Hotel Business Intelligence: Issues, Challenges, and Solutions

Every industry, including travel and hospitality, needs data analytics to understand customer behavior and drive improvements to their operations.

Hotel Business Intelligence (BI) addresses the problem of tracking, analyzing, and interpreting crucial data. 

However, the system is not a stranger to challenges. Mainly because it collects and transforms raw information from multiple sources.

This article will define the peculiarities of hotel business intelligence and pitfalls faced while providing practical solutions.

In this blog, we’ll address the following topics.

While the industry is a no stranger to data and its importance in making better business decisions, it’s often recommended to confirm the obvious and take necessary actions.

Importance of business intelligence for hotels

Business intelligence is growing at an amazing rate. And it would be wise to use this tool for your organization’s growth.

In 2016, the global intelligence market’s value was at around $15.64 billion. This figure is expected to reach a staggering high of $29.48 billion by 2022, with a CAGR of 11%.

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We already know that the hospitality industry generates a lot of data. Names, email addresses, phone numbers, reservation dates, arrival and departure details, and communication preferences are just some of the information this industry needs to collect.

In a nutshell, hotel business intelligence allows you to study market trends and analyze how it affects your customers’ behaviors. To mention, here are a few aspects where business intelligence affects hotels.

Improves decision making

Hotel business intelligence lets you take all the data and use it to run your hotel more efficiently. The BI solutions help you in decision making and make it possible to compare historical data with current data.

Above all, you can perform predictive analysis by comparing different metrics across any timeline. Parsing the data collecting through BI helps you figure out when to intervene and take necessary actions. You can also determine what to do to increase profit or avoid losses and errors in the future.

Improves your marketing and revenue management strategy

You can get hotel bookings from multiple sources such as websites, OTAs, Local Travel Agents, GDS. And it can be difficult to use this raw data on its own.

Thankfully, hotel business intelligence makes raw data analysis easy and helps you find out which of these booking sources is the most lucrative option.

Therefore, it becomes convenient for your management team to determine what marketing strategy to employ and which demographic to target.

Enables you to adapt to latest trends

BI makes it easy to identify trends early enough.

This makes it possible to adjust your strategy in a way that’ll maximize your growth potential. It helps your business to scale with less difficulty.

Identifying patterns on time help you set your business in the right position for success.

That was all about the importance of hospitality business intelligence. Let’s take a look at some of the problems BI helps you to solve in your business.

What problems does BI address in hotel businesses?

BI addresses and solves a variety of hotel industry problems. Some of them are:

Poor Performance Management

Starting a hotel business is one thing, but keeping it afloat for years is a whole different ball game.

Over the years, it becomes harder to make well informed, long-term and strategic decisions quickly and efficiently.

This is where hotel business intelligence comes in. It gives you relevant and deep insights into how your business is performing today.

For instance, it interprets the data you collected from your time trackers and identifies where you’re losing money. Armed with this knowledge, you can come up with proactive measures to improve performance. 

This is better than finding out later, at a time when it’ll be too late to make changes.

Losing Customers

Business intelligence tools for hotels give valuable insight into guest behavior. It uses collected data to perform analysis and to determine how your guests think.

This analysis gives you the necessary tools to create guest profiles based on their history, preferences, interests, and such likes.

As a result, any hotel can deliver a personalized experience to its customers and build long-term relationships.

Slow Market Response

This is one of the easiest ways to lose money and guests.

Hotel business intelligence solutions help you study market trends and analyze how it affects your guests’ behaviors.

You can even view these reports on a daily basis instead of waiting until the end of the quarter. If market shifts occur unexpectedly, you are better prepared to make quick decisions.

You’ll also predict how your customers will react, and make adequate changes to your services.

Addressing these issues will not only boost productivity, but also increase revenue. BI makes this process easier as evident in the examples we’ll show below.

Use cases of hotel business intelligence

Modern hotel industry business intelligence provides a holistic view of various hotel metrics and activities. While this list is not exhaustive, it contains a few of the main ones. Let’s take a look at them.

Classification of Customers

Hospitality is concerned with serving each customer using an exclusive and unique approach that will meet their varied needs. You can segment or classify your guests, using information such as behavior, geography, demographics.

This information is gathered from reservations and bookings made on the website, CRMs, and through POS purchases.

It could also be obtained from other sources where each individual inputs or shows their personal preferences.

Apply this practically in your business to use customer classification to give individually personalized offers or use it to create new ways to improve guest experience.

Analysis of Reservation Behavior

Another primary metric of hotel industry is the occupancy rate. It shows you the percentage of rooms occupied at a particular time or over a certain period.

By collecting data on occupancy rates from your PMS, you can analyze factors that affected it in the past and use this to make predictions for the future.

For example, if you have the data on your hotel’s annual occupancy rate, you can analyze and understand what affects occupancy. Is it seasonal changes, changes in the competitors’ market, events, or your approach to marketing/pricing strategy?

