Why is Marriott the Big Data analytics leader in hospitality? [Case]
It’s been a while since the tourism and hospitality industry have recognized the need for a customer-centric approach centered around the visitors’ needs, desires and preferences. Nonetheless, many hospitality executives still struggle to offer carefully personalized experiences that delight their guests. Understanding what modern uber-demanding customers want and actually provide the kind of service they are looking for remains a challenge.
This is because customer satisfaction in hospitality is a very complex topic and measuring it remains a burdensome task. A 2008 research from Monash University stressed the existence of a large gap between what managers believe is important and what guests say is important in the selection and evaluation of accommodation. Sure, customer surveys can help but, due to poor sample quality and low response rates, the insights they offer are often too vague. As such, while more than a decade has passed since this study was carried out, many hospitality management teams are still stuck in that same scenario.
Luckily, today big data analytics technologies are here to help. In this article we take a look at the artificial intelligence and data science strategy of the globally recognized hospitality leader Marriott, considered a leader among hotelier attempting at digitalization. However, before getting into Marriott’s approach to big data, let’s first give a look at the current state of the hospitality industry.
Big data analytics in the hospitality industry: context and trends
The hospitality industry is going through a very interesting phase of growth and transformation. The last decade has been characterized by steady growth and analysts forecast that this trend will continue, at least for the coming years, though not every company might be able to keep pace and the least innovative brands will be driven out of business.
Traditionally, the products and services offered in the hospitality industry have been characterized by a high level of homogeneity. As a result, the competition in this vertical has always been intense and this explains why hospitality executives spend so many of their energies trying to increase customer satisfaction. Indeed, delighted guests become loyal customers, repeat purchases and contribute to a positive brand image through their reviews and word-of-mouth. Ultimately this leads to competitive advantages and higher profitability.
Further, the rise of new community-based online platforms like Airbnb has made the competition even harsher. Analysts describe the context of today’s tourism, travel and hospitality industry as hyper-competitive and characterized by temporary advantages that need to be constantly kept under eye or will be ripped away by more innovative brands.
The key to get and sustain competitive advantages is big data analytics. Indeed, travel and hospitality companies have access to huge amounts of data that, if analysed properly, provides meaningful and actionable insights that can radically reshape a company’s strategy.
Big data helps hospitality firms to reframe key questions about the way they research, collect and use information and gives them the power to act based on live metrics and real-time data. Key benefits of real-time big data analytics in the hospitality industry include improved inventory management, optimized workforce management, enhanced guest experience, increased marketing efficiency and streamlined processes.
The case of Marriott International
With almost 7,000 properties worldwide, Marriott International is one of the largest hotel chains in the world, the largest (by far) in terms of revenue. It operates in 130 countries and territories, with a record pipeline of 478,000 rooms, and keeps expanding by acquiring smaller but valuable brands, like Delta Hotels (2015) and Starwood Hotels and Resorts (2016).
In 2018, the company signed management and franchise agreements for 816 properties and opened nearly 500 properties comprised of more than 80,000 rooms around the world across its portfolio of 30 brands. Analysts agree Marriott strengthened its leader position in the luxury hospitality market, set new records for signings in international markets and grew their loyalty program to 120 million members around the world. As such, despite seeing Marriott’s revenue drop, Tony Capuano, the company’s Executive Vice President and Global Chief Development Officer, made optimist statements about 2019.
So what’s the secret of Marriott’s success? Marriott is constantly striving to attract new customers, retain legacy ones and open new markets and built the right corporate culture to sustain these efforts. Most importantly, the hotel chain recognizes the value of innovation and understands how to use data to guide decisions. Its Data Strategy and Governance team implements innovative solutions to provide decision-makers with frictionless and timely access to high-quality, integrated data. The end goal is to actually make the guests’ travel experience as smooth and friendly as possible.
How Marriott uses big data analytics to constantly improve
Marriott is able to get many competitive advantages from its use of big data analytics. The company uses data to track competitor brands and hotels, identify new revenue streams outside of rooms, such as new facilities and services, and make sure they are satisfying both guests and people in the local community. The company’s main areas of focus, however, are revenue management and customer satisfaction.
Revenue management consists in setting optimized prices in order to achieve the best possible profit margins. Marriott’s approach to revenue management is known as Dynamic Pricing Automation and allows the hotel chain to accurately predict demand and patterns of customer behavior.
Dynamic Pricing Automation requires real-time, accurate data from a variety of sources, which refers to local and global economic factors, events and weather reports as well as key metrics, such as average daily rate, cancellation and occupancy, revenue per available room, reservation behavior, average occupancy rate, gross operating profit per available room. By integrating and analyzing all this information, Marriott is able to predict customer behaviour, understand how its properties are performing compared to their competitors in the same area targeting similar profiles and eventually adjust its pricing strategy accordingly and proactively.
