Web Analytics: A Missed Opportunity for Hotel Online Strategy?

Jos Manuel Pinedaa, and Alexandros Paraskevas a

a

Department of Hospitality, Tourism and Leisure Management Business School Oxford Brookes University, United Kingdom jmpineda@jmpineda.com aparaskevas@brookes.ac.uk Abstract

Web analytics can provide hotel and tourism organisations with a better understanding of website visitor behaviour. Such an understanding can be very useful in the development of appropriate web strategies. This study attempts a first investigation of how the hospitality industry in Europe has adopted and uses these tools and at what extent it reaps the full benefits they offer. Ten UK-based web analytics solution providers were interviewed on their products and the potential they offered to the hospitality industry and sixteen executives from hotel chains in UK, Spain and Greece were interviewed on how the use these tools. The solution providers do not consider hospitality as a strong market as in their eyes- it is not as advanced in terms of web strategies. The study proved them right although there are some really encouraging signs of change in this respect. Keywords: Web analytics, web performance measurement, online strategy

Introduction

In the last decade the Internet has emerged as a major source of change in the global economy. Its impact in hospitality and tourism has been explored by several researchers (for example, Marcussen, 1999; Yuan and Fesenmaier, 2000; Cline, 2001; Poon, 2001). Tourism product distribution has been the area where the Internet has caused the deepest changes. The Internet is "reinventing the distribution" (Middleton and Clarke, 2001:166). One of the main impacts has been the phenomena of dis- and reintermediation (Palmer and McCole, 1999). While re-intermediation is a process that could shift the power from traditional players to new online businesses,

disintermediation tries to create a direct communication channel with the client avoiding any intermediary. The extent to which principals succeed in keeping a direct relationship with the customer depends on a successful online strategy built around an effective proprietary web site. In the case of hotels, their web sites become a strategic asset of vital relevance for long term profitability. In order to support this conclusion, PhoCusWright (2002) reports for the United States market online bookings of 9% of the total bookings for the year 2002, with predictions for 2005 reaching 20%. Slightly more than half of these online bookings are made through proprietary web sites. Experts and practitioners predict a surge in the importance of hotel websites (O'Connor and Frew, 2002). Web strategy is crucial for obtaining maximum benefits from this shift in consumer behaviour. Consequently, managing the success of their own web site is critical for the overall performance of a hotel company. The cornerstone of the management of a successful web strategy is analysing the online behaviour of the client. The tools required to facilitate website data collection and analysis are widely available in the market and are known under the 'umbrella' term of web analytics. Although web analytics is part of the broader topic of performance measurement, which is widely studied in the academic literature, perhaps due to their novelty, have received little attention. The core literature is based on books written by practitioners (Friedlein, 2003; Inan, 2002; Sterne, 2002), but the academic research focused on their use in hospitality and tourism is quite limited. The study aims at closing this gap in the extant literature by presenting a wide range of web analytic tools currently available in the market, exploring the hotel industry awareness of these tools and investigating the extent to which the full potential of these tools is exploited by hoteliers.

Web analytics: What is it?

Although the term 'Web analytics' is not unanimously accepted, and other terms such as web metrics (Sterne, 2002), web measurement (Friedlein, 2003; Inan, 2002) or emetrics (Cutler & Sterne, 2000; Eisenberg & Novo, 2002) are used, there is a consensus in defining these tools as the set of techniques, processes or applications that allow to measure the success of a web site. More specifically, web analytics can be defined as "the analysis of web site traffic data to determine a web site's success and to understand customer behaviour" (Swamy, 2002:44). Several authors

