All products featured on WIRED are independently selected by our editors. However, we may receive compensation from retailers and/or from purchases of products through these links.
If you checked into a hotel over the weekend, chances are that the details of your room-service orders, phone calls, and movie transactions have already been tucked away in a central database, where they will eventually be aggregated and mined for marketing purposes.
Pegasus Systems, a global supplier of hotel reservation and commission services, plans to mine the mountain of data that the company collects in real time from the thousands of hotels under its electronic umbrella. The firm’s plans came to light last week in a report published in the trade journal Data Mining News.
A Pegasus executive said that while individual customer records will not be sold, the company plans to crunch aggregate data into “trend reports” that will be channeled back to hotels and travel services as marketing resource material. Nonetheless, the plan is riling privacy advocates.
“Airlines can tell you that the traffic from Dallas to Atlanta is up 6.2 percent,” said John F. Davis III, Pegasus Systems’ president and CEO. “For a hotelier, that doesn’t help them.”
“What they want to know is that when people get off the airplane in Atlanta, where do they go? Do they go downtown? Do they go to Buckhead? Out to Marietta?”
Pegasus, a Dallas-based multinational corporation, runs a service called THISCO (The Hotel Industry Switch Company) that facilitates booking for more than 27,000 hotels via the company’s TravelWeb site, and others, including Microsoft’s Expedia. According to the Data Mining News report, the company also supplies the back-end reservations system on America Online.
The company said that Pegasus IQ, a recently formed subsidiary, is building on this THISCO system and collecting real-time data from hotels and online booking sites in order to glean information about travelers’ spending habits.
The Pegasus IQ project will be ready to roll in about six months, said Davis.
Pegasus said that the project is designed to provide “trend reports” and “benchmarks,” but privacy advocates caution that such services carry strong potential for abuse.
“These industry-wide data warehouses are privacy Chernobyls waiting for a meltdown,” said Jason Catlett, CEO of Junkbusters, a firm that sells software that blocks online marketing messages.
“Someone’s marriage will be ruined when their spouse finds a detailed electronic account of a weekend fling in Aruba four years ago. And if the spouse happens to be a member of Congress, Americans may finally get the data protection laws that the majority have wanted for years.”
Catlett’s hypothetical scenario is still far from the present reality, however. The closest the hospitality industry has come to Pegasus IQ is the STAR Report. That monthly study is compiled by a company called Smith Travel Research, based on sales averages voluntarily supplied by hotel managers.
By contrast, the Pegasus technology collects real-time transactions as they occur at the hotels themselves. Guest history databases are then compiled for each property, with full check-out information.
“Every site out there goes through [THISCO] — I can tell you exactly how many bookings Preview [Travel] did yesterday, I can tell you what Travelocity did,” Davis said. “We know.”
Davis insists that individual names will not be made available to marketers. Rather, the compiled data might be used by a hotel manager to obtain booking information of a competing hotel on a particular day.
“We never give out [data] on a property-by-property, a chain-by-chain, or an individual guest name,” said Davis.
But in a filing earlier this year with the Securities and Exchange Commission, the company hinted that it may eventually provide data to third parties concerning the particulars of a guest’s stay.
“The Pegasus IQ service intends to provide data in an electronic format to individual travelers or corporate travel departments regarding a particular stay at a hotel, together with information provided by payment card companies, to facilitate automated expense reporting or to ensure travel policy adherence.”
A Pegasus spokeswoman said that the document was filed before the Pegasus IQ system was even designed. She said that once work began on the new system, it became apparent that such data collection would not even be technically possible.
But Davis said the hotel interface software only supplies partial information.
“We may have a half [of] a name and stuff, but the field record that goes through the [database system] isn’t a full name, and it’s certainly not a full address,” he said. “We’re dealing in tens of millions of transactions, so we have abbreviated fields — we don’t pass addresses and we don’t pass full names.”
Other privacy watchdogs were concerned over a recent Pegasus investment in Customer Analytics, Inc., makers of “relationship marketing” technology, where database marketing is used to target an individual’s spending habits.
“Consumers are rebelling against this type of marketing,” said Susan Dobscha, an assistant professor of marketing at Bentley College and co-author of a study on the subject, “Preventing the Premature Death of Relationship Marketing.”
“That’s not where consumers want a relationship forged,” Dobscha said, saying that a consumer would prefer a lower price over, say, having their beverage choice anticipated.
A spokesman for the Center for Democracy in Technology said that some hotels pride themselves on knowing the tastes of regular guests, but that such arrangements are built on mutual consent and trust, and are not crunched in shared databases.
“The difference is when the consumer knows about [personal data storage] and consents to it, and there is an option to go to that hotel,” said Ari Schwartz, policy analyst with the Center for Democracy and Technology. “If everywhere you go collects info about you, then there is no option to protect your privacy.”
