Investment in digital transformation is increasing year on year. However, a lot of money is still being allocated to maintaining the status quo.
Migration from legacy systems is not a simple exercise. Independent owners of small to medium chains, especially in the midscale segment, are the most likely to be putting off cloud migration and consequently paying more on maintenance and integrations.
Tech strategy and investment is usually led by the operator who is accountable to both the brand and the owner who ultimately pays the bill. There may be an asset manager involved too.
The brands are constantly trying to better their standards and outdo each other in a race to create the technologically perfect environment. So, the operator must satisfy the brand but also justify to the owner why they still need to invest when the owner may have already invested in the same cycle.
As tech investment has shifted from a capital expense to an operating expense, this has created scope for more resistance, according to Kevin Edwards, managing director, PnK People.
Measurable ROI
“The pushback is not just from within the ownership groups, who look at the P&L and the increasing cost line of technology which they didn’t have before. There’s now also the senior operations management looking at their performance and their increased costs. And the brand, ultimately, is becoming less and less accountable from a cost point of view. That’s when you start to call into question whether [the brands] are making the right decisions,” said Edwards.
A case in point is the championing of mobile keys by several major brands. With no obvious financial benefit, adoption by franchisees has been understandably low, and those that have installed mobile room entry systems have reported extremely low guest usage.
“How is it going to impact business KPIs? How will a certain guest technology or RMS increase revenues and guest satisfaction and decrease costs? These are the three indicators owners are interested in because they have the greatest impact on business performance. All too often, unfortunately, the business case for new tech is lightweight,” reckoned Edwards.
Tech vendors are often brilliant marketeers, but independent sources of truth on the benefits of tech adoption are hard to come by, according to Edwards: “For technology to be taken more seriously, there needs to be a greater degree of commercial governance.”
Hotels can compare their IT costs with their competitor set via P&L benchmarking services like Hotstats, although they may well have IT expenses on the balance sheet too.
It’s a tricky area. The effectiveness of some technology is easier to measure than others.
Take digital twins, for instance. Does providing an immersive 3D view of a resort lead to an increase in bookings? If the booking engine is part of the digital twin experience, then, yes, there is measurable direct correlation. Otherwise, did direct bookings go up because of the digital twin service, or are there other reasons?
To reduce abandonment rates at the booking stage, hotels are seeking to offer more choice. For example, Point A Hotels, a group of ten UK budget boutique properties, allows customers to select a specific favourite room, like selecting an airline seat. The service, provided by tech start up Expect Me, takes customers through a step-by-step process with different upsell opportunities along the way. Here, the success of the service is easy to measure.
Hotels with cloud native PMSs are in a better position to control their IT costs and evidence shows they are making sensible investments. Mews clients now have a choice of 1,000 integrations, and distribution and accounting software are the most popular integrations chosen by hoteliers.
Voicebots
A technology outlook wouldn’t be complete without a mention of artificial intelligence.
Investors and developers are looking at AI as a tool to find the best properties or make acquisition decisions, says a PWC report. Limehome, a Munich-based provider of serviced apartments founded in 2018, now has more than 5,000 leased apartments in 230 locations in 110 European cities. Managing director Josef Vollmayr said: “Not only have we completely digitalised the customer journey, we have completely automated our location analyses with a digital tool that evaluates the attractiveness of a location based on defined parameters.”
In customer-facing applications, voicebots are gaining new levels of human-like sophistication thanks to generative AI. They can put a stop to customers encountering long wait times or their calls going unanswered.
US group Golden Nugget Hotels & Casinos was experiencing high call volumes (nearly three quarters of all its reservations are made by voice) and a lack of staff. Their solution was a voicebot from software company PolyAI, that handles complex reservation requests (34%) in addition to FAQs (87%) and provides a clearly measurable ROI.
Brian Jeppeson, director of Golden Nugget’s contact centre, said: “It’s a great experience. It doesn’t have a bad day, it shows up to work every day, 24/7. I wish I could hire more agents that nice!”
Other PolyAI hospitality clients include The Big Table Group of 230 UK & Ireland restaurants, including the Bella Italia and Café Rouge brands, and cruise ship operator Carnival UK.
Jon Wells, director of customer contact at Carnival UK, said: “I listened to a number of different solutions and they all sounded quite robotic. PolyAI was the only one that actually sounds human-like.”
The right balance
Vendors are starting to embed generative AI capabilities into their hospitality products and services. Alliants has operated AI solutions such as chatbots and personalised online offers since 2017. Although AI can curate personalised experiences for guests at scale via messaging platforms and digital itineraries, human input is still essential, said Tristan Gadsby, CEO, Alliants.“A lot of travel platforms are using AI now to provide an itinerary in a destination, which is great, but unfortunately, all that is doing is reinforcing what we already know and I think the human touch needs to come back in and be alongside the technology so that actually you can provide unique experiences,” he said. “While technology helps, it doesn’t really help with the authenticity of your property, it doesn’t help with the authenticity of your experience. You must combine these things to make it work.”
It's a timely reminder to get some perspective. The strong emotions and ethical considerations that fake AI-generated photographs and music provoke, for instance, should perhaps be a warning to tech vendors and hotels not to stray too far from using AI for the business basics.
Richard Valtr, founder of Mews, added: “Hotels think of technology as something impenetrable, something that puts them on their guard, that they don’t fully understand and even something that gets in the way of delivering hospitality. Technology is currently seen only in terms of replacing team members and lowering costs and not in terms of how it can help to create better experiences.”
“I hope that in 2024 technology will be viewed more as an extra team member who can do what a good hotel team member can do: intuit what the hotel and the guest needs. Technology is becoming more and more complex, stunningly so, but I think we will start to see it become more human, more closely resembling somebody on our side, something that's been designed to help you achieve your goals.”