As technology advances, more and more industries are adopting data analytics — and the hospitality industry is no exception to this movement. Since the COVID-19 pandemic has imposed many restrictions on travel and tourism, the hospitality industry, a key contributor to the global economy’s growth, has taken a severe hit.
This has forced many sectors of the industry to become more innovative and technologically aware. Using AI, automation tools, and data analytics, hospitality has experienced a significant boost in business operations.
Now, hotels, restaurants, and entertainment and recreation services can use data to identify guest trends, understand internal weak points, and create various solutions to fix them to promote overall profitability.
“Data is now part of every sector and function of the global economy and, like other essential factors of production such as hard assets and human capital, much of modern economic activity simply could not take place without them,” consulting firm McKinsey explains.
“The use of big data — large pools of data that can be brought together — will become the key basis of competition and growth for individual firms, enhancing productivity and creating significant value for the world economy.”
As the world begins its return to normalcy, companies in the hospitality industry must analyze the importance of data analytics, and how it can effectively maximize their profits.
Business Data Analytics: What They Are and Why They Matter
Data analytics pertains to a wide range of applications, especially within the hospitality industry. To understand how they work, we must first understand the importance of their role.
Businesses are more reliant than ever before on data analytics for optimizing and analyzing overall performance. Data analytics offer solutions to manage, protect, transform, and communicate information to make more educated decisions. By harnessing raw data, business data analytics generate usable and comprehensible data, which businesses leverage to reduce risks and costs, and increase profitability.
To function, data analytics requires three key technologies: machine learning, data mining, and data management. Machine learning is an aspect of AI, which allows the software to discover and automate business models. The goal of this aspect is to file and analyze large amounts of data as quickly as possible and produce outcomes based on the models.
Secondly, data mining takes these large chunks of data and identifies trends, patterns, anomalies, or correlations among them, allowing companies to more easily and precisely answer complex questions.
Finally, data management offers a set standard to collect, keep, and manage the quality of data before the company officially puts it into practice. The goal of data management is to optimize the use of data according to company policies and procedures.
Together, these technologies greatly determine how a company measures against its competitors. In the hospitality industry, business data analytics allow companies to possess a much more detailed understanding of what clients, customers, and guests want, and how to resolve potential conflicts.
How Business Data Analytics Benefit the Hospitality Industry
As we’ve learned, data analytics relates to various technologies. But each aspect serves as a benefit in enhancing business operations, developing marketing strategies, and identifying key customer trends, among others.
Over the past few years, the hospitality industry has looked forward to digitization. From increasing online food delivery services and online accommodation services the digitization of the hospitality industry has become widespread.
With this increase in online usage, customers, clients, and guests are demanding faster-paced services, which, of course, requires a faster-paced system of business operations.
That’s where business data analytics comes in.
In 2020, executives and company leaders in the global hospitality industry were questioned on the importance of data analytics, and how it relates to the success of their organization. The results showed that over 50% believed that data analytics had become absolutely necessary to reach a considerable profit.
Now commonly called the “smart” hospitality sector, the market size of this industry has generated $13.9 billion USD thus far and is predicted to reach $58.1 billion USD by 2027 — a CAGR (compound annual growth rate) of over 22%.
To enhance business operations, data analytics has become not just a luxury, but a necessity. Companies now rely more heavily on these technologies, as it allows them to make more educated decisions as it relates to customer trends and demands.
Leverage Predictive Analytics for Product Recommendations
Predictive analytics — one of the four main branches of business data analytics — allows companies to incorporate key data into various algorithms to make predictions about potential outcomes.
For the hospitality industry, this can be extremely useful to determine which product proves to be most useful for customers, as well as the chances of customers purchasing that product.
Large technology corporations utilize predictive analytics to learn consumers’ preferences and understand which products or services are ranking above others. For example, one uses its recommendation tool to produce over 30% of its consumer preferences. How so? By using AI tools and predictive analytics.
Similarly, hoteliers can recommend offers and sell products in real-time by combining predictive analytics and geolocation data. This further allows them to use this knowledge to acquire, understand, and retain their most valuable and loyal customers.
As predictive analytics continue to advance, the hospitality industry will experience complete transformation as businesses can provide personalized offers and create unique experiences in real-time according to the behaviors, trends, and needs of customers.
Business Data Analytics Allow for Optimized Pricing Management
For most businesses in hospitality, pricing management is one of the most important aspects. Until recently, pricing management meant pulling lengthy reports and using historical data to predict future trends and demands. Now, with more fast-paced, competitive markets, developing dynamic and optimized pricing management methods is crucial to a hospitality company’s survival.
In the case of a hotel, price optimization means being able to sell the right room to the right guest at the right price at the right time. To effectively do so, it becomes an absolute must for the hotel to leverage the power of data analytics.
Price optimization uses data analytics to achieve two main objectives. The first is understanding the reactions and behaviors of customers to vary prices for different products and services. The second is finding and setting the ideal prices for the company according to its goals.
When these two objectives are achieved, hospitality businesses can get a step ahead of the competition. As businesses in the hospitality industry strive to keep up with the ever-advancing technologies, they must use better research, evaluation, and accurate predictions according to market demands, which will allow them to generate more optimized pricing management methods.
Virtual Assistants Help Drive Growth and Revenue
As more and more people rely on their digital devices, virtual assistants have become the new normal as a booking platform for trips, appointments, and reservations. Given the popularity of virtual assistants like Siri and Alexa to complete these actions, businesses in the hospitality sector should expect a heavier reliance on similar voice-activated services.
Powered by AI technology, virtual assistants make processes like travel planning, hotel reservations, and other bookings much easier and more streamlined. The growth of this online tool is transforming the way in which guests and customers use services and purchase products in the travel and hospitality industry.
To increase participation in this trend, hospitality companies can use data analytics to produce other digital assistance to enhance the customer experience and work to generate relevant results from voice searches. Not only is this a preferred method for customers, but the use of virtual assistants has been proven to reduce company costs and drive growth.
Instead of tending to day-to-day repetitive tasks, companies can use virtual assistants to automate numerous administrative tasks like bookings and reservations, room service requests, meal suggestions, concierge services, and other basic jobs. This allows employees to focus on more important tasks which will generate more revenue for the company.
Enhance the Customer Experience Through Data Analytics
In the hospitality industry, customers are the lifeblood of companies. Using data analytics to generate an enhanced customer experience will keep your most valuable customers engaged.
To establish themselves as an innovative hospitality brand, companies gather and unify data from various sources, like social media, marketing interactions, and websites, to develop an all-encompassing understanding of each individual customer. Additionally, this information allows companies to gain greater insights and suggestions on preferred stay options, destinations, and other information that demonstrates a customer’s preference.
Business data analytics allows companies to offer the agile, automated, and personalized experience every customer wants. Plus, using data can help you understand exactly what your customers are looking for, how they shop, and how they engage with your services.
Data analytics helps you build better solutions to service and retain those customers. BirchStreet Systems Reporting & Analytics Solution provides a single lens on all spending with business intelligence to power your organization with over 200 standard reports.
As companies in the hospitality industry realize the power of data analytics, the global hospitality market can expect significant growth in the overall customer experience, as businesses become more in tune with customer needs and preferences. Data analytics will further allow hospitality and travel companies to make better decisions and open gateways to achieve maximum growth.