Where and how can the hospitality industry best exploit AI? A roadmap to get there

This article was compiled following interviews with company executives, leaders in AI investment and innovation, and technology companies that use and innovate AI within their applications. It draws on practical experience in innovating solutions that use AI to improve business results.

From day-to-day operations to planning long-term business strategies, hotel management is a complex jigsaw of tasks. Managers are pressured to keep customers and staff happy whilst juggling multiple other balls that keep the proverbial wheels on the track. Experience goes a long way, but traditionally, much of the long-term business planning, including supply-chain optimisation, marketing and fraud protection, has required extrapolation of data and a degree of second-guessing.

It’s hard to recall when technology didn’t play a role. Hotel system infrastructure has evolved within a framework of tried-and-tested application solutions to meet specific needs. These have been employed at almost every step of the business and customer journey, from payment systems to in-room control tablets. Affordable and quick to implement, it’s easy to see why these off-the-shelf applications have proliferated.

This legacy “short-term fix” technology has proved to be both best friend and worst enemy. Why? Because a business with a portfolio of fragmented systems causes unnecessary complexity and duplication of work. That is because every single application requires and stores multiple copies of hotel data, for example, pricing, inventory and availability or customer profile information. They also require interfaces and point-to-point integration with all other hotel systems, which need to be maintained and managed.

Legacy bolt-on applications absorb useful data, yet none of these point-to-point applications is connected in a productive way. Short-term issues and problems are solved, but that’s where the journey ends. And there are no economies of scale in buying off the shelf because as you grow proportionately, so do your costs.

It’s time to rethink.

Why? Because in a world that’s embracing artificial intelligence (AI) the industry’s legacy applications become a significant barrier to innovation and productivity. The biggest challenges for travel and hospitality companies in adopting AI-based solutions stems from how the industry and industry technology solutions have evolved. Your data is stored in scores of silos. AI needs a single source of truth. With that, the same core technology can be leveraged over hundreds of hotels, hundreds of business units and millions of customers.

The path to future success lies in open platforms, cloud technology and horizontal architectures that abstract hotel systems from channels and in leveraging single data sources of truth to create data-driven insight across all aspects of hotel and commercial operations. In a nutshell, AI will be crucial in ensuring the success of future business operations. Now is the time to move away from our traditional, highly fragmented modus operandi and focus investment to move over time to a modern technology ecosystem. Here is our road map to get you there.

The opportunity for AI – why now?

AI has evolved significantly in recent years. The technology has reached a level of maturity where AI can make a tangible impact, with huge benefits for hospitality and tourism. Executives: take note. Its applications can make a difference in several key areas, including forecasting and analytics, revenue management, customer targeting and personalisation and supply-chain optimisation. And you can leverage market and industry data. AI uses cloud technology, which needs large amounts of data from which to learn and hone and the tech industry, too, has been going through a transition. AI relies on large volumes of high-quality, clean data. Hyper scalers, including Microsoft Corp, Google, Amazon Web Services, Salesforce Inc and META, among them, are keen to partner and invest in developing AI. These companies have industrial-scale levels of information that can be leveraged to the benefit of individual travel and hotel companies. Not only can hotels buy what is proven, they can leverage industry-scale data and compare it with their own.

Cloud technology opens the door to huge amounts of data that hotel executives and travel companies can use to make good, accurate decisions. Now is the time to get on board.

The technology is affordable and available on a pay-as-you-go basis, so businesses large and small can tailor payment to specific needs. Data is available to the smallest and the largest companies and can be merged and matched to provide a 360-degree view of operational needs, as well as customer behaviours and preferences. Translate the business data, apply it and use it to enhance business performance. As you grow, your unit costs are reduced. It’s a win-win.

Navigating the changing landscape

Undoubtedly, the hospitality industry has seen significant transformation, yet it lags behind other sectors when it comes to the integration of AI technologies. To move forward, hotel companies, small and large, need to think strategically about how they evolve their technology architecture. This is important not just in terms of efficiencies – which are outlined below – but to be able to innovate at speed. Some companies are already migrating from outlet-based technology to modern, cloud-based platforms. For others, it’s about knowing where to start.

The biggest barrier to innovation is the hotel industry’s fragmented legacy architecture, which is stuck in a high-maintenance vertical framework. ‘Vertical’ because all standalone applications must interface with the same core systems in the hotel. These many-tentacled platforms not only build a huge degree of complexity into your ecosystem but also make it impossible to innovate.

What are the benefits of horizontal architecture, and how do I get there?