(Jagannathan et al., 2002; Swamy, 2002; Friedlein, 2003) maintain that web analytics should feed the companys web strategy in both its planning and its implementation. Inan (2002) proposes a framework of web performance analysis by measuring and tracking online visitor activities alongside their life cycle: reach, acquisition, conversion and retention. Web analytics is based on data collection methods quite similar to 'offline' performance measurement, such as secondary data obtained from publicly available sources and data collected from web site visitors such as online questionnaires, panels, focus groups or mystery shoppers (Chaffey et al., 2003). However, the fact that this data is automatically recorded on web sites through the use of web analytic tools is what makes this data collection so distinctive, offering an unprecedented potential for consumer behaviour analysis (Sen et al., 1998). The data collection starts with the identification of individual visitors. The Interactive Advertising Bureau (IAB) accepts two methods for counting unique visitors: registration-based method and cookie-based method (IAB, 2002). Both methods are not totally accurate. Not all visitors accept to register. Furthermore, some of them may register more than once using pseudonyms. On the other hand, although cookies are more widely used, some users may disable or delete cookies, use more than one computer or multiple users may use the same computer. An alternative to the above is the use of IP addresses, but this is only valuable in combination with the other methods (Inan, 2002). Once visitor identification is reasonably achieved, different approaches for data collection may be used: Server-based data collection, where the server registers in logfiles every single request it receives from the user, Page-tagging or browser-based data collection, where each page of the website has a tag which sends data to the server every time the page is requested (even if it is loaded from a cache memory), so all data is retrieved directly from the browser, and Packet sniffing or network-based data collection, where data is collected as visitors move through the Internet, based on their ISPs. All of the above have their merits but they also have some limitations. For example, some requests do not reach the server due to visitors using cache memories (that store web pages to allow faster navigation) in their terminals, thus decreasing the server based approach effectiveness since some of the visitors activities cannot be recorded for the server. Page tagging reduces undercounting but some computer terminals may

not be able to read the script language. Packet sniffing provides less depth of information but it is used mainly for benchmarking purposes. There is a wide range of web performance measurement techniques and metrics available in the market. Traditional web metrics tended to focus on measuring only traffic, but metrics such as hits, page views or number of visits have little business value (Cutler and Sterne, 2000). Inan (2002) the techniques into eight categories as displayed in Table 1. Table 1. Web Performance Measurement Techniques
Technique Best customer analysis Customer-engagement funnel Internet-traffic measurement and ranking Where from-to analysis Multi-dimensional analysis Path analysis Onsite searcheffectiveness analysis Usability-testing Purpose Classifies the customers based on recency, frequency and monetary value. Allows graphical representation of at what stage the potential client is lost Allows the benchmarking of certain metrics, such as visits, with competitors Identifies the sites visited immediately before and after visiting a website. Identifies the best referrers including search engines and the keywords used in the searching. Examines the metrics in the context of other business data, identifying the factors affecting the results Displays the route or path of every visitor from the entry page to the exit page. Evaluates the effectiveness of own search facilities Reflects on how easy and effective to use a site is for a user.

Source: Inan, H. (2002). Measuring the Success of Your Website. A Customer-Centric Approach to Website Management. Frenchs Forest, Prentice Hall, pp.142-143.

It should be pointed out that visitor privacy is an area of strong debate (Friedlein, 2003; Inan, 2002) in web analytics. Some data collection mechanisms can be intrusive and cross-country legislation must be taken into account when data collection techniques are planned. Inan (2002) emphasises the need to ensure transparency in the way data is collected on the web site and give users the right to refuse to participate in a web-metrics activity.

Web Performance Measurement in the Hospitality Industry

The hospitality and tourism literature addresses web analytics in the context of data mining (Olmeda & Sheldon, 2001) or as a tool for enhancing the benefits of a CRM system. For example, Murphy et al. (2001) describe the benefits of web site-generated data, but limit their discussion to log files and offer the example of a restaurant deploying this method of data collection emphasising the need to combine log files with cookies and site registration in order "to attribute on-site behaviour to individuals" (Murphy et al., 2001:91). Alford (2001) strongly recommends linking Internet data with CRM systems, but does not discuss the use of web analytics for data collection. Gilbert and Powell-Perry (2002) explore the concept of web based relationship marketing in the hotel industry but limit their discussion to database analysis. Finally, there is quite a significant body of research aiming at the evaluation of website effectiveness with a number of criteria that are not related to web analytics tools (see, for example, Chung & Law, 2003; Jeong & Lambert, 1999; Jeong et al., 2003; Morrison et al., 1999). Consequently, although these studies offer a valuable insight on web performance measurement in hospitality and tourism they do not address web analytics in the required depth. The present study is a first attempt to a deeper exploration of this topic.

