The 360-degree view: Gaining a complete picture of your guests

For hotel companies, it is challenging to find new ways to differentiate in an ever evolving marketplace. There is a lot of talk in our industry about the increasing numbers of third party channels and distributors to have entered the marketplace, and how that impacts the hotel company’s core business. Every one of these players is competing for your guests. However, most hotels possess an advantage over their competition that is often sitting forgotten in their databases - the detailed transaction data that they have on their guests.

To stand out from the competition, hospitality companies need to match guests with highly targeted offers that demonstrate an understanding of both guest preferences and value. To ensure these offers strike the right financial balance to drive profits, hospitality companies should base their campaigns on a true understanding of guest worth, both today and in the future. A 360-degree view of the guest is essential to achieving this vision. But what is a 360-degree view, and how do hoteliers achieve it?

Today’s hotel guest is likely to participate in a variety of activities across the property, including dining, meetings, spa, even golf and shopping if available. To gain a 360-degree view of your guests, these activities need to be captured and linked back to the guest. Gathering this information from disparate operating systems presents a technical challenge for many hotel companies, as do the analytic techniques that extract guest behavioral insight.

Hotel and resort companies are gathering the information needed to know their guests, but often have difficulty determining how to access and use the data. And once the data is gathered together, how can hotels companies ensure the quality of the data? Duplicate guest profiles and duplicate transactions are common in property management systems as well as customer relationship management systems. When you add the other systems such as point of sale, restaurant reservations, spa or golf systems, the problem can grow exponentially. That’s why a thorough data management approach, including data integration and data quality is essential to an accurate picture of your guest’s behavior. When you have access to relevant, accurate information about your guests’ actual behavior you can use that information to make informed business decisions with clarity and confidence.

Once you have a 360-degree view of your guests you have many more opportunities to leverage analytics. Using advanced segmentation strategies and predictive analytics, micro-groups of guests with similar preferences and purchase behaviors can be identified. Perhaps you want to look across all of your guest records and understand what relationships exist between those that use the restaurants at your properties and those that use other facilities, for example, your spa. This can certainly help with understanding how changes to the spa operations such as opening hours or even a renovation will directly impact the revenue of the restaurant. Additional data on guest behavior enables you to group guests by more than just their room revenue, but rather on all of their activities across your estate. Micro-segmentation allows you to be much more laser-focused in your marketing and service efforts, and your guests will feel that you really understand them.

Access to information about your guests at a detailed level allows you to match your service offerings and your marketing efforts to the set of customers that responds best to it. You do not have to be all things to all guests, but you can define your core offering based on your most valuable guests, and work on attracting other similar customers. New guests exhibiting similar behavior to your most valuable guests can be identified and nurtured, so you do not have to build an extensive guest history before you are able to identify and serve them. Behavioral indicators signal an opportunity for hotel companies to intervene to encourage or discourage expected behaviors. For example, churn models predict when an individual guest is at risk for leaving, so you can take appropriate action before he or she defects.

Your guests are also interacting with you via websites, social media channels and mobile aps from when they first start to do research on your property, to well after they have departed. Adding online behavior data, which includes not just what was purchased, but also what was viewed by your guest during the purchase process can help your understanding how to cross-sell and upsell your service offerings. If a guest was reviewing spa open hours during their room reservation purchase, would that same guest respond well to an offer for a spa appointment? In many cases the offers do not need to include a discount to make them effective.

Redefining “valuable” and nurturing these relationships allows you to be more proactive, creative and focused in your marketing and service offerings. The hotel that can demonstrate a personal knowledge of their guests, and drive revenue while generating an attractive bottom line, will rise above the rest. Your guests will ultimately reward your attention with increased loyalty and spending.

How are you consolidating information about your guests? Do you currently have a 360-degree view, or single view of guests available to you? How are you deploying this in both your marketing and service operations efforts?

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The Cornell School of Hospitality Administration: What will 2015 bring?

We asked our partners at the Cornell Center for Hospitality Research to poll the research faculty at the Hotel School to understand their guidance about what to expect in 2015. We were also able to get a preview of what the faculty will be working on in terms of research this year. I know the Center for Hospitality Research is always interested to know what the industry is worried about or wants to investigate, so I hope you will reach out with your questions, comments, and interesting business problems!

What should the hospitality industry expect in 2015?

Bill Carroll, Clinical Professor, Services Marketing, believes that the economy and technology will be big drivers for hospitality in 2015. He says: “Technology will drive change in the ways consumers engage travel and hospitality suppliers. Increasingly consumers will find travel planning, execution, and savoring more digital, mobile and seamless. This will be driven primarily by consumer use of mobile devices, increasingly functionality of apps; and increasing use of big data management. As important, these trends will financially favor intermediacies over suppliers.”

Bill is an economist, so we asked for his predictions in that area as well. He predicts that North America will grow, while China will shrink slightly. In the balance, it will even out, but expect more activity from NA, and a bit less from China.

From a human capital perspective, Mike Sturman, Professor, Associate Dean for Faculty Development, Academic Director of The Center for Hospitality Research and The Kenneth and Marjorie Blanchard Professor of Human Resources, reminds us of labor legislation that will impact our industry “A huge issue for the hospitality industry in 2015 will be employee wages, and in particular the wages of minimum wage or near-minimum wage workers. As of January 1st, 21 states and Washington DC saw increases to the minimum wage. Eleven states have increases scheduled for the future, and 16 states have minimum wage linked to cost of living or similar indexed increases. The effect of these wage increases will be particularly salient for the restaurant industry, but we will also likely see related increases in pay across much of the hospitality industry, as even works earning somewhat more than the minimum wage are likely to see increases in their pay related to minimum wage changes. This year will also see continued battles between employer and labor groups on this issue, as the fight over minimum wage and living wage changes are only going to continue.”

Tony Simons, Associate Professor Management & Organizational Behavior, agrees “In the US and elsewhere, there is growing awareness of, and the actuality of, extremes of income and wealth inequality. Along with that is, in the US, an awareness that the economic recovery has largely left lower-wage workers behind, and that there is a growing pool of working poor.”

To net it out for our analytic hospitality executives, the maintaining the delicate balance between labor costs and service levels is only going to get more challenging in the next year. If you don’t have the right forecasting and optimization to understand demand patterns and match that to needed labor, you’ll throw your organization out of balance.

Dave Sherwyn, John and Melissa Ceriale Professor of Hospitality Human Resources, Academic Director of the Cornell Institute for Hospitality Labor and Employment Relations and Stephen H. Weiss Presidential Fellow, mentioned the NLRB is seeking to change the test to determine if a franchisor is a joint employer from the control test to the Industrial Realities test. The NLRB could be the tip of the iceberg – the DOL and the EEOC could follow. If this comes to be, franchisors will either: (1) relinquish substantial control over their brand; or (2) be responsible for employment related liabilities.

Soberingly, Jack Corgel, Robert C. Baker Professor of Real Estate and Director of Graduate Studies for the Baker Program in Real Estate, reminds us that terror attacks on major US cities can become a real possibility, given recent activity.

How do you think the hospitality industry needs to be prepared to address these trends?