Horizontal architecture puts an integration layer in between every single transaction generated by a customer or channel. It abstracts customers from channels and channels from systems so that neither customer nor employee has to interface with separate property management, point of sale systems and spa and housekeeping systems.

This abstraction of technology enables you to innovate any component you like without having to worry about the complexity of multiple other applications. It means you can innovate a website without having to consider dependencies with any other downstream system. The integration layer abstracts the website from all those other systems. Similarly, if you want to upgrade a Hotel Property Management Solutions (PMS) to the latest version there is need to worry about the point-to-point interfaces of all those systems because you are talking solely to the integration layer, and it manages messaging with all other systems and channels.

The good news is that the transformation to a cloud-based system platform doesn’t require a “scratch everything” approach. Think of it as a gradual unhooking from traditional technologies and taking the necessary steps towards achieving a modern architecture and cloud-based platform-enabled ecosystem.

Phasing out legacy applications and making them gradually redundant strikes a balance between the goal – evolving to a point where the business can leverage a single 360-degree view of the customer, inventory, pricing, bookings, availability and revenue information across multiple channels and markets – and what companies can afford and achieve in a given time frame.

The outlook is positive. Focus on early growth and on gradually building ‘intelligence’.

AI has taken off, and how?

To be AI-ready, the business must be data-ready. The fields of healthcare, transportation and manufacturing have all been early adopters of AI. Airports have been able to take advantage of readily available operational data, which has given that sector a head start.

AI can predict equipment failures with a high degree of accuracy. At Seoul’s Incheon airport, the integration of AI with digital twin technology has enabled AI-driven predictive maintenance to predict needs before issues arise. Successfully employed, this synergy can result in real-time insights, operational gains and proactive maintenance.

Similarly, AI-driven analytics in predictive maintenance at Dubai airport has seen a 40% reduction in unscheduled maintenance. Singapore’s award-winning Changi airport integrates IoT (Internet of Things) sensors extensively across its facilities to predict and prevent asset failures. It also uses robots for cleaning, baggage handling and customer service. Robotics are integrated with digital systems allowing for real-time communications for efficiencies.

So how can travel and hospitality companies use AI to best effect?

From highly personalised customer experiences to targeted advertising, there are endless ways in which AI can elevate a hotel’s performance. AI can analyse vast amounts of data to identify trends and customer preferences and ultimately inform decision-making and strategy. In the premium hospitality sector, where the art of anticipation is what sets it apart, customers stand to benefit hugely. Here are examples of where hospitality can best exploit AI:

• Forecasting and revenue management
  Forecasting and predicting the market and dynamic pricing are hugely important areas because they help drive revenue. By looking at historic patterns of demand, AI can determine what the price should be on any given day, and which inventory should be made available.AI algorithms can also analyse market conditions, exchange rates, competitor pricing and demand around calendar events to optimise room rates in real time. Knowing what the likely demand is going to be can also help determine the conditions of sale around a particular room. Are you going to sell a room on a day-by-day basis? Should it be a weekend-only proposition, and should you incorporate a two-day minimum stay?
• Marketing and customer profiling benefits everyone
  AI can be used not only to target certain customers but to communicate with them in a more relevant way. Should you need to plug a shortfall in suite sales for example, there is no point scatter-gunning your entire database and bothering customers who only stay in entry-level rooms. AI can help you find customers with a propensity to buy what you want to sell.The next step involves communicating in a way that resonates with those customers. That might involve using certain images (highlighting the spa, certain restaurants, and so on) the right language and the right sales points, and then sending that information at the right moment and via the right channels. Make it relevant to the customer and they will likely come back.AI can also manage data analytics. By segmenting audiences based on user behaviour and demographics AI helps a business to understand its position in the market and identifies opportunities for growth.
• Virtual assistance saves time
  AI can facilitate in-room services through voice-activated devices, enhancing convenience for guests. It can also help frontline staff with guest interaction by monitoring conversations and shaping automatic responses while AI chatbots can answer queries, assist with bookings and provide local information as well as providing 24/7 customer service.
• Personalised customer experiences build relationships
  The dream scenario for any guest is to be welcomed back by name, perhaps in a favoured room type and with their preferred amenities in place. AI-driven technology in hotel rooms can be used to create seamless personalisation at different points in the customer journey, whether it’s tailored itineraries, restaurant bookings or in-room services. By adjusting lighting, temperature and entertainment and mini-bar options based on guest preferences. The easier and more relevant the experience, the more likely a guest will return.
• Operational efficiencies
  There are significant efficiencies to be made. AI can monitor equipment and predict when maintenance is needed, reducing downtime and unnecessary running costs. AI tools can also optimise staff schedules (based on historical data) and expected guest numbers. Lost business can’t be recovered, but you can be better prepared for next time.
• Supply-chain optimisation
  AI is particularly good at anticipating perishable inventory. The procurement and distribution of perishable goods as well as energy and other resources, can all be managed by cloud data. Mapping supply and demand in tandem removes guesswork and reduces overheads.
• Fraud detection and security
  By monitoring transactions AI can help prevent fraud and ensure secure payments by detecting uncommon activity in hotel systems and unusual patterns in transactions.Previously, with multiple applications to contend with, locating a security breach would require a forensic trawl through multiple, siloed operations systems. With all information in the cloud, a security breach is not only less likely, but also easier to detect.
• Sustainability initiatives and resource management
  AI can optimise energy and resource use in hotels and travel operations, helping to support sustainability goals.
• Social media monitoring
  It can also be employed to analyse social media and review platforms to gauge customer sentiment and target marketing strategies accordingly.
• Travel planning and management
  AI tools can help travellers plan, adjust and manage their itineraries in real-time, offering alternative options based on changing circumstances.
• Real-time translation, marketing and publishing
  AI-driven translation services can help break down language barriers and enhance communication between guests and staff.