Moreover, knowing what factors affect the reservation behavior of your customers will help you to understand reoccurring tendencies. You can use this to figure out how to respond to them and increase your revenue.

Revenue Management

Revenue management is a discipline on its own. It’s a complex approach that deals with the basic law of demand and supply, which is then used to generate target revenue by predicting optimal room rates.

Revenue management uses several KPIs such as revenue per room (RevPar), average daily rate (ADR), or total revenue per available room (TRevPar).

Here, demand forecasting is one of the main areas of interest in revenue management. It relies on bookings and market data for its analysis. It’s possible to consider all KPIs for analysis through market data and utilizing stored information from the past. Consequently, you can use this information to estimate future demand for a particular product or service.

So, demand forecasting is all about using historical data to make forecasts on probable product demands.

If you decide to go with custom solutions, you can use several advanced methods to make demand forecasts. Some of these methods include search engine data and other sources that are publicly available.

Advanced Pricing Strategies

You need to understand market changes and devise strategies in order to create the best pricing strategy for your hotel.

To achieve this, you must understand your guests’ expectations, demographics, and needs.

Understand where the inflow of demands is coming from and how seasonal changes affect your hotel booking rates. 

Have you noticed that you receive more business travelers demanding single rooms in the summer months and families requesting suites during the winter holidays?

Machine learning has advanced to a point where BI data can be used to automate rate changes and implement dynamic pricing.

This means that you don’t need to analyze this data manually. Hotel business intelligence through machine learning can be trained to go through your historical data to identify common tendencies.

It can use this to suggest optimal pricing for specific periods automatically. It also helps you monitor your competition and their rates. If they increase or decrease their prices, the tool enables you to adjust accordingly.

Having a clear understanding of where your guests are coming from and when they choose to come will help you with your pricing strategies.

You may like to read: 9 Powerful Hotel Pricing Strategies for hotels

Analysis of Distribution Channels

A single hotel can have lots of different partnered distributors. They connect with these partners through channel managers. These can include OTAs, GDSs, bed banks, and more.

When selling rooms through indirect sources, channel managers take into consideration the costs of using each distribution channel. Of course, the amount includes taxes, commissions, and other maintenance expenses. 

With Business Intelligence, you can track and monitor the amount of revenue generated by each channel. You can then compare this information to the distribution and cost of running the channels. Using this knowledge, you can easily figure out which partnered distributor contributes more to the success of your business, and which channel is causing revenue leakage in your business.

Also, analyzing your distribution channels will reveal any distributor violating the rate parity agreement.

Insight into Direct Competition

We can all agree that the hospitality business is a cutthroat industry. Therefore, it makes sense to understand what offers your competitors are proposing to guests if you want to remain relevant.

Hotel managers can access market data in several ways. One of such ways is to access data provided by market consolidators such as HotelTechReport, STR, and HotelMarketData.

You can also use the method of the scraping prices of any direct competitors that you have in your region.

Whichever method you decide to use, BI will provide you with a competitive advantage by helping you to optimize your marketing and pricing strategies.

What are the sources and components of hotel data?

Now that we’ve seen the actual cases of Business Intelligence, let’s take a look at the data sources that hotels can use, including their components.

Data sources include any internal or external systems containing valuable information about your customers, business, metrics, revenue and such likes. Property Management System (PMS), Revenue Management System (RMS), and Channel Managers are considered the main sources of data in the hospitality business.

Property Management System (PMS)

A Property Management System or PMS is a software that facilitates the administrative tasks and reservation management of a hotel.

Its many functions include channel management, reservations, occupancy and rate management, housekeeping, and front-desk operations.

The major function of PMS software is to manage and control reservation and financial transactions. Even so, you can also use it to carry out human resource management and manage housekeeping.

In essence, PMS allows a hotel to facilitate the main processes in its internal and external operations.

Revenue Management System (RMS)

As Robert G. Cross wrote in his book, Revenue Management: Hard-Core Tactics for Market Domination, he defines revenue management as “the art and science of predicting real-time customer demand at the micro-market level and optimizing the price and availability of products.” 

Simply put, revenue management is about using data collected in the past to predict the behavior of your customers.

You can use this to sell your services at an optimal price.

Think of it this way. Using a RMS can help you sell the right room to the right guest at the right price. The right distribution channel and the best commission structure is also imperative in this case.

Channel Manager

Channel managers control these distribution channels through which guests book and make reservations at a hotel.

Ideally, a distribution/sales channels include websites, metasearch sites, online travel agencies, travel agents, tour operators and your own hotel brand website. 

Channel managers maintain a connection between a hotel’s property management system and their chosen sales channel. Using that, hotel owners can distribute their rooms amongst these channels and deliver reservations to them much faster.

Channel management analysis allows you to study available data and figure out which sales channel yields them more revenue. As a result, they can refine their marketing strategy and optimize pricing.

Challenges of using business intelligence in the hotel industry

Although hotel business intelligence brings a lot of benefits to the industry, it still has its challenges. Let’s take a look at some of them.

