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Hotel revenue management, data responsibility and customer profiling

Hotels and Data in 2018

The relationship between businesses and their customers’ data is a complex issue, and in May 2018, the introduction of the EU GDPR (European General Data Protection Regulations) has changed the regulatory landscape, effectively ending a free-for-all in the unfettered use of customer data.

Like any other business, hotel revenue managers must be aware of the increased expectations from regulators and customers alike, when collecting, storing, and using data.

Where once data could be collected, stored indefinitely, and used with little restriction by businesses, the balance of power has now altered slightly, putting the tangible privacy rights of consumers at the heart of data collection, storage and use: but what does this mean for hotels and revenue managers?

Essentially, the complex regulatory obligations should have little effect on responsible hotels and revenue managers.  There are six legal grounds for processing customer data, but the two most relevant considerations for hotel revenue managers are ‘consent’ and ‘legitimate interests’.

This means that, where the customer consents to the use of data, this can then be used for improving and personalising the customer experience. Consent can easily be incorporated into opting into mailing lists, choosing to complete customer satisfaction surveys, and engaging with customers to address any concerns.

It is impossible to obtain explicit consent for all of the ways that data can be used, but data can also be used for legitimate interests.

‘Necessary for legitimate interests’ is slightly more difficult to define and may be subject to much legal argument in the years to come, but essentially the principle is simply that of responsibility.

Direct marketing to inform customers of products and offers, and the personalisation of marketing based on data should be valid where responsibility is exercised, and sensitive information is neither sought nor abused.

Hotel revenue managers should continue to include customer profiling as part of revenue management strategy. Making a stay in a hotel a better experience for a particular customer is an intrinsic part of the hotel business and of revenue management strategy: the data that this flows from is clearly necessary and legitimate.

The benefits of customer profiling for hotel revenue management

Customer profiling and segmentation is a potentially huge topic in hotel revenue management.

Essentially, in a perfect world it would be easier to offer the right service to a customer if you knew everything about them: their budget, their method of transportation, their lifestyle, preferences and the media channels that they used.

Effectively, knowing something about customers allows a revenue manager to create different audiences for their messages.

Knowing who the most valuable customers are, allows revenue managers to target similar groups.Hotel Revenue Management, Data Responsibility and Customer Profiling

Customer profiling is becoming increasingly sophisticated, for example, vast quantities of reliable information about the type of customer can be discerned from a postcode alone: some homes are likely to be post-family retirees more likely to be interested in a luxury experience, whilst other homes may be value family homeowners more focussed on budget.

This is the most basic example from the most basic piece of data: imagine how much more sophisticated analytical practices can flow from knowing much more about what a customer’s profession, hobbies, interests and lifestyle priorities can yield. A more detailed analysis of how this works will be considered in a future blog.

Knowing more of the right information can improve customer experience and consequently ratings, satisfaction and customer loyalty.

This can tangibly feed into room occupancy and ROI. If data is important in this way, hotels should be better at collecting it, where appropriate, and using good communication to get the consent and acquiescence of the customer base to put a customer, as opposed to customers at the heart of revenue management strategy.

If you have any concerns about data collection and having the right strategies in place, Octopus Revenue are here to help.

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