Bill suggests that “In a word, the hospitality industry must be “resilient”. Fortunately, the major changes driving change in 2015 are foreseeable – technology and economic growth. So, forward thinking is straightforward for impacts that have high probability of occurring. Simultaneously, a focus on the strategic core of service experience provision is critical. Finally, organizations should insure that the core of their service experiences are made "resilient" to foreseeable and non-foreseeable impacts.”

(As an aside, I love the advice about resilience. Technology is changing nearly faster than we can keep up, true, but the best advice is to keep focused on the core service experience, yet with an eye to “the art of the possible”)

To address the salary gap, Tony Simons suggests the following “These trends will manifest in increasing pressure to raise salaries at the lower end of the wage scale. If we, as an industry, are to pay our workers more, then we must seek ways to enhance service and productivity to offset increasing costs. In my opinion, the highest-leverage point at which to engage that mission is leadership practice, from CEOs all the way down to supervisors. It is well established that workers do more, better, are more creative, and are more generous to guests when they are engaged, when they care about the company, and when they feel like the company cares about them. “

Jack Corgel says hotel management needs to be prepared for the worst at two levels – an attack on the hotel property and an attack in the city market. Hoteliers will need to increase expenditures on security, increase cash reserves, update property emergency and shut down plans.

Dave Sherwyn feels the industry needs to address the issue of the franchisor as joint employer on all fronts: legally, lobbying, and operationalizing. “In other words, the industry needs either stop this progression or figure out what franchising will look like under the industrial realities test. Will franchisors accept employment liability, exercise more control, and incur more costs? If so, will they be able to pass the costs on the franchisees or the consumer? If not, will franchisors give up brand control? If so, what will that do the brand? Franchisors need to thinking of this now, even though it could be years before the issues is resolved.”

What research projects are you working on in 2015?

  • Tony Simon: I am studying how the trust and credibility processes differ across cultures and countries. How leaders who are seen to consistently deliver on their word increase employee engagement through trust and also through improved communication of standards. How the effective implementation of ethical leadership initiatives, diversity initiatives, and other leadership approaches often depends on the personal credibility of the leader as a critical make-or-break factor. To better understand how to develop these trust- and credibility-based leadership skills, I am engaged in a six-year project to help train, coach, and document the leadership skills and their effects at the police department, fire department, and government bureaucracies in five English cities.
  • Jamie Perry, Assistant Professor and Rachel Etess Green '98 and Jason Green Faculty Fellow, Human Resources: Currently, I am working on two projects that will benefit the hospitality industry. The first project is a meta-analytic review of 40 years of research on diversity training. In this project, my colleagues and I examine the effects of diversity training over time and across characteristics of training context, design, and participants. The second project is a field study of healthcare teams that examines how social differences (e.g. power and status) impact the teams’ cognitive, motivational, and affective states, and performance outcomes. Both of these research projects are important to the hospitality industry because current workforces are composed of individuals with diverse abilities, cultural backgrounds, and work styles that may impact how work is performed. By understanding and leveraging the differences, organizations can not only reap the performance benefits of diversity, but will also be able to retain top talent.
  • Rohit Verma, Singapore Tourism Board Distinguished Professor in Asian Hospitality Management, Service Operations Management, is working on two projects: Text Analytics: Leveraging On-Line Text Reviews in Managing Hotel Operations and Understanding Technology-Based Innovations in Upscale and Luxury Hotels
  • Jack Corgel is working on a project called: Sell Hotels Now – How to Decide!

From all reports, the industry will continue to move fast, with pressures from all sides both internally and externally. It seems that it is becoming more important than ever to have the right data and analytics strategy in place to anticipate these trends and identify opportunities. Be assured that we at the Analytic Hospitality Executive will be here to help in 2015!!

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Top 10 Global Trends that will Impact Hospitality in 2015

We asked our partners at the Cornell Center for Hospitality Research to comment on what they are seeing in terms of trends that will impact the hospitality industry in 2015. Cathy Enz, full professor in strategy and The Lewis G. Schaeneman Jr. Professor of Innovation and Dynamic Management at the School of Hotel Administration at Cornell University has been doing some thinking on this topic, and gave us these 10 trends for our Analytic Hospitality Executives to focus on.

