytics

The first important stage on the journey to a strategic analytic culture is bringing siloed departments closer together.  Natalie gave us a perspective on how this works as a marketer, and Alex took the revenue management position.  Natalie also spoke about how hospitality operations could leverage information from other departments in their decision making, and finally, she provided some examples of integrated hospitality analytics in action in leading hospitality organizations.

Pricing as a Strategic Tool

As always, revenue management was a big topic for us this year. As part of becoming a strategic analytic culture, we wanted to help our revenue management teams elevate their thinking beyond day to day tactical pricing recommendations, to using price as a strategic lever to support an organization’s business strategy.  We kicked off the discussion early in the year in: Pricing as a Strategic Tool: A conversation with Maarten Oosten.  In a two part series, Alex talked about revenue management as a big data problem (part 1 and part 2) to set the stage for the opportunities revenue mangers can take advantage of.  Lee Ann (a new blogger for us), discussed examples of this in Pricing as a Strategic Tool: Part 1 and in Part 2.  She interviewed Craig Eister from IHG to hear how he looks at price as a strategic lever in Strategic Pricing in the Real World, and spoke with Cathy Enz, a full professor at Cornell, about her research in Strategic Pricing – Learnings from the latest academic research.  Finally, Alex gave us an example of how sports teams use pricing to sport a business strategy in his post about Sports Ticket Pricing.

Research

There were no shortage of research posts on the Analytic Hospitality executive this year.  I updated us on where the industry stands in their use of Social media analytics for hospitality, and then featured two posts on her research with Dr. Breffni Noone from Penn State, on Pricing in a Social World: Five tips for Revenue Managers and How consumers use ratings, reviews and price when choosing a hotel

We also had some good discussions with researchers from our co-sponsor, The Center for Hospitality Research at Cornell.  We spoke with Chris Anderson about his research project on Social Media and Lodging Performance, had a A Primer on PEAD from Pamela Moulton to set up her research on hospitality stock performance versus the market, and spoke with our old friend Mike McCall about his latest research on Loyalty Programs.

Looking at what’s next

Natalie finished the year with two posts about digital intelligence, which we expect to be a big topic in 2014, on Big Data and the technology landscape.  Taking full advantage of the complex digital environment will continue to challenge hospitality managers for years to come, but there are some exciting new analytic innovations that we tease in these two posts, and will jump right into in 2014.

I hope that you enjoyed the year as much as we did!  Have a safe and healthy holiday season, best wishes for the New Year, and we’ll look forward to more conversation in 2014!!

 

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Analytic Hospitality Executives - what happened to 2013??

If you are like me – as I suspect many of our Analytic Hospitality Executives are – you are sitting at your desk today thinking – is it really mid-December already?  What happened to 2013??  How am I going to finish everything I said I’d get done this year?  What happened??   The year was a bit of a whirlwind for me, but it’s certainly been an exciting and positive one for our industry!  As I look forward to next year, I’ve also been reflecting back on 2013.

2013 was a return to optimism for the hospitality industry.  With performance back to 2007 levels, we were able to breathe a sigh of relief and start thinking about what’s next instead of worrying about when the next shoe would drop (so to speak).

I was personally inspired and encouraged this year by the growing interest in all things data and analytics.  It wasn’t just window shopping either.  We’ve seen organizations make serious investments in analytic people, process and technology across all industry sectors and organizational functions.

Here are some trends that I saw over 2013:

  • Getting realistic about big data – Everyone gets sick of a buzz word – and big data is no exception.  At the beginning of 2013, no one in hospitality would admit they had a big data problem.  By the end of this year, many had embraced the idea that “big” isn’t just about volume.  While we may not have the volumes of transactional data that say, an online retailer might have, we do have variety of data (performance information, unstructured text data, images, location data…), and it does come at us fast – and really, there is a lot of it.  More than we can handle, really. Hospitality managers, whether they want to use the actual term “big data” or not, are starting to realize the benefits of being able to unlock the insights in all that data.  In today’s highly competitive and interconnected environment, the company that is able to use all of their “big data” – especially the somewhat non-traditional sources like text or click-stream – to improve the customer experience, will be the one that wins!

 

  • Data visualization – There was a tremendous amount of interest in data visualization (business intelligence, if you prefer) around the industry this past year.  It’s now gone way beyond delivering static reports to executives – (which is why I prefer saying data visualization to business intelligence).  Companies want interactive and flexible data visualization tools that let them pull all of that disparate data together and slice and dice in whatever way best suits their needs.  Most of the major hotel companies, and even many of the smaller ones, are deep into data visualization initiatives.  Not surprisingly, the biggest challenge, as you start to pull all that interdepartmental data together, is developing a common business language.  It is surprising how often different departments define the same metrics in very different ways.  When you build that “single version of the truth”, these inconsistencies come to light.  Your data visualization initiative will fail if you don’t pull together a cross functional team that can come to agreement on how to define, collect and persist key business metrics.  And remember, this effort will always take much longer than you expect – but it is worth it!

