Personalization in Hospitality: Stages, Key Elements, and Industry Examples

Original article: https://www.altexsoft.com/blog/personalization-hospitality/

The 2023 State of Personalization report by Twilio, a cloud-based communication platform, shows that 56 percent of consumers will likely become repeat buyers after a personalization experience. The numbers are even higher in younger generations: 59 percent for Millennials and 60 percent for Zoomers or Gen Z (born 1981 —1996 and 1997 —2005, respectively.)

Tailored offers not only make people feel special, they also save time and simplify the decision-making process. This combination of convenience and emotional engagement can deliver an 8x return on investment on marketing spend and increase sales by at least 10 percent.

The encouraging figures seem only to confirm how on-target great hospitality brands as they’ve practiced an individual approach to guests for decades. Yet, now, they are expected to meet consumers’ need for uniqueness much earlier in the customer journey than at the hotel front desk. The article explores how to make old-school business know-how work online.

What is personalization?

Personalization in hospitality is a process of tailoring content, messages, offers, and services to suit a guest’s lifestyle, preferences, and requirements. It aims to enhance customer experience and create a long-lasting, meaningful relationship between the client and the brand.

When speaking of personalization in the hotel context, the first thing that comes to mind is room decoration for a special occasion or a bottle of a favorite champagne for a repeat guest. But today, an individualized approach goes beyond offline interactions occurring at arrival. It can be applied at different steps of a customer journey in the form of

• targeted email advertising,

• unique landing pages,

• tailored product offers on the website or app,

• omnichannel customer service,

• conversational chatbots,

• push notifications, and

• individualized loyalty programs.

Alas, hospitality businesses don’t excel in delivering unique experiences digitally. “Personalization has always been quite good when you’re checking in a really luxury hotel,” admits Markus Mueller, Co-Founder and Managing Director at GauVendi, an AI-based inventory management platform for hospitality businesses. “But, say, at the time of booking on the website, there is pretty much none.”

The State of Personalization Maturity in Travel and Dining report by Incisiv and Adobe, an insight firm for digital transformation, confirms that the majority of traditional travel businesses, including those in hospitality, go no further than basic personalization. Let’s see what it means, what progress can be made, and what value hotel businesses will gain.

Personalization maturity curve

Personalization stages range from one-size-fits-all emails to very specific offerings tailored for a particular user, considering different aspects of a particular journey. As you climb the maturity scale, your conversion, revenue per visitor, and average order value also grow.

Business growth as you scale personalization. Source of data: The State of Personalization Maturity Travel and Dining (Incisiv in partnership with Adobe)

No personalization: one-to-all stage. At this level, hotels and other hospitality firms send the same marketing emails, produce the same online content, and offer the same discounts to all customers, so they don’t experience any personalization effect.

Basic personalization: one-to-many stage. Marketing emails and notifications already include personal insertions — usually the first name, the country and/or city where the guest lives, age-specific information, etc. The website can welcome returning visitors with an engaging message and show offers and discounts based on generally known data — like the current season or channel (website or mobile app) used.

Moving from no-personalization to the basic step increases conversion by 5 percent while revenue per visitor and average order value grow by nearly 8 percent.

Segment-based personalization: one-to-some stage. Customer segmentation involves dividing the broad target audience into smaller groups according to shared characteristics. There are four main types of segmentation:

• demographic — grouping by age, gender, occupation, income, marital status, family size, etc.;

• psychographic — separating audience based on beliefs, values, hobbies, lifestyle choices, opinions, etc.;

• geographic — segmenting by the location where customers live and work; and

• behavioral — grouping according to the client’s interactions with your business. It encompasses browsing and purchasing habits, time spent on certain pages, brand engagement, etc.

Segment-based personalization is a tried-and-true method of delivering relevant offers to the right guests, enhancing the efficiency of loyalty programs, and increasing overall customer satisfaction.

