How can Tour Operators profit from Big Data

Is this mumbo-jumbo about Big Data confusing you? I will try to shed some light on the subject. First, let me bring some perspective about data management with a short story. Many years ago, during a consulting gig, a seasoned exec in charge of several destinations for a large DMC asked me to perform an assessment on their regional operation. The guy was devoted to a bulky collection of Excel files; he was deeply proud of the stats he was able to calculate from those lone spreadsheets. His pride vanished as soon as I merged and mixed all his beloved records into a single Access database. You should have seen his face when I showed him the reports, graphics and queries my database spawned!

That was a manager with a knack for numerical stuff, so he could immediately see the benefits of advanced data handling. However, small to medium TO directors and owners tend to put all their attention to the P&L sum-up, for obvious reasons… I can fully understand that, as I am a P&L person myself. But wouldn’t you take better business decisions if you could predict what your clients want? Wouldn’t you like to reduce costs and increase profits while avoiding hunch-based mistakes? If your replies are positive, read on… there is much, much more you can gain from data crunching!

Perhaps you’ve been in the business for quite a long time. You’ve seen it all: innovative concepts that looked promising went legs up, big brand ideas backed by multi-million budgets died a slow death, hotshots claiming to be the industry’s Messiah… Notwithstanding, you helmed your company through good and bad times, armed with a Windows 95 computer and your big fat network of personal relationships. Kudos!  That’s exactly why your hardened gut is telling you to check this “Big Data” subject, that so many people is mentioning in so wide-ranging contexts, seldom explained.

To put it simply, “Big Data” refers to the collection of massive quantities of information gathered directly from clients, their bookings and other sources, plus the processing of such information to determine and interpret repeating patterns or trends, aiming to assist with complex strategic decisions. True, it sounds like plain old statistics, although the amount of data is so colossal now that you need complex methods and sundry resources to process it all (think of climate simulations, astronomic research, financial forecasts, etc).
In our environment, I would say the concept “Big Data” only applies to hotel chains and multinational, vertically integrated operators. The key here is the sheer quantity of data to acquire, cook and serve: their databases (and the budget to manage those) are orders of magnitude bigger than anything a single, privately owned operator can pull together in years of operations. Currently, within the Tour and Travel industry, “Big Data” is a term largely misused, or a fancy dress some smart-ass is laying on ol’ trusted Business Intelligence, just to look and sound cool. If you own or manage an independent DMC or Wholesale Tour Operator, Business Intelligence is what you actually need, dear reader, as it deals with analysis tools suitable to your “Not-so-Big Data”.

OK, you might be thinking, but aside from tech stuff and buzzwords, how’s that useful for my business? At the accommodation industry the benefits are widely known, so allow me to present a few samples applicable to both the incoming and outgoing aspects of tour operating:

Incoming – Which is your captive market? What service or tour is most popular in that market? What are retailers’ most frequent requests for young couples? How about middle-aged passengers travelling solo? How many rooms do you expect to sell next Christmas? Why are your competitors stealing market share from you in that particular country? If you only have two or three clients, you can do without BI (for now). However, if you have dozens or hundreds of wholesalers signed in, data analysis is unavoidable in order to find out the precise answers to such questions. For instance, you want to know who your final clients are and exactly what they want during their holidays, to sort them out towards offering to wholesalers and retailers the right set of products and services. That’s called segmentation: no company can do without it nowadays, and it can hardly be done manually.
Other aspects improvable via BI are fleet management, budgets design, and obviously marketing and sales.

Outgoing – Every year on trade shows I come across Product Managers that happily claim to be launching a charter to this or that destination next season. Whenever I ask them, “What’s your demand forecast for the first quarter?” they spat a farfetched figure based on daydreams, or just look at me as if I just killed their puppy… Correct me if I am wrong, but I believe the vast majority of independent wholesale TO’s concoct their brochures over the boss’ personal tastes, sponsors from Tourist Boards, or just plain hunches (as in “everybody is selling Lanzarote this summer, why wouldn’t we too?”). Not to mention contracted allotments in hotels and flights: do they actually have the market insight to risk such operation? Is the product positioning and pricing correct? Feel free to correct me again if I’m wrong, but I think it is being done the other way around: if TOs happen to find a cheap flight and/or resort, they’ll go for it and take their chances. A hit-and-miss scheme is unsustainable (Lowcostholidays, anyone?), hence a Business Intelligence project is in order to obtain not only a birds’ view of the company’s soft spots, but to deliver strategic and operational grounds on which managers will be able to take educated decisions, rather than emotional guesses.
Other areas in which BI would benefit TOs is revenue management, demand forecast, distribution, costs optimization and, of course, sales & marketing.

Ok, you might think, I’ll buy it. What’s next? The good news is that every organization –no matter how small- can benefit from BI. The not-so-good news is that the bigger the company, the more complex its implementation will be, requiring quite a few resources (although rewards will be proportionate). At the end of the day, BI is a reasonable investment with a quick, significant return.

What does it take then? you would ask. Well, the essential condition is commitment, as this project will demand certain changes in your decision-making and operational ways, so you must envision the value of such changes. Relish that moment, as it could be the very last time you use a gut feeling for business! Next, you’ll need all the data amassed in –say- the last three to five years: every booking you’ve got so far (past and future) with the relevant information (client, market, demographics, etc.), plus your website usage, MICE requests, even all your cancellations. Also accounting and payroll data, local air traffic, competitors’ facts. Everything you can think of! If you already have all that info on a manageable database, or even on spreadsheets, great! You solved already a huge problem. Otherwise, start collecting data today! On a side note: if you are still doing things manually, do you see why it is so important to work with a comprehensive management software? It would be the single source of all that information, easily extracted and prepared. In a future article, I’ll present reviews for said software.
Finally, a set of analytic devices tailored over the company’s needs will deliver –in an easy to read report or graphic- the facts and figures that will assist you by correcting strategies, balancing budgets and spotting new business opportunities.

A Business Intelligence system would be complete and much more accurate if there is access to proper benchmarking data: if you compare your dataset with that of competitors, you could better adjust your plans and pricing. The hotel industry has such an instrument, but the tour operators must rely on general statistics issued by government boards and trade publications… Biased or insufficient data, I bet, but it’s better than nothing and can be used (with a pinch of salt).

Hey, here is yet another idea for a profitable business: an independent aggregator could (confidentially, of course) compile via XML the real traffic and production from all TOs on a determined market/region. There, a powerful benchmarking tool valuable for all connected operators!

Coming aboard the Big Data train could be a daunting task, or a relatively easy one –depending on the data collection system you have in place-, but I can guarantee the process will be fun, the results exhilarating and permanent. Business analysis should be considered an integral part of your organization, a trusted friend that tells you openly what’s working and what’s not, where to put your money and where to collect it from now on, for the rest of your company’s life… or until you retire rich and satisfied.
In uncertain times like these, only companies able to make data work for them will be ready to oppose uncertainty. Here’s a certainty, though: those who don´t jump into the data train (big or not) will be left behind, still wandering why numbers were so important in an inherently human trade.

Are you interested in a ticket to the BD train? Is BI working for your company? Please share comments below, or drop me a line if you have questions.
Thanks for reading!

Marcello Bresin