The importance of increasing digitization in hospitality

Ever since the first hotel reservation system was established by Westin in 1947, technology has increasingly become a centerpiece of hotel operations.

The pace of change continues to accelerate, with strides in artificial intelligence (AI) and machine learning (ML) technologies expanding the capabilities of automated personalization. But that doesn’t mean that hospitality technology has kept up with the times.

The majority of hotels have yet to fully unleash their full digitization potential. It’s not for a lack of trying: AI marketing is supported by 75% of hotel chain’s top executives, and yet only 36% of all chains deploy automated personalization strategies.

So where do the gaps lie? And how can we build bridges to a fully-realized digital future for hotels? H2C’s latest Global Automated Personalization Study surveyed a global sample of hoteliers across categories to explore these questions — and illuminate pathways towards delivering digitization in a meaningful, impactful way.

Opportunities

When it comes to AI-driven automation, there’s an inherent tension between operational efficiency and individual relevance.

Hotels want to benefit from automatically personalizing each touchpoint on a 1:1 basis, but that precision can’t sacrifice guest individuality. Even if they accept the necessity of automation for today’s businesses, guests still want relevant communications that feel authentic and genuine.

But achieving automated personalization without sacrificing guest individuality is incredibly difficult due to competing priorities and lack of knowledge.

Even with these glaring challenges, the opportunities are numerous if automation is embraced:

• Elevate the guest experience: From more relevant marketing offers to a more personalized experience on-property, AI-driven technologies can elevate each guest interaction.
• Increase profitability: Matching guests to their ideal offers has a positive effect on conversion rate and better alignment of price to segment makes each booking more profitable.
• Reduce operational cost: Automation saves money in a variety of ways. From self-service tools that reduce front desk labor to implementing text messaging so guests can communicate with staff more efficiently, automated tools can not only personalize the experience but streamline operations.
• Boost retention: Staff are more productive — and happy — when they don’t have to do tedious tasks like manual data entry. Automated tools illuminate those types of tasks so that staff can focus on guest-facing interactions.

Challenges

The normalization of AI technologies in hospitality isn’t without its challenges. These include:

• Data collection: 83% of hotels struggle with collecting data that’s both accurate and clean. Without clean, organized data, there are real limitations to successful AI.
• Systems integration: With limited data provided by 3rd parties, and internal systems that don’t always work well together, data remains siloed.
• Cross-channel communications: With guests communicating across more than one channel, it’s increasingly difficult to manage and personalization can be less reliable unless data is captured across all touchpoints.

These challenges reduce AI effectiveness, as personalization is less relevant and accurate, and implementation becomes a steep hill to climb for overburdened staff with limited budgets. To overcome these challenges, there are some clear action items to take.

Action items

Even once hotels apply automated personalization, success is not guaranteed. It requires a dedicated implementation approach that’s structured to overcome the challenges of automated personalization.

There’s a reason why only one third of respondents in h2C’s study use automated personalization technology: it’s difficult to deliver at scale across an entire hotel operation and even those that manage to implement automated AI systems aren’t always successful as the study found 80% of chains are challenged with automated personalization tech.

Successfully implementing these new technologies requires thoughtful action informed by clear-eyed strategy. Some action items to consider:

• Focus on systems integration: First and foremost, align internal systems with 3rd party inputs to collect clean data. As the backbone of automation, clean data is what ensures that marketing, sales, distribution, and front-line operations are all working from detailed data aggregated into a single source of truth.
• Be cross-functional: Don’t make AI and emerging tech the siloed responsibility of IT. Bring together IT, e-commerce, distribution, and revenue, marketing, and operations into a single AI group to fully leverage its potential across the entire operation. No silos means more visibility and more effective implementation.
• Strive for 1:1 Marketing: The majority — 60% — of chains plan to implement a one-to-one marketing strategy but face a lack of technology and budget. Take the time to build a budget that affords your hotel best-in-class technology.
• Support attribute-based selling: A huge 64% of chains plan to use narrow-segmented pricing to improve booking profitability. That requires automated tools that process data in real-time to provide precise pricing to specific segments.
• Invest in training staff: Upskilling for automated technologies is essential. Even as personnel cutbacks reduce capabilities, training the remaining staff should be prioritized. Once fully underway, automated personalization will improve productivity and profitability.

With each of these action items, your hotel will be well-equipped to successfully implement automated personalization and other AI-driven technologies.

Looking ahead

The imperative to invest and leverage these technologies is also accelerating. With COVID-related labor shortages, coupled with evolved guest expectations, AI has the potential to put your hotel in a more competitive position, boosting productivity and operational efficiency.

But there are a few areas for improvement that could benefit from AI automations. The top five priorities for respondents over the next 24 months are:

• Messaging apps: With guests increasingly turning to messaging apps to communicate, 46% of hotels are planning to use AI to automate messaging through different channels.
• Loyalty programs: Connecting with guests by sending personalized offers to engaged loyalty users is planned for 38% of hotels.
• Search engines: From Google Hotels to Bing and other search engines, personalizing offers automatically is a priority for 36%.
• Hotel apps: Surprisingly, only 25% of hotels currently use AI-automated tools for their apps. That will change over the next 2 years, with prioritization by 35% of hotels.
• Check-in terminal: To accommodate the rise of self-service, many hotels have installed guest kiosks. With 35% of hotels intending to expand personalization capabilities in these kiosks, the channel is emerging as a core asset in automated personalization.

As hotels become more comfortable with AI-driven technologies to automate personalization, the benefits accrue more readily to the bottom line. The guest experience also stands to benefit from more accurate, relevant and timely communications across all touchpoints.