Data-driven decentralization in the hospitality industry is empowering consumers, putting them in control of what they are offered and how they are served. At the heart of this revolution in personalized marketing are robust customer data platforms (CDPs) driven by powerful data analytics.
Once passive systems, typically collecting and storing customer data well after the average 72 hour stay, CDPs have evolved dramatically. By collecting data across multiple internal and third-party platforms, hospitality brands' CDPs are building comprehensive data profiles of customer activity. Robust personal identifiers allow hotels and restaurants to deliver targeted marketing campaigns and individually assess the results, even as they track real time behaviors on site.
The Flow of Capital
Based on numbers compiled by White & Case, global PE investment activity in the hospitality sector registered a deal volume of $24.81B across 217 deals. This is a 35 percent decline in disclosed deal values relative to $38.06B recorded in 2016. While deal volumes held roughly steady in North America, there was steep decline in investment activity in the EU.
EU deal volumes in the hospitality space declined sharply from the $20.59B level reached in 2016 to $6.82B in 2017. European PE investor interest in the hospitality sector does not seem to have waned, with the number of deals holding roughly steady. In 2017, 88 PE deals were struck in this space compared to the 85 deals in 2016. What seems to have changed is investor appetite toward striking big deals in the space. Average deal size declined from around $24M in 2016 to $7M in 2017.
The outlook for PE investment in Asian markets is more optimistic. After registering a significant decline in deal volumes in 2016 — $4.42B in 2016 relative to $8.26B in 2015 — the market rebounded sharply to post deal volumes of $7.41B across 44 deals in 2017.
Funds like Blackstone Group, TPG Capital Management and Capital International Group, Goldman Sachs, and SAMHI have been investing in buying operational hotels in an attempt to avoid delays and cost overruns in new construction. For example, in 2015-2016, investors invested $100M in hotel chains in India. In 2017, investments in operational Indian hotels and restaurants rose to $119M.
Personal is Powerful
Data marketer SessionM reports that 86 percent of consumers say personalization plays a role in their purchasing decisions. It’s just one of many companies helping the hospitality industry target and deploy pre-scheduled and behaviorally triggered campaigns via email, SMS, push, and in-app messaging.
In the hotel industry, CDPs are driving engagement across six interactions. Beginning with personalized incentives during price and availability look up, personalized campaigns are again deployed in the period between booking and arrival, during check-in, while customers are on property, at check out, and between stays.
Customers are offered real-time discounts, shown snapshots of potential loyalty-related earnings, and reminded of value-added services based on their histories and preferences. This level of granularly personalized engagement allows hotels and restaurants to grow incremental sales while not discounting products customers are already likely to buy.
The hospitality industry is expanding from traditional tiered and frequency-based loyalty programs to hybrid programs incorporating behavior-driven and experiential rewards, based on deep knowledge about customers' personal wants and preferences.
Mastering the Data
Hospitality is an industry that has never been at a loss for data. The challenge has been what to do with it all. Back in 2014, Forrester reported that companies were analyzing only 12 percent of the data at their disposal. Getting databases, which often reside on multiple platforms or are siloed across departments, to talk to each other has been difficult. Consequently, securing actionable guidance from all that data has been nearly impossible. But that is changing as data collection and consolidation have improved dramatically. Actionable insights are now possible in real time. This raises a whole new challenge. What happens when your data tells you to change your business model?
Disrupting the Disruptors
A team made up of former employees from Google, Facebook, Uber, and Civic have launched a middleman-free, peer-to-peer network of home-sharing hosts and guests on the decentralized web. Beenest is a blockchain-centered, commission-free platform that utilizes its own cryptocurrency, Bee Tokens. It is currently operating in California with plans to expand in 2019.
While dominant home-sharing platforms like Airbnb charge fees for a range of transactions including cancellations, credit card payments, and currency conversions (which can add up 22 percent in additional fees), Beenest eliminates commission fees while providing more reliable, payment, security, and reputation reporting.
Millennials are gravitating to branded retail partnerships. Overpriced and unprofitable room-based drink bars are being replaced by branded coffee offerings from companies like Starbucks, and this increase in branded offerings will only continue to expand. Virgin Hotels has partnered with The Gap to allow guests to order from their rooms and have Gap products delivered within three hours.
Millennials are informing other hospitality trends, morphing conference rooms into co-working spaces and creating more robust internet bandwidth delivery and infrastructure. It’s all part of an industry chasing the lifestyle and work lives of millennials.
Home-sharing apps represent about about 3 percent of the hospitality market and are expected to take 5 percent by 2025. And while home-sharing apps will continue to impact the hospitality business, the industry’s major innovations are coming from internal initiatives designed to attract digitally savvy millennials.
Experience Counts in a Whole New Way
Hospitality's high degree of responsiveness to customer wants and needs is having a Darwinian impact on the industry as providers reshape their offerings based on data-driven marketing assessments. As millennials seek more context and connection, the hospitality industry is shifting to offer not just products but experiences. Take, for example, the rise of Airbnb Experiences, Burning Man, Habitas, Summit Series, and others.
As service providers enter a more relational space, new opportunities and challenges will arise. Service providers are focusing not only on what they provide to the customer, but also on the response they are able to elicit from the customer in the back and forth of the experience. While a far less tangible data point to track and monetize, what emerges from the customer instead of what is provided to the customer may prove the most salient predictor of brand loyalty. Thus, technologies like facial recognition software, which are also able to track emotional response, may play a more central role in populating customer data to CDRs.
The potential for disruption and decentralization in the hospitality industry will accelerate as millennials, known for their marked preference for personalized marketing, enter their prime spending years. Accordingly, look for the hospitality business to morph further as the customer-focused data revolution continues.