At this stage, according to the Incisiv/Adobe study, the growth is 14 percent for conversion, 16 percent for revenue per visitor, and almost 21 percent for average order value. Yet, to exceed guest expectations and see even better business results, you need to level up.

Microsegmentation: one-to-few stage. The State of Personalization research suggests that moving from segmentation to the next stage triples conversion, revenue per visitor, and average value rate. Microsegments are small groups that combine characteristics from two or more traditional segments. It enables you to create tailored offers for people of a certain age, from a certain region, considering their past actions, hobbies, etc.

How a customer microsegment is created.

Hyper-personalization: one-to-one stage. At this stage, personalization is delivered at an individual level based on a unified guest profile and trip context. It heavily relies on real-time data, machine learning, and advanced predictive analytics tools to offer products that precisely match the wishes of particular guests (even if they don’t know what they’re looking for.)

However, reaching the highest level doesn’t multiply business KPIs like at the previous stage. Your performance becomes only about 10 percent better across all three parameters compared to microsegmentation. This partially explains why only about 20 percent of digital-first travel brands are able to provide a one-to-one level of personalized experiences. The number of those achieving this stage among traditional hotels is close to zero.

Even if you are still at the basic level, gradually moving up the maturity curve is worth trying. Below, we’ll explore essential building blocks to scale personalization and make the most of it.

Personalization building blocks

True personalization can’t be achieved without granular data, robust underlying technologies, and a general shift in the way hotels market their products to end customers and resellers. Here are several key components of a unique experience.

Comprehensive guest profiles

Siloed data is mentioned among the top personalization challenges in travel. While the information lives in different systems, you can hardly build comprehensive guest profiles and organize them in segments and microsegments. To see the big picture, hotels need a customer relation management (CRM) platform to aggregate data across fragmented sources.

Serving as a centralized database, a CRM also helps you track customer activities, spot upsell and cross-sell opportunities, run tailored marketing campaigns, and evaluate the performance of your personalization efforts.

For more information, read our guide on digitizing hotel upselling and cross-selling.

Knowing your guests is only one piece of the personalization puzzle — you must also create unique products to match individual needs.

Granular inventory

Traditionally, hotels break their bookable inventory into a limited number of room types that give travelers a very general understanding of what they will get upon arrival. The broad categories such as standard, deluxe, or suite tell us nothing about the unique features of the accommodation. Which floor is it on? Does it face north or south? What’s the actual bed size?

Of course, you can learn all these things by contacting the hotel via email or phone (or even by carefully reading the description on the website.) The problem is that characteristics are not integrated into the data structures of property management systems (PMSs) and central reservation systems (CRSs). Oversimplified categories make it impossible to automatically generate highly personalized advertising messages and booking recommendations.

“I can’t put guests in a room that fits them best without manual workload and product knowledge, simply because the proper data structure is not there,” Markus from GauVendi says. “So having more granular data points will be a good start.”

Trip context

Suppose you think you know your customers well enough since you’ve collected a lot of data on their past actions and preferences. You also have unique products to meet different sets of needs. But a perfect match can’t be achieved without one more component — real-time data to provide you with the context of a particular trip.

“Hyper-personalization for me is putting the right product in front of the customers in their context of travel,” Markus explains. “What is important for me on this trip? It depends on when and with whom I’m traveling, for how long, for what purpose, and so on… Hotels should capture all these things to create a really unique experience”.

The same guest traveling alone on business matters on Monday or with a couple of children on the weekend, obviously has different requirements. And a different willingness to pay for the same room attributes. This leads us to the next aspect of personalization — individually tailored prices.

Personalized pricing

The concept of dynamic pricing, which adjusts rates to the current demand, is not new to hospitality. Personalized pricing considers not only the market but also the traveler’s needs and intents.