  1. Millennials the New Power Segment - Exploration, interaction, and emotional experience is the hallmark of Millennials, the fastest growing customer segment in the hospitality industry, expected to represent 50% of all travelers by 2025. With the rise of millennial consumers businesses will need to be more transparent and tech savvy, with a strong focus on empathy and customer connection. Technology is essential for this demographic and they will expect technology to power check-in, payment, eating, and shopping. They will also actively engage in social media like Twitter, Yelp, Facebook, and TripAdvisor to complain. Millennials will expect a deeper link between tourism services and how they manage their everyday lives. “Foodies” are a distinct subset of this market looking for a gourmet experience at a reasonable prices. Culture buffs, LGBT and multi-generational travelers are looking for unique and novel experiences. Over half of Millennials stayed at independent hotels last year, 20% more than baby boomers. However, don’t count out the aging baby boomers that are living longer, are rethinking how to define retirement, and placing their energy in more creative pursuits.
  2. Political Tensions and Terrorism – Around the world citizens have responded to increased government involvement with distrust and have begun to challenge entrenched political parties. Punishing economic policies and austerity measures along with ethnic, cultural and religious tensions have resulted in the rise in civil unrest. A megatrend found in Europe and likely to spread is the rise in populist movements that seek to regain national identity. The ability to efficiently deliver social services will be an ongoing challenge for governments. Countries and states with ethnic and religious tensions along with poor governance, and weak economies will breed terrorism. Transnational and free-wheeling terrorism enabled by information technology will replace state-supported political terrorism. In spite of collective actions to prevent, protect, and respond to terrorism, the threat will remain high in Europe and the US.
  3. Deepening Income Inequality and the Working Poor – Inequality tops the list of economic trends to watch with the US viewed as the most unequal of the world’s rich nations. The wealthiest 1% of all Americans have 288 times the amount of wealth as the average middle class American family. Many predict that Asia will be the region most affected by deepening income inequality in 2015. Middle-income groups in many advanced economies are shrinking. Consumers struggle to pay down debt because their inflation-adjusted incomes have fallen since the 2007-09 recession.
  4. Taking Control of Health and Personal Well Being – Taking charge of personal health will expand. Monitoring and adjusting your health will become more important as technology moves onto the body and consumers take greater control of their health. Tracking internal biochemistry and personal fitness data will result in more engaged and empowered personal health, and telehealth (remote consultation) will allow for higher quality and more personalized care. You can also expect to see more advanced devices to help people stay healthy and connect with their doctors, like devices worn on the ear due to the proximity to the temporal artery. The privacy and security of health records will become increasingly important in 2015 as medical records and online patient portals expand. The West Africa Ebola outbreak raises new challenges in managing infection and healthy living while traveling will require more innovative wellness options. Air purification, energizing lighting, a yoga space, in-room exercise equipment, and vitamin infused shower water are just the start.
  5. Technology Driven Self-Sufficient Travelers - Innovative technologies on a mobile platform will be expected as more individuals rely on digital concierge services. Mobile check-in and seamless connectivity across platforms and devices is now expected. With geo-location software easily available, selling locally with a focus on content marketing is expected. Connectivity is key as more individuals are relying on information delivered through social software from virtual networks. Technology is better and smarter, and more integrated user experiences are likely. The smartphone is essential equipment for almost all employees, making it a potential tool for HR training and other workplace uses. Integrated outlets, USB ports, and wireless technology integration with hotel TV systems are basic. The iPod docking station is passé, but simple clocks are back in.
  6. Sustainability and Resource Constraints – Eco-friendly practices are becoming the norm, and most hotels must have an attractive “green policy”, as travelers expect hotels to have some type of environmental program in place, while few are still willing to pay more for eco-features. Critical resources such as water and power are under increasing strain leading to price increases, volatility and even shortages. Global warming and energy use are affecting how we consume and live on a societal scale. Water scarcities and allocation pose challenges to governments in the Middle East, Sub-Saharan Africa, South Asia, and northern China. Renewable energy resource and innovative projects will shape the future of resource use, while regional tensions over water will be heightened in 2015. Falling oil prices, show how easy resource constrains can change, with a dampening effect on the power of countries such as Russia and Iran, while lowering prices for jet fuel, impacting growth in air travel, even as airlines acquire new fuel-efficient jets from Boeing and Airbus and replace old fleets.
  7. Disruption and the Sharing Economy - Emerging new business models including peer-to-peer networks life Airbnb, Uber, and Lyft, multi-sided platforms such as Google and eBay, or free business models such as Skype and Flickr will change the business landscape. As peer-to-peer networks expand and grow they will become more professional and pose stronger direct competition to traditional travel services. Further, the growing popularity of meta search engines from big players like Google and Microsoft and the rapid growth of firms like Kayak may alter the user experience, define the mobile experience, lead to consolidation and impact partnerships with OTAs and hotels. As OTAs consolidate and expand their relationship with customers the costs of distribution will become increasing critical.
  8. A Global Worldview – Increasing similarity and connectedness between nations, companies, and individuals. The globalized economy will be a net contributor to increased political stability in the world, although its benefits will not be universal. Continued transparency in global financial systems and free capital flows is likely. The global market for skilled and trained employees will grow while countries with aging populations will require immigrants to fill entry jobs. Expect more human migration. The travel industry is among the largest and fastest-growing industries worldwide, forecasted to support 328 million jobs, or 10 percent of the workforce, by 2022 according to the World Travel and Tourism Council. Citizens of Finland, Sweden and the United Kingdom have the best passports for global travel (may enter 173 countries without a visa). In general, passport holders in North America and Europe have the most freedom of travel, while passport holders in Africa, the Middle East and South Asia have the least. Chinese tourists still encounter difficulty traveling abroad with only 50 countries and territories offering visa-free or visa on arrival access for this group of travelers.
  9. Fewer People and More Data - Will staff be needed to clean rooms and provide concierge services? As more travelers prefer technology to human beings, bypassing the front-desk, using a digital concierge, and saying good bye to bellmen and other traditional positions could be in your future. Rethinking how to communication with guest will mean using more data and fewer staff. Recommendation engines will allow guests to obtain “good service” on an array of travel needs once handled by the hotel. Group planners will also expect easy online planning capabilities and fast rates. While a help yourself model will focus on technology to drive service, staff will need to be better able to create and execute on a “new” model of service.
  10. Emerging Growth Markets - Global growth in GDP (adjusting for inflation) will be moderate at 3.2% in 2015, projections of 3.1% for the US, 1.3% for Europe, 7.1% for China, and .8% for Japan. Europe appears to be in an economic rut, Japan’s recovery is faltering again, and China while high compared to other nations looks to have its slowest growth since 1990. The US may be the most likely to power world growth in 2015. The International Monetary Fund (IMF) in its latest outlook called global growth “mediocre”. Emerging markets are challenged with inflation if they seek to grow as fast as they have in the past. Brazil will be challenged by slow growth and high inflation, while South and East Asia as well as much of Arica are projected to experience the strongest growth. Overall the global economy is taking longer to recuperate from the financial problems of the last decade.

So, what do you think? Are these ten forces impacting your business today? We’d love to hear your thoughts about where the impacts will be and how you plan to deal with them. In our next post, we’ll provide additional diverse perspectives from the research faculty from the CHR, and include some insight into the research projects we can expect from them in 2015.

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The 15 actions for Hospitality Executives to take in 2015

By now you have seen dozens of articles with trends and predictions for what the hospitality industry should expect in 2015. I’m not going to add to those, or rehash them exhaustively here. You’ve all probably read them yourself and gathered the highlights: optimism, more acquisitions, transaction volumes will stay high, continued demand growth, pricing power, rise of digital marketing – it’s going to be a busy year! Instead, I’m going to give you, our Analytic Hospitality Executives, my fifteen actions to take to prepare yourself and your organization to survive and thrive through 2015 and beyond.

