hotel fireworks
2 years ago
 

Finally, something BIG to get excited about in hotel technology

There’s little new in hotel distribution, but that’s not to say that there’s little interesting going on elsewhere in the industry when it comes to technology.

There has been much talk and PowerPoint presentations about using the vast amount of data – social, semantic, transactional, loyalty profiles – that are available about travelers to craft more meaningful offers to improve conversion and increase revenues and profits.

However, there are precious few that actually delivering in that promise (I’m not counting Orbitz offering higher priced lodging to Mac users, that’s correlation, not causality).

Cue the good news.

Real(ly) big data

So, enter a little company called Nor1, based in the heart of Silicon Valley but seemingly not clammering for the attention of the local tech press which some its counterparts in the area attempt to do constantly.

The company, created in 2005, is trying to build a business at the intersection of personalization and predictive analytics with respect to upsell in order to increase ADR and RevPAR for hotels.

I hadn’t heard of the company before meeting with them at the HITEC event this year, but after spending some time with Jason Bryant, president and COO and Nor1’s data scientist Andrew Hines, I think they’re on to something.

For one, Nor1’s data team started with the recognition that the traditional CRM profile is flawed. Not that the attributes that are often used are wrong, but as soon as they are put into the system, they are outdated.

As Hines states: “[The] weakness of standard variables associated with hospitality profiles is that they are declarative, not dynamic”.

Translating that to layman’s terms, what a person tells you about themself at a single point in time is not necessarily and indicator of what they want in the future.

To that end, they built an engine that focuses on emphasizing the actual behavior of the traveler and let the accumulated experiences guide the offers that you put in front of the customer.

As Hines adds:

“When you look at the traveler profile and attempt to make conclusions, you are assuming causal relationships based on static information. What you don’t pay attention to are the outcomes over time.”

Nor1’s PRiME engine utilizes 250 variables (though 16 carry the most weight) and measures what upgrades are chosen and not chosen, enabling the system to make different offer decisions over time.

The results have been impressive, according to Bryant:

  • Over 70 Million hotel guests exposed to Nor1 offers, to date – current pace 1.5-2.0 million guests exposed in per month.
  • Between 20%-25% of exposed guests commit to pay for an upgrade.
  • Incremental Upsell Demand per Booking = $79
  • Incremental ADR Boost (without affecting occupancy) = 1+%
  • Increases original amount of booking by 24%

The Conn is yours

From Dr Daystrom’s M-5, to Wargames’ WOPR. and SkyNet, science fiction has painted stories of computers taking over the jobs that people used to do…all while making better decisions.

Not surprisingly, Nor1 feels that its real-time decisioning engine can help shift the emphasis of where revenue management staff spend their time.

Hines projects that over the next five years, the big change in the industry will be to let machines make tactical decisions and let people be strategic.

What does that mean you may ask? Well, let the machines automate manual processes and crunch numbers to uncover insight from information.

Math is an important skill for global competitiveness, but there is little value in having people repeatedly crunch calculations, especially as the data you collect increases dramatically and the speed at which you need to process the data rises.

The result is that hoteliers will better know their guest and be able to use that data at the point of decision in real-time to better service them.

His belief is predicated on the belief that the more decisions you make, the more you learn and the better the next decision can be. And that rate of learning is critical and that favors machines.

Hines claims machines provide “provably exponential learning” capacity.

What does strategic mean you may ask? That will require a little introspection on the part of the hotelier.

Where can their people create the most impact for the company and for the guest? Devising new channel strategies? Pricing? Design differentiated experiences?

Will hoteliers bite?

In order to decide, hoteliers have to determine how willing they are to trust the data and the process. There are three stages of trust with data according to Nor1:

  • Use data in order to inform decision making. This is the least intrusive use of data.
  • Let a machine recommend a decision. The tool says “I looked at occupancy level” and recommends pricing strategy. The individual chooses whether to accept it and/or modify. Requires a higher level of trust or understanding
  • Lastly, automated decision making. The tool computes, recommends and then executes the decision. It requires the highest level of process automation, sophistication and trust in the process.

So far 10,000 properties have signed on to the concept. If you’re a hotelier, is this something that excites you are worries you?

NB: Hotel fireworks image via Shutterstock.

 
 
Glenn Gruber

About the Writer :: Glenn Gruber

Glenn Gruber is a contributing Node to Tnooz and senior mobility strategist at Propelics, an enterprise mobile strategy firm.

