Big Data ROI – a worthwhile investment!

By Michael Toedt - Managing Director at Dailypoint Gmbh

Visit us at HITEC booth 2246
13 October 2015

A world without Big Data or industry 4.0 is unimaginable today. Meanwhile, each responsible manager should understand the importance of this subject, at the latest since CeBit and even Chancellor Merkel has put it on top of the agenda.

Strangely enough hardly anybody asks for the concrete usage! Mainly large corporations outside the hospitality industry are investing heavily in Big Data, if they have not already started a while ago. It is almost amusing to see that many of them lack a usage scenario. Consulting firms are hired to hastily define areas that can justify their investments.

The hospitality industry is often accused of being unprofessional, but other industries have not exactly covered themselves with glory either. This is somehow comforting. As with every investment, the key question is WHY the investment is done and this question should be asked before an investment is done. In my experience, this is rarely the case. In particular, entrepreneurs who invest their own money could avoid bad investments by asking this question.

The key motivations for IT investments, which are the first steps towards Big Data, should be:

  • Reduction of Costs
  • Creation of Additional Revenue
  • Gathering of information (which justify the investment)

Other reasons certainly include sustainability, generation of USPs or enhancement of services. But the ultimate goal should also be a sustainable increase in profitability.

With dailypoint™, we provide the leading Big Data package for the hospitality industry. In the following, I will explain why an investment in Big Data is so profitable. The following aspects are significant for a holistic Big Data approach:

  1. Empower management to take the right decisions
  2. Support direct sales
  3. Conduct targeted cross- and up-selling
  4. Optimize the use of media channels
  5. Reduce administrative costs and licence fees
  6. Increase productivity

The six variables for Return on Investment (ROI) alone make it clear that a general statement is not sufficient. In order to be able to make a valid statement it is important to look at the characteristics of each individual company. Experts claim that intelligent data management, if used correctly, can increase profitability by up to 100%. How this works I will not be able to explain in a blog. But you can find detail information in my latest book "Data Revolution". Here is a brief and explicable summary:

1. Taking wrong decisions

Still today, many decisions with a huge financial impact are taken instinctively or based on misinterpretations or false data. Social Media channels including TripAdvisor and Facebook are used to enhance products – an almost silly misuse with risky negative effects. Big Data has changed fundamentally market research, which reduces the risks for decision-making. Thus, bad investments can be avoided. In my opinion, it is only a matter of time until banks use the data management of a company as a criterion when calculating the interest rate.

2. Support direct sales

Big Data helps to create a central guest profile. This profile is different from a guest profile in the PMS. A Big Data profile contains data from many sources and makes the guest "transparent". Through special software systems companies can thus keep in close contact with their guests. A higher communication frequency increases the chance to be considered in the booking decision. What nowadays only OTAs can do individual hotels will be able to achieve through Big Data. The share of lucrative direct bookings can be increased or at least stabilized.

3. Targeted Cross- and Up-selling

Jeff Bezos and Amazon are so successful, as they understand to send their customers the right information at the right time. This is only possible in a Big Data environment. From an industrial psychology standpoint this makes the integration of senseless up-selling offers in the booking confirmation redundant.

4. Optimize the use of media channels

Hoteliers in many countries, including chains in the US, have ceased to send out mailings by post. Managers in other countries, however, have understood the value of this medium and not followed this trend. A good example is Austria: Direct marketing has a long tradition and thus the awareness for a central data management is much higher than in, for example, Germany or Switzerland. As a result, Austrian hoteliers enjoy the highest direct booking rates in Europe! They continue to send out comprehensive mailings by post to stay in the minds of their guests. Only the frequency of the mailings is sometimes too high. Through the RFM++ system, which has been developed for dailypoint™, and the use of scorecards we can achieve a reduction of the number of mailings of up to 50% while keeping a constant booking rate! Some of our clients were able safe amounts in the six-digit range. This is a good reason for an investment.

5. Reduce administrative costs and licence fees

Big Data means connecting all relevant data sources. This requires either the development of various costly interfaces or the consolidation of the providers. dailypointTM often replaces up to five systems. In a Big Data environment, it does not make any sense to use an external system for newsletters and surveys. Also vouchers, loyalty or up-selling and cross-selling should run via a centralized system. The system grows with the needs of the hoteliers. For the first time, this consolidation enables the creation of a significant and usable database, as it is centralized. It also reduces the number of service providers and thus the costs for administration and licence fees.

6. Increase Productivity

Cross-linkage nowadays means automation – in communications, but also in many other areas. Big Data makes manual input of interests, transfer of feedback into the guest profile, or editing and uploading of mailing lists in the email things of the past. You might not be able to reduce the number of staff, but you can definitely use your resources more efficiently.

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Augustenstr. 79
Munich, 80333
Phone: 49 89 189 35 69 0

Michael Toedt

Operating at the intersection of business and technology, Dr. Michael Toedt helps hoteliers with the software dailypoint™ to use the tremendous increase of data in order to become data-centric. Dr. Michael Toedt has over 25 years of experience in operations, technology and marketing. He is the author of several books – among others the German version “Big Data – Herausforderung und Chance für die Hotellerie (ISBN: 978-3-8751-5305-7) and “Data Revolution – How Big Data Will Change the Way of Doing Business” (ISBN:978-3–7375-1688-4) and his articles are published by journals on a regular basis. Dr. Toedt holds a doctoral degree in management science. He is lecturer at several universities and assistant lecturer at the University of Applied Sciences of Munich for the subject “Customer Relationship Management in Tourism”. Apart from this he speaks at various hospitality events and fairs such as ITB, HITEC, Internorga, Austrian Hotel Society ÖHV or Cornell Hotel Society.