The Rise of AI in Hospitality: Trends, Opportunities and Challenges

Posted 25 April 2023

If you’ve paid any attention to the news or social media in the last few weeks, you’ll know the AI is here to revolutionise business from finance to logistics. But how does hospitality, with its emphasis on human connection, fit into this picture?

Discerning hospitality owners know the power of technology to streamline their businesses and drive revenue without sacrificing comfort or personality. So, while the media may focus on more extreme ideas such as robot hotels, in reality AI is now powering many facets of the industry that already rely on technology such as booking, operations and marketing.

As a leading provider of software platforms to the hospitality industry, Access can help provide a holistic overview of how AI can revolutionise your business without compromising on guest experience and the personalised touch that makes hospitality special. This guide is packed with realistic information about the AI boom and looking at the ways businesses can integrate this technology into their operations seamlessly.

What is AI in the hospitality industry?

First of all, what exactly is AI? In the rush to adopt this new trend, it is easy to overlook that AI itself has different facets. At heart, AI (which stands for Artificial Intelligence) is a technology that enables machines to learn and make decisions on their own, without human intervention. AI can be categorised into different types, including machine learning, natural language processing and robotics, all of which can have applications in the hospitality industry as we will see below.

The hospitality industry is all about providing excellent customer service, and AI has the potential to revolutionise the guest experience. From personalised recommendations and super-reactive dynamic pricing to chatbots that can assist guests with their needs, AI has the power to enhance customer satisfaction while creating efficiencies and driving revenue.

How is AI being used in the hospitality industry?

AI is increasingly being used in the hospitality industry to improve operational efficiency, enhance the guest experience, and increase revenue. In this section we look in detail at how different business models are utilising AI to streamline and optimise the various processes in their organisation.

Operations

Let's dive deeper into how AI can help with hotel operations, specifically with bookings and check-ins. With AI-powered tools, hotels can automate and streamline these processes, making them more efficient and effective.

Firstly, let’s look at chatbots. A chatbot is a computer programme that uses the language capacities of AI to understand customer questions and automate responses to them, simulating human conversation. Bookings and check-ins are a natural application for chatbots to support their human counterparts, dealing with online queries. Chatbots can assist customers with their bookings, answering questions about availability, pricing, and amenities. They can also provide recommendations based on customer preferences, such as room type and location. This saves hotel staff time and resources, as the chatbots can handle a large number of enquiries simultaneously, without the need for human intervention. Many businesses have already found that blend of chatbots and human staff is the optimum combination for efficiency and guest comfort.

In addition to assisting with bookings, AI can also improve the check-in process. With AI-powered facial recognition technology, guests can check in without the need for physical keys or ID cards. This not only saves time but also enhances security and eliminates the risk of lost or stolen keys. Guests can also use their mobile devices to check in, receive their room number and access code and bypass the front desk altogether. This creates a seamless check-in experience for guests, reducing wait times and improving overall satisfaction.

Another way AI can help with hotel operations is through resource optimisation. By analysing data such as energy consumption and resource expenditure, AI can help businesses optimise distribution and reduce costs. Saving on energy and resources is not just a cost-saving exercise. Environmental impacts are also important to customers, and reducing your impact is a demonstrable way of showing your concern for your wider community.

Marketing

AI can play a significant role in the hospitality industry's marketing efforts by enabling targeted and personalised communications and automating time-consuming data analytics tasks. AI algorithms can analyse a customer's previous interactions with a hospitality brand, such as their bookings, reviews and any other preferences, and use that data to provide personalised recommendations for future bookings. For example, a hotel could use AI to recommend specific room types or amenities to guests based on their past behaviour.

In the future this could even recommend restaurants, theatres and outings to provide a maître d’-style level of local knowledge. As well as making an appearance at the check-in desk, an AI-powered chatbot available from the room could provide 24/7 concierge service, answering guests' questions, and helping them with bookings and other tasks. Chatbots can also collect data on customer behaviour and preferences, which can be used to improve marketing efforts and personalise future interactions. Email marketing, for instance, is a task which can be automated and enhanced by natural language AI, resulting in timely and personalised emails to your guests. You can read more about how to free up time from this task in our guide to email marketing.

As well as analysing individual data, AI can also monitor social media platforms for mentions of a hospitality brand and analyse the sentiment of those mentions. This can help hotels respond to customer complaints or issues quickly and proactively, and identify opportunities for engagement and marketing. The new LLM models such as ChatGPT can assist with writing brochures, while image generating AI such as Mid-Journey can generate imagery for promotional materials. One note is to use these AI assistants with care – as always, honest descriptions and imagery are necessary to create trust in your brand.

Finally, AI can help generate marketing reports, tracking the marketing campaigns that had the most impact, giving valuable insight on how to construct strategy in the future.