Previously Glenn was AVP travel technologies at Ness Technologies, responsible for developing the company’s strategy and solutions for the travel industry.

Prior to Ness he held leadership roles at Symphony Services, Kyocera and Israeli startups Power Paper Ltd and Golden Screens Interactive Technologies.

He also writes a personal blog, Software Industry Insights

 

Comments

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

  1. RB

    A lot of folks in hospitality management are looking to SubtleData (www.subtledata.com) to help move to real time analytical programs for rewards and loyalty. The key is the integration with existing Point of Sale systems.

     
  2. » Buy An Upgrade. Really? Who Buys Upgrades Social Media for Hospitality

    […] First the technology. Nor1 a hospitality technology company attempts to match a hotel’s perishable inventory with buyer behavior and preference. Their Prime product suite focuses on hotel room and services upgrades. The behind the scenes is historical comparisons conducted across the industry and among guests of the 10,000 properties using the software suite according to an article in Tnooz […]

     
  3. Bruce Rosard

    Glenn – great article, and it spurred some interesting comments. I recently met Jason and his partner Art Norins, the CEO, they have a great vision and are creating something that is definitely going to be BIG. As mentioned by Nicole, Nor1 only gets paid if the hotel has an upgrade to offer to the guest at time of check-in, it is all incremental revenue without taking any inventory. Nor1 has a very clear vision of utilizing big data that I believe is currently leading the pack for the hotel industry.

     
  4. Mario Mucalo

    This looks very interesting, and it seems to be moving the industry forward. It will be interesting to see whether people recognizing this in the beginning will get a big increase in their business.

     
  5. Hhotelconsult

    To anyone involved with Nor1 – quick, innocent, non-loaded question – do you have an ethical code of conduct in regards to how you mine data or make offers?

     
    • Nicole Hockin

      Nor1¹s ethical code of conduct includes that personalization of offers is
      fair to all guests. We do not bias offer sets based on age, race,
      religion, gender, ethnicity or socio-economic status nor do we mix data
      specific to our hotel customers such that there is any chance of
      competitive information being leveraged from one customer to another.

       
      • Hhotelconsult

        That’s fantastic. I just imagine this is so complex, and you have to be so vigilant so not to fall down rabbit holes. Keeping data separate, not contaminating, not drawing false conclusions, etc.

        It has got to be daunting to create an code of ethical use and conduct, trying to protect oneself for being sued for something not invented yet, or a problem that hasn’t even been conceived of…

        so well done, and I truly appreciate the response. Those I know that use you shrug their shoulders to this conversation, because they don’t care… they apparently just see results. So if your clients are happy, and guest privacy is maintained…. I think you will likely go far.

         
  6. Glenn Gruber

    @Erin, one more comment.

    If it’s not rocket science than we there is a bigger problem afoot. The quality and relevancy of offers that I get from hotels and airlines alike are off-the-charts awful. Airlines send me offers to fly city pairs that are hundreds of miles from my house. Hotels send me emails about places I have no desire to go to. And when I go to their sites they offer booking options in price order and make me hunt for “specials” on their site, which are often irrelevant.

    And when I get to the property things don’t improve. I travel a fair amount and I don’t recall the last time that someone at the front desk offered me any upgrade or tried to tell me about other services at the hotel.

    If it’s all there in front of them, there must be some obstacle that they’re not overcoming. I’m all ears.

     
  7. hhotelconsult

    oops… “hotels are *not* pioneers…. pardon not being able to edit my typo! =)

     
  8. Erin

    One thing the article doesn’t mention is how much commission Nor1 takes of each upgrade (which I have to say would keep this piece from sounding like a sales pitch). I hear numbers between 25-35% of the incremental revenue, which is a chunk. It would be nice to hear from hoteliers about this, not just the provider.

    Granted, the hotel companies haven’t figured this out yet, but once they do, or once Nor1’s competitors glom onto this, I would expect those fees to drop.

     
    • hhotelconsult

      This is another issue with hospitality vs. tech. There’s an ancient joke in our world, regarding hotels bein conservative: “Hotels are pioneers because pioneers were shot in the back”. You just have to go through one disaster during an opening to help you realize why hotels are so boring with their design, because if you try a new tech and it fails, it’s far too costly to rectify. This has happened, in one form or another, with heating / cooling systems like AC or radiant floor, it’s happened with wireless or tech infrastructure.