 

  • Data-Hungry Marketers – Marketers have fully embraced the benefits of more targeted marketing programs.  They understand that being relevant and engaging drives all of the behaviors we want from our guests – loyalty, intent to return, and likelihood to recommend.  They have also realized that they need analytics to effectively predict response rates and identify interventions that will incentivize this positive behavior.  Success in this area requires data.  Marketers have become very focused on building that accurate and complete guest profile.  They are hungry to get, and use, as much information as they can about guests interactions across the estate.  I’ve been especially encouraged to see our hospitality marketers getting so passionate about data and analytics.  There are so many opportunities ahead in 2014 that will require analytic-minded marketers!  (More on that in a couple of weeks, in my first January post!).

 

  • Revenue management “modernization” – Revenue management systems were among the first analytic technology investments most hospitality companies made.  These systems have shown their value time and again, but there are always new opportunities to advance the discipline. This was never more obvious than in 2013.  Between the increasing visibility of revenue management success, the wealth of new data available and advances in revenue management analytics, many hospitality companies are now looking to expand or modernize their revenue management programs.  Just in this past year we’ve seen sectors of the lodging industry, like limited service, making investments in revenue management systems where none existed before.  There has been talk about how to think about incorporating external data sources, like reputation scores.  Many hospitality companies are expanding the user base of revenue management systems, or results, to other departments (like sales and marketing, operations, or executive team) through reporting, mobile applications or even access to the system itself.   There’s always been talk about expanding revenue management beyond hotel rooms, and we did see progress in that area this year.  All in all, revenue management is definitely not resting on its laurels, but continuing to push the envelope – becoming more strategic and even more valued in the organization.

We at the Analytic Hospitality Executive, wrote a lot about building a strategic analytic culture this past year.  We talked about how you organize and visualize your data to help achieve this goal, and we addressed trends both in strategic decision making, and in integrating departmental analytics.  I’ve been very encouraged to see the industry not only talking about this, but laying the foundation to make it happen.  We have a long way to go, and it won’t be easy, but it’s a worth-while goal – and we’ll get there!

See you in 2014!!!

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Digital Intelligence for Hospitality and Travel: The technology landscape.

Last post I explored why hospitality and travel organizations need an analytic-based approach that focuses on using the masses of digital (web and mobile) data that is available to help identify what customers are searching for online and how content and search results can be tailored to deliver what the customer wants. This week I spoke to Suneel Grover, senior solutions architect for digital intelligence at SAS about the technology required to support such initiatives.

Better targeting requires better marketing automation technology

Suneel sees the need for added marketing technology investment borne out of the extra pressure on campaign management as a result of more focused targeting. “If, instead of targeting a mass audience with one approach, we need to target 10 segments across different channels with multiple, unique approaches – this creates challenges for campaign management processes,” he said. The complexity to accurately target and execute has driven greater adoption of marketing automation technology. “It is the joining of human subject matter expertise and software technology to utilize data, analytics, and business rules in addressing this new, hyper-targeted, integrated marketing world,’ he explained.

And it doesn’t stop at marketing automation, which traditionally includes replacing the myriad of high-touch repetitive campaign execution tasks with software. Suneel elaborated that marketing operations technology can further supports this cultural marketing shift. “Marketing operations technology enables an interactive user environment to handle creative processes, digital assets, leadership approvals, third party partner efforts, time lines, and much more,” he explained. As marketers imagine new and adventurous approaches using new forms of data and analytics, special consideration must be given to the process of execution. “Failure to execute will limit data-driven marketing’s potential, and this is why strong recommendations have been surfacing around campaign management automation and operations technology,” Suneel said. The alternative is that the propensity for human error will increase, reaching unstable levels and result in negative customer experiences.

Optimizing all of your customer touch-points

I asked Suneel how to bring together all of the data on your customer touch points and get the best results. He explained that it is making the most of all of this data on your customers that will provide the best results. Suneel identified that analytic-centric approaches such as marketing optimization provide the underlying technology to make the most of this data. “The practice of marketing optimization is the endeavor to contact the right customers with the right offers at the right time, while staying within budget and channel capacities, all without cannibalizing future sales or burdening customers with too many messages,” he explained. Marketing optimization helps to maximize economic outcomes by making the most of each individual customer communication. This approach increases marketing return on investment by determining the best offers for individual customers and by providing analysis of the most effective way to spend the marketing budget while considering business constraints, such as channel selection and capacity, offer promotion strategies, and contact policies.

