By Dr. Michael Toedt, Managing Partner and CEO at TS&C GmbH
When we compare the value of public listed hotel companies with the value of Priceline or Uber, it is obvious, this is a complete different story. The value of Priceline is higher than the value of Marriott, Hilton, AccorHotels, IHG and Wyndham together. But how comes? How can a relatively young company be so valuable? Priceline, Expedia or Uber, all these companies have one in common, they use the capabilities of Big Data in any possible manner.
Hotels have not created a model to monetize data
When Microsoft bought LinkedIn in 2016, Microsoft paid US$ 260 per active user. At that time LinkedIn had about 100 million active users which led to the unbelievable price of US$ 26 billion. The question is, how much would an investor pay for a hotel company with about 100 million guests? Most likely, the guest profiles were not part of the evaluation process, but how comes? 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. In order to make oil valuable, it must be refined for instance to get petrol out of it. Only after the refining process it can be used. It is the same with data. Data needs to be refined, it needs intelligence to get value out of it.
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 process extremely complex: technology wise, organizational wise, people wise and it needs the sponsorship from the top. A Central Data Management strategy means a shift of responsibilities and this needs the support from the CEO first of all.
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 and also to create fully automated interests and preferences without any manual interaction.
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.
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. Hotels should start to fight back against the OTA’s and use the new possibilities of Big Data.