      We’re conservative for a reason, and it disappoints me how we rushed into the OTA’s, we rushed into Groupon, and now we may rush into big data without wondering if it’s justified or if we are being ethical with our guest’s data, or if the data tech group is being ethical with their charging.

      When a desk agent convinces someone to upgrade at check in, we will often have an incentive program, offering a couple bucks for every upgrade, or a percentage of the difference. Hotels think in dollars and cents, while big tech thinks of tens of thousands of dollars over a billion dollar IPO. Tech and hotels don’t have anywhere the same mentality, and it’s been a big problem for a long time.

       
      • Erin

        I agree with you mostly. From my own experience in the hotel industry, hotels can be lazy and prone to panic, and I think that’s at play here. Nor1’s pitch to hotels is that they’ll take this function off their hands and return profit, but that was hotels.com’s pitch and Groupon’s pitch, and see where that got us.

        To be able to understand how to price an upgrade today and in the future is a challenge, but one that an experienced revenue manager could easily overcome with the support of the executive office. Hotels are taking the easy way out here, and are leaving money on the table.

         
        • Glenn Gruber

          @Erin @hhotelconsult, I appreciate both of your comments, but I wanted to address a few things you said:

          1) if it came across as a sales pitch for the company, it was not intentional. I am not working for them or with them, I just think it’s an interesting idea, where there is lots of talk, but little action. I find the concept interesting as I spoke about it at HITEC this year prior to meeting with the Nor1 guys.

          2) Re the comparison with Groupon, that’s a little unfair. We all probably agree that Groupon isn’t really very good for any vendor — hotel or otherwise. I don’t really know how much Nor1 takes, but say they take 25% of the upsell as @Erin suggests. Groupon only LEAVES 25% of the entire offer price to the supplier. Pretty different, but understand the general point. What do you think would be a reasonable commission for such a service?

          3) @Erin, do you really think that a single revenue manager at an individual hotel can efficiently create a buying propensity profile for any individual guest in real time based on purchase data across different hotels and looking at how those choices might vary based on buying across different channels? I can understand having the revenue manager determine the pricing for the upgrade based on occupancy and competition, but doing the personalized offer generation seems a bit of a reach.

          Thanks, always love a lively discussion!

           
          • Erin

            Glenn,

            No of course a single property or regional revmgr can’t recreate what Nor1 does, because that’s Nor1’s business, but absolutely the hotel can figure out on a given day what to offer as an incentive to upgrade or get people into the restaurant. All the data they need are in the PMS – guest history, occupancy, ADR, etc. It’s not rocket science.

            Hotels are used to ‘trusting the data’ as many of them have black-box rate management systems. Hotels aren’t using Nor1 for their fantastic algorithms – they’re using it because it gives them a bit of extra revenue without extra overhead.

            My last comment on this hotels are their own worst enemies at times, handing off basic revenue opportunities like this and allowing their margins to be cut into so steeply.

             
          • Hhotelconsult

            I definitely did not mean to compare you to Groupon, nor even directly to OTA’s, regardless if you are at 25% commission. I get that you are providing a technological service that intelligently mines data to create a found revenue stream. It’s quite smart. My point is that we sometimes rush into new ideas or concepts, being taken for a ride by salespeople, without understanding the long term impact on guest, brand, image, etc. There are some very delicate issues in leveraging information this way, and for an industry that errs on the side of respect, deference, and privacy of a guest, I just hope that groups like yours are considering the ethical impact of how these datas are extrapolated.

             
        • Nicole Hockin

          Thank you Glenn for bringing Nor1’s technology to the public. We have been busy building disruptive technologies for travel and are just now, in the past few months, beginning to really share that learning and benefit with the industry.

          I thought I could clear some of Erin’s misconceptions up for her.

          Nor1’s model is not at all like Hotels.com or Groupon. Nor1’s goal is purely revenue maximization for the hotelier in the upsell channel and does not drive bookings. Nor1 solutions exist post-confirmation and focus on gleaning more revenue from each reservation during the guest’s stay experience. Actually, Nor1 provides a competitive advantage to hoteliers in offsetting the revenue-loss they accept from their distribution partners. Because every dollar that comes from an awarded upgrade is bottom-line revenue for the hotel generated by monetizing services and inventories post-confirmation – on top of existing bookings. It’s incremental revenue that affects ADR without affecting occupancy.