Suneel outlined three main benefits of implementing marketing optimization technology:

  1. Improved return on investment for marketing
  2. More focused contact strategy
  3. Increased organizational efficiency

“The return on investment for marketing is derived from several areas of improvement, including increasing targeting effectiveness which results in higher response rates, improved channel effectiveness, reduced spending on campaigns, fewer deleted e-mails and fewer unwanted ad solicitations,” Suneel said. The math-based approach offered by marketing optimization techniques produce results that are superior to segmentation and rules-based approaches to prioritizing marketing offers. When it comes to contact strategy, Suneel explained that complex contact policies are required to avoid over-saturating customers and violating corporate governance requirements. “Marketing optimization techniques can eliminate uncoordinated and conflicting communications while incorporating relevant relationship factors such as customer risk, advertising exposure and house-holding into the optimization to ensure that valuable customers are receiving the best possible set of communications across every channel,” he said.

Lastly, marketing optimization techniques can show where and how changes in channel usage, target customer segments, campaign budget, and other constraints will affect the business, and highlight financial opportunities and unused capacity. “All of this improves your overall organizational efficiency,” Suneel said, “keeping you from spending time, resources and budget on campaigns that do not bring the desired results.” Overall, marketing optimization blends technology, methodologies, and Big Data capabilities to address the business challenge of making the most of customer interactions across all digital touch points.

Recommendations for getting started

I asked Suneel what recommendations he has for organizations who are embarking on a deeper dive into digital marketing and technology. He gave 3 pieces of advice to those who are embarking on this journey. “First – take it in stages,” he said. Suneel recommends that an organization develop practical, and most importantly, rationale goals that are achievable given annual budget constraints, and current work force skill sets. “Second - do not abuse the power of data-driven marketing,” he recommended.  There have been plenty of well-publicized cases of organizations going too far and upsetting their customers due to privacy concerns. Suneel recommends that hospitality and travel marketers educate themselves on these case studies, and avoid falling into these types of situations. “Your brand has everything to gain (or lose) in how you leverage this new opportunity,” he said.

Finally - be open to learning new techniques to solving business problems, and focus on communicating the value to your organization in a manner that everyone understands. “Your efforts should not just be at the data-scientist level,” he said, “business leaders will not adopt data-driven marketing and analytic strategies if they do not understand what is happening. Interpretation is everything.”

Is your organization enhancing its marketing process with analytic technology? What are the benefits that you have seen so far? We’d love to hear your success stories!

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Big data and digital intelligence for Hospitality and Travel

The US online travel market is maturing. According to eMarketer, growth in US digital travel sales is slowing, down from 15.1% growth in 2011 to 8.0% in 2013, with 4.5% growth predicted for 2017. What does this mean for travel and hospitality companies? The endless stream of brand new consumers booking online is ebbing - it is no longer enough to have a web site with a booking engine, the online experience must be such that it attracts customers and keeps them coming back. Consumers have multiple options for making online and mobile reservations - to prevent your potential customers from booking with the competition, it is important to understand the intent of your potential customers, and provide relevant, timely and insightful interactions that increase the chance of conversion from browsing to booking.

To do so, hospitality and travel organizations need an analytic-based approach that focuses on using the masses of digital (web and mobile) data that is available to help identify what customers are searching for online and how content and search results can be tailored to deliver what the customer wants. Luckily, improvements in data storage and processing power mean that analyzing web and mobile behavior using predictive analytics has become much more feasible.

Digital data is quite simply a big data challenge. In the past web analytics have focused on aggregating data as a first step, then providing summary reporting. However, data storage has become relatively inexpensive and processing power has increased exponentially, enabling companies to access, process, and analyze their data in its entirety without sacrificing any speed or accuracy. Using predictive analytics, companies can use raw data collected from websites, mobile apps, and social media data and turn that into powerful insights on their customers.

Digital behavioral data and predictive analytics can supplement three areas within marketing:  outbound, inbound and integrated marketing efforts. Digital behavioral data, business rules, and predictive analytics can help outbound marketing efforts by identifying which marketing offer to use in your email, display, or re-marketing campaign. Digital behavioral data, business rules, and real-time predictive analytics can deliver a personalized visitor experience when an inbound prospect returns to your website for the nth time this week. And finally, digital behavioral data, business rules, and real-time predictive analytics can be used in an integrated marketing approach that expands to every customer touch-point, including prescribing how a call-center or front desk team member can up-sell a repeat customer with the most relevant offer when that customer calls to make their next reservation. Personalizing the web experience and expanding it to the service operations experience is a comprehensive way to keep customers coming back to your booking site.

Displaying different options to different set of customers is fundamental to online retailing.  The methods used to determine what product options to display to which customers and when are becoming increasingly sophisticated. Hospitality and travel companies have a multitude of different products that potentially can be displayed to a customer at the moment that customer performs a search of their website. Using personalization technology, hospitality and travel companies can present, customize or suggest the exact content that is relevant to an individual customer, based on an understanding of that customer’s preferences and behaviors.

Over the next few posts, we will be exploring the area of digital intelligence and personalization for hospitality and travel companies. I hope that you will join us for more on this subject!

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