Responsible Use of Big Data: Evaluating New Data Sources

At the beginning of the year, I released my 14 actions for 2014.  I outlined a list of actions that hotels can and should take right now to ensure they are set up for success in the years to come.  Action #4 cautioned analytic hospitality executives to carefully evaluate new data sources.  I thought this action in particular was worth some additional discussion.

In this “big data” era, new data sources are cropping up every day – from internal sources and third party data re-sellers.  With all of this activity, plus constant messages from big data vendors and technology experts about the value of capturing everything you can get your hands on (I recognize that I am part of this as well, of course), it’s tempting to think that you can just shove all of that new data into a database and you’re good to go.  Regardless of how inexpensive storage space is getting and how fast processing is becoming, capturing, storing and analyzing data still takes resources  - technology and human capital.  Further, the wrong kind of data, used in the wrong way, will simply add overhead and noise to your analysis, rather than providing any additional insight.

There are myriads of detailed technical and analytical methodologies for assessing and transforming data to make it useful for reporting and analysis, which I won’t go into here.  In this post, I will provide some business-oriented suggestions for how to think about a new data source, and discuss potential problems that could arise from throwing too much data at a problem.

I’ve said this many times before, the first important step in evaluating a potential new data source is to determine what business value you will gain from accessing that data.  You should clearly and specifically define not just the insight you expect to be able to gain from that data source, but also who will benefit from that insight and how the company will take action.  Assess how the data could contribute to an existing business analysis, improve a decision making process, or help you gain new insight.  Knowing the “fit” at the level of business value will help you justify the investment in acquisition.

Once you understand the potential business  value, you need to be sure the data can actually deliver.  The second step is to understand the characteristics of the data source.  Ask the following questions:

  • What is the data? Make sure that someone in the organization has a clear understanding of the data fields, how they are calculated, what level of detail is available and what they mean. You will also need to understand how this data relates to other data in the organization. For example, if you are looking at time series data, does the level of detail and the intervals match any related sources? Also determine whether the data is unique, or highly related or correlated to another source.
  • How is the data collected?  Understanding where the data comes from will give you a sense of how reliable it is.  If it is heavily driven by user entry, then you need to assess the business process around the data collection.  User driven data is notoriously unreliable unless it has tight business process around it.
  • How often is the data updated and how?   Your systems will need to be set up to receive and store the data in a timely fashion.   If the data comes too fast, and the ETL process takes too long, it might be useless by the time you are able to access it.  For example, tweets or geo-location data are stale almost as they are created, so if you aren’t able to process them in time to use them, it’s not worth the trouble.  Further, if the data delivery process is unreliable (as in it frequently doesn’t show up, or shows up with missing values etc), and you are counting on it for a critical piece of insight, you may want to look elsewhere.

Finally, determine whether you will need any additional technology or resources to manage the data source.  Unstructured text data can be highly valuable to the organization, but it’s large, and it requires some specialized analytics to interpret.    There are also human capital implications for adding new data sources.  Do you have enough people available to manipulate and analyze the data so that it can be effectively used by decision makers?  Obviously, if you need to make an investment in new technology and new resources, more work is required around my first point – understanding the business vale.

If you are just interested in using the new data source for reporting, or descriptive statistics, the previously outlined steps will keep you out of trouble.  Throwing more data at a predictive modeling or forecasting analysis is trickier.  I am going to introduce some statistical concepts that you should be aware of as you are thinking of incorporating more data into an advanced analytic application.

Some of you may be familiar with Occam’s razor.  It is a principle of mathematics developed in the 14th century which basically states that “simpler explanations are, other things being equal, generally better than more complex ones.”  Many statisticians follow this guidance, believing that you should always select the simplest hypothesis until simplicity can be traded for predictive power.  Occam’s razor cautions us that simply throwing more data at a statistical problem might not necessarily generate a better answer.

