Tuesday, 24 February 2009

Hotel industry in need of data or innovation?

In a recent interview from Sandeep Govil and Natasa Christodoulidou, the author was talking about the need to better understand your customer interaction with the hotel booking sites. Essentially, "hotels have a long way to go in talking to guests about the product, its attributes, locale, etc. in a way that each individual guest wishes to receive that information"

According to Natasa, "the key to working on CRM data gathering approaches in a manner that engages the customer as little as possible while obtaining the information that makes the biggest impact on the goals as a service provider is simply personalisation".

It is clear that there is a lot of value from capturing more data, as long as data is available. However, there is a significant challenge in the hotel industry. One that I usually describe with the number 4.

If users have used a site less than 4 times, then they are unlikely to use it by default for their next booking. They simply don't have much loyalty to the site yet.

Above 4, the users become more loyal to the site and use it as a natural starting point to their hotel research.

Now this is clearly over-simplifying a complex problem for marketers and CRM experts. But I think it's worth the analysis.

So in terms of numbers what does it means. Well the below 4 represent 95% of the bookings. 95%. To give you another representation of the challenge, the average number of bookings per user is below 2... Building user statistical patterns with such a low amount of data is unreliable. Hence the challenge of marketers and CRM specialists.

Now there is an interesting parallel that can be done here. 4 is also the number at which personalization solutions based on collaborative filtering (people who like the same hotels I liked also liked...) start showing interesting levels of accuracy and related impact on conversion rates. Before 4, consider yourself in a cold start situation.

We've addressed both sides of the challenge at LikeCube.

Leveraging our expertise in semantics, ontology and search, we provide very innovative solutions to address the cold start issue. Rather than asking data and trying to profile users as suggested by Natasha, our SaaS solution enables hotel sites to offer a powerful way for users to express their preferences and filter their results accordingly. Conversion rate improvements are expected to be of the order of 10% to 20%.

And for users that have crossed the '4' gap, our state of the art collaborative filtering solution could up conversion rate significantly more. The other key benefit here is that users get the noise filtered out automatically, including reviews and other form of user generated content. This of course results in drastically improved user experience. They will see first the content from their taste neighbors, the people most like them in terms of preferences, as opposed to hundred of reviews, most of which are non relevant to them.

So how are you going to differentiate from your competition to secure the 95% of users that are in cold start? And what are you doing to leverage your investment in UGC? Is data or innovation the answer?

Feel free to contact us at info@likecube.com for your free Site-Matcher evaluation.

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