Research Method

Due to the exploratory nature of the study, in-depth interviews were the chosen method for primary data collection, as this method is more flexible to capture the essence of new knowledge. Relevance of interviewees was a key concern to ensure the validity of data. A complete view of web analytics could not have been possible collecting data only from hotels, as they might not be aware of the range of tools available in the market. Therefore, it was decided to start the enquiry by interviewing analytics providers in order to obtain a deeper knowledge of the features and benefits of web analytics. The interviews were more focused on the description of their core product, and the service bundle that they offer alongside (such as standard SLAs service level agreements-, possible added professional services, model of service provision, usual cost of deployment, pricing and payment models). Participants were also asked to discuss the value of their services for their customer and give market insights in terms of the competition in this field, the existing demand for their services as well as their predictions for the future in terms of service provision and customer expenditure. Once a clear picture of web analytics was obtained, the researchers interviewed hotel executives - typically IT Managers (webmasters/editors), e-business or marketing managers/directors, as these positions have the responsibility of hotel website performance. The interviews were focused on the perceived strategic importance of web presence and web booking facilities for the organisation and then on the ways the organisation measures web performance. Further to that, participants

were asked to discuss the perceived benefits of these measurements and the impact they have on the organisations overall web strategy. The sample was purposive, although the geographical criteria also followed convenience characteristics. Based on the generic business literature review, the researchers created a list of 208 metrics available in the market. This list was filtered down to 84 metrics that the literature states as more commonly used. Twenty-five web analytics providers with presence in the UK were identified offering these metrics. Ten of them, still offering the full range of metrics in this list and the full range of data collection approaches, agreed to participate (response rate of 40%). Fifty-nine hotel chains in UK, Spain and Greece with some advanced web presence (i.e., website with automated booking facility and customer interaction features) were contacted out of which thirteen agreed to participate (22.03% response). As this is a research attempting to explore the topic for the first time in the hospitality industry, criteria such as company size, number of units, market segment, etc. were not taken into consideration. Also the geographical location of the hotels does not allow generalisations. Nevertheless, some theoretical generalization is inferred from the data, proposing a basis for more explanatory or descriptive studies.

Findings

5.1 Web Analytics Providers Only few of the web analytics providers have some experience in the hospitality industry (as opposed, for example, to banking and retailing who are currently the most important customers) but they do not feel that sector experience is that important. Most of the respondents share the idea that hospitality is not quite sophisticated in terms of e-business. One of the companies interviewed provides a range of services for hotels and reports that only 20% of their hotel clients actually use some web analytics. This information cannot be extrapolated but it is an indicator of the number of hotels that have not captured the importance of these tools. The respondents realise that they have failed in convincing the market about the benefits of their solutions. Although all respondents agree that there is a trend of business growth in their sector, they admit that a large part of the does not know what web analytics can do for it. In the words of one interviewee, "it is inconceivable to have a successful Internet strategy without management information. Web analytics makes visitor behaviour understandable". They believe that in the market there are three levels of web performance measurement. In the first level, companies collect statistics but do not analyse them. Many companies are in this stage and do not obtain

