Is AI the answer? The hotel industry grapples with its implications.

Despite its best efforts, there remains more than a scintilla of skepticism around artificial intelligence or AI. But it’s not so much about the technology itself; it’s how it will be deployed and its impact on the human race. It’s scary, it’s exciting, it’s bold, it’s uncertain, it’s here and it’s only growing. 

Consider ChatGPT, the language model-based chatbot that burst on the scene in late 2022 and became an instant source of curiosity, giving hope to procrastinating and duplicitous students worldwide. But its potential applications for the hotel industry are several: it can speed response rates to customer requests, provide customization, reduce certain customer service needs provided by humans, improve SEO—which can all lead to higher customer satisfaction rates and better experiences. 

For instance, one practical application could be delivered through a hotel’s app, where guests can have access to local recommendations based on persona, such as restaurants and retail. Or, like a virtual operator, it can respond to customer inquiries, while continually learning and becoming smarter with each interaction.  

AI may very well be a newish technology for the masses to experiment with, but its emergence stretches back to the mid-20th century, with the likes of Alan Turing, who was memorialized in the 2014 film “The Imitation Game.” Since then, it’s matured, with the likes of Google and OpenAI carrying the torch. It’s no longer an expectation but a certitude that businesses will further adopt and adapt to AI to fuel and streamline operations. Consider the ubiquity of chatbots, which (try to) simulate human conversations and (attempt to) provide helpful responses to inquiries. Seek to, because more often than not, they don’t provide the answer, leaving the user yearning for a human. AI, still, is poised to engender automation, which, as it goes, could free up humans to do other things machines can’t yet achieve. 

It’s a lot to take in, but it must be embraced, argue many. “Artificial intelligence will revolutionize how businesses compete and grow, representing an entirely new factor of production that can ignite corporate profitability. To realize this significant opportunity, it’s critical that businesses act now to develop strategies around AI that put people at the center and commit to develop responsible AI systems that are aligned to moral and ethical values that will drive positive outcomes and empower people to do what they do best – imagine, create and innovate.” The comment was made by Paul Daugherty, chief technology and innovation officer at Accenture. In 2017. At the time, Accenture estimated that businesses that successfully applied AI could increase profitability by an average of 38% by 2035. 

IMPLICATIONS FOR HOTEL INDUSTRY  

Six years later, where does it stand? Generative AI is all the rage and has many in the hospitality industry scrambling to understand its impact and how to harness its gifts. “I think it’s a revolution,” Jason Freed, a hospitality data evangelist at data platform MDO, said of AI, comparing it to the transformative power of the internet. At its basic level, generative AI performs like a search engine, aggregating a multitude of data from myriad sources. But it goes beyond mere search engine results, spitting back links to queries. It becomes conversational, moving from predictive to prescriptive, Freed said. “Instead of just giving you a bunch of information, it’s now telling you what you can do with that information.” 

AI will accelerate from here, Freed argued, reshaping the customer experience and also, in the case of hotels, how they are operated. “It’s going to make everything more self-service, but not to the point where we’re sacrificing the hospitality touch. It’s going to make self-service in a better way,” he said. 

This has been tried before. In the mid-2000s, self-service kiosks began cropping up in hotel lobbies, a ploy to eliminate wait times by giving guests the option to check in and obtain room keys by connecting directly into the hotel’s property management system. 

The adoption rate was iffy but could resurge as guests become more comfortable with contactless and automated processes. Freed compared it to self-checkout at the grocery store or big-box stores like Target, which is gaining in popularity.  

BRAND ADOPTION 

Hyatt Hotels Corp. is already leveraging AI across its more than 25 brands, all under the vigilant eye of Ray Boyle, VP of data, analytics and insights, whose central focus is to apply AI in a way that enhances the guest experience and betters profit for owners. Hyatt, he said, has been investing in software powered by AI and machine learning for several years.  

“AI can enhance the guest experience by increasing the level of personalization during the booking process, from optimizing search processes, property recommendations and ensuring each guest sees the right content and offers,” Boyle said. In a way, it’s all about making the booking decision easier for prospective guests and gaining deeper engagement with customers.  

Owners and brands make investments when they expect a return. Though AI doesn’t have foreseeable benefit on real estate value, it does on cash flow. “From an operational standpoint, AI has the ability to enhance existing technologies, such as revenue management, insight processes and central reservation systems,” said Boyle, adding that the ability of AI to automate certain processes can reduce operating costs. 

