Artificial Intelligence - Impacts to Hotel Operations
POTENTIAL SCENARIOS AND IMPACTS TO HOTEL OPERATIONS
Implementing AI in hotel operations can lead to significant reductions in labor costs while enhancing productivity and efficiency. This shift can impact various aspects of the hotel industry, transforming operations, guest experiences, and overall business models. Although some of these impacts may be expected, many are not currently anticipated by many people in the hotel industry.
1. Operational Efficiency
Current Scenario: Labor is one of the most significant costs in hotel operations. Tasks such as front-desk management, housekeeping, and concierge services require substantial human resources.
Future Scenario: With advanced AI and automation, many of these tasks can be supported by robots and AI systems. For example, AI can help with bookings, check-ins, and check-outs, while robotic vacuums assist housekeepers in cleaning rooms more quickly.
Impact: Obviously, this shift can reduce operational costs, allowing hotels to have more work done with the same resources. We believe that housekeepers and front-desk staff will still play substantial roles, but they will be more productive with AI assistance. This brings up the classic quote about AI and jobs: Your job will not be taken by AI, but it will be taken by someone who knows how to do your job with AI. It is also important to keep in mind that many of these AI use cases could be years away. Anything involving robotics and physical movement will involve many more factors than just writing books or social media advertising, so many of those technologies will be very expensive and have slow adoption. On the other hand, if someone invents a robotic hotel housekeeper that is effective and has an immediate return on investment, then it could become widespread in a few years.
So, what will hotels do with these cost savings? You might see lots of answers out there, but it will really vary by hotel. Some hotels may choose to pocket the extra profits. Others will choose to hire the best labor, experts in AI, sharing and reinvesting some of the cost savings with people doing the work. And others will use the cost savings as a way to lower prices charged to guests if they are in a price-competitive market. The reality will probably be some combination of all of these.
2. Enhanced Guest Experiences
Current Scenario: Personalized guest service relies heavily on well-trained staff who can anticipate and meet guest needs.
Future Scenario: AI can provide personalized services at scale, using data to anticipate guest preferences and offer tailored experiences. For instance, AI can analyze a guest's past stays and preferences to customize room settings, recommend activities, and provide personalized offers.
Impact: Naturally, some guests will not want to interact directly with a kiosk or a robot, but enhanced personalization can lead to higher guest satisfaction and loyalty. The actual delivery mechanism may vary, but AI is very good at remaining in the background and the UI (User Interface) is quite easy, even for people with low technical skills. AI has won out over humans in many experiments that measure innately human things, like empathy. Most people in hospitality believe firmly in the human touch and personal service, so the idea that a machine could do that has been proven wrong many times in the past. On the other hand, AI is more human than any previous machine or software, so many guests will prefer the accuracy, consistency, and availability, as long as the downsides are minimal. The market, and time, will determine how much of this changes.
3. Scalability and Flexibility
Current Scenario: Scaling operations requires hiring and training additional staff, which can be costly and time-consuming.
Future Scenario: AI and automation can be scaled more easily. For instance, an AI-driven customer service platform can handle increased inquiries without additional costs.
Impact: Hotels can quickly adapt to fluctuations in demand without the constraints of labor management and recruiting and training. Let's take the simple example of a chatbot. First of all, these chatbots are very human-like and always on, so they are not like any robotic chatbots of the past, which are often just a different interface for search. These AI chatbots can reason like humans and do a better job of understanding the customer needs and finding solutions. Eventually, they will be on the telephone, conducting a fairly normal conversation with guests or prospects and responding in a way that is informative, helpful, empathetic, and always polite and available. Scaling these services up or down, based on occupancy, is nearly automatic, immediate, and easy.
4. New Business Models
Current Scenario: Traditional hotels rely heavily on a lot of human labor to operate, which limits the more radical changes to the business model.
Future Scenario: With lower labor costs, hotels can explore new business models. For example, hotels can implement more self-service kiosks and automated room services while maintaining minimal staff for high-touch services. If you've recently checked in to a low-cost hotel, late at night, then you can probably sense that this scenario already exists in pockets.
Impact: This can lead to the emergence of new hotel categories, catering to different market segments such as budget travelers seeking efficiency or tech-savvy guests looking for innovative experiences. Many hotels already have extensive automation around maintenance and other functions, so at certain times of the day there may already be just one or two people operating the property. In Japan, which is famous for having vending machines for almost everything, these types of hotels already exist. Some hoteliers and guests may never find this appealing and it may not even fit into their definition of "hospitality", but many people said the same things about guests booking their own travel on the internet. Never say never.
5. Challenges and Considerations
While the potential benefits are significant, there are challenges to consider:
- Job Displacement: Lowering labor costs means fewer traditional jobs, which can impact employment in the hospitality sector. Hotels should balance automation with social responsibility, possibly through retraining programs for displaced workers. But in many cases the jobs will evolve, so that each employee can be more productive. Of course this depends on the speed of technological advancement, but it also depends heavily on the guest acceptance and economic return on investment. Slow moving businesses will eventually go out of business, but it may also take a long time. The speed and depth of this is still just a guess by even the most advanced thinkers.
- Re-skilling and Upskilling: AI can improve the skills of current employees. If an employee is underperforming in a particular area, such as social media copywriting or data analysis, AI can help them improve their performance and meet the hotel's needs. This approach can be a win-win for employees and hotels by enabling some employees to do great work in areas where they previously lacked skills.
- Technology Dependence: Over-reliance on technology can pose risks such as system failures or cyber-attacks, so security measures and contingency plans are essential. This area is progressing rapidly, but for the foreseeable future will still require human supervision. With the help of AI, a human might be overseeing much more security for more properties, but many AI tools are still unable to distinguish nuance and "right" versus "wrong".
- Maintaining Human Touch: Despite automation, maintaining a human touch is crucial in hospitality. Our positive views on AI interactions with guests is based on the assumption that the experience feels more human than previous robots or chatbots. There is evidence that AI can exceed humans in many services that guests consider important, so it will be up to each hotel to understand their customer needs and blend AI into the experience and monitor feedback along the way. Very few of these systems are currently at the stage of development where you can say "set it and forget it".
These insights are just the tip of the iceberg, but if you have additional perspectives, we would love to hear from you in the comments, or at [email protected].
Many of these changes are coming whether we like it or not, so it's best to anticipate them, adapt, and experiment with them in your own hotel first-hand. It's also valuable to learn from the experience of other hotels and experts, so if you want to learn more, check out www.aiforhotels.com.