any valuable for them information. The second level might be properly called Web analytics and aims at understand online behaviour to optimise web strategy. Few companies are in this level and these are the core business for the respondents. There are different opinions on whether the third level or 'predictive' analytics has actually been reached. In this level, the objective is to predict future online behaviour and most of the providers in the high-end are currently providing or planning to provide this service. Consensus in the areas impacted by web analytics is high. The respondents locate the main benefits in the improvement of visitors site experience (based on their online behaviour), the effectiveness of online marketing (by accurately tracking the channels attracting valuable visitors), the identification of top referrers and search engine optimisation (knowing the pages delivering more traffic, including search engines and keywords used in these engines), the calculation of online customer acquisition costs (by accurately knowing the clients delivered by every channel), and having a complete view of the customer (through integration with other systems, such as CRM although this may be quite costly). Finally, they feel that one of the next big steps in this area - although quite a controversial - will be the use of benchmarking analytics, i.e., tools that allow companies collect data on their competitors traffic. But, the respondents pointed out that a key success factors for the web analytics is their link between with the companys web strategy. If there is not a clear online strategy, full benefits of web analytics will not be gained. A few respondents also highlighted the effective design of performance measurement (choice the data to be collected, the analysis to be performed and the reports to be delivered) as an additional factor of success. Some respondents warn about the information overload that may occur when companies are tempted to generate all available reports and advise to link report generation with the organisations strategic objectives. Web analytics solutions range from low-end (prices as low as 300 one-off or 35 per month) to solutions in the high-end with costs over 100.000. The first group is targeting a mass market, not still developed in Europe or Asia, but very solid in the USA. The high-end providers aim at corporations with strong presence in the Internet and a need for integrating different systems. At the moment the market is blurred and most of the providers do not have a clear targeting strategy. It is suggested that this will change in the near future although respondents have various opinions on who and how will dominate this market. However, they all agree that the low end will become more commoditised and their tools will rather target the mass market. 5.2 Hotel Executives

Taking into account the providers discussion on levels of measurement, the study showed that the hotels in the sample are at different levels of web analytics deployment. Overall, all hotel chains agree that web presence is an important strategic tool and are actually running some metrics in their web sites. However, their perception of strategic web presence is not really corroborated by the fact that five of them are only measuring hits, page views or number of visitors (not distinguishing unique visitors). Less than half of the chains in the sample go beyond the basics and are looking for entry and exit pages, page popularity, top referrers, search engines and keywords, navigation paths, etc. The respondents, however, in these hotels were not able to explain the individual visitor behaviour, as they were only monitoring the visitors movement in the site (often referred to as clickstream). Only a minority of chains in the sample (2 out of the 13) have a more complete measurement system identifying the individual visitor, tracking and analysing their behaviour alongside their life cycle, evaluating customer lifetime value (measuring the customer in terms of recency, frequency and monetary value), customer loyalty, customer acquisition cost, channel effectiveness etc. Even in these cases, respondents admitted that they often find it hard to interpret the reports and end-up with speculative conclusions. Two chains stated that they employ one full time member of staff specifically to analyse the reports and disseminate them to the relevant departments while the rest said that the analysis is part of the relevant department heads job. Web analytics is perceived by all respondents (even the ones who do not actually use them) as a tool to measure and adjust web strategy. However, when presented with the options available (in terms of data collection approach and metrics) only six of them seemed to be aware and take advantage of these tools. Most hotels in the sample did not have the necessary tools to track the client from the attraction stage all the way through to the conversion stage, and therefore face the risk of having fragmented information. This is mainly due to the fact that their systems did not allow to integrate information from their web server with data from the third party reservation engine they were using in their website. However, the respondents who use web analytics to shape their online strategy have reported that it helped them reduce website maintenance costs (by removing/revising the parts that were not visited), predict website traffic (and effectively modify its capacity), effectively segment website visitors and formulate online offers that would attract top customers, measure the effectiveness of various on- and sometimes off-line campaigns, calculate visitor-to-customer conversion rate and finally, identify which edistribution channels/partners are more or less profitable.

Two respondents (both IT managers/webmasters) said that they viewed web analytics as a tool that justified investments on the web site and the information collected was not used by anyone else. It was interesting to see that in most of the cases, the reports generated by these tools did not leave the department responsible for the web site and in many cases this was not the marketing department. A surprising finding was that the respondents who are reluctant to use more sophisticated metrics, did not state costs as a reason for this (what the researchers expected to be the main factor) but the fact that they felt that web analytics makes people accountable for the results of the online presence. One respondent said that the reports generated are incomprehensible (you need an MBA to understand them). Also, one chain in the sample suggested that using customer feedback (through online surveys, which aim at explaining online customer behaviour) is more effective than web analytics in this respect. Finally, privacy was not found to be a concern for the industry. Although some participants reported cases of personal data being collected for reasons other than measuring behaviour in a particular web site (mainly statistics and to use visitor profiles in marketing campaigns), they all agreed that the industry follows all current privacy regulations. Two main types of data are usually collected: anonymous and personal. In the former, data is aggregated and it is not possible to link it with personal information; therefore, privacy is not an issue. For the latter to be collected, the user needs to register and agree with the organisations privacy policy, and therefore privacy should not be an issue. One respondent pointed out that "technically, we are using data that [visitors] provide freely; [visitors] make an enquiry to a server and just provide the data needed to process that request". Some discussions in the European Union about regulation on cookies were abandoned as it was realized that cookies are necessary for e-commerce and users are free to reject cookies. As illustrated by a respondent, limiting the data collection techniques on the Internet would be "equivalent to wearing a bag hiding your face in the street".

