Should hotels invest in a customer data platform?

hotel reception and guest
A hotel receptionist taking the contactless payment from a guest. (DGLimages/Getty Images)

Insight comment
CDPs or customer data platforms are moving into the mainstream and could be a good investment for large hotel companies that already have strong expertise in data management and marketing.

Hoteliers are under pressure to make their electronic communications with guests more personal. The consensus is that hotels need to emulate the AI-driven recommendations sent out by the ecommerce giants. Amazon, for example, says its personalization engine, driven by customer data, accounts for 35% of its sales.

Access to guest data is not a problem for hotels; they have more of it than most sectors. "Hotels have always known that data is important and, across all of the consumer businesses, they have been most adept at collecting it,” said Kevin Edwards, business development director, Alliants.

“Compared to supermarkets, we in the hotel business have received a remarkable amount of guest data,” added John Burns, president, Hospitality Technology Consulting.

Traditionally, hotels have used customer relationship management (CRM) systems to store and exploit their guest data.

“Within our CRM system, we typically capture the contact name, address, email as well as their stay and contact history. This helps us with identifying stay patterns and offering our guests promotions and packages that are more meaningful to them,” said Mauri Berry, VP of digital marketing, Remington Hotels.

Vibhu Gaind, the CIO at another multi-brand operator, RBH Management, explained the set-up: “There are bolt-ons that we use in the PMS for CRM. A lot of the data sits with the brands and we tap into it and update it for them. It’s a combination of hardware and software. We work with Amadeus and a few other companies.”

CRM Versus CDP

One of the latest marketing acronyms to gain prominence is CDP which stands for customer data platform. So what’s the difference between a CRM and a CDP?
“In simple terms, a CRM system is a customer facing application which focuses on the engagement with our customer database and deployment of promotions and marketing initiatives while a CDP is focused on the data and analytics behind identifying the best customers to target based on their long-term value,” explained Berry.

Edwards commented: “The traditional CRM has afforded hotels years of data, but, as with many other aspects of a hotels' operations, it suffers from siloing. It is often only available to one department, rather than all.” 

“A CDP allows for a database which is accessible across systems and therefore across all departments, allowing for a cohesive approach towards the guest. It is only by bringing all departments together that you can create a seamless guest journey which leads to a lifetime of loyalty. Otherwise you have a guest with a gluten allergy looking at you mystified when you repeatedly offer them a free pastry with their morning coffee.”

CDPs primarily manage a company’s own first-party data, for example, bringing together user data from the hotel website, CRM platforms, social media interactions with customers, customer feedback and point-of-sale records.

This is an important capability at a time when access to second and third-party data from the likes of Google, Facebook and Apple is increasingly restricted, preventing hotel firms from following travelers’ online search and purchase habits.

In any case, first-party data has the advantage of being complete, free from privacy compliance issues and can be held permanently in order to build a long-term view of guest value.

Wyndham Makes a Move

Last year, Wyndham Hotels & Resorts deployed an Amperity CDP which took four months to install. The CDP unifies customer databases and centralizes information from online and offline transactions, loyalty program activities and email interactions. 

Lisa Checchio, Wyndham’s chief marketing officer, said: “We're able to become more sophisticated in not only who we reach out to with a particular campaign, but how, where and when we engage them. Our guests will ultimately see content and offers that are more compelling and engaging to them.”

It’s not just enterprise-level hotel groups that are investing in CDPs. The Student Hotel and citizenM are using CDPs via the installation of Ireckonu middleware products.
citizenM’s chief commercial officer Lennert de Jong told Hospitality Insights earlier this year: “The hospitality industry underperforms in having live customer data operationally available at all times and we fixed that. We invested heavily in the new customer data platform. A customer data platform is an interesting tech space to watch as it has been growing outside of the hospitality industry quite rapidly.”

There are more than 100 vendors of CDP products. One of these, mParticle, has worked with Airbnb since 2015 and, the accommodation platform says that data insights were responsible for a 10% increase in conversions in Asia. 

So do hoteliers now need both a CRM and a CDP? “For single property operations, the CRM is more important as it is actionable,” reckoned Berry. “When dealing with a CDP, you also need a database, science and analytics to identify trends, sort through the top customers and identify the different target audiences. This is more common for large hotel brands and other large enterprises.” 

The cost to purchase a CDP can vary from $100,000 to $300,000 annually, according to Gartner, while the labour costs to build and maintain a CDP in-house can be significantly higher.

CDPs are not a silver bullet and there are those who remain skeptical as to whether they represent a truly new approach to guest data. Like any other data system, they require a lot of integrations with existing infrastructure. 

While a CDP may amass useful data on guests and prospects, it does not transform that data into actions by itself. So hoteliers who struggle to find meaningful ways to use the data already in their possession will not gain any value from a CDP without skilled personnel to manage it. 

In fact, many hotels are not reaping the full benefits of their existing CRM systems, according to research by Gartner and so may take a wait-and-see approach when it comes to CDPs.

Hoteliers are used to hearing how online retailers and supermarkets are better at marketing than they are, but is it even a valid comparison?
“Hotels have a lot to learn from retailers, but retailers have a simpler task at hand,” said Edwards. 

”When you have a guest, they are putting their lives in your hands and you are hosting them while they sleep, work, play and generally live in your property. There are more opportunities to get it wrong, but if you get it right, there is the chance to create memories which will last much longer than an Amazon purchase.”