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Hotel GMs Risk Owners' Money Without Data-Driven Decisions

04 July 2024
Every year, hoteliers leave millions of dollars on the table due to fragmented data and low-quality insights. This issue not only hampers potential revenue but also significantly lowers owners' ROI. Inefficiencies in data management mean that hotels miss valuable opportunities for revenue optimization and strategic decisions are made based on incomplete or inaccurate information.
Last week, attendees at the HSMAI CSC and HITEC in Charlotte, NC, I talked to many people who voiced their struggles with accessing data from multiple vendor systems, the lack of centralized data platforms, and the poor quality of available data. Despite the industry's ongoing discussions about concepts like total revenue management, customer acquisition cost, and new KPIs such as NetRevPAR, there has been little progress in implementing effective solutions.
This blog aims to address these frustrations and propose practical solutions. By understanding the root causes of these issues and exploring strategies for improvement, we aim to highlight the immense benefits of having access to the correct data for making data-driven decisions. Understanding the benefits of becoming more data-driven can help convince top management and owners of the critical need to invest in better data management practices and technologies.

The Frustrations with Integrations and
Data Quality

Data Silos and Integration Issues

In today's hospitality industry, the landscape is dotted with multiple vendor systems, each serving different functions such as property management, customer relationship management, revenue management, etc. However, the lack of a centralized data platform to integrate these systems creates significant challenges.
Hotel commercial teams, including marketing, sales, and revenue management, find themselves grappling with data silos that prevent them from gaining a holistic view of their operations. Each system operates in isolation, leading to inefficiencies and frustration. The time and effort required to manually extract, consolidate, and analyze data from these disparate sources often result in lost opportunities and delayed decision-making. This fragmented approach hinders the ability to respond swiftly to market changes and limits the potential for identifying new revenue streams and optimizing existing ones.

Low-Quality Data

Compounding the issue of data silos is the pervasive problem of low-quality data. Many hotel systems generate incomplete, outdated, or irrelevant data, making it difficult for commercial teams to rely on it for accurate insights. This challenge is particularly pronounced when analyzing guest behavior, forecasting demand, or evaluating marketing campaigns' effectiveness.
For example, if guest profiles are not accurately maintained, personalizing marketing efforts or anticipating guest needs becomes nearly impossible. Similarly, if revenue management systems rely on flawed data, the resulting forecasts and pricing strategies will be suboptimal, leading to missed revenue opportunities. Poor data quality can also lead to misinformed strategic decisions, as management might base their actions on incorrect or incomplete information. Making decisions based on gut feeling can result in ineffective marketing campaigns, incorrect pricing strategies, and, ultimately, a negative impact on the hotel's bottom line.
The combination of data silos and low-quality data creates a significant barrier to achieving the full potential of data-driven decision-making in the hospitality industry. Addressing these issues is critical for unlocking new revenue opportunities, enhancing operational efficiency, and ultimately improving the ROI for hotel owners.

The Unrealized Potential of Total Revenue Management

The Concept of Total Revenue Management

Total Revenue Management (TRM) is an approach that extends beyond traditional room revenue management to encompass all revenue streams within a hotel, including food and beverage, spa, events, and other ancillary services. TRM aims to optimize the overall revenue and profitability of the entire property rather than focusing solely on room rates and occupancy.
The importance of TRM lies in its holistic view of a hotel's revenue potential. By considering all sources of income, hotels can better align their pricing and marketing strategies to maximize total revenue. This approach enhances financial performance and improves the guest experience by ensuring all services are optimized to meet demand.
Hotels have discussed TRM at conferences for over a decade. Industry leaders have long recognized the need to move beyond siloed revenue management practices and adopt a more comprehensive approach. However, despite the widespread acknowledgment of its benefits, the implementation of TRM has faced significant challenges.