In fact, statistical analysis bears this out in some cases.  Note that when I talk about “more data” in the next few paragraphs, I am talking about more “predictor variables” not more observations within the same data set.  Generally speaking, more observations will help to increase the reliability of results, since they will help to detect patterns in the data with greater confidence.

Two different statistical phenomenon can occur in predictive analysis with the addition of predictor variables to a model.  In both cases, the addition of variables decreases the reliability or predictablity of the model.  I’m only going to define them at a very high level here, so that you can verify with your analysts whether there’s a concern.  There has been plenty of research on both of these issues, if you want more information.

The first issue to watch out for is multicolinearity.  This happens in a multiple regression analysis when two or more predictor variables are highly correlated, and thus do not provide any unique or independent information to the model.  Examples of things that tend to be highly correlated could be height and weight, years of education and income, or time spent at work and time spent with family.  The real danger in multicoliniarity is that it makes the estimates of the individual predictor variables less reliable.  So, if all you care about is the model as a whole, it’s not that big of a deal.  However, if you care about things like what variable has the biggest impact on overall guest value, or on likelihood to respond, then you do have to watch out for multicoliniarity.

The second thing to watch out for is overfitting, which happens there are too many parameters relative to the number of observations.  When this happens, the model ends up describes random error, not the real underlying relationships.   Every data sample has some noise, so if you try to drive out too much error, you become very good and modeling the past, but bad at predicting the future.  This is the biggest danger of overfitting a model.   This is particularly problematic in machine learning algorithms, or really any models that learn over time (like revenue management forecasting, for example).

So, what is the bottom line here?  Don’t assume more is better, prove it!

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What’s the future of email in hospitality marketing?

This week I spoke with Bruce Swann, Customer Intelligence Solutions Manager for SAS, about the role that email will play in the future when it comes to hospitality marketing. Bruce is a veteran of marketing, having more than 15 years of experience working with marketing and CRM technologies, including marketing automation, predictive analytics and marketing resource management, as well as interactive marketing disciplines like web analytics, social media, mobile marketing and email marketing. At SAS, Bruce works closely with prospects and customers in the hospitality sports and gaming industries to help design the optimal customer intelligence platform based on current and future business requirements. As you can imagine Bruce is a big proponent of data and analytically driven marketing approaches. This week we chatted about how to get more impact for your investment when it comes to email marketing. And of course that raised the following question…

With so many marketing channels available to a consumer today, is email even still relevant?

Bruce explained that without a doubt – he believes that email is still relevant and a very powerful channel for a marketer to leverage for customer engagement and driving revenue. “In fact, while many think email is fading, quite the contrary; it is growing exponentially.” Bruce referred to a recent eMarketer report that projects there will be nearly 240 million Americans with email accounts by 2017.

“One of the contributing factors to the growth of email is mobile accessibility and the prevalence of smartphones,” he said.  “Also, with the advent of new devices, such as Google Glass and wearable devices like smart watches, access to email will be that much more convenient for the consumer,” Bruce explained, “and this presents new options for the marketer to target and engage customers.”

Bruce feels that the challenge for the hospitality marketer is not whether email will still be relevant, but how to be relevant with email and stay ahead of the competition.

How can a marketer be more relevant with email?

Bruce thinks that the bottom line is that it is very difficult for a marketer to be relevant with email, considering email is not the only inbox that a marketer competes with. “There is also Facebook, Twitter, Google+, Instagram, Pinterest and a multitude of other social channels,” he explained. In addition, it only takes a second to lose a customer to an opt-out. “You need to consider that of the top two reasons for a customer to unsubscribe from an email list, the top one is simply volume, or too many emails, and the second is that they are getting content that is just not relevant,” Bruce elaborated.