  1. Get Educated: Our guests have come to rely on technology to support their lives, and we rely on it to run our businesses. I don’t have to tell you that the technology space moves fast. Every day there’s a new provider, a new app or a new platform (seems like 90% of them are new ways for you to pay someone to move your inventory at a discount, but I digress). There is a lot of information about “the latest and greatest” out there, and some of it can be pretty misleading. It is important to get your facts straight about data and technology innovation, and the value they can provide to you and the organization. These are not inexpensive investments, and many have a huge impact on your ability to deliver the guest experience. Investments are being made that will impact your ability to do your job (successfully). I’m not suggesting that you need to become an IT expert, but arm yourself with the basics so you can ask the right questions and properly interpret the answers. Find a few people in your IT organization you trust, and a few external sources that you can rely on to help you separate the hype from the facts (stay tuned, I may be able to help here…).
  2. Build a Vision: It’s a great time to build a long term strategic vision for your organization. Where do you want to be in 5 years? What do you need to get there? I’m not necessarily talking about the company level here. You need a vision for your department, your team or yourself. Think about your organizations business strategy (or find out what it is if you don’t know). Figure out how you and your team fit within it, and contribute to it. Are there opportunities to take on a new project, or contribute in a new way to an existing initiative? How can you make a difference in the organization?
  3. Work with your peers: Collaboration will be the key to success in the next few years. Not news, I know. Lines between departmental responsibilities are blurring. Now is the time to forge relationships across departments, even if there are no formal mechanisms for doing so. There are huge (and well-recognized) benefits to better synchronizing activities across marketing, sales, revenue management and operations.   Fortunately, there has been increasing momentum across the industry in this direction, with many organizations consolidating reporting structures so sales, marketing and revenue management report in through a common commercial services division, or consolidating all analytics functions to a shared services group, rather than dispersed through separate departments. All of this activity facilitates integrated decision making, but you shouldn’t wait until it’s formalized in your company to get started.
  4. Develop a common business language: I’ve spoken about this extensively in the past, but the point remains crucial. As data visualization and analytics initiatives become popular in the industry, requiring a common data platform, organizations must be sure that the definitions of data fields and metrics are consistent across departments. It sounds intuitive, but we have all been in situations where a meeting devolves into an argument about “where the numbers came from”, rather than a discussion about actions to take. Pull together a cross-functional team to create this common business language, and ensure you have rules in place for persisting it. Plan for this to take much longer than you expect and for you to get much less credit for doing it. The results will be worth it, however, when you prepare for the next executive level meeting.
  5. Build and support the analytic culture: We are the analytics evangelists for hospitality. We know the value of a strategic analytic culture grounded in fact-based decision making, and have witnessed the successes of those companies that adopt such a culture. Now is the time to further that mission in your organization. Find opportunities to provide training, add resources or invest in technology that helps to build that culture. Analytic and visualization technology today is moving towards a much more self-service delivery methodology. Wizard driven applications, open source platforms and highly graphical interfaces are making these products much more accessible to the end user.   We don’t need to rely as much on IT or a high-powered analyst to gain insight from our data. However, you DO need to make sure that these tools are implemented properly, leveraged fully and interpreted correctly. You will have to invest in training, and possibly some additional resources, to ensure success.
  6. Learn how to tell a story with data: As access to data and data visualization technology becomes easier and more widespread, it is crucial to learn how to use all that data and technology to effectively support your position. The point is not the data itself, but the story you will tell around that data. Brush up on your presentation skills and really focus on the effective use of data to support your argument. I wrote an article that might be helpful, and Natalie has blogged about this as well.
  7. Know your guest: In today’s social world, guest expectations about the relationship they have with the firms they do business with has changed. They deal with the world through their mobile devices. They are able to customize nearly every aspect of their experience today from the news they see to the look and feel of the interfaces they deal with. They provide a wealth of information about themselves in the social sphere. They have a similar expectation of their hotel experience. You have a huge opportunity to take all of these digital interactions with guests, and turn it into meaningful insight that can create that personalized experience to keep them coming to you. Not to a competitor, and certainly not a to third party distributor.
  8. Focus on the guest journey: With personalization initiatives on the top of everyone’s list, still, it’s time to focus on the guest’s journey. Use what you know about your guests to understand how your service process will meet their needs. How do you want them to experience their interactions with you? Where are the opportunities to enhance the experience by infusing data or analytics? How do you want line level staff to use the information they have access to? Simply providing a guest profile to an agent or housekeeper is not going to guarantee personalization. It’s much more likely to guarantee creepy. Make sure that you have processes in place for how the information you provide will get used by technology and humans.
  9. Leverage your text data: There is a tremendous amount of information locked in unstructured text data across the organization. I’m not just talking about reviews. As an industry, we’ve gotten reasonably good at tracking and managing online reputation, but the opportunity is much larger. Think about all of the internal sources of text as well like emails, guest surveys, call logs and maintenance records. This data can provide a tremendous amount of information about your service delivery, customer needs and preferences, offerings, operating procedures, staffing levels, etc. etc. I am seeing hospitality organizations expanding their text analytics program to integrate these internal text sources with the external data for a more holistic view of the voice of the customer. This year, make a plan for capturing and using all that data.
  10. Think about video data: At the Analytic Hospitality Executive we think video will be the next data opportunity for hospitality. There is a very cool case study of a major retailer who used surveillance video to track traffic patterns around the store, and was able to predict when the lines at the front were about to get long. They could call staff off of the floor to staff registers before lines formed, but not have cashiers waiting around all shift for business. It’s a very clever use of data that organizations are already collecting. We know there are issues associated with video and predictive analytics, but I think it’s time to at least start thinking about the possibilities!
  11. Leverage your mobile presence: Your mobile app is a clearly great way to engage with guests. Users need to have a compelling reason to use their mobile aps however, or the opportunity is lost. As hotels work on initiatives like advanced check in or mobile device as room key, guests will find more value from downloading and using these devices.   As you are working through these initiatives, don’t forget that the mobile device can also be a valuable source of information, including location data. Carefully consider what you could learn from guests’ interactions with your app, and their use of their devices in general, as you build these mobile initiatives.
  12. Don’t get distracted by big data: Whether you like the term or not, there is a ton of data out there, more sources added each day. It is really easy to get lost in all this new information and lose the point. As you begin to explore new data sources, stay focused on the business problem you would be able to solve with that data source. Be disciplined in your evaluation of what it is and what it isn’t. Understand how you would actually use that information to make a decision (or whether you would). Develop processes for evaluating whether to invest in new data sources, and apply that discipline to any vendor partner who is advising you that they are gathering “new” data on your behalf.
  13. Justify, justify, justify: When times are good, everyone wants a piece of the pie. Experts predict supply growth and continued acquisitions for 2015. This means that companies will be spending a lot of money on acquiring or building assets, not necessarily technology, data or business processes.   You will need to justify any investments just as thoroughly as you needed to when times were not so good. We do need to take the opportunity now to make investments that will benefit us in the future. Just make sure you get the attention you deserve.
  14. Don’t forget about the guest: After telling you to “know” your guest, this seems silly to say, but keep in mind that your guests are staying with you for a reason, and it isn’t because of the latest shiny technology or the fanciest lobby design (that helps of course). They are there to conduct business, visit with friends, see family members, or participate in an event, and they need a place to stay while they do that. They may not be there for the same reason every time. We have arguments about whether it’s appropriate to replace people service with technology. We invest in the latest social lobby design, or room technology.   We hire tons of people to respond to tweets. Only by understanding what is driving your guest behavior – not a laundry list of demographic and transactional information, can you really serve them properly and keep them coming back. Make sure you are still delivering on your core service proposition as you innovate around it.
  15. Don’t forget the basics: This goes along with my previous point. Now that you’ve made an effort to increase your knowledge, you are fully embracing the latest trends in data, technology and analytics, you’ve gone fully digital, and you’ve explored new data sources, I’m telling you to go right back to basics. There are so many shiny objects in this social world that it is very easy to get constantly pulled away from the basics of the job. Just because we have more data and faster technology, doesn’t necessarily mean throwing away the playbook – whether from marketing, operations, revenue management or finance, the core tenants of these disciplines still apply (they can be applied faster and better, of course, and things that we didn’t think were possible 10 years ago, are now). And your organization is relying on you to be that expert. As you innovate and transform your organizations, evaluate everything through that lens of your expertise, and the knowledge base that came before you.

It’s going to be another roller coaster ride in 2015. This is a great time to be in hospitality, and we definitely need to take advantage of it while we’re here! I look forward to continuing conversations with you here on the blog and out in the field! I would love to hear what’s on your to-do list for 2015.

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The Analytic Hospitality Executive in 2014: A Review

Well, Analytic Hospitality Executives, the year has once again flown by, and here we sit just before the holidays looking back on 2014, and figuring out what it all means for 2015. I traveled even more than usual this year (if that’s even possible), spending a significant amount of time with our hospitality and travel colleagues in Asia Pacific, which was absolutely fantastic. It’s refreshing to see that while the scenarios might be slightly different, hospitality and travel companies around the world are realizing the value of their data, and the need for powerful analytics to unlock that value.