Revenue

AI can be extremely helpful for the hospitality industry when it comes to revenue management. AI algorithms can help hotels adjust their prices in real-time based on demand and other factors, often known as dynamic pricing. By analysing data from a variety of sources, such as booking patterns, competitor prices and even weather forecasts, AI can help hotels optimize their pricing strategies and maximise revenue. Factors that influence dynamic pricing can be extremely varied, from regular occurrences such as festivals and graduations, to one-off events such as sports finals or concerts. Even being featured in a popular film or TV programme can have a profound effect on demand in a given area. While dynamic pricing is a not a new strategy, AI can respond quickly and efficiently to many factors in real time to keep adjusting prices for optimum revenue.

While dynamic pricing responds to factors in the outside world, AI can also adjust quickly to factors inside a hospitality business to maximise revenue. AI can help hotels optimise inventory by predicting demand patterns and suggesting the optimal mix of room types and amenities to offer at any given time. This can help hotels maximise occupancy and revenue while minimising waste.

AI can also help hotels manage their distribution channels more efficiently by analysing data from multiple sources, including online travel agencies, direct bookings and social media platforms. This can help hotels identify the most effective channels for reaching their target audiences and optimise their distribution strategies accordingly.

AI can automate the reporting process by collecting and analysing data from multiple sources, such as booking systems, customer reviews, and social media platforms. This can save hotels time and resources, allowing them to focus on other revenue-generating activities.

Guest experience

The hospitality industry is all about providing the best guest experience possible. And with the rise of AI, hotels and other hospitality businesses have a new tool to help them achieve that goal. This can start before the guest has even set foot over the threshold of the business. With AI-powered virtual tours, guests can get a detailed view of a hotel room or suite before booking. This can help guests make more informed decisions about where to stay and what type of room to book. Virtual tours can also help hotels showcase their properties in a more engaging and immersive way, which can lead to more bookings and better guest satisfaction.

AI can also be integrated into room features such as lighting, temperature control, and entertainment systems, allowing hotels to provide guests with a more comfortable and convenient stay. For example, guests could use voice commands to adjust the lighting or temperature in their rooms, or to order room service for the ultimate ‘smart room’ experience.

Add these features to the use of chatbots and automated room check-in mentioned above, and hotels can provide guests with a more seamless and enjoyable experience. Ultimately, this can lead to higher guest satisfaction, more repeat bookings, and increased revenue for hotels and other hospitality businesses.

HR and labour

The hospitality industry has long been known for its high employee turnover rates and recruitment challenges. However, with the advent of AI and its various applications, the industry can now leverage this technology to streamline HR processes and manage employment issues more effectively.

The first step in the recruitment process is CV screening. This can be a time-consuming process, especially for large hotel chains or restaurants with multiple locations. AI-powered recruitment tools can help automate the process, making it quicker and more efficient. These tools use machine learning algorithms to scan CVs and identify the most suitable candidates based on specific job requirements. This not only saves time but also helps to eliminate human bias from the recruitment process.

Another challenge for the hospitality industry is creating and managing staff schedules. This is especially true for businesses with multiple locations and different shift patterns. Predictive analytics can help with this by using historical data to forecast staffing needs. This information can then be used to create schedules that are optimised for both employee availability and business needs. This not only helps to reduce staffing costs but also ensures that the right number of staff is on hand to provide a high level of customer service.

In addition to scheduling, predictive analytics can also be used to forecast demand. This is especially useful for restaurants and hotels that experience seasonal fluctuations in business. By analysing historical data, AI-powered forecasting tools can provide accurate predictions of demand for specific days or periods. This information can then be used to adjust staffing levels, inventory and pricing strategies to optimise revenue and customer satisfaction.

From CV screening to predictive analytics for scheduling and demand forecasting, AI can help businesses to operate more efficiently, reduce staffing costs, and provide a better experience for customers. As the industry continues to evolve, AI is likely to play an increasingly important role in helping businesses to stay competitive and thrive in an ever-changing landscape.

Data analytics

The hospitality industry generates a vast amount of data daily, from guest bookings and interactions to restaurant and bar sales. By using AI and machine learning algorithms, businesses can extract meaningful insights from this data and make data-driven decisions.

A business that can anticipate its customers’ preferences and fulfil them almost before the customer has realised they’ve had them will be sure to create a memorable experience. AI can help personalise and tailor the customer experience by analysing customer data to identify patterns and preferences. The benefits of AI in data analytics go beyond just providing insights. By using AI, businesses can automate tedious tasks and free up employees to focus on providing excellent customer experiences.

What are the benefits of AI in the hospitality industry?

AI can be a powerful tool for the hospitality industry, helping to streamline HR processes, manage HR, and improve customer service. From CV screening to predictive analytics for scheduling and demand forecasting, AI can help businesses to operate more efficiently, reduce staffing costs and provide a better experience for customers.

As the industry continues to evolve, AI is likely to play an increasingly important role in helping businesses to stay competitive and thrive in an ever-changing landscape. Many Access packages already employ hard-working algorithms that leverage the power of technology to streamline the many complex processes that go into running a successful hospitality business, for instance unlocking the power of data to give your best-ever customer insights, or how to create efficient automated marketing campaigns.

While the adoption of AI may seem daunting, it's essential to remember that it's not an all-or-nothing proposition. Hospitality businesses can start small by incorporating AI in a specific area and gradually expand its use as they become more comfortable with the technology.