Industry Update
Opinion Article 3 October 2017

Why Hotel Technology Hasn't Kept Pace with Revenue Management

By Michael McCartan, Managing Director Europe, the Middle East, and Africa at Duetto

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McCartan

The overreliance of legacy technology solutions and the lack of data integration are possibly the single biggest constraints on the hotel sector today. The reasons for this are deep-seated in the history of hotel technology. Most hotel operations have built up their technical systems and applications piecemeal over the years. As a consequence the teams that were created to support them looked at things from a narrow viewpoint. These organisational silos limited data exchange between teams, and that has evolved into limited data exchange between technology systems. In order to drive revenue, hotels need to drive technological advancements in two ways:

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  1. Predictive Data Analytics - To better understand the market demands and customer needs in order to optimise on revenue through an Open Pricing strategy, ultimately culminating in personalised prices.
  2. Machine Augmentation and Learning - To remove friction from the guest experience by replacing redundant human interventions with automated processes, allowing hotel staff to engage with the guests only in ways that truly enhance their stay.

However, their technological inefficiencies and organisational habits make it very difficult for hotels to break free. Things are changing, and hotel companies are seeing the benefits of using best-of-breed, cloud-based technology solutions that don't require a huge capital investment and can be replaced relatively easily. However, there is still a large level of fragmentation between the various technologies they are now employing. This is holding back the access to and analysis of customer data.

At the other end of the technology spectrum sit the online travel agents (OTAs). They occupy a walled garden environment where they have all of the data that they need in one place and organise themselves around analyzing that data to build the complete picture of online guest interaction in order to see the business opportunities.

Guest-Led Data

Hotels do have two advantages over the technology giants - they have first-hand experience with the guest and complete knowledge of their inventory. From these they can reap valuable data insights, provided the right technology systems are in place.

By combining the information they gain through hardware and supplementing it with the softer data that comes from having the guest in-house, hotels can create a richer, more granular data pool.

Technological advancement, such as the Internet of Things (where hardware meets software), provides data insights into guest behaviour, likes and dislikes. Hotels can track what their guests do and where they spend. This is a huge data source that the OTAs and others don't have. By capturing that and using it when the guest comes to engage with the hotel online you can present something more relevant, appropriate and more unexpected, and that's where the hotels can start clawing back some of the imbalance of the relationship.

OTAs recognise this and they are investing in booking engines, property management systems and revenue management systems. They are trying to extend their reach with the guest beyond the "search and buy" process and understand more of what is happening on property. It would be a huge mistake for hotels to let that happen because then they are conceding the last valuable asset they have. If OTAs can understand guest spend and behaviour on property, then they will own demand generation.

Linking Data

Hotels need to link all the disparate pieces of data they hold on a guest and their properties. Thankfully, technological innovations such as the cloud make this easier than ever before.

Once you have created a fuller picture of your guest you can start to market to them both pre-stay and on-site. What's more, you can exceed on their expectations.

One of our young innovators at Duetto will always drink any mini bar dry of Coke Zero. For him, a tailored guest experience is arriving to find a mini bar stocked only with Coke Zero. If he has already stayed at a hotel, or another sister property within the same group, it should be easy to determine his soft drink preferences. The data is there, it is just a case of finding it, analysing it and then acting on it. The end result is an increase in mini bar sales on Coke Zero and a happy guest who feels like the hotel really understands his needs.

Test and Fail

The hotels industry is an inherently conservative market, but in order for it to truly get ahead it needs to break the mold. The big digital companies will go through rounds and rounds of A/B testing. They are not afraid to test and fail, test and fail. Hotels don't do this because they are fearful of the capital expenditure related to testing - they want to be sure it will work so they delay decisions.

However, a new breed of hotel is breaking through. Citizen M, for example, has demonstrated that hotels can be innovative and risk-averse. They are willing to test and fail until they reach a solution.

Cloud-based solutions mean that hotels don't have to invest so heavily in infrastructure and can be more agile. While cloud solutions are doing a good job at collecting and exchanging data between solutions there is still a missing link: the free exchange of data with few limitations. Many good ideas don't take flight because the barriers to entry are too high. We need to be in a position where any bright idea can get access to this market data. This will enable new solutions to test and fail very quickly, rather than spending time and money on building solutions only to find that not all of the information they need is there to fully support what the hotels want.

