How to turn data into money?By Michael Toedt - Managing Partner and CEO at TS&C GmbH
When we compare the value of public listed hotel companies with the value of priceline or uber it is obvious, this is a complete different story. The value of Priceline is higher than the value of Marriott, Hilton, AccorHotels, IHG and Wyndham together. But how comes? How can a relatively young company so valuable? Priceline, Expedia or Uber, all these companies have one in common, they use the capabilities of Big Data in any possible manner.
When Microsoft bought LinkedIn in 2016, Microsoft paid US$260 per active user. At that time LinkedIn had about 100 million active users which led to the unbelievable price of 26 Billion US$. The question is, how much would an investor pay for a hotel company with about 100 million guests? Most likely, the guest profiles were not part of the evaluation process, but how comes? The answer is simple, hotels have not created a model to monetize data.
For sure data is the new oil, the foundation of the fourth industrial revolution, called Big Data. But data is first of all just a raw material companies have to make useable. In order to make oil valuable it must be refined for instance to get petrol out of it. First after the refining process it can be used. It is the same with data. Data needs to be refined, it needs intelligence to get value out of it.
But how to make data valuable, how to transform Big into Smart Data into values? The way is simple to explain, but the way extremely complex: technology wise, organizational wise, people wise and it needs the sponsorship from the top. A Central Data Management strategy means a shift of responsibilities and these needs the support from the CEO first of all.
The way of creating value from data can be described in five steps:
- Step1: Like an umbrella an above property system has to consolidate all relevant data sources. For hotels these are: PMS, POS, Newsletter System, Website, WIFI, questionnaires and table reservation system.
- Step2: Data cleansing: this is one of the hardest parts since about 75% of all data centralization projects fail due to poor data quality.
- Step3: Based on the consolidated and clean data a central profile must be created which shows a complete picture of each individual.
- Step4: Artificial Intelligence (AI) and machine learning is needed to create knowledge from the huge amount of available information. E.g. A click in a newsletter, a click on the website, an answer in the questionnaire, all this information can be used to learn who a customer is and to create fully automated interests and preferences without any manual interaction.
- Step5: Usage of the new knowledge. Big Data is all about quality, it is all about individualization for a better marketing, a better service or better decisions.
Companies who follow these five-step approach will gain a complete different value set. The principle looks simple, but the change process requires a combination of leadership, an aligned team and the right partners. Hotels sit on a treasure of raw material like almost no other industry which waits to get refined. Hotels should start to fight back against the OTA's and use the new possibilities of Big Data.
Dr. Michael Toedt is the founder and CEO of Toedt, Dr. Selk & Coll. GmbH, a leading Big Data Marketing and CRM company. Operating at the intersection of business and technology, he helps hoteliers with the software dailypoint™ to use the tremendous increase of data in order to become data-centric. Dr. Toedt has over 25 years of experience in operations, technology and marketing. He is the author of several books (among others “Big Data – Challenges for the Hospitality Industry” (2013) and “Data Revolution – How Big Data Will Change the Way of Doing Business” (2014) and his articles are published by journals on a regular basis. Dr. Toedt holds a doctoral degree in management science. He is assistant lecturer at the University of Applied Sciences of Munich for the subject “Customer Relationship Management in Tourism” and as guest lecturer at various universities such as the University of Applied Sciences of Bad Honnef, Kempten or NDS Hôtelleriesuisse. In the past, Dr. Toedt was regional vice president of SANSORA INTERNATIONAL, a subsidiary company of the Schoerghuber corporate group and accompanied many hotel associations during the production of their central customer and marketing data base. He was raised in his parents’ hotel and after completing a mercantile apprenticeship he graduated as cook to be employed in the 5-stars restaurant Hotel Koenigshof in Munich. 1995 he began his business economics studies at the University of Applied Sciences in Munich. During this time he visited the Cornell University, NY and is now President of the German Chapter.Property TechnologyDigital MarketingBig DataGlobal