For an email to be relevant, hospitality marketers should ask themselves the following before an email campaign is launched - Is the email compelling and timely? “Marketers already know that the best way to engage with a customer is to leverage data-driven marketing to target them with content that is persuasive and compels them to act on the call to action,” Bruce explained, “but often what is missed is the timing of the email.” For example, will the email get buried in an inbox and ignored, or delivered to the inbox at the wrong time or the wrong day? “Analytics can provide insight into the best time of day or day of week to target a customer, but an even more productive approach would be to leverage triggered emails,” he explained.  Triggered emails are sent (or
"triggered") based on an action taken by the recipient.

The “triggered” in triggered emails refers more to the technology used to send the email. “Marketers need to remember to factor in some strategy behind the email as well as content to help boost revenue,” Bruce said. He gave examples of triggered emails that included welcome to the hotel emails, reservation purchase confirmation, website behavioral triggers such as interest in specific property features such as the spa, or even abandoned booking. “A recent Epsilon report states that triggered emails have open rates nearly 60 percent higher than non-triggered messages,” Bruce explained, “and the click-through rate on triggered messages is nearly 130 percent higher than on business-as-usual messages.”

What should a marketer consider with data-driven marketing when it comes to email marketing?

Bruce thinks that to really be relevant, personalization is just not enough. “Marketers needs to leverage all they know about a customer to determine the optimal content target,” he said. “For example, a customer who has viewed videos of hotels on the website might be far more receptive to view a video embedded in an email; a new customer might be more receptive to a cross-sell or upsell offer than a lapsed customer; a re-marketing email might resonate better with a frequent online shopper; one who browses on a mobile device should be targeted with mobile-friendly content; also - consider sending socially targeted emails to subscribers who have mentioned you on social media,” Bruce explained.

“For this to work effectively, however, relevant data needs to be considered, such as preference center data, web behavioral data, social and transactional data,” he said. Data also needs to be brought together to provide a more panoramic view of the customer. “Not having a more thorough view of a customer, or missing key data elements, is a major obstacle to data-driven marketing, which impacts the ability to target the customer with the optimal content,” he said. When you incorporate data-driven marketing into an email strategy, along with a focus on what customer is interested in, what they are telling you and what you know about them, you can better determine what to communicate in a way that is relevant and drives engagement. “This also enables more effective segmentation strategies,” Bruce explained, “which will enhance the ability to target customers with engaging content.”

How can analytics be used in email marketing?

“In general, predictive analytics can be used to predict what content, or offer a customer is likely to respond to,” Bruce said, “but another effective use of analytics in an email strategy is segmentation.” Analytics can help determine email marketing segments where the customers within the segments have common needs and priorities. “This means the marketer can better align the content and timing of an email campaign with customers being targeted,” he explained. One of the benefits of this approach is that it can prevent poorly targeted email campaigns from overwhelming subscribers with seemingly meaningless offers. “Analytically driven segmentation narrows the focus content, based on the segment’s characteristics, which in turn decreases contact fatigue or opt-outs associated with poorly targeted emails,” Bruce said.

When it comes to measuring the success of email marketing, what metrics should a hospitality marketer care about?

“Beyond standard operational metrics such as opens, clicks and conversions, the marketer should also measure engagement,” Bruce said. As he explained it, engagement pertains to email activity that drives not just opens, clicks, time on site, and conversions, but also activity that increases repeat business, increased spending and lifetime value. “I would recommend that you seek out metrics that help answer questions such as how many people clicked through on your email but didn’t convert? Of the people who converted on your website, how many of them came from social media? How many opened your last email campaign? Which results in more leads, PPC or organic search: email or social?” Bruce said. “These are the answers that will result in more targeted, engaging and revenue-driving email marketing.”

In summary, when it comes to email marketing strategy, the hospitality marketer should keep a few key considerations in mind: to be relevant with email, the approach must be compelling and timely. The content of the email will mean nothing if it arrives in the inbox along with a deluge of other ill-timed emails; the timing will mean nothing if content is bland and meaningless to the recipient. By incorporating data-driven email marketing, triggered campaigns and analytics, email strategies are more likely to drive engagement and revenue opportunities.

