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Hoteliers - Innovate or perish! By Todd Dirks

I couldn’t help but smile when I read a recent article about leading hoteliers such as Hilton coming up with stylish yet affordable extended stay brands. The reason I find this interesting is because just a few days back, I was having a discussion with the chief marketing officer of a leading hotel chain and this is precisely the dialogue we were having. How do you understand or predict customer behavior? How do you come up with timely product innovations in response to current customer needs? How do you ensure that your schemes and packages are relevant and will deliver in the current market? You may be launching discount schemes one after the other, but how can you ensure better returns on these schemes? The message was loud and clear - “innovate to survive.” Hoteliers are now starting to understand this and are keen to engage in discussions as to how they can leverage analytics to drive growth and sustainability. I remember a project we worked on for a leading player in the travel and leisure industry. The client faced high attrition rates because customers were inactive, i.e., were not using their time share properties, eventually leading to non-renewal of their subscriptions. By using analytics, more specifically logistic regression modeling, we helped the client better understand their customers. As a result, the client targeted specific customer segments more effectively with separate retention programs. This customer insight resulted in substantially reduced direct marketing costs and attrition rates. It is also evident that data-based business insights play a pivotal role in driving innovation. As a hotelier, in tough times like these, you want to be empowered by actionable insights for all elements of your business including promotion effectiveness, customer segmentation, customer loyalty, risk management, and cost optimization. The increased awareness that comes from the right data will allow you to make better informed decisions. A recent blogpost by Jim Brown, “Profit Impact of Market Strategy,” a British study of 1,000 businesses during the past 30 years, found that companies that spent more on innovation during the downturn saw return on capital employed rise 23.8 percent during the recovery, compared with 0.6 percent for those that slashed spending.” To survive and grow, hoteliers must have an exquisite focus on targeting the right customers with the right product/service package, now more than ever before. Analytics can certainly help.

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