Starwood hotels started implementing this approach in 2014, not long before merging with Marriott International in 2016. The hotel chain invested more than $50 million in its Revenue Optimizing System (ROS), which can integrate data from both internal and external sources and suggest optimal prices based on the results of its real-time analysis and demand forecast. For instance, if on a rainy day North American consumers are more willing to spend for a week of vacation in the Caribbeans, the ROS will automatically adjust rates. Thanks to dynamic pricing automation, Starwood achieved a 5% increase in its revenue-per-room in one year and today Marriott is able able to maximize its profit and ensure adequate staffing.
Marriott’s other main focus is to offer its customers the most seamless and comfortable experience as possible. To do so, the hotel chain is introducing in its facilities new digital technologies that rely on data to function properly while also collecting precious data on customer satisfaction and guests’ tastes. For instance, the company is testing facial recognition check in, which allows guests to check in in less than a minute through a digital terminal, thus also skipping waiting lines at the desk.
Further, Marriott is also experimenting with guest service robots for routine tasks such as concierge services. The hotel chain partnered with Amazon to install virtual digital assistants in some of its properties. Every room in those facilities will be equipped with Amazon Echo speakers that feature Alexa for Hospitality, the software specially designed by Amazon for the hospitality industry. Guests will be able to access local and hotel information, request hotel services as well as listen to audio-books, play music and control smart home products such as lights, thermostat and TV.
According to Marriott’s executives, Amazon Echo offers them many advantages. First of all, it contributes to an engaging and delightful experience for the guests, making them feel closer to home. Secondly, it liberates the front-desk from several duties, as customers will submit most of their questions and requests to Alexa, rather than Michael from the reception. Finally, this allows Marriott to collect tons of information about their consumers preferences, which will provide the company with a deeper understanding of what its guests are looking for.
Marriott’s approach to big data analytics: what you can learn
Most hospitality companies focus analytical efforts on marketing. That’s great, as big data analytics allow marketers to create more personalized campaigns and communicate more effectively. However, this also indicates a narrow view of what big data technologies can actually offer.
Marriott, in turn, has a deeper understanding of big data analytics than many of its competitors. The company understands it has access to a huge variety of structured, semi-structured and unstructured data sources available. As such, there are astonishing amounts of data that can be collected, analyzed and applied to improve any process in the company. Hence, all the hotel chain’s operations are managed based on such data.
Marriott’s decision-makers can develop their strategies based on information such as customer feedbacks, transactional activities, the use of loyalty programs and third party demographic data. Other data refers to their customers’ household profile, including the number of kids, the type of jobs held by their family members, their salaries, even where and how they spend their money. Finally, even data from weather reports and local events schedules can be used, for instance, to improve demand forecasting, optimize pricing or identify new business opportunities.
However, Marriott executives understand that managing all this information is complex. Indeed, not all data has the same value and is actually actionable. Data can be reactive, predictive or proactive. Simply put, it can either give you insights about your past activities, either help quantitatively predict outcomes or qualitatively prescribe what steps you should take in the future. What you should look at depend on your goals.
Further, there are tons of complex analytical models and approaches to big data companies can adopt. And they can empower them in so many different ways. However, firms must know what they’re looking for to be productive. As Nancy Pyron, senior director of operations research and revenue management at Marriott International, once explained: “The complexity of a model can span from giving you a three-month moving average to building a full neural network. But the level of complexity interacts with the accuracy (of the data), the time (it takes to build and operate) and the cost.”
Machine science and neural networks can provide a very deep understanding of a business operations, but require huge amounts of data. This can be a challenge as there are many costs associated with data and in such quantity it gets harder to interpret and use it. Indeed, commitment from executives and communication are critical when dealing with big data, otherwise companies risk to end up developing models that don’t address their most important questions.
Therefore, Pyron advises to “start with the most simple and work forward.” Nonetheless, she also recommends companies not to hold back from becoming more and more sophisticated as time goes by.
Big data analytics: challenges and opportunities of the hospitality industry
Investing in big data analytics doesn’t guarantee a hotelier will outperform their competitors. There needs to be a solid understanding of big data, not just from a technological perspective, but also, and most importantly, from a cultural point of view. It’s about being data-driven, not about collecting huge amounts of data that increase complexity and no one knows when they will be used.
Further, the case of Marriott also shows that there are always some obstacles when embracing big data analytics, even for those who understand it. For instance, the integration of the Marriott and Starwood loyalty programs produced some technical issues that temporarily frustrated customers.
Further, the hotel chain suffered a hacking attack that involved data from up to 500 million guests. While this is definitely worrying, luckily the unauthorized third party wasn't able to gain access to encrypted payment information to utilize the cards thanks to the company’s data security measures. While both issues have been solved, both contributed to the drop in revenues the company experienced in 2018.
While issues like these are not uncommon for businesses embracing artificial intelligence and data science, the benefits of these technologies totally outweigh the cost those challenges. Becoming data-driven allows to increase efficiency and sharpen strategies based on real-time, accurate information. Big data can bring incredible benefits to all departments, not only marketing, and those who will full embrace it will be those leading the industry in the (near) future.