Challenges in Implementation

One significant frustration for hoteliers is knowing which questions to ask, even when they can access all their data in a centralized platform, such as a data warehouse with a BI tool. Many hoteliers stare at a blank screen, unsure how to leverage the vast data available. While powerful, data warehouses and BI tools are often too general and not specifically adapted to analyze the intricacies of a hotel business. The hurdle to getting started builds on the frustration of not having the time or expertise to formulate the right questions that could drive actionable insights.
Another critical aspect is determining which KPIs hotels should analyze to move towards set goals. Without clear objectives, hotel staff tend to remain in their silos, performing daily tasks without a strategic direction. Identifying and implementing goals and the right incentives are crucial to growing revenue and maximizing profits. However, the absence of tailored guidance on the most relevant KPIs for total revenue management leaves many hotels struggling to measure and manage their performance effectively.
Finally, aligning and leading the team to realize opportunities based on data insights is essential for achieving significant positive impacts on revenue and profits. Increasing productivity requires the right tools, data, and organizational cultural shift. Teams must be encouraged and trained to interpret data collaboratively, breaking down silos and working towards common goals. Hotel companies need effective leadership to guide this transformation, ensuring that hotels translate data-driven insights into strategic actions that enhance overall performance.
Addressing these challenges requires a concerted effort to adopt integrated data solutions and embrace new metrics that reflect the full spectrum of a hotel's revenue potential. By doing so, hoteliers can move closer to realizing the benefits of Total Revenue Management, ultimately leading to improved profitability and enhanced guest experiences.

The Value Proposition of Centralized Data Platforms

Benefits of Access to the Right Data

Access to all relevant data through a centralized platform offers numerous benefits that can transform hotel operations and profitability. Here are some key advantages:

Improved Decision-Making Capabilities

Centralized data platforms provide a single source of truth, enabling hotel commercial teams to make informed decisions based on comprehensive and accurate data. This unified approach eliminates the guesswork and ensures that strategies are grounded in solid evidence. Having all relevant data at their fingertips, hotel managers can identify trends, uncover insights, and proactively adjust their operations and marketing efforts.
However, hotels need a hotel-specific data platform with pre-built dashboards and reports relevant to their operations. Most hotels do not have the time or capability to build their dashboards and reports. Yes, making data-driven decisions sounds excellent, but the key is in the actionable insights provided by the platform. Consider these questions that a centralized, hotel-specific data platform could help answer:
  • Would you make a different decision about pricing if you knew that hotel guests eating in the restaurant spend more and are more satisfied?
  • Would you make a different decision about distribution channels if you knew that guests from a specific country and distribution channel only spend money on the lowest possible room rate?
  • Would you make a different decision if you could identify your most valuable guests/customers?
Hoteliers have no clue which decision to make without addressing these and similar questions. They cannot optimize their pricing strategies, improve guest satisfaction, or tailor their marketing efforts to attract the most profitable customers.

Enhanced Ability to Forecast and Manage Revenue

Accurate forecasting is crucial for maximizing revenue and optimizing resource allocation. Forecasting is about preparing for the future and making proactive decisions to capture opportunities before they disappear. It plays a vital role in resource management, such as labor scheduling and purchasing, by ensuring that hotels are adequately staffed and stocked to meet demand without overextending resources.
Hotels need centralized data platforms to manage total revenue by consolidating data from various sources, such as room bookings, F&B sales, and event revenues. This holistic view enables more precise demand forecasting, dynamic pricing strategies, and effective inventory management, ultimately driving higher revenues and profitability. Here are some questions that centralized data and accurate forecasting can help address:
  • Would you make a different labor scheduling decision if you knew a specific guest segment would stay in the hotel a few weeks from now?
By understanding the upcoming guest mix, hotels can schedule staff appropriately to meet different segments' unique needs and preferences, enhancing guest satisfaction and operational efficiency.
  • Would you make a different purchase decision if the forecast shows a peak in breakfast guests?
Accurate forecasts can guide purchasing decisions, ensuring the hotel is well-stocked for expected demand, reducing waste, and improving guest experience by avoiding shortages.
  • Would you make a different decision about pricing if you saw a slower booking pace two months from now?
Early detection of a slower booking pace allows for strategic pricing adjustments, targeted marketing campaigns, and promotional offers to stimulate demand and fill rooms during anticipated slow periods.
By leveraging these insights, hotels can optimize their operations, enhance guest experiences, and drive significant improvements in revenue and profitability. Centralized data platforms are not just about providing data; they are about enabling smarter, data-driven decisions that prepare hotels for the future and allow them to capitalize on opportunities as they arise.

