Will Analytics be a Game-changer for Hospitality Companies?

By Kelly McGuire Vice President, Advanced Analytics, Wyndham Destination Network | March 17, 2013

Despite encouraging signs that the recession is well behind us, revenue, costs and profits are still under close scrutiny. Achieving a competitive edge, while at the same time "doing more with less" is a daily challenge for hospitality executives. Revenue management "changed the game" for hospitality when it came on the scene 20 years ago. By applying analytics the specific problem of room pricing, hotels were able to increase room revenue without increasing room cost. It's time to change the game again. To stay ahead, executives need to build this kind of fact-based decision making into the corporate DNA.

The Challenge

Hospitality executives struggle to maintain the balance between providing that memorable experience that keeps guests coming back (and telling their friends) and meeting their revenue and profit responsibilities to stakeholders, owners and franchisors. For many companies, it feels like standing on a teeter-totter (or see-saw, if you like), as shown below. If you put too much weight on the customer experience, your revenue and profit will suffer; for example, when you give away a dinner or free bottle of wine without considering whether the room price makes up for the cost. The reverse is also true, like when you cut staff to save labor costs, but create long lines at check-in. You are constantly making adjustments back and forth to achieve that stability, and always in danger of tipping the scale. Analytics can help.

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Achieving the Balance

Revenue managers have had great success in driving revenue using predictive analytics like forecasting and optimization, but by its nature, revenue management only focuses on the revenue and profits side. Without an eye to the customer experience, there is a danger of alienating loyal guests by not having rooms for them or of misinterpreting the property's value proposition, and not bundling the right experiences into a discount package. Incorporating guest preferences into room offers, or customer lifetime value into the revenue management optimization can shore up that relationship between experience and profits, restoring balance.

Optimization is not just for room rates. The marketing department can use optimization to come up with the best contact strategy for promotions, considering response rates, guest contact preferences, prevailing rates, demand forecasts, all available promotions and the cost to deploy those promotions. Using this technique, you are maximizing the return from marketing efforts while respecting your guests' preferences about how often they want to be contacted and with what types of offers. Further, you can ensure that you send out the right number of offers to fill the hotel without having to turn customers who wanted to redeem the offer away. As organizations continue to adopt analytics department by department, opportunities will continue to arise to find that balance.

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Hotel Law: New Administration - New Policies

In a business as large as a hotel and in a field as broad as the law, there are innumerable legal issues which affect every area of a hotel's operation. For a hotel, the primary legal focus includes their restaurant, bar, meeting, convention and spa areas of their business, as well as employee relations. Hotels are also expected to protect their guests from criminal harm and to ensure the confidentiality of their personal identity information. These are a few of the daily legal matters hotels are concerned with, but on a national scale, there are also a number of pressing issues that the industry at large must address. For example, with a new presidential administration, there could be new policies on minimum wage and overtime rules, and a revised standard for determining joint employer status. There could also be legal issues surrounding new immigration policies like the H-2B guest-worker program (used by some hotels and resorts for seasonal staffing), as well as the uncertain legal status of some employees who fall under the DACA program. There are also major legal implications surrounding the online gaming industry. With the growing popularity of internet gambling and daily fantasy sports betting, more traditional resort casinos are also seeking the legal right to offer online gambling. Finally, the legal status of home-sharing companies like Airbnb continues to make news. Local jurisdictions are still trying to determine how to regulate the short-term apartment rental market, and the outcome will have consequences for the hotel industry. The December issue of Hotel Business Review will examine these and other critical issues pertaining to hotel law and how some companies are adapting to them.