The industry really seems to be accepting and embracing that the volume, variety and velocity of data today is creating a big data challenge (and opportunity) for the industry, particularly when it comes to non-traditional formats like text or web data.  Companies that are able use analytics to turn all of this big data into meaningful actionable insights, especially those that improve the guest experience, will be the ones that win.   I’ve had many conversations around the globe on these topics this year, and expect to have many more in the years to come. Our blog posts this year have attempted to help our analytic hospitality executives understand where and how to identify these opportunities. Here is a review with links in case you missed anything, or wanted a refresher.

Right from the beginning of 2014, we started hearing the term “personalization” around the hospitality industry, with most major hospitality companies announcing strategic initiatives to develop a more relevant and engaging relationship with their guests. We kicked off the year with a couple of prediction blogs, one from the research faculty at the Cornell Center for Hospitality Research, our blog partners, and one from me “The 14 actions for hotels in 2014”. The CHR researchers talked extensively about the role of technology and data in improving the guest experience – reflecting the growing conversations about personalization. In my blog, I provided a set of “to do” items to help organizations prepare themselves for the data ,analytics and business process change required to set themselves on the path to personalization.

Our blog covered several broad topics through the year, including trends in digital marketing, pricing and revenue management, and text analytics. Underlying every topic was the importance of data management, to address the growing sources and impacts of big data in hospitality. Natalie spoke about how “Multi-channel marketing in hospitality starts with data management” emphasizing the importance of data storage, data integration, data quality and data governance as the underpinnings of a successful marketing program. I posted a two part series on Big Data and Big Analytics as a “Big Opportunity” for hotels: Part 1 and Part 2. In those two posts, I defined the technology enablers that facilitate the management of big data, and the execution of big analytics. As well, I advocated for “Responsible use of big data” and described how to thoroughly evaluate new data sources to ensure you aren’t adding data overhead with no value. Alex touched on the opportunities to leverage big data in revenue management in his video post “Can big data help revenue management”.   In her recent post about Web Analytics for Hospitality, Natalie and special guest Suneel Grover advocated for better data and better integration – reinforcing the need to incorporate the online and offline profile of guests for a true 360 degree view.

Modernizing marketing, especially moving towards digital marketing, was a big topic in the industry and on our blog as well. Natalie interviewed Bill Carrol about challenges and opportunities in hospitality marketing, to provide a broad perspective on the topic. We then featured Bruce Swann, Customer Intelligence Solutions Manager at SAS, in a couple of more detailed posts on elements of the hospitality marketing problem, including his interview in “What is the future of email in hospitality marketing”, where he discussed the relevance of email in hospitality marketing, and provided advice about how marketers can be relevant with email and stay ahead of the competition. He also provided advice for marketers on how to move beyond campaign management, to leverage omni-channel marketing, marketing optimization and digital intelligence. Natalie described how to apply advanced analytics techniques to digital marketing in her two posts “Forecasting digital outcomes for hospitality” and “Streamlining tough choices: Applying an optimization approach to hospitality marketing”.   .

We talked about opportunities for hotels to improve pricing strategies, including several features on the latest research into reputation management and pricing. I reviewed “What research tells us so far” in the arena of reviews, ratings and hotels. I also reported the latest research results from my “Pricing in a Social World” research, co-authored by Dr. Breffni Noone from Penn State, including a blog summary of our project on how business travelers buy, and a video summary of the research results. Natalie described how hotels can assess their reputation through text analytics, and described the importance using text analytics to capture, comprehend and act on the voice of the customer , summarizing her thoughts in a video blog.

Natalie provided an interesting perspective on what hotels can learn from casinos in a multi-part series: “Focus on knowing your guests” and “Focus on the service environment” which concluded with Alex’s describing what hotels could learn from casinos’ focus on non-rooms pricing. I also reminded our analytic hospitality executive that analytics are not just for innovation, but can help hotels maintain and improve their core services as well in my post “Be thankful for great hospitality and customer service” Alex provided a summary from the revenue management section at INFORMS, which described some of the latest research in pricing and revenue management analytics that was presented there.

So, what can you expect from us next year? Well, we’re going to focus our attention on three or four broad themes, including customer experience, big data and big analytics, and analytical data visualization. Within these themes we’ll continue to provide clear definitions and helpful tips and strategies for leveraging analytics to drive value in your organization. We look forward to continuing conversations with you next year! On behalf of the entire team at the Analytic Hospitality Executive, we hope you have a great holiday season, and best wishes for a safe and happy new year!!!

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Forecasting and Optimizing Digital Media Mix for Hospitality: Let’s get practical!

Last week, I spoke to Suneel Grover, senior solutions architect for digital intelligence at SAS, about how better data and integration can drive improvements in web analytics. This week I wanted to see how this could be applied for a hospitality company. We decided to tackle a frequently debated topic in marketing: how digital media mix can impact a firm’s set of business objectives. I asked Suneel Grover to walk me through how he would answer this question using methods that could be used and understood by a business user. Suneel used SAS Visual Analytics to show me how he would optimize digital media mix to increase website traffic by 50% in a forecasted time period.

Step One: Forecast future visitors

Suneel began by accessing digital clickstream data at a level of aggregation specific to summarizing individual session behavior (not simply overall clicks or page views). This approach provides a granular data view of individuals visiting a digital property, allowing for flexibility in ad hoc analysis. An example would be a guest who visited a hotel website 8 times over the last month, we would have a record of those 8 visits assigned to that individual. This kind of data is not available with typical web analytic reporting tools, but can be accessed when an organization modifies their digital data collection methodology to transform web analytic third party data into its own first party data source. When it becomes your own data, you are free to aggregate, modify, and manipulate it to support a variety of downstream analytic goals – from reporting and BI, to predictive analytics and data mining. Ultimately, the intention is to liberate yourself from the analytic limitations of traditional web analysis, and increase your organization’s level of digital intelligence.

Suneel created a forecast in Visual Analytics by first plotting the historical web traffic visitation. In this case we produced a line chart that displays Session ID by Visitor count. This indicates how many individual visitors (sessions) visited your site between certain dates.

Next, he created a visual of the forecast. In this instance Suneel selected to forecast for the next 14 days. To obtain the most accurate prediction, the technology uses a champion/challenger modeling approach which leverages six different forecasting algorithms. After applying the math, the software makes an assessment of which algorithm produces the most accurate answer (based on a statistical test) and displays the champion forecast with a 95% confidence interval. To this he added seven underlying factors (i.e. traffic referral sources such as display ads, social, search, email, etc.) to help identify the important digital media channels and further improve the forecast model’s accuracy. Both Organic & Paid Search were identified as statistically significant referral traffic sources with respect to the forecast, so as a result are featured in the visualization shown in Figure 1.

Figure 1. Visualization of the forecast showing underlying factors of Organic and Paid Search.

Figure 1. Visualization of the forecast showing underlying factors of Organic and Paid Search.

Step Two: Running What-If Simulations through Scenario Analysis

Using the forecast prepared in Step One, Suneel adjusted the forecast to explore potential what-if scenarios. He did this by addressing the following question: “If we increased our paid search advertising spend by 50% in the forecasted time period; how will this impact overall site traffic? Suneel adjusted the future values of paid search traffic by 50% for the duration of the forecast. Once he applied that adjustment he was able to assess the incremental impact of increasing the effect of paid search on the forecasted global site traffic, as shown in figure 2.

