Traditionally, it has been the case that hotel guests make a booking, enjoy their stay and are presented with a lovely itemized bill at check-out. But, other than allowing them the chance to deny that they ever opened the minibar door, the bill served very little purpose.
Data is now a lot more accessible and we are now able to take a close look, not just at the revenue from rooms, but at the ancillary revenue and all the breakdowns within that. For example, at the high end, we have found that the room is around 20% of the total spend, with 22% in food and beverage and a further 15% in the bar or in-room dining. Together, this adds up to a significant spend, which would warrant learning more about. Within the food-and-beverage spend, you can then see the spend on dinner, breakfast, afternoon tea, whatever you care to add in.
It’s clear from this that hotel food and beverage represents the biggest opportunity for analysis and we have looked at it in terms of spend per type of guest. We found that 30% of guests were spending up to 10% of the ancillary revenue, as a percentage of accommodation revenue. Then, another 24% were spending between 11% and 20%. But we saw an interesting spike, with 16% spending beyond 50%. That’s a significant group of people spending a considerable sum. If you can grow that segment of high spenders and if you can understand who those people are, what's driving them, what kind of stays are they looking for, then this is great information for your marketing and targeting efforts to try and attract those types of guests, because they're the ones that are super profitable for you.
At the other end, it is interesting to understand the guests that are not spending too much, to work out what you can do differently to incentivize them to spend more. When we see people arriving at the hotel, we've already got an idea of what they're likely to want and we can encourage this with a more personalized approach.
Where it becomes very interesting indeed is the ancillary spend for repeat guests. They spend 30% to 40%, much more than those who have never stayed before. It allows you to put a monetary value on loyalty and gives you a real chance to focus on these highly profitable guests.
Hotels are crying out for this insight, because they currently have no real way of properly segmenting or understanding what guests are doing and how to target them other than very top-line thinking, which is closer to a finger in the wind than anything backed with data. The great news is the more data we can collate, the closer we then come to being able to create a predictive model.
With enough data, you can see typical spends for certain types of guests and you know who to attract to maximize the profit in your property. You can look forward to the next month, understand what kind of arrivals you are expecting and build out a model to predict how much money they're likely to spend. Then you can model changing the mix of guests and gauge how that will affect performance. Say you observe that domestic guests are spending half as much as international guests. You can look at bookings and understand what the spend is likely to be and take measures to try and improve it.
You can understand how to give the right guests the right incentives, but it's also then information to help your teams with predictive insights as to what guests are doing and where they're spending their time. It could also then help you with resource planning, staff planning and to help prioritize spending money. Because, typically, marketing through email campaigns is hard to quantify. You don’t really know what results you have had. What did guests spend their money on as a result of you sending that email? Did it make any difference? Did you hit the right messages? If you can know your guest that much better, this becomes less of a shot in the dark.
As Francis Bacon would say: “knowledge is power.” In this case, the power to empower your teams.
Kashif Yamin is senior vice president of data and AI strategy at Alliants, focusing on helping hospitality and travel companies optimize their customer experience and make winning decisions.
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