There are so many good technology solutions out there that hotels can tap into - whether that's to do with up-sale, before the guest arrives, identify if a room is occupied or not so as to clean rooms more effectively, or know when to restock Coke Zeros. But many data points are lost because the exchange of information doesn't allow the hotels to be proactive in their engagement.

Bringing data stacks together can drive revenue, it can drive guest engagement and it can drive guest experience.

Remove Guest Friction

Guests want a seamless travel experience. Innovators are looking at ways to use technology to smooth the way.

For example, Changi Airport in Singapore recent installed sensors to check the flow of people from planes. If two planes arrive simultaneously the airport can check to see which is emptying faster and then work to get the baggage from that flight to the carousel faster. It's a great example of how you can use data to make the customer experience richer. Another great example of using technology to remove customer friction is the new Amazon Go supermarket concept; where shoppers walk in, take what they want and walk back out again. Using machine learning, computer vision and AI, Amazon has removed the friction of supermarket queues and checkout. Instead, you open an App on your Smartphone, fill your bags and leave. Your shopping is then charged to your Amazon account.

This makes me think of the check-in process at hotels. Why do we need to have a human interaction at this point? Often guests are travel-weary and just want to get to their room; they don't want to be asked, 'Have you stayed with us before?' Technology can handle the repetitive jobs, such as check in, while hotel staff should be there to enhance the guest experience.

Machines remove friction, analyse data and identify opportunities. Supplement that with human empathy and you have a powerful combination.

Amazon is not a poor service provider, just because you don't speak to humans. When you do, they are probably very empathetic and understanding.

Imagine what an Amazon hotel would be like?

How Can The Hotel Industry Catch Up?

  1. Data Quality and Quantity - The quality and the extent of the data hotels were dealing with was fairly limited. Not only were you dealing with puddles of data rather than lakes of data, but also the amount of information in these puddles was fairly limited anyway. The move toward a free flow exchange of data and new standards around how data should be structured has meant that it is easier for the various technology systems used by hotels to talk to each other. But more needs to be done to improve this data exchange.
  2. Common Language - Developments such as APIs have normalised the information exchange. Two decades ago every technology provider was structuring data to serve their own purposes and not to serve a global community. It was as if everyone talked a different language. There was no common way of translating that information. Each of these systems has now accepted a common language, and this makes the exchange of information and ability to act on it much more efficient.
  3. Co-operation - The hotel industry did not come together quick enough to recognise how far behind they were slipping in the data race. Hotel companies worked against each other, being insular in their approach to data. It's as if hotels were too scared to create a platform together with their competitors to their mutual benefit.

The irony is that this inaction empowered the hotel industry's biggest competitors, the OTAs. If they had created a platform similar to what the OTAs are sitting on, then the hotels would be in a stronger position and competing on customer service and experience rather than at a technology level. Technology shouldn't be the advantage between hotels; it's the application of technology that should make the difference.

By accident hotels gave the OTAs their customer data when they gave them their inventory. This gave the OTAs the ability to dissect and analyse this data to further outwit the hotels at their own game. Hotel companies now have a responsibility to set aside their differences and open up the data lake in order to compete more effectively.

Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com

Michael McCartan

    More from Michael McCartan

    ABOUT DUETTO

    Duetto delivers a suite of cloud applications to simplify hospitality revenue decisions and allow hoteliers to work smarter, increasing organizational efficiency, revenue, and profitability. The unique combination of hospitality experience and technology leadership drives Duetto to look for innovative solutions to industry challenges. The software as a service platform allows hotels and casinos to leverage real-time dynamic data sources and actionable insights into pricing and demand across the enterprise. More than 3,500 hotel and casino properties in more than 60 countries have partnered to use Duetto's applications, which include GameChanger for pricing, ScoreBoard for intelligent reporting and BlockBuster for contracted-business optimization. Duetto is backed by investors Warburg Pincus, Icon Ventures, Accel Partners, Battery Ventures and Spectrum 28.

    For more information, visit http://duettocloud.com.

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