Figure 2. Visualization shows the baseline and inflated forecasted impact of a 50% increase in paid search with respect to overall website visits.

Figure 2. Visualization shows the baseline and inflated forecasted impact of a 50% increase in paid search with respect to overall website visits.

Of course, as soon as Suneel was able to produce a result for a 50% increase in paid search advertising, I wanted to know what the results would look like if we varied the simulations with increases of 15%, 25%, or even 35%. Suneel agreed that running multiple scenarios was one method of approach to arrive at a decision recommendation on how much money should be allocated into a specific digital media channel. However, he suggested an even more powerful idea to arrive at an optimized solution to this digital media channel allocation exercise.

A new feature released in SAS Visual Analytics 7.1 during the fall of 2014 was Goal-Seeking. Suneel continued to explain that running simulations on varying the potential impact of one digital media channel has tremendous value. However, at the end of the day, we need to address an overall business objective of increasing website visitation. Rather than manually adjusting the levers of each digital media channel, let’s get straight to the heart of this problem, and request the software to optimize the values of each digital media channel to reach our business objective. This is what the SAS Visual Analytic technology is built to do – run complex math very quickly on large volumes of digital data and arrive at a data-driven insight. He reset the scenario in Visual Analytics and applied a new adjustment of 100% to overall site visits – in essence, we want to double website visitation in the two week forecasted time period. Now tell me – how are we going to get there?

Figure 3. Visualization shows the recommended values within Organic and Paid Search to arrive at an increase of 100% in overall website visits in the forecasted time period.

Figure 3. Visualization shows the recommended values within Organic and Paid Search to arrive at an increase of 100% in overall website visits in the forecasted time period.

Once we had the results, we proceeded to review the results, and identify any areas of concern. 

Step Three: Assess the optimized scenario and apply business constraints.

One result that immediately jumped out to us was the level of spending required on a specific day to obtain the volume of paid clicks that would drive a 100% increase in individual visitors. Suneel knew that marketing leaders would balk at that level of investment, so decided to assign upper and lower constraints to allocations to paid search and control the level of daily spending on pay-per-click ads. Suneel used a lower constraint of 0 and upper constraint of 250. Once applied, he re-visualized the forecast with the constraints applied. The results can be seen in Figure 4.

Figure 4. Visual display of optimized predicted metrics with business rule constraints by day for business objective and media channels.

Figure 4. Visual display of optimized predicted metrics with business rule constraints by day for business objective and media channels.

In summary, Suneel’s analysis resulted in the identification of more important (and less important) digital media channels with respect to forecasting website visitation. After identifying that Organic and Paid Search were the two most important media channels in predicting future traffic, he proceeded to highlight approaches of running scenarios (or simulations) of varying the impact of one digital media channel. Ultimately, utilizing goal-seeking (i.e. optimization) and business rule constraints, Suneel arrived at the optimized values required by ALL digital media channels to reach an overall business objective of doubling website visits in a specific time period. One could suggest that this is an example of prescriptive analytics!

How do you identify what impact the increase or decrease in digital media channels will have on your website traffic?

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Web analytics for hospitality: It’s time for better data and better integration

There’s a lot of talk about modernizing hospitality marketing – and most of it is dependent on finally cracking the nut between online and offline guest data and bringing predictive analytics to play. But there is a fundamental problem hampering our ability to do this and it starts with how hospitality manages web analytics. This problem is not new to Suneel Grover, senior solutions architect for digital intelligence at SAS, since he started his marketing analytics career building predictive models for online marketing campaigns.

“I really wanted to use web interaction data in my models, to more accurately predict the outcomes of these online marketing campaigns” he told me. “When I went to the web analysts to get access to the underlying data, it fast became apparent that they didn’t have it.” Most web analytics data is being hosted in the cloud, then aggregated to produce the kinds of reports that tell you how many people came to your website last week, how many came from one search engine versus another, what version of the operating system or browser they were using, etc. These reports can be very helpful, but do not give you the type of data you need for a deeper analysis.

Where this impacts hospitality firms the most is when it comes to personalization and targeting. Without a more granular level of data, your segmentation will remain at a very macro level. You also need the underlying data for building predictive models. “And if you cannot do predictive analysis on digital data, then your personalization efforts will plateau very quickly,” Suneel explained.

“Basically, web analytics is still functioning at the descriptive level,” Suneel said, “and few web analysts have ever built predictive models, or are familiar with predictive techniques.” That makes it rather difficult for there to be common ground between the marketing analyst and his/her web analytics counterpart. And these two need to be able to work together to meet the demands of the industry today. “To achieve effective personalization and targeting, we need to be able to work with both online and offline data in an integrated format,” explained Suneel. “This is extremely important – if hospitality companies are going to be relevant and engaging as they interact with their consumers across online devices and offline interactions - these two functions need to come together.”

Up to recently, many organizations could not handle detailed digital data because it amassed at such a quick rate. “Digital data has always been a classic big data problem,” Suneel told me. “Aggregating digital data for reports is much easier to manage,” he said, “but this has very limited analytic value.” Now that we are able to play with very large digital data sources, the possibilities really open up. “You can quickly start to move from descriptive analytics – describing things that happened in the past, to diagnostic analytics – statistical validation that analyzes why something happened,” he explained. “Predictive analytics allows you to be more proactive, because you are analyzing what will happen next. But most important is prescriptive analytics, which provides data-driven decision recommendations prioritized for individuals (not mass groups) in outbound and inbound consumer interactions.”

Predictive and prescriptive analytics are needed today by hospitality marketing organizations to answer the questions they have, such as how can we double website visitation? Should we invest more advertising dollars into Paid Search, Social, Email, or Display? How much more should invest within each of these channel? Is there a way to arrive to an optimized allocation to support our digital media mix business goals? “With detailed digital data we can answer these questions,” said Suneel. “Using optimization to identify how much money I should spend in each media channel in a given time period to get the highest return on an overall business objective is the queen bee of analytics, and we can do this by re-thinking how we collect, store, and apply advanced analytics to digital data.”

How is your organization thinking about digital data? Are you stuck at the aggregated level? Or do you already have a plan for collecting, storing and using detailed digital data?

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Be thankful for great hospitality and customer service

I generally don’t use this blog to air my personal experiences, but recent events have reminded me of a few things that I think would benefit our Analytic Hospitality Executives and their organizations to also be reminded of.

This past week, I took my fifth trip to Asia this year. With such a lengthy flight and so many nights in a row in so many different hotels (including a weekend this time), I was immersed in the hospitality and travel consumer experience for a while.   I will keep names out to protect the innocent and the very, very guilty, but being on the receiving end of so much “service” , and a really interesting conversation with a New Zealand technology consultant living in Macau, reminded me of a few things.

In this exciting, fast moving world of technology and analytics, it’s easy to get caught up in the next shiny object, the next innovation, the next “killer app”. However, it is crucial in the midst of what’s new, not to forget about the core service proposition.   My New Zealand colleague and I were trading personal pet peeves about hospitality and travel between meetings in Macau. She used to work in call centers, and pointed out to me that nearly every “hold” message starts with “Your call is very important to us”. Well, if it were that important, wouldn’t you answer it instead of putting me on hold?

