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Defining and Leveraging True Guest Value Versus Total Guest Value

Defining & Leveraging True Guest Value Versus Total Guest Value

Guests can generate revenue for a hotel in many different ways. Revenue management powered by guest valuation algorithms enable hotels to increase guest wallet share, keeping guest spending on-property instead of losing it to local attractions, restaurants, spas or competitors.

NB: This is an article from Rainmaker

True Guest Value, which refers to the accurate valuation of your customer, is distinct from Total Guest Value, which aims to capture data to predict guest spend when on-property. Here, we further detail the difference between True Guest Value and Total Guest Value, and how algorithmic models and data can help you maximize revenue from potential guests.

True Guest Value: Accurately Value Your Customer

Some revenue management systems (RMS) operate on a customer valuation model, which is a prediction of your guest’s value upon their next visit to your property. The valuation model is derived through an automated testing of many different predictive models to determine which model is the most accurate. In this sense, “True” guest value refers to the most accurate valuation of your customer. This is particularly useful in the casino realm, where gaming value is volatile from trip to trip.

When accurately valuing a guest, hotels preserve profit by correctly segmenting customers and making the best possible hotel yielding decisions. For example, if you overvalue a customer and put them into a high-value segment when they are not actually worth that much, you’ll risk displacing a more valuable guest who should be staying in the hotel instead. If you undervalue a customer you might turn them away when they should in fact be staying. Maximizing the accuracy of your customer value prediction will minimize the number of times you overvalue or undervalue your guests.

Total Guest Value: Capture Data to Understand Guest Behavior

Algorithmic models are very science-driven. They are vast improvements over what has been used in the gaming/hospitality industry for a long time. These algorithms are useful for identifying True Guest Value, as described above, but Total Guest Value relies more on accurately capturing data.

Total Guest Value strives to capture guest spend across the many different outlets on a property. The data could be all over the place – for example, if a guest uses their credit card rather than charging a purchase to their folio, the hotel might miss those data points. Total guest value is contingent upon whether the hotel can capture the data or not. Generally, any information captured by the PMS or stored in a customer database is accessible by the hotel.

Leveraging third-party vendors that capture data on guest behavior when they are not on your property can also help identify the Total Guest Value. By accessing information on a customer, you can develop a profile, including previous hotel stays and demographics, that can help predict value. Finally, accessing information on guest behavior when visiting your website, such as path to purchase, can aid in the process of predicting guests’ potential behavior when on-property or what types of offers might appeal to them.

Hoteliers with a clear understanding of their guests and competitive differentiators can enhance their guests’ experience while simultaneously generating significant streams of ancillary revenue. By mining various data sets at a granular level, including both guest stay and guest spending history anywhere on property, your hotel can offer the best rates and ancillary products to your most valuable guests.

For more things you must evaluate before you invest in your next revenue management system, including science vs. rules, building a revenue management culture, what to look for in support/service from your RM vendor, and PMS integration, download our free guide.

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