Big Data, Big Analytics and Revenue Management

By Kelly McGuire Vice President, Advanced Analytics, Wyndham Destination Network | March 09, 2014

Revenue Management Data Really is Big Data

The most useful definition I have come across for big data is from Forrester: "When the volume, variety and velocity of data exceeds the organization's storage and processing capabilities for accurate and timely decision making".

I speak to many hoteliers who are not convinced that their organizations have big data. Let me lay out the revenue management problem for you, (typically solved using an analytical revenue management solution), so that I can demonstrate how revenue management has always been a big data problem. A typical hotel has the following input data:

  • Detailed customer or market type segments (optimal for RM analytics): 60
  • Different accommodation types: 12
  • Historical dates (2 years of history): 730
  • Future dates (1 year): 365
  • Length of stay types: 8
  • Snapshots stored for each occupancy date: 40

The combination of all of this input data for just one property is 252 million observations. If you then generate decisions based on this data and store those decisions, you will need to store approximately 10-20 gigabytes per property. For a hotel chain with 2,000-4,000 properties, that would equate to 20-80 terabytes of data. That is a lot of data. Note that this only includes only a subset of the information that revenue managers or a revenue management system might find valuable. It is likely that your organization is storing competitive rate information, STR data, forward looking demand data, and probably a few other data sources as well.

It is not just about volume though. Perhaps your revenue management system is handling the volume just fine right now. However, brand new data sources are cropping up all the time – data sources that could help to inform pricing decisions if they could be incorporated into the algorithms or available for ad-hoc analysis. Many of these new sources are in non-traditional formats – like unstructured text data from reviews, click-stream data from web interactions or geo-location data from mobile devices – which increases the variety of data. Some of this data changes so quickly, it is stale almost at the time it is created – like click-stream data or tweets. This is velocity.

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The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.