A large balcony where kids can play is of value to a parent who won’t mind paying extra for this feature. But it might be unnecessary for a businessman seeking a quiet place not facing the highway and the elevator. So, based on historical and real-time data — a person’s profile and trip context — hotels can sell the same room at different rates, highlighting characteristics the guest desires most.

Unbundling legacy hotel rate plans lies at the heart of a novelty attribute-based shopping (ABS) model. It allows travelers to select features (for example, a lower floor, late check-out, a balcony with a view for drinking a cup of coffee in the morning, etc.) they want to buy as part of their room experience.

To learn more, read our article on how attribute-based shopping will change hotel booking.

In view of the fact that 46 percent of travelers are ready to pay more for desired features, ABS creates new opportunities for revenue generation. Among its early adopters are large brands — Expedia Group and IHG Hotels & Resorts, the latter partnering with Amadeus to try and test the novelty method.

Tailored recommendations

Hyperpersonalization is not about endless choices. Quite the opposite, it spares a guest the trouble of choosing from dozens of similar offers.

“If I know you’re coming on Tuesday for three nights with two people, I recommend you three things which other people with the same behavior liked,” is Markus’ description of how a platform with hyperpersonalization capabilities should work. But right now, hotel booking websites tend to “overwhelm customers with too many offers, and that’s a bad selling practice because nobody will read through them.”

To dive deeper, read our article on recommender systems or watch a video explainer.

Modern AI models enable the building of powerful recommender engines that consider behaviors, preferences, and the current context of each customer to generate uniquely tailored content. We can see how it works thanks to Amazon, Netflix, and Starbucks, which deliver hyper-personalized experiences via different channels — homepages, emails, push and in-app notifications, etc.

Currently, hospitality lacks such prominent examples. Yet, there are some advances in personalization worth mentioning.

Hospitality personalization examples

Big hotel chains and booking platforms are the ones that understand the importance of an individual approach to each customer. Let’s see what they already do to add a personal touch when interacting with guests online.

Marriott: Provides a tailored mobile experience for loyal guests

The world’s largest hotel chain by the number of available rooms, Marriott oversees 30 brands and nearly 8,300 hotel and resort properties in 138 countries. What’s more, it runs the world’s largest loyalty program, Marriott Bonvoy, which comprises 180 million members.

To communicate with each of them in a more personal way, the hotel giant hired IBM data scientists who mapped customer data across all of Marriott’s brands. Covering both leisure and business travelers, this huge dataset powers the Mariott Bonvoy app.

Though it’s also available for non-members, loyal guests have the privilege of accessing exclusive rates, advanced features, and personalized recommendations.

Every time a program member interacts with the app or redeems points, new data is acquired, which generates even more relevant promotions.

Hilton: Tests AI and praises ABS

With its 6,200 hotels in 119 countries, Hilton is the third largest hotel chain in the world, after Marriott and China’s Jin Jiang. Recognizing the importance of personalization, the industry leader is now testing AI-powered software that will allow guests to get desired amenities as part of their packages at the booking stage instead of getting those features arranged during the stay. This includes parking, late checkouts, and meals pre-booked at short notice.

The hotel group is planning to make these amenities bookable via partner distribution platforms such as Booking.com and Expedia. Hilton also refers to attribute-based shopping as a driver of powerful personalization. Yet, chain authorities don’t reveal when their AI solution will go live or whether they plan to adopt ABS.

Wyndham Hotels and Resorts: Benefits from personalized digital marketing

Wyndham Hotels and Resorts is the world’s largest hotel franchiser by number of properties, with 9,100 hotels across 95 countries. In 2020, they launched a new customer data platform that enabled the company to personalize digital marketing campaigns. In six months, they improved the conversion rate by 60 percent and cut media costs by 35 percent.

Sage Hospitality Group: Creates a 360-degree view of the customer

Sage Hospitality Group, with a portfolio of nearly 60 hotels across the US, relies on Hapi data streaming technology and Salesforce CRM to integrate data from multiple property management systems, hotel point-of-sale systems (POSs), and other sources. This enables the company to create a 360-degree view of the customer, which results in more meaningful engagement that drives loyalty. As the Group’s managers put it, the innovation “will deliver an exceptional experience for our guests for years to come.”

