Analytics: Improving Customer Retention in the Hospitality Industry

hotel industry

The hospitality industry caters to millions of people worldwide. It is the largest industry in the world, generating colossal revenue figures every year. According to reports, the industry will reach a value of more than $4 trillion in 2016. The success of this industry hinges on one thing only. No points for guessing, though. It’s the holy grail of most businesses – customer satisfaction. The rapidly changing consumer preferences and growing demands in terms of service differentiation are keeping hoteliers and catering business owners on their toes. In today’s day and age where most people lead a hyper-connected lifestyle, one bad review on the social media could cost a business a lot of potential customers and, therefore, money.

So, how are most successful businesses managing to keep pace with the whimsical arbitrariness that is customer expectation? The answer is one word – analytics. A large number of businesses in varied domains have big data analytics as an integral component of their marketing arsenal. The enterprises that are yet to incorporate analytics into their business strategy will sure need to step up their game if they want to see continual growth in today’s competitive landscape.

Hospitality Industry Landscape

The hospitality industry is rather broad and can be categorized as follows:

  • Travel and tourism
  • Food and beverages

The travel and tourism market began to pick up steam in the 20th century with the advances in transportation technology. It has since grown rapidly in most parts of the world. The market in the US was worth $341 billion in 2015 and is likely to reach $381 billion by 2017 (source: www.travelweekly.com).

US Travel and Tourism Industry Size 2015
data credit: www.travelweekly.com

In the travel and tourism domain, the airline and hotel industries reign supreme with a combined revenue share of 83%. The car rental and cruise segments follow with a share of 5% each.

Travel and Tourism Market Segmentation
Data credit: www.travelweekly.com
US Hotel Industry Size
Data credit: www.statista.com

The food and beverages market in the US is expected to reach more than $782 billion in 2016. To know how the catering industry has evolved over the years and for information on the restaurant market size in the US, China, and India, click here.

Analytics Applications: Use Cases

Red Roof Inn
Image credit: www.expedia.com

Red Roof Inn, a hotel chain with more than 450 establishments across the US, is using analytics platforms to increase occupancy rates. Its marketing division uses metrics, which include historical weather information, data on travel patterns, and flight cancellation details, to target travelers who get stranded due to bad weather conditions. Around 3% of flights are canceled every day, which leaves about 90,000 passengers stranded. In such a situation, most passengers would look for temporary accommodations close to the airport. The hotel chain came up with a marketing strategy to send targeted advertisements to these passengers’ mobile devices. The advertisements are well-timed and contain personalized messages, which help establish a loyal customer base. Overall, the strategy led to a 10% year-over-year growth in business.

The Denihan Hospitality Group is another chain of boutique hotels operating in the US. The group’s management teams use analytics to predict the type of rooms that are likely to be occupied, the approximate duration of stay, and the probability of cancellations for a particular day. This improved their productivity by 40%. The teams analyze information such as purchase history, occupancy data, and customer reviews and ratings to understand the needs and preferences of customers in real time. These insights also help make effective business decisions and increase customer loyalty.

For information on how businesses in the catering domain, including restaurant franchises like KFC and Domino’s, are leveraging insights from analytics, click here.

BRIDGEi2i: Hospitality Case Study

BRIDGEi2i offers advanced analytics solutions to businesses in various industries. The company recently helped a leading hotelier build customer loyalty by analyzing travel patterns, identifying the most valuable customers, and developing a personalized recommendation system. To know more, read the complete case study here.

Technology for Better Customer Experience

To keep pace with the constantly evolving technological landscape, many businesses in the hospitality domain have started using beacons to improve customer engagement and experience. Beacons are low-cost sensors that transmit relevant information or notifications to smartphones and other mobile devices in their proximity. They run on Bluetooth low energy (BLE) technology and are, therefore, energy-efficient. Businesses use these sensors inside their establishments to provide indoor location-based services (LBS) to their customers. However, the customers will have to turn on Bluetooth on their devices, install the relevant app, and accept location services in order to receive notifications.

Marriott International uses beacons, which are strategically placed at their spas, restaurants, bars, etc., to send offers, discounts, and other promotional messages to customers. Beacons also facilitate indoor navigation inside establishments. Further, they collect data on where customers spend most of their time; the hotel staff gains insights about their preferences and habits by analyzing this data. This contributes to the overall customer experience and thus improves retention.

The travel industry has seen several advances in personalization and visualization technologies over the years. Travel websites/apps like Hopper and Kayak use big data analytics to help users understand airfare pricing trends. Kayak uses historical data pertinent to search queries to aid users in finding the cheapest rates for flights, hotels, travel packages, etc. In 2014, Hopper launched Hopper Flight Explorer, a platform that generates real-time quotes and helps users find the best deals and plan their travel.

In spite of the major strides in technology in the hospitality industry, there are still many business owners who have this fallacious notion that customer data is a liability they need to rid themselves of. However, growing market competition will result in increased technological awareness, and businesses will soon see customer data for the gold mine it really is. With the increased availability of affordable cloud services and advanced analytics solutions, storage and data mining have become simple and convenient. In conclusion, analyzing customer data to derive actionable insights is the key to improving customer satisfaction and retention, which in turn will help gain a competitive edge and multiply profits.

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