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The challenges and opportunities of hospitality marketing: An interview with Bill Carroll

This week, I reached out to Bill Carroll, senior lecturer at the School of Hotel Administration, Cornell University. I caught up with Bill earlier this year during the HSMAI Digital Marketing conference, where he was the MC, and more recently during the Center for Hospitality Research round table on customer loyalty. It seemed that the time was right to touch base with Bill on the state of digital marketing in the hospitality industry.

Natalie: Bill - what do you see as the biggest opportunities in digital marketing for the hospitality industry?

Bill: One of the largest opportunities for hotel companies is to enhance engagement, particularly in regards to leisure customer segments. First of all, engagement needs to move beyond the loyalty program and expand to all aspects of the process, from the time the booking is made all the way through to the time that the customer submits some review about the property. Second, reputation management is becoming more and more effective. This provides an enormous opportunity to not only resolve any customer issues in real-time, but also to drive overall operational improvements. The third significant area that I see is the increased use of items that a hotel property can offer. Instead of thinking about improving occupancy, maybe we ought to focus on improving the revenue we are making per square meter of hotel asset. And if we began to think that way, then we would focus on increasing sales in meeting space, additional services, food and beverage, and not just in rooms.

Natalie: What trends or focus areas from other industries do you think that the hospitality industry should be adapting or adopting?

Bill: One of the areas where the hospitality industry has to adopt is in the area self-regulation. I get very concerned about the issue of privacy of customer data versus using information to serve customers better. If, as an industry, we don’t start to self-regulate, then at some point the government will step in and do it for us. I see self-regulation initiatives starting and being executed in other industries but not our own, unfortunately.  We need to start partnering together as an industry to draw up guidelines to help regulate private information so that the industry can collectively preserve the value of information, while at the same time protect the customer’s privacy.

Natalie: Bill – this is really an area where you have to have some internal capabilities to manage private information and make sure that it is protected and secure.

Absolutely. And I would really like to see the industry as a whole drive co-operation around self-regulation, so it doesn’t become a competitive sticking point between hotel companies. It should be that we are all going to agree to do it this way as a service to the consumer. So then, it does not become a cartel issue, or an anti-trust issue, it really becomes a privacy issue – and the hotel industry should be co-operating to protect the privacy of the consumer.

Natalie: What are some of the upcoming challenges and opportunities for hospitality marketing that you see?

Bill: Number one has got to be the ability to evaluate return on investment with regard to attribution. We are in the digital age, so it seems that we should be much better at attributing the value of a search site, an online travel agency site and the interaction that occurs there. We don’t know as much as we really should because that the industry hasn’t stepped up to be willing to do that as yet.

The second is really dealing more effectively with the trade-off of privacy versus efficiency and efficacy of service, as I mentioned earlier. The third challenge is that of changing source markets and demographics. When you look ahead to 2025, the world will go from the European Economic Community being the largest global producer of gross domestic product to China being the number one producer. At the same time - the United States will move to number seven. This is a huge challenge that the industry needs to recognize, both in terms of source markets and in terms of the allocation of capital. The question becomes - where is capital going to flow geographically? It is certainly not going to be towards the U.S. How will this change the nature of our industry? There are plenty of aspects to start to prepare for, and all of the early signs of change are already there. I see this change in demographics realized in my classroom every day.

Lastly, one of the inherent challenges for hotel companies is that of loyalty. I think that travel intermediaries such as OTA’s are going to recognize the value of loyalty programs and customer relationship management sooner rather than later. And because they have bigger budgets and can offer points on everything you buy, they will be a real challenge to the hotel’s more traditional loyalty programs.

In summary, there is plenty for the hotel marketer to do to prepare for the future. No only will some of these challenges will require building strong internal partnerships, when it comes to data privacy and service efficacy, for example, it will require a strong partnership between IT and marketing. These challenges also may require external partnerships between hotel companies to drive towards better industry self-regulation.

Marketers - how are you readying yourself for these challenges?

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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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