Ms. McGuire, PhD

Revenue Management

Revenue Management Meets Social Media: Taking advantage of social data and channels

By Kelly McGuire, PhD, Director of Hospitality & Travel Global Practice, SAS, Institute

Many companies have tactical social media programs managed by the marketing department, but the industry as a whole has yet to fully exploit the potential of this emerging data and communication resource. The revenue management department, as it takes a more strategic role within the organization, is poised to be an early adopter of the opportunities provide by social media. In this article, I will discuss a framework for evaluating social media-related, revenue management opportunities which can be used in revenue management and across the organization understand the role of social media in supporting better business decisions.

In order to help revenue managers identify and take advantage of social media data and channels, I will first define social media, discuss the types of data that are available through social media channels and describe the emerging analytic techniques that will turn that data into meaningful, actionable information. Then I will present a framework that will help revenue managers take advantage of opportunities to leverage social media in their decision making.

Social media is defined as a group of internet-based applications that allow the creation and exchange of user-generated content(i). These applications are designed to facilitate conversation, allowing the consumer to participate in the development and dissemination of content. Examples include review sites (TripAdvisor and Yelp), news sites (Digg), social sharing (Flikr, YouTube), social bookmarking (Delicious, Faves) and purchase/review sites (Amazon, Travelocity). There is a myriad of these types of applications. Conversations about your brand are taking place in many languages across the globe. While this can be intimidating, it also represents a huge opportunity.

These sites generate volumes of unstructured text data, but they also contain images, video and audio. Basic quantitative data like number of reviews, number of fans, number of friends or followers or aggregate consumer ratings is also available. Demographic information can be mined either through site-mandated entry (age range, gender, purpose of travel, location) or through the comments themselves (my wife ordered the fish; we don’t have a place like this in Chicago). Finally, the connections among users within the networks and the impact of their activity can provide a valuable source of information to help identify the most influential participants.

Analyze and act on intelligence gleaned from online conversations

There are three basic categories of social media analytics: descriptive statistics, social network analysis and text analysis. Descriptive statistics provide a snapshot of historical and current performance. They answer questions like, how many fans do I have? How many reviews have been posted over the last six months? What is my average rating on each of the Online Travel Agents (OTA)? Social network analysis (SNA) is an advanced analytic technique that uses the connections among users, and the impact of their activity, to determine the degree of influence each participant has within these social networks, and who they are influencing. Once you have this information, targeted marketing efforts can be directed at the most influential users such that they spread your message for you. For example, you could use SNA to identify the influencers in a cruise community and invite them to preview a new ship or a new itinerary with the hopes that they will rave about it within their community.

Text analysis, to quantify unstructured text data, includes: content categorization, text mining, and sentiment analysis. Content categorization automates the process of categorizing text documents according to their content and tagging them to optimize search. This time-saving technique keeps organizations from having to read through every document and manually tag them. Content categorization helps hotels to automatically categorize open ended responses on guest surveys so they can be routed to the appropriate department, whether it be housekeeping, front desk or maintenance. Text mining, similar to data mining, uncovers related concepts in large volumes of conversations, and surfaces key topics that can be used to predict or understand guest behavior. For example, text mining could tell you that the most frequent topic of conversation among your customers relates to the loyalty program, and when guests mention the loyalty program, they also talk about earning and redeeming points. The final technique is sentiment analysis, which uses natural language processing to determine how guests feel about attributes of your brand, product or service. Sentiment analysis will tell you that guests are relatively positive about your beds, but they have negative feelings about the service at the restaurant. Best of all, social data is public data, so you can grab your competitor’s data and perform the exact same analysis on it that you do on your own.

Once you have quantified unstructured text and collected descriptive statistics, traditional advanced analysis like forecasting, predictive modeling and optimization can be used on this data to gain additional insight. For example, you can track trends in sentiment analysis to predict where service problems may occur, to target training efforts or to help in determining where to invest in refurbishments. Volume of chatter after a promotion can be used to predict success of future promotional activity. Results of text mining can be incorporated into behavioral analysis to enhance acquisition, retention and attrition modeling. Influencer scores can be incorporated into the customer value calculation to place a dollar value on a particular guest’s network.