Paring down operating costs is often a euphemism for cutting staff. When hotels turn to AI to automate certain processes, it can free up staff to attend to matters that a computer can’t perform, like helping a guest with a bag or bussing a table.  

“Some people are afraid to talk about that across the industry, that fewer people are good for the industry,” Freed said. “Costs are continually rising and labor is the biggest expense.” 

It’s a truism that you get what you pay for. Fewer full-time employees translates into lower labor costs, but less FTEs can equate into a dip in customer service. For every action there is an equal and opposite reaction, as Newton said.  

Consider the interplay between revenue management and marketing. When you add AI to the equation, it can have a profound effect. Freed attested to one way: After a revenue manager makes pricing recommendations, it falls on a marketing person to develop packages and create copy around them. With AI, both of those processes can be automated. “It’s a manual process that somebody doesn’t have to do anymore,” Freed said. Conversely, the future of AI can allow it to make pricing decisions, potentially obviating the need for the revenue manager.  

Other potential benefits include inventory management, using AI to predict demand and plan for supply, reducing waste and optimizing costs. 

The administration of AI is infinite. 

HUMAN V. MACHINE 

Most hotel executives glorify new, useful technology like AI; simultaneously, they extoll the virtues of human touch. Can they coexist? Hospitality isn’t logistics, it’s a service, not a product. “We see value in AI enabling our corporate and property teams to increase efficiency and add value for our guests so that we deliver on our purpose to care for people so they can be their best,” Boyle said. “We know that person-to-person contact is an important aspect of our industry and something that we don’t see changing.” 

One technology that aims to free up humans and carry out quotidian tasks is voice assistants, which can automate conversations over the phone. Most have endured one of these: a spectral voice answers the phones and forces you to either answer questions audibly or key them into your phone. This, invariably, leads to a plea to speak to a human, who then may ask the same questions the disembodied voice was trying to collect. But the tech is getting better. 

PolyAI is a London-based company that describes itself as a customer-led conversational platform for enterprise, which can resolve over 50% of calls and “consistently deliver your best brand experience.” In other words, its voice assistant technology can automate what it calls “superhuman customer experiences” over the phone and in any language. “They answer every call immediately to take the pressure off your staff and delight your customers,” its website claims. 

Its website also curates a collection of real-life examples of calls. In one, a man calls the Golden Nugget Lake Charles, Louisiana, seeking to make a two-night reservation. A voice—sounding more real than bodiless—walks the man through the booking process, even upselling him on a room with a balcony. It—though her voice is female—even employs folksy terms like “alrighty” and “gimme a sec” to push the conversation along. In a 1:45 conversation, it elicits what the guest is looking for and collects personal information, including credit card information, resulting in a made booking of $861.70. It’s unclear whether the customer knew he was speaking to an inanimate object. 

That’s precisely the experience PolyAI is after, said its COO, Yan Zhang. “Voice assistants can handle frequently asked guest questions, make or amend reservations, provide information about products and services, automatically identify upsell opportunities and more, all while communicating with guests so naturally that many are initially mistaken for live agents.” 

These are not your grandparents’ voice assistants. They are vastly different from traditional interactive voice response, which relies on speaker prompts and exact keywords to push conversations forward. It can make for a very frustrating experience. “Sophisticated AI-powered voice assistants can detect nuances in how people use language,” Zhang said. These include word choices, pauses and accents. It’s why, like in the above example, customers think they are speaking to a live agent.  

The idea around AI is to not replace humans, but to free them up so that AI can take over the more mundane and routine daily tasks of running a hotel. In fact, as Zhang argued, AI-powered technology can not only benefit customers but also—which sounds almost counterintuitive—save jobs. “Voice assistants help prevent live agent churn and the associated costs because when AI can answer frequently asked questions, call volume declines and, with it, agent frustration,” he said. “Fewer redundant calls mean shorter wait times and the ability for agents to focus on more complicated tasks that AI can’t resolve.” 

It follows that shorter wait times will make guests happier, who, in turn, will be less likely to disrespect agents, which is a frequent occurrence.  

AI can also ease interactions between hotel guests and employees by removing friction and attending to more mundane matters that are about speed and accuracy. “We’ve found that truly personalized service delivered by meaningful interactions with staff still reigns when it comes to the guest experience,