Footsteps Analysis: The Key to Total Revenue Management

By Michele Walters Co-Founder, Origin World Labs | March 17, 2013

The highest evolution of a hotel's rate strategy is to get as close as possible to Total Revenue Management. This is the utopian state where hotels can offer a different rate to each reservation based on each guests potential lifetime spend. While true one-to-one yielding may never be attainable or even desirable, the potential revenue upside and loyalty effects of moving closer to such a pricing scheme could be enormous for most properties.  

The biggest obstacle to creating individual pricing, however, is that you have to understand your guests behavior down to the most granular level of activity.  For many hotels and resorts that means that you must be able to predict, with some reasonable certainty, the spend pattern of a guest before they are offered a rate. This analysis begins by digging into the behavior of past guests and this is where things get complicated.  

Many hotels, who have CRM level data, have the ability to group guests by total spend or potentially even by spend on a certain outlet.  That's great and useful if you are offering rewards after the stay, but what we are trying to accomplish is to get a sense of what the guest might spend before they arrive.  This means that we need to recreate the entire path of activities from the second the guest left the hotel to the first contact that guest made with the hotel. Then we aggregate the number of guest who took similar paths of behavior and finally we have to calculate the probabilities that a future guest might do the same.  If it sounds complicated it's because it is, but thankfully we have the powerful algorithms of data mining to help us get through this process.

Digital Footprints

For decades, forensic scientists have relied on footprints to recreate crime scenes. By following the path of a set of shoe marks, investigators could determine how many people were involved and what they likely did or, more importantly, did not do.  In the hotel business we have very detailed digital footprints in the form of transactions. Every time a guest interacts with the front desk, enters or leaves their room, makes a call, has a meal, makes a purchase, or even uses the hotel wifi, a digital transaction is recorded with a timestamp and other relevant data.

All these transactions can be linked back to recreate the specific actions taken by each guest while at the property. More importantly, you can also see what activities the guest did not engage in within the property, such as never having dinner at the hotel. This is very important for properties in metropolitan areas where many of the dining and entertainment (i.e. spend) options are outside of the property.

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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.