With so many options, it can be challenging to determine where and how to get started. To help with this, some colleagues and I developed a framework (Figure 1) that places the direction of social media communication (inbound – or consumer generated and outbound - or firm generated) against the scope of the decisions revenue managers must make (short term – tactical, and long term – strategic). Inbound information flow is the data generated in social networks by the consumers, and outbound represents the firm’s communications through social media channels. Revenue managers are accustomed to working with data and with channels, so social media simply adds another data source and another channel.

Revenue managers have always been responsible for tactical, inventory management decisions, but are beginning to have more strategic responsibilities such as setting competitive pricing strategies, planning distribution strategies and becoming more customer-centric in their approach to pricing. Because of this, we have broken out the time scope of decision making into tactical, short term and strategic, long term.

Many hotels have already leveraged the short term, outbound quadrant (2), using social media channels for last minute promotions to fill distressed inventory. So, why not make those promotions more effective by incorporating some of the preferences or values that consumers express in social networks (1)? If consumers are complaining about internet charges or that breakfast was not included, a short term promotion including internet and breakfast might encourage bookings. Any intelligence that helps you make better promotion and pricing decisions will result in filling more inventory and generating more short-term revenue.

The biggest opportunity for most hotel companies is moving from the tactical column (1,2) to the strategic column (3,4). Social media information can be incorporated into analyses that supports strategic decision making, resulting in better long-term decisions. For example, when developing a pricing strategy, sentiment analysis will uncover consumer sentiment about key attributes of your product versus your competitive set, helping you to better understand how consumers differentiate you from the competition. This level of intelligence, combined with other analysis like RevPAR Index, market share, consumer surveys and competitive shopping can help you to set pricing that truly reflects your value to the consumer, rather than pricing that simply follows the competition. The better you are able to differentiate yourself from the competitive set, the easier it is to avoid price wars.

The most important takeaway from the application of this framework is that the right approach to incorporating social media is to start by identifying a business problem you need to solve, and then to determine how social media analysis could be used to improve the solution. Instead of letting social media drive you, think of incorporating it as another data source and channel to augment your existing tool basket. This will allow you to extend the use of social media across the enterprise (and probably give you more ammunition to justify your investment in social media!).

If you’d like to read more about how revenue management can take advantage of social media data and channels, I would encourage you to read the paper this article was based on in the Journal of Revenue and Pricing Management. The citation is below and you can also find it at: http://www.palgrave-journals.com/rpm/journal/v10/n4/full/rpm201112a.html

References:
(i)Kaplan, A.M and Haenlein, M. (2010) Users of the world, unite! The challenges and opportunities of social media Business Horizons 53 (1) 59-63.
(ii) Adapted from Noone, B.M, McGuire, K.A. and Rohlfs, K.V (2011) Social media meets hotel revenue management: Opportunities, issues and unanswered questions, Journal of Revenue and Pricing Management 10, 293-505.

Kelly McGuire leads the Hospitality and Travel Global Practice for SAS, Institute. In this role, she is responsible for driving the offering set and setting strategic direction for the practice. Before taking on this role, she was the industry marketing manager for Hospitality and Gaming at SAS. Ms. McGuire works with product management, sales and R&D to ensure that SAS solutions meet the needs of the market. She is responsible for the outbound messaging regarding SAS’s Hospitality and Travel capabilities, particularly in the areas of revenue management and price optimization. Ms. McGuire works closely with IDeaS Revenue Solutions, a SAS company, helping to integrate IDeaS revenue management solution with SAS’s marketing solutions. Ms. McGuire, PhD can be contacted at 607-216-5800 or Kelly.McGuire@sas.com Extended Bio...

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