          Nor1 only makes money IF upsell offers are awarded by the hotel – at the discretion of the hotel. That revenue share actually depends on a number of variables, too.

          The data-driven pricing and merchandising technology that Nor1 has created is unlike anything available today and for a hotel to make the investment in Phd level statisticians, mathematicians and engineers needed to replicate such efforts is cost prohibitive. While an experienced revenue manager can certainly sift through the data, actioning a plan, in real time, for every booking based on real-time data is humanly impossible.

          With all do respect to Erin and mostly to enlighten readers, there are actually many more variables that need to be considered in order to actually predict a guest’s willingness to pay for a particular product at a particular time. If it were enough to simply use the data from the PMS then current efforts would be more successful. It’s the combination of guest-specific, stay-specific, property-specific variables combined wit transactional history that creates relevant and targeted offers. That is what Nor1’s PRiME engine accomplishes for the hotel. And doing all of that in real-time is more than the best revenue management teams can accomplish. Nor1’s new FrontDesk Upsell solution that integrates with MICROS Opera takes all this to the front desk enabling and empowering every front desk agent to make the right offer to the right guest at the point of check-in. Certainly, this can be accomplished at some level by hotels themselves – and should be. But the idea that hotels can react instaneously and use all the right data – not based on assumptions but predictive analytics – to drive ancillary revenue is significant and is the “now” of next generation commerce not to mention an opportunity for brands and chains to finally have a standardized method for driving and measuring upsells.

          Nor1 does not remove any function for the hotel but streamlines operational efficiencies and enhances the hoteliers’ existing rate strategies working alongside Revenue Managers to showcase their properties, drive loyalty and increase wallet share. That is why hotels are eager to work with Nor1 because the company functions as a partner for success helping hoteliers to re-establish value for premium inventories and services that often go unused and undervalued.

          Over 70 Million hotel guests exposed to Nor1 offers, to date.
          Current pace 1.5-2.0 million guests exposed in per month.

          REVENUE OPPORTUNITY: (of bookings exposed)
          • Incremental Upsell Demand per Booking = $79
          • Incremental ADR Boost (without affecting occupancy) = 1+%

          Thanks for allowing me the opportunity to clarify. If you have any questions, please email me at marketing@nor1.com

           
  9. hhotelconsult

    This is awesome. As a consumer, it’s wholly unacceptable how data is being used to manipulate us, but as a business man it’s just the same market demographics we have been using to identify guest segments for decades. It’s just that it is so much smarter and more invasive now. The real problem is the assumptions data will make…. like that you really went with your wife, and not a mistress, to your last upgraded luxury hotel. The road blocks, complexity, privacy issues are all important…. but in a world where advertising drives an economy, one might hope for, at least, relatively topical or targeted ads that don’t waste our time with worthless products that do not interest us.

    Privacy is, by far and wide, over…. the issue now is civil liberties, and we need to start talking about the intersection of automated, algorithmic personalisation, and how that will impact our rights. I have zero expectation of privacy in regards to my personal data online, but I do have the expectation that people’s interpretation of that data will not infringe on my liberties. Whether that’s something as ammoral and inappropriate as cheating on a loved one is not my point… but the hallmark of hospitality is guest privacy, and unlike those committed to societal marketing horrid products, we should look very deep into the way we interact and engage our guests. If our industry is falling apart such that we need to leverage any and all guest info to exploit them into buying our services, then by all means – flip the switch and let hospitality marketing become the same as informercial marketing – learning how to manipulate, confuse, or misdirect. But I think we desperately need the tech people to understand this isn’t traditional business…. that this is hospitality, and we have a modicum of respect for the guest’s ability to decide how and when he wants to be inturrupted. This may be an idealogical notion of the hotel industry, but as we move into the big data world, we need to actively explore ethics that help us to not exploit guest data, and sort of acts as guardians against ourselves.

    The whole world needs to address this, but the pace of business is such that it won’t happen.

    So does it scare me? No. Do I think we need to remind ourselves that the way hospitality should be respectful and noble in how we manipulate, interpret, extrapolate, and use all this data, in lieu of guest privacy and respecting them? Yes. Yes I do.

     
 
 

Newsletter Subscription

Please subscribe now to Tnooz’s FREE daily newsletter.

This lively package of news and information from Tnooz’s web site provides a convenient digest of what’s happening in technology that drives the global travel, tourism and hospitality market.

  • Cancel