Justifying the need for investing in BI

The first challenge is trying to convince stakeholders as to why BI is a necessary investment.

It may feel unfamiliar to handle initially. In addition, you might feel discouraged by the idea of trying to integrate a new process into your business.

However, remembering the benefits and how it can give you a competitive advantage will help you surmount this hesitation. 

Identifying the right data to use for analysis

As we’ve mentioned, hotels operate with a lot of data sources – each of them storing different information in different formats.

This makes it challenging when trying to decide which data to use for analysis and what purpose this data will serve.

With a business domain, it makes the task-specific for the hotel industry. This is because multiple properties may have different infrastructures, in addition to different types of data stored.

It means that the data you choose to use will depend on what you’re trying to achieve following your analysis. To make this easier, you can outsource this to a data science team.

They will be the ones to analyze any information you have. However, in the end, how you apply this to your business is up to you.

Integrating BI into the internal infrastructure

Business intelligence in hospitality industry is more than a tool.

It encompasses various software tools that will be integrated into the internal infrastructure of your business.

Creating this connection between the systems will enable BI to extract necessary data automatically from its source. It can then apply transformation to this data and upload bits of information, which will be used to generate visuals and reports.

An Application Programming Interface (API) establishes an integration between two software systems. You can view this as a connector that enables software programs to access each other’s functionality and exchange data in the process.

Now, hotel software has three categories of underlying systems, which include:

1. No Software or Legacy Software

In this category, you’ll find hoteliers that do not operate a Property Management System (PMS) or any other hotel management system to begin with.

That is, they don’t use any software at all. This category also contains those that use legacy software. However, this software is difficult to integrate when using modern data transfer standards.

2. PMS with Closed API

Well, certain PMS software may come with closed API specifications. This means that third parties cannot easily access the API. In some cases, the API access does not even exist. When faced with these scenarios, hoteliers have two options: 

1. They can rely on the existing tools provided by their vendor (Some PMS providers support a few analytics).
2. Consider switching to other providers.

3. PMS with Open API

This is the opposite of a closed API. Developers have access to API documentation.

To achieve a successful integration of one software system with another, the PMS should have an API with open specifications.

When it comes to a closed API, you’ll need the PMS vendor to create a custom integration with each required system. This approach comes with its own challenges in terms of maintenance and accessibility.

Creating a custom API connection for your closed APIs comes with difficulties that are well known in the industry. To solve this integration issue, software and BI vendors will develop an out-of-the-box integration with popular PMS. These PMS will have either close or open APIs.

Unusual Integration Options – Impala API or Custom PMSs

• Impala API is a universal API designed with the purpose of integrating as many PMS systems as possible, allowing them to be accessible through one interface. There are available PMS, which includes six systems. They are Oracle Hospitality Opera, Clock PMS+, Protel, Mews, Oracle Hospitality Suite8, and Guestline. In addition, as a hotel operator, you can vote for PMS that you want to appear in Impala’s integrations list.
• Custom PMS are commonly used by large hotel networks that have data security concerns. Also, if a hotel network doesn’t find a system on the market that fits, custom PMSs offer an easy solution. However, it is worth noting that this is an expensive investment. The upside to this approach is that building a custom integration for your hotel business will make it easy to integrate with any other software.

Investment and infrastructure a BI system needs

Hotel business intelligence software are one of the best investments you can make for your business.

However, most hoteliers do not know where to start from.

Building a house needs a blueprint and foundations. Similarly, you require a solid foundation with proper planning and a clear purpose to implement a BI system.

However, the fact remains that you cannot move your business in the right direction if you don’t have the necessary data to help you make decisions.

With advances in modern technology, it has gone far beyond insights alone. Gaining access to data in real-time is the power tool that makes the difference, especially in today’s on-demand and fast-paced economy.

3000 business leaders report BI priorities to be about master data management and data quality.

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Now, there are lots of data pouring in on a daily basis. So, having a solid BI infrastructure designed around the purpose and strategy of your hospitality business is what gives you the competitive edge.

For example, if your focus is on building customer experience, then your BI infrastructure should be built around this strategy. This way, you can analyze customer behavior and feedback to know how to keep them coming back.

Focus on developing your strategy first and understanding what it is you want to fix or achieve before you move on to source data. To make it easier to develop your strategy, you can start with a blueprint.

How to choose the right BI provider for the hotel industry?

To get the best out of business intelligence tools, you have to know the right things to look out for.

For starters, you need to make sure your provider knows what to do with the data you’ll provide. It has to be done in a way that is essential and beneficial to your business.

After that, the data analysis and visual report should make your revenue management strategy clearer and not more difficult.

So, these are things to look out for in a BI provider and their tool:

• The alerts come in real-time
• They provide in one view, a comparison of room rates with competitors 
• Access to unlimited rate shopping
• Exportable reports
• Rule creation for rate strategy

These are a few of the capabilities your BI system should have. It is needed if you’re going to achieve any meaningful data-based decisions around your hospitality business.