Conclusion

Web analytics offer an extra vision in measuring the effectiveness of a companys web strategy and it is clear that hotel chains are not taking full advantage of these tools. The reasons for this vary from complete unawareness of the potential offered, lack of interest in usage by managers, resistance to usage due to the accountability they may create to the lack of clear web strategy.

Obviously, the solution providers need to take a more active role in educating the industry about the various ways that web analytics can be used and the benefits that can be gained from its use. The cost of web analytics solutions may vary but providers need to make sure that the industry understands what they offer at the different price levels and when the low-cost open source tools are preferable from sophisticated expensive solutions. Another challenge that is presented to the providers is the merger of data across the various sites, servers and applications that a chain may have or use. Although solution providers do not find it necessary, it is felt that they need to better understand the hospitality industry in order to attract it. Some specialisation in this sector will be needed if the providers will need to suggest metrics that are relevant to hospitality-specific business processes but most importantly when they will guide their hotel executives how to convert the data into actionable results. On the other hand, the hotel organisations will need to have a web strategy with carefully designed measurables. More often that not, companies first install a measuring system and then decide on what they want to measure (Bourne et al, 2000) leading to information overload. Hotels should be very realistic about who and how is going to use the analytics and choose solutions and metrics that complement their inhouse skills, as they may end up with data that no one is able to interpret. It was not surprising to see that hotel chains trying to use the analytics more productively, prefer customer-centric measurement. The hospitality industry is a peoples industry and site-centric measures such as number of hits and page views are not so helpful. The customer-centric approach reveals more about the customer and their visit patterns. Clickstream data that most of the respondents collect is quite helpful even if it only leaves room for speculation about the visitors behaviour. The executive who dismissed these tools in favour of online surveys was partially right. Hotels should look for a combination of clickstream data and online surveys that allow them gain significant qualitative and quantitative feedback from their online visitors. This way they do not only track what the visitor is doing in their website but also why he/she is behaving this way. Therefore web analytics should not be viewed as an isolated new set of information tools, but as an indispensable part of a wider web strategy. Exploitation of a web analytics system can be seen as a circular systematic process of gathering, analysing, delivering data and providing feedback that allows hotels to tactically adjust their web sites and, at the same time, informs their online marketing strategy. At the moment, this opportunity is being missed by the largest part of the hospitality industry but there are some chains that already reap the benefits from the use of these tools. Hotel

organisations willing to take the lead in this field will be able to co-ordinate online strategy and analysis and will achieve a definite competitive advantage.

Limitations and Further Research

This study has been predominantly exploratory and carries some limitations. The study of this area should move to a more descriptive approach extending the sample. Due to the size of the sample, the research has not drawn any conclusions based on geographical segmentation, size or target customers. Nevertheless, the researchers see a need for an analysis of the possible differences for different segments in the industry. One segment that has not been studied here is the individual hotel property. Small hotels can obtain benefits from web analytics solutions even at low cost by tracking the most effective channels, possible navigation problems and visitor traffic patterns. The effectiveness of specific metrics and techniques is another interesting research topic. Currently, some data on the benefits of some particular metrics is merely anecdotal or based on the experience of vendors who might not be fully familiar with the hospitality sector. Longitudinal studies on how some strategic processes are being measured and what metrics deliver the most effective results could help to establish a more solid knowledge on this topic. Finally, research should also be carried out to investigate the financial impact of the decisions made through usage of these tools in hotel organisations

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