By Dr. Michael Toedt, Managing Partner and CEO at TS&C GmbH
(DE-Version veröffentlich in hotel revue Jan 18)
Data is the new gold or the new oil. Data is the raw material of our digital age. But what does all this really mean to managers and how can especially hotels benefit from current transformation? How can data be monetized? That is the question I want to try to answer today.
When we compare the value of public listed hotel companies with the value of OTA’s such as Priceline with its subsidiary Booking.com, Expedia, Airbnb or companies like Uber, it is obvious, that something must be completely different at these companies. All have one thing in common, they are relatively young, some only a few years old, and all are data driven. For instance, the value of Priceline is higher than the value of Marriott, Hilton, AccorHotels, IHG and Wyndham together. But how come? How can a company be so valuable which own more or less nothing than data? Priceline, Expedia or Uber, all these companies have one in common, they use the capabilities Big Data offers them in any possible manner.
Hotels have not created a model to monetize data
When Microsoft bought LinkedIn in 2016, Microsoft paid about US$ 260 per active user. At that time LinkedIn had approximately 100 million active users which led to a ridiculous price of US$ 26 billion. The question which raises to me is, how much would an investor pay for a hotel company with about 100 million guests? Most likely, the guest profiles were not even part of the evaluation process, but how come? The answer is simple, hotels have not created a model to monetize data.
Data is a raw material and companies have to make it useable
For sure data is the new oil, the foundation of the fourth industrial revolution, called Big Data. But data is first of all just a raw material and companies have to make it useable. It is not enough to possess it, although it is the pre-requisite, hotel have to make something out of it. For instance, in order to make the raw material oil valuable, it must be refined first to get the valualbe petrol out of it. Only after a refining process it can be used. This is exactly the same with data. Data needs to be refined, it needs intelligence to get value out of it. The only difference which makes it abstract for many people, data is intangible, managers cannot touch it but this does not mean it has no value. It is exactly the opposite.
But how to make data valuable? How to transform Big Data into Smart Data and then into value? The way is simple to explain, but the way normally extremely complex which requires experts on the vendor as well as on the hotel side. Within an organization it has of course a technical component, but this must be accompanied with an organizational adoption and new responsibilities, the people are a key factor and of course with all disruptive changes, the top management must not only sponsor the change, they must be the leader.
Technology wise the first thing what hotel manager should do is to rethink their current IT system infrastructure. Big Data requires the consolidation of data and this comes with a consolidation of vendors and systems. Instead of having many independent and unconnected software solutions, hotel manager have to implement a strategy to centralize all data in an above property system. A so called Central Data Management (CDM) means that each and everything must be connected to create the base for monetizing the asset data. This means Hotels have to regain the control of their data before they can benefit from it. By the way also GDPR pushes hotel managers to re-think their current system strategy and formally recommends a CDM to become compliant with the new regulations.
The way of creating value out of data can be described in 5 steps:
Step1: Like an umbrella an above property system has to consolidate all relevant data sources. For hotels these are: PMS, POS, Newsletter Systems, Website, WIFI, questionnaires and table reservation systems.
Step2: Data cleansing: this is one of the hardest parts, since about 75% of all data centralization projects fail due to poor data quality.
Step3: Based on the consolidated and clean data a central profile must be created, which shows a complete picture of each individual.
Step4: Artificial intelligence (AI) and Machine Learning is needed to create knowledge from the huge amount of available information. That means a click in a newsletter, a click on the website, an answer in the questionnaire, all this information can be used to learn who a customer is. This must be done fully automated since even a single hotel has millions of data points every year which can be processed. Manual interaction is not needed anymore to deeply understand the consumer.
Step5: Usage of the new knowledge. Big Data is all about quality, it is all about individualization for a better marketing, a better service or better decisions. Based on the new knowledge applications like for marketing, operations, quality management or decision making in combination with a smart data management team on site are than responsible to monetize and use the new asset.
Hotels sit on a treasure of raw material
Companies who follow these five-step approach will gain a complete different value set. The principle looks simple, but the change process requires a combination of leadership, an aligned team and the right partners. Hotels sit on a treasure of raw material like almost no other industry, which waits to get refined. Hotel managers should not complain about OTA’s anymore, they should start to fight back and use the new possibilities Big Data offers. The digitalization is the democratization of competition. Not the budget decides about the success, it is the quality of the management. Finally, even in the digital world, people are the key success factors. How calming is that?