Are you a numbers person? If not, you’re not alone. Many people are drawn to the hospitality industry because they’re great with people, not numbers. That’s a good thing when it comes to hosting guests, but today it’s increasingly difficult to avoid data analytics no matter where you work on the property.
Fortunately, there are numerous hotel software tools available that make data more accessible and do a lot of heavy lifting for you. Here we explore the role of data analytics in the hotel industry, explain key terms, tools, and metrics, and show you ways to leverage data to improve performance across your property.
What is data analytics in the hospitality industry?
Data analytics is the process of examining data sets to search for patterns, draw conclusions, support decision-making, and predict future trends. By data, we mean facts and information, which, more often than not, come in digital and numeric formats.
In the hospitality industry, the shift to online trip planning and digital communications has created immense amounts of data. Everywhere travelers go during their guest journey, from online travel agencies (OTAs) to check-in to post-stay surveys, they leave digital footprints that hotels can use as clues to better understand their target demographics and deliver a better customer experience.
How important is data analytics in the hospitality industry?
Data has become so important it’s sometimes referred to as digital gold. Unlike gold, however, data isn’t rare or scarce. In fact, it’s so abundant we sometimes don’t know what to do with it. To be useful, data needs to be organized, filtered, and cleansed. Thorough data analysis can provide hoteliers with vital business intelligence to help make better decisions for their property.
Personal customer data in guest profiles and payment transactions also need to be stored and used securely, not only because guests expect it but also because many jurisdictions are governed by strict data privacy and security laws. A data breach can cause huge headaches for hotels and erode trust with travelers.
Cutting through the clutter with hotel key performance indicators (KPIs)
To avoid being overwhelmed by data overload, hotel management focuses on key performance indicators (KPIs). These are the metrics used to evaluate progress toward achieving the property’s most important objectives. KPIs are used to compare or benchmark performance against historical data, against competitors and similar properties, and against the local market or industry-wide averages. In addition to overall KPIs, properties have departmental KPIs. For example, an overall KPI is gross operating profit (GOP), whereas a KPI for the housekeeping department is average room cleaning time.
Benefits of data analytics in hospitality
Data analytics have all sorts of applications in the lodging industry, chief among them is finding ways to increase revenue, save costs, streamline hotel operations, and improve guest satisfaction. Here are just a few examples of how hotels can use data to improve performance:
- Understand changes to traveler preferences to serve your customer base better
- Examine previous booking patterns to help increase future occupancy rates
- Compare pricing with competitors to develop an effective pricing strategy
- Analyze guest spending behavior to identify your most profitable segments
- Track labor costs per occupied room to identify optimal staffing levels that deliver increased guest satisfaction
Spotlight: Marriott and Big Data Analytics
If you think you have a lot of data to sort through, imagine the challenges faced by the largest hotel chain in the world. With 30 brands and more than 8,000 properties, Marriott is on the receiving end of a veritable firehose of guest data. And yet, the company is considered a leader in big data analytics.
Marriott focuses on leveraging high-quality, integrated data to improve two key areas: revenue management and guest satisfaction, according to this article from Datumize. The company uses data to track competitors, identify new revenue streams, predict guest behavior, and make the guest experience as smooth and friendly as possible.
If you operate an independent property, you don’t have the luxury of a dedicated team of data analysts like Marriott. But you can take inspiration at a smaller scale by focusing on the areas where you can achieve the best results. To start, look at opportunities in each department. Then identify your objectives, the KPIs you’ll use to track performance, and the tools you’ll need to collect, analyze, and report on results. A good hospitality management solution will include robust and integrated data and reporting functionality so you can get a comprehensive overview of your operations and make data-driven business decisions.
Hotel data analytics by department
In every department, you’ll find opportunities to leverage data analytics to improve performance. Here are just a few areas to focus on:
1. Guest experience
Multiple departments contribute to the guest experience, from the front desk to housekeeping to the hotel restaurant. By tracking real-time data from online reviews, accommodation operators can measure overall guest satisfaction and ratings by department. Many properties supplement review data with data from post-stay surveys sent through guest messaging apps. Guest feedback data can be used to understand guest sentiment, identify trends and patterns, and prioritize the improvements that will bring the greatest benefits to guest satisfaction and loyalty. It can also be used as part of your marketing strategies to highlight the features guests love in hotel marketing campaigns.
