Personalization and Pricing: How to Drive Profitability in Web-based Booking Engines

By Kelly McGuire Vice President, Advanced Analytics, Wyndham Destination Network | March 30, 2014

The InterContinental Hotel Group recently conducted a global survey of their hotel guests, and came to the following conclusion, as expressed by their CEO: "Hotel brands have traditionally concentrated on being 2D – how to be both global and local. But our research shows that the rise of personalization means brands must be 3D [personalized, local, global] in order to build both trust and lasting relationships with guests and to win in a highly competitive global market," (Richard Solomons, CEO, IHG).

In a highly competitive and increasingly commoditized environment, many hoteliers feel that delivering a more personalized guest experience will be the differentiator, and recent research backs up this claim. With more guest data available than ever before, and the emerging technologies to capture, comprehend and act on that data, this vision is coming close to reality. The hotel company that is able to turn all of the data about guests and operations into improvements in the guest experience will win. Revenue management and pricing has a key role in this initiative, ensuring that personalization is delivered profitably.

What is Personalization, Exactly?

As always, with any term that is coming dangerously close to a buzz word, understanding what is meant by personalization is an important first step to delivering on it. The dictionary defines personalize as: "to design or tailor to meet an individual's specifications, needs or preferences". Translating this into a technology environment, I found this definition to be particularly useful: "Personalization technology enables the dynamic insertion, customization or suggestion of content in any format that is relevant to the individual user, based on the user's implicit behavior and preference, and explicitly given details." (attributed to James Dorman in Quora).

If we interpret both of these definitions in the hotel context, I see two opportunities, both equally important. First, following the technology definition, hotels should find opportunities within the guest lifecycle to deliver content, recommendations or experiences that match the guest's expressed (or inferred) needs and preferences. This isn't a "new" idea – frankly, it's really just good service – but with technology enablers, we can infuse personalization into every interaction, and standardize delivery across touch-points, whether through a personal interaction, or with technology (i.e. website). For example, the front desk agent could recommend an upgrade or a restaurant reservation based on the guest's previous stay patterns – even if it was to a different hotel in the chain. When a guest is browsing on the website, the content they see could be customized to their search patterns (Caribbean properties if they are searching for resorts, pictures of F&B as they explore dining options).

The second important aspect of personalization, following the first definition, is allowing the guest to customize their own experience, effectively giving them control over certain key aspects – attributes of the room, on-property activities or local experiences. This could come in the form of packages that can be entirely customized by the guest, or being able to select from amenities in the room or dining options on property. In either case, it will be crucial to track the actions and the results over time, so that profiles can be updated, recommendations improved and the program can continuously evolve.

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Eco-Friendly Practices: Corporate Social Responsibility

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.