Airbnb: Builds an ultimate AI concierge

The home-sharing platform offers more places to stay than the top five hotel brands combined can provide. To help users find the best possible option, Airbnb applies a search algorithm that considers over 100 different parameters, including location, journey duration, pricing choices, past guest stays, listing views, and feedback.

In the near future, Airbnb recommendations are expected to be even more personalized. The company’s CEO, Brian Chesky, shared his plans to rebuild the platform and make it work “like the ultimate AI concierge pointing you to places, community, homes, experiences, and many more things.”

Nothing personal: Top challenges of personalization in hospitality

Hospitality lags in personalization compared to other industries for several reasons. They include data-related problems — particularly fragmented landscape and the problem of the old-world inventory codification. “The challenge starts with the property management system, which is outdated,” Markus Mueller points out. “All the new technologies that are out there still have to deal with traditional room types. While an advanced recommender system is only possible with better, more granular data points.”

Other top challenges of personalization in travel and hospitality mentioned in different studies are limited in-house resources, the inability to scale personalization efforts across channels, and — last but not least — issues with building a business case or justifying ROI.

Since hospitality brands doubt personalization efforts will pay off, they hesitate to invest much in this endeavor. As the above-mentioned State of Personalization Maturity paper demonstrates, traditional travel brands allocate no more than 10 percent of their marketing budgets to scale personalization. This leads to falling behind in technologies and data capabilities.

Don’t be everything for everybody

As the digital experience becomes more crucial to getting and retaining customers, hotels and other players will eventually be forced to upgrade at least some components of the personalization infrastructure. Currently, companies mostly focus on

• better ability to personalize emails and website and/or app content (traditional hospitality brands); and

• getting more accurate guest profiles to deliver relevant content via all channels (digital-first brands.)

The priorities change as a business goes up the maturity curve, from personalizing a single channel to orchestrating one-to-one experience across the entire guest journey. But it all begins with a mind shift. Here are some tips for personalization newbies.

Differentiate your offers. Rooms are not the same even in very small and simple hotels with low budgets. “Some rooms are at the corner, some are north-facing, others are south-facing. Maybe some of them have two separate beds, while others — one big bed…” Markus Mueller from GauVendi says. “It’s physically impossible to have the same feeling everywhere!” Defining the unique features of each accommodation is a significant step towards personalization.

Outline your target audiences. Every hotel has at least two types of customers — business travelers arriving on work days and leisure travelers coming over weekends. There can be more. Knowing your target audiences enables you to offer something relevant to their travel purpose and willingness to pay (leisure travelers are usually more price-sensitive than business ones.)

Add the storytelling element. The same room can be presented in different ways to different audiences.“That’s what a good salesperson usually does — uses the art of storytelling,” Markus shares. “A big balcony could be a good place to have a cigarette for one person and a great opportunity to sunbathe for another.”

Introduce data collection and data management practices. Data is key to personalization. You need to collect customer information across all touchpoints and manage it in a consistent way. The more you know about your guests, the better you can tailor individual experiences.

We have general articles on data collection and data management, as well as an industry-specific post on hotel data management to give you more context on the subject.

Continuously improve tools and processes. Personalization is not a one-off undertaking or a single piece of technology. It’s rather an endless journey, along which you continuously upgrade your data infrastructure, test and integrate new automation and analytics tools, retrain AI models on new information, etc. Scaling personalization also entails introducing new processes and roles — personalization specialists and executives.

Unfortunately, many hotels keep saying they’re just standard and miss a big opportunity to build their brand and get higher yields. “Don’t be everything to everybody!” Markus Mueller sums up. And we subscribe to every word of this — as a consulting company with a focus on travel tech and as true travel fans.