This conversation got me thinking about how important it is to keep the guest at the center of the hospitality experience, with everything that happens designed around the experience that the brand promise sets for that guest.   I don’t see this attitude as consistently in the hospitality and travel industries today as I would hope.

For me, the hands down most frustrating experience of my long haul trips this year has been the baggage claim experience inside customs and immigration in the US. The last trip back to the states in early September, I waited 50 minutes at LAX at the carousel (not including the 20 minutes it took them to bus us to the immigration area) just to pick up my bag, only to drop it off again two minutes later after going through customs – and it had a priority tag on it (that is, it took them nearly 70 minutes to get my bag onto the carousel)!! I nearly missed my connection with an hour and fifteen minute layover – and I had global entry, top status with my airline and TSA pre-check!   In Detroit a couple of months ago, one of my bags arrived on the priority carousel and the other on the regular carousel across the baggage claim area (both were priority tagged). On a previous trip to Detroit, the bags came out on a completely different carousel than the one the flight was listed on (again, causing me to nearly miss my connection).

When I arrived in Hong Kong this trip, it was 40 minutes from when I left my seat on the plane to when I got into the cab. This included a long walk to immigration, a lengthy line at immigration and a lengthy cab line. My bag was waiting for me on the carousel when I left the immigration line (I’m guessing 25 minutes after landing). In Singapore this year, my record was 17 minutes – including picking up a checked bag, which again was waiting on the carousel when I got out of immigration!

Hotels, in general, do much better, but not perfect by any means. I have had great service at some hotels, and touchy service at others. I have endured overly chatty front desk agents, long check-in lines and not-ready rooms, when I just want to get to my room after a long trip. I’ve also had very thoughtful housekeepers that noticed that I drank every bottle of water in the room, leave me extra the next night (also housekeepers who failed to replace the water). I’ve been turned away with no alternative at hotel restaurants when my delayed flight meant arriving after the kitchen closed, and been “protected” from overly-friendly bar patrons by thoughtful bartenders.   I’m getting a little tired of crawling under desks to find an outlet to charge my phone, or waking up every five minutes because heavy doors are banging shut up and down my hall. I’ve had to open my bag on the floor because there was no surface large enough to support it in the room, and no luggage rack – and had to endure long waits for staff to bring an iron when there was none provided and no time to send out for service before my meeting.

This is not a therapy session (although I do feel better now that I’ve gotten it out), but rather a reminder that data and analytics are not just for the next big innovation.   It’s great that we can monitor twitter to intervene when a customer identifies a service problem – but what about preventing that problem in the first place? Data and analytics should be used first and foremost to monitor and improve core service delivery processes to ensure excellent customer experiences.

Forecasting arrivals and departures can ensure lines are kept to a minimum at check-in, and housekeeping staff is adequate to turn over rooms in time for early arrivals. Simulation and optimization algorithms can model baggage handling processes to streamline delivery. Thoughtfully crafted and carefully analyzed surveys paired with content analysis of online reviews will identify key traveler needs to inspire product and service design, as well as opportunity areas for staff training and development. Statistical analysis of demand patterns will help to ensure that operating hours for ancillary outlets align with guests travel patterns. Forecasting and optimization algorithms ensure that call hold times are kept to a minimum. Within all of this, your basic instincts, experience and training about what service means and how to deliver it in the context of your brand promise and your organizational capabilities will put the right wrapper around the analytic results.

This kind of discipline helps with innovation as well. I attended a really interesting talk from Clayton Christenson at a SAS event this fall. Professor Christensen teaches at Harvard Business School and is famous for his work on disruptive technologies. He suggested that companies are spending too much time trying to “know” their customer – understanding everything about them. Rather, they should be understanding the basic need that is driving that consumer to buy your product or service – or as he put it, “the job that your customer is hiring your product or service to do”. I would “hire” a very different room for a romantic getaway than I would for an overnight for a business trip. Think why your guests would “hire” your room – is it because you have good lighting and plenty of outlets in the work area? Is it because you are close to a fun restaurant and bar area? What would you really be able to do with a set of demographic information about a segment (35-40, 45% female, traveling from east coast of US), without understanding what that traveler NEEDS from your service offering – why they would hire you to provide it?

So, consider this a call to action for all of our Analytic Hospitality Executives. Are you confident that the service delivery of your core product is measuring up? Can you identify areas of improvement? Can you coherently describe why your guests would hire your hotel for their next stay, and how you will deliver against that need?


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Revenue Management and Pricing Analytics: A report from the INFORMS Annual Meeting

Last week I had the opportunity to attend the INFORMS Annual Meeting in San Francisco.  For those of you not familiar with this organization or conference, the Institute for Operations Research and the Management Sciences (INFORMS) is the largest society in the world for professionals in the field of operations research (O.R.), management science, and analytics.  Several thousand papers are presented at a typical INFORMS Annual Meeting, which is held over three to four days, and includes many separate tracks covering distinct areas of focus.  The plurality of presentations at an INFORMS Annual Meeting seem to come from academic sources, but there are also papers presented by vendors and industry.  This mix of paper sources makes the conference an excellent place to see where research is being focused (by academics, industry, and vendors), while at the same time gauging where the current “state of the art” is in a given area.  Unfortunately, because the conference is so large, it is virtually impossible to see more than a very small slice of it, which makes getting general impressions across disciplines difficult.  In my entry today I’m going to focus very specifically on Revenue Management and Pricing, as this was my focus at the event.

This year’s conference included 83 separate tracks, ranging from Aviation Applications to Service Science.  It seemed that every available meeting room was taken up by the conference, and most attendees agreed that this year’s event was larger (in terms of numbers of sessions) and better attended than others in recent years.  There were two (sometimes three) tracks dedicated to Revenue Management and Pricing, but several very relevant presentations on revenue management were held in other tracks, so I found myself shifting tracks quite a bit to catch those topics that interested me most.

My own presentation was held in the Practice track, and all three of the presenters in this section focused on revenue management.  I presented “Revenue Management in the Big Data Era” where I focused on the industry and technology changes that are driving new challenges to revenue management, and how Big Data appears to offer the opportunity to face these challenges more successfully in the future – when that data is paired with new analytic approaches.  In my presentation I referenced several studies that are showing the potential value of big data to revenue management, including Kelly McGuire and Breffni Noone’s studies on Hotel Pricing in a Social World.

The two other presenters in my practice section were Warren Lieberman from Veritec Solutions (Warren also chaired our session, which was titled “Succeeding with Revenue Management”), and Cory Canamo from Disney Cruise Line.  Warren’s presentation “Models and Methods” covered a number of topics, including comparing the benefits of centralized vs. decentralized revenue management organizations, and the availability data and importance of using a range of data to drive pricing decisions – which dovetailed nicely off of my own piece.  Warren then described the benefits that Veritec’s customers are seeing from a multiple signal approach.  Cory’s presentation provided an overview of Disney Cruise Line, and some of the unique challenges that Disney Cruise Line faces as a niche, family-oriented cruise line.  Cory also discussed some of the industry innovations that Disney Cruise Line has introduced (such as the Magical Porthole), and how customer reactions to these innovations has challenged the revenue management function at Disney Cruise Line.