Convincing Top Management and Owners

Convincing top management and owners to invest in centralized data platforms requires presenting hard facts and a solid ROI calculation. Hotel owners need to see a clear financial justification for the investment. To achieve this, hoteliers should calculate the total cost of ownership for the first five years, including initial setup costs, ongoing maintenance, and any associated training expenses.
Next, it's crucial to estimate the solution's monetary benefits. These benefits include increased revenue, lower operational costs, higher productivity, and improved guest satisfaction. Each factor has an economic value, albeit challenging to quantify precisely. However, by aggregating these estimates, hoteliers can demonstrate a positive impact that will ultimately lead to a favorable ROI, satisfying the owner's financial expectations.
It's essential to recognize that all ROI calculations made before an investment are estimates, not the actual ROI, as no one can predict the future with certainty. The key is to build a compelling case that convinces stakeholders to believe in the ROI projection.
In addition to the ROI calculation, it is essential to show the owner "What's in it for them." Here are some compelling reasons:
  1. Reduced Risk of Operational Mistakes By providing a better tool for improving operational decisions, the owner can lower the risk of hotel management making costly mistakes. A centralized data platform enables more informed and accurate decision-making, which can prevent revenue losses and operational inefficiencies.
  2. Faster and More Accurate Information Access Owners will have quicker and more accurate access to the hotel's performance information. This direct access to unfiltered data allows owners to understand the business dynamics better and make informed decisions about their investments. The transparency centralized data platforms offer is invaluable for owners who seek a deeper understanding of their hotel portfolio's performance. This direct line of sight into operations provides a significant advantage, enabling owners to respond more swiftly to market changes and make strategic adjustments as needed.
  3. Alignment and Collaboration Between Owners and Management A centralized data platform aligns the owner and the management company and fosters collaboration. Ensuring that both parties have access to the same accurate and up-to-date information builds trust and encourages a unified approach to achieving common goals. This alignment is crucial for confirming that the hotel management company is performing effectively and working toward the same objectives as the owner.
  4. Enhanced Decision-Making and Strategic Planning With access to comprehensive and integrated data, owners can engage in more strategic planning and better oversight of hotel operations. Instantly accessible data ensures that hotels base decisions on solid data rather than intuition or incomplete information. For example, understanding detailed financial metrics and guest satisfaction trends can help owners and management identify areas for investment, cost-saving opportunities, and potential revenue streams.
By presenting a well-rounded argument that combines a robust ROI calculation with the specific benefits of a centralized data platform, hoteliers can effectively persuade top management and owners to invest in these solutions. Highlighting reduced operational risks, improved access to accurate data, and enhanced alignment between owners and management underscores the platform's value. Ultimately, demonstrating how these benefits translate into tangible financial gains and strategic advantages will help secure the necessary buy-in from stakeholders.

Conclusion and Takeaways

This blog explored hotel commercial teams and technology vendors' significant frustrations, particularly around data integration and quality. The fragmented nature of current data systems leads to inefficiencies and missed opportunities, while poor data quality hampers effective decision-making. Despite the long-discussed Total Revenue Management (TRM) concept, hotels have been unable to move forward due to a lack of integrated solutions and clear metrics such as NetRevPAR.

Recap of Key Points Discussed

  1. The High Cost of Data Fragmentation: Hoteliers are losing millions of dollars due to fragmented data and low-quality insights, which results in a lower ROI for owners.
  2. Data Silos and Integration Issues: Multiple vendor systems and a lack of centralized data platforms create inefficiencies, frustration, and lost opportunities for hotel commercial teams.
  3. Low-Quality Data: Challenges with incomplete and irrelevant data significantly affect decision-making and operations.
  4. The Unrealized Potential of Total Revenue Management: Despite its importance, TRM's potential remains untapped due to a lack of integrated solutions and difficulty measuring new KPIs.
  5. The Value Proposition of Centralized Data Platforms: Access to the correct data improves decision-making capabilities and enhances the ability to forecast and manage revenue. Clear communication of ROI and showcasing successful implementations can convince top management and owners to invest in these solutions.
To harness the full potential of data-driven decision-making, industry leaders must invest in robust data integration and quality solutions. An essential solution is a hotel-specific data platform with pre-built dashboards and reports tailored to the hospitality industry's unique needs. Such a platform enables hoteliers to make informed decisions about pricing, labor scheduling, purchasing, and guest management, ultimately driving higher revenue and profitability.

Final Thoughts on the Future of Data-Driven Decision-Making

The future of the hospitality industry hinges on the ability to leverage data effectively. By overcoming data fragmentation and poor quality challenges, hotels can unlock new revenue opportunities, optimize operations, and deliver exceptional guest experiences. Investing in centralized data platforms and fostering a culture of data-driven decision-making will be crucial for staying competitive in an increasingly complex market. As the industry continues to evolve, those who embrace these technologies and strategies will thrive and achieve sustainable growth.