Guest experience KPIs. Examples of KPIs include average ratings in reviews and surveys, departmental ratings, and review or survey volume, as well as Tripadvisor rankings, and Net Promoter Score (NPS). Guest loyalty can be measured using metrics like stay frequency, average guest spend, and customer lifetime value (CLV).
2. Revenue management
Aside from accounting, revenue management may be the most data-heavy department in hotels. Revenue managers combine external data like market demand and competitor activity with internal data like historical performance and business on the books to guide pricing decisions, inventory controls, promotions, and demand forecasting.
Revenue management KPIs. Basic KPIs include average daily rate (ADR), occupancy (OCC), revenue per available room (RevPAR), and average length of stay (ALOS). Examples of advanced KPIs include revenue per available room (TrevPAR) and gross operating profit per available room (GOPPAR).
Hotel marketing is another data-heavy department because it involves multiple channels, including the hotel website and search engine marketing, email marketing, and social media channels like LinkedIn. Each channel generates valuable data for measuring return on investment (ROI) and deciding where to allocate resources to generate the best results.
Marketing KPIs. Examples of website metrics include monthly site visitors, page views, bounce rates, and conversions. Email marketing metrics include subscription rates, email open rates, and click-through rates. And social media metrics include followers and engagement.
4. Food & beverage
Hotel restaurants, bars, and room services tend to run on tight margins, so it’s important to keep a tight rein on expenditures. If costs climb without commensurate increases in revenue, it can weigh heavily on the hotel’s balance sheet. Managers can analyze revenue data to find ways to increase guest spend through menu engineering, upselling, and promotions. It’s also important to analyze spending behavior to target guests with a high propensity to purchase F&B on property.
Food & beverage KPIs. Examples include average check, average table occupancy, labor costs of sales, food and beverage costs of sales, and revenue per available seat hour.
Spotlight: What are STR reports, and why are they important?
An important method for evaluating the success of a hotel’s revenue strategies is to benchmark performance against competitors. For many properties, this means subscribing to STR’s monthly STAR Report. The STAR report provides rate, occupancy, RevPAR, and market index data for a hotel’s competitive set, along with market averages and other valuable data points. The information helps property owners and operators visualize how they’re performing relative to competitors and identify opportunities to establish a competitive advantage, boost performance, and increase market share.
What are the 4 types of data analytics?
Data analytics can be divided into four main types:
- Descriptive analysis focuses on past data. It tries to answer the question, “What happened?”
- Diagnostic analysis examines data to find the cause of an outcome. It tries to answer the question, “Why did it happen?”
- Predictive analysis focuses on the future, utilizing historical data to predict future outcomes. It tries to answer the question, “What is likely to happen in the future?”
- Prescriptive analysis draws on data to determine the best decision or course of action to take to solve a problem or reach an objective. It tries to answer the question, “What should we do?”
Which type of analysis you perform will depend on your objectives and the type of data available to you. To learn more about data analytics, check out Cloudbeds’ book, More Reservations, Happier Guests.
Hotel data analytics software
To perform data analytics accurately and efficiently, hoteliers need the assistance of technology. Many of today’s software tools use automation to collect, process, store, and report on data, saving hoteliers countless hours and preventing manual errors.
Here are a few examples of data management tools by department:
- Guest experience data tools. These include the property management system (PMS), which acts as the central repository of guest profile information, spending behavior, and payments. Online reputation and guest survey solutions help hotels collect, analyze, and benchmark guest feedback data.
- Revenue management data tools. These include rate shopping tools to facilitate dynamic pricing, channel managers to manage a diverse distribution strategy, and revenue management tools to manage hotel room rates, inventory, and stay restrictions.
- Marketing data tools. Options range from free platforms like Google Analytics and Search Console to comprehensive digital marketing platforms to help hotels reach target markets and optimize return on marketing spend.
- Food & beverage data tools. These tools include point-of-sale (POS) systems, payment systems, and labor management software to help hotels manage costs, optimize scheduling, and increase guest spending.
The importance of data integration
With so many data sources to manage in the travel industry, hoteliers need a modern PMS system that provides seamless, secure connections to tools and applications in every department, centralizing and streamlining the collection, integration, storage, and usage of all types of data. With the right tools, virtually anyone can be a numbers person.
Cloudbeds can help you leverage data to improve your property’s performance. Learn more.