This year saw a large number of papers at the INFORMS Annual Meeting, with 27 papers involving SAS authors, presenters, or topics.  A number of these presentations related to revenue management and pricing, including Matt Maxwell’s two presentations “Customer Choice Model Optimization with Overlapping Consideration Sets”, and “Optimization Challenges with a Customer Choice Model”.  Matt’s presentations highlighted:

  • Limitations in traditional revenue management forecasting approaches - in particular the assumption of independence between demand streams
  • How customer choice model approaches overcome these limitations, and
  • Challenges that must be overcome to optimize revenues using customer choice models

Jason Chen’s (also from SAS) presentation “A Simulation Study of BAR by Day Heuristics” discussed the complexity in optimizing BAR (best available rate) by Day (where room prices are the same for a given date of stay for all occupants, regardless of length of stay).  As Jason explained, BAR by day is attractive due to its simplicity, but it presents challenges when trying to optimize revenues while accounting for length of stay effects.  Jason presented the outcomes of simulation studies used to gauge several different approaches to optimizing BAR by day pricing.

One last presentation that I thought would be interesting to regular readers here at the Analytic Hospitality Executive: “Upgrades and Upsells: Hertz vs. Hilton Models” by Guillermo Gallego from Columbia University.  Upgrades and upsells is an area that has received quite a bit of attention, not only in hotels, but also in airlines (due to the increased number of seat inventory types caused by the addition of extended-legroom coach seating).  Dr. Gallego’s presentation discussed the origin of upgrading / upselling (mismatching demand and inventory types) and compared several different business strategies to maximize revenue.  Dr. Gallego also discussed the issue of “strategic behavior” (i.e. customers choosing not to pay for paid upsells when free upgrades are frequent), and the impact on optimization and outcomes.  One of the things that struck me about this particular presentation was the value that was gained from improving inventory utilization (occupancy) when using just a simple free upgrading policy – value that I think is being lost or forgotten as hotels have begun to follow paid upgrade policies, because the value gained from the payment is simply easier to see.

Overall I had two general impressions regarding revenue management and pricing from this conference:

  1. Choice modeling continues to be a very hot topic amongst researchers, with at least 5 separate sessions (3-4 presentations per session) in the revenue management tracks dedicated to Choice modeling in revenue management – and a handful of other sessions outside of the official RM tracks covered this topic.
  2. I was also intrigued and encouraged at the large number of presentations at the conference regarding the application of game theory in revenue management.  One of the general criticisms of traditional revenue management approaches has been the focus on short-term revenue / profitability, and the inability to capture the complexities of strategic decisions that need to be made in a competitive environment, where competitors respond to actions.  Based on what I saw at INFORMS, researchers are clearly beginning to take a hard look at these very issues.  You might want to study up on “Nash Equilibriums” before attending your next revenue management conference.

The most anticipated session that didn’t actually occur was the planned keynote by Google project leader Anthony Levandowski. Anthony was to present on Google’s work on the driverless car, but unfortunately this session was cancelled at the last minute.  An audible “No!” was heard throughout the conference center when the email went out to all attendees, less than an hour prior to the event, indicating that the session was cancelled – leaving all of us with the question “If they can invent a driverless car, how come they can’t run a speaker-less keynote session?”  (Full credit for this quip goes to my colleague Ed Hughes).

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Big data and big analytics are a big opportunity for hotels – Part 2

Big data is of no use unless you can turn it into information and insight.  For that you need big analytics.  Every piece of the analytics cycle has been impacted by big data, from reporting, with the need to quickly render reports from billions of rows of data, through advanced analytics like forecasting and optimization, which require complex math executed by multiple passes through the data set.

Without changes to the technology infrastructure, analytic processes on big data sets will take longer and longer to execute.  It’s not enough now to push the button and wait hours or days for an answer.  Today’s advanced analytics need to be fast and they need to be accessible.  This means more changes to the technology infrastructure to support these new processes.

Analytics companies like SAS have been developing new methods for executing analytics more quickly.  Below is a high level description of some of these new methodologies, including why they provide an advantage.  Once again, the intention is to provide enough detail to start conversations with IT counterparts (or understand what they are talking about), certainly not to become an expert.  There is a ton of information out there if you want more detail!

  1. Grid computing and parallel processing – Calculations are split across multiple CPUS to solve a bunch of smaller problems in parallel, as opposed to one big problem in sequence.  Think about the difference between adding a series of 8 numbers in a row versus splitting the problem into in four sets of two, and handing them out to four of your friends.   To accomplish this, multiple CPUs are tied together, so the algorithms can access the resources of the entire bank of CPUs.
  2. In-database processing - Most analytic programs lift data sets out of the database, execute the “math” and then dump the data sets back in the database.  The larger the data sets, the more time consuming it is to move them around.  In-database analytics bring the math to the data.  The analytics run in the database with the data, reducing the amount of time-consuming data movement.
  3. In-memory processing – This capability is a bit harder to understand for non-technical people, but it provides a crucial advantage for both reporting and analytics.  Large sets of data are typically stored on the hard drive of a computer, which is the physical disk inside the computer (or server).  It takes time to read the data off of the physical disk space, and every pass through the data adds additional time.  It is much faster to conduct analysis and build reports from the computer’s memory. Memory is becoming cheaper today, so it is now possible to add enough memory to hold “big data” sets for significantly faster reporting and analytics.

To give you an idea of the scale of the impact, applying these methodologies, we have been able to render a summary report (with drill down capability) from a billion rows of data in seconds.  Large scale optimizations like risk calculations for major banks, or price optimization for thousands of retail products across hundreds of stores, have gone from hours or days to minutes and seconds to calculate.  As you can tell, the advantages are tremendous.  Organizations can now run analytics on their entire data set, rather than a sample.  It is possible to run more analyses more frequently, testing scenarios and refining results.

Here are some examples of how innovative companies are applying big analytics to get value from their big data:

  • Airline companies are incorporating the voice of the customer into their analyses, by mining all of the internal and external unstructured text data collected across channels like social media, forums, guest surveys, call center logs, and maintenance records for passenger sentiment and common topics.  With big text analytics, these organizations are able to analyze all of their text data, as opposed to small samples, to better understand the passenger experience and improve their service and product offerings.
  • A major retailer is keeping labor costs down while maintaining service levels by using customer traffic patterns detected by security video to predict in advance when lines will form a the register.  This way, staff can be deployed to various stocking tasks around the store when there are no lines, but given enough notice to open a register as demand increases, but before lines start to form.
  • A major hotel company has deployed a “what if” analysis in their revenue management system which allows users to immediately see the impact of price changes or forecast overrides on their demand, by re-optimizing around the user’s changes.  Revenue managers no longer have to make a change and wait until the overnight optimization runs.

Unlocking the insights in big data with big analytics will require making some investments in modernizing technology environments.  The rewards for the investment are great.  Organizations that are able to use all that big data to improve the guest experience while maximizing revenue and profits will be the ones that get ahead and stay ahead in this highly competitive environment!

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