What are the critical success factors that can help drive successful AI innovation?

By focusing on certain criteria, hospitality and travel businesses can maximise the effectiveness of AI initiatives to drive meaningful outcomes.

1. Set clear objectives
   Establish specific, measurable objectives for AI initiatives, such as improving customer experience, increasing efficiency or driving sales. Communicate the vision and benefits of the technology to stakeholders to gain buy-in and insights. Once change is underway, compare old and new data management and highlight the tangible benefits of employing AI. Do this consistently along the journey. Establish key performance indicators (KPIs) to evaluate the success of AI initiatives and track progress against goals to ensure continuous improvement.
2. The technology infrastructure – and regulatory compliance
   Going forward it’s important to focus on scalable solutions and to invest in relevant cloud-compatible AI technologies that grow in tandem with your business needs. Factor in your business infrastructure. Choose the right deployment model, based on your operational requirements, whether that is cloud, an on-premise or a hybrid set-up. Don’t forget compliance – ensure AI implementations comply with industry regulations and data privacy laws to avoid legal pitfalls.
3. Data management and integration
   AI needs reliable data sets so ensure high-quality, clean and well-organised data. When it comes to integration, focus on building modern architecture around all guest touchpoints, and direct all queries through one technology. Design your AI applications with the end user in mind, ensuring they are intuitive and meet customer needs effectively. Ultimately, this will ensure a seamless guest experience.
4. Human resources and ethics
   Taking the necessary steps to equip staff to work alongside AI technologies will help to foster a culture of innovation. Workplace change is only as good as the training and upskilling that underpins it. Prepare your organisation for the adoption of AI technology by anticipating potential resistance and promoting a culture of data-driven decision-making. There are opportunities for collaboration here, too, by encouraging cross-functional teams to pool expertise. Don’t overlook ethics. AI systems need to be fair, transparent and accountable. It is essential to implement strategies to identify and mitigate bias in AI algorithms (ethical AI) to ensure fair and equitable outcomes.
5. Transparency
   Maintain transparency in how AI models operate and make decisions to foster trust among staff and stakeholders.
6. It’s good to talk
   Look outside of the business for collaborative purposes. Consider strategic partnerships with AI specialists or technology providers to leverage expertise and accelerate implementation.

Key takeaways

For hospitality and tourism businesses keen to adopt AI, the goal is to establish a seamless, end-to-end source of data by which you can orchestrate all aspects of hotel operation. Stop spending on standalone applications that duplicate content, functionality, data and point-to-point interfaces with multiple individual systems and plan for a cloud-based future.

Build intelligence by creating a single view of the business by leveraging industrial-scale data from big tech companies. Hospitality leaders need modern, abstracted, and scalable horizontal technology architecture to create economies of scale. With growth, unit costs come down. This is a fundamental principle and is how hotels can grow profitability and not just scale. Prioritise your needs, as outlined clearly in this road map.

PACE Dimensions is expert in opportunity identification and prioritisation, business architecture and design, operating model design, transformation delivery and change management. Find out more about how PACE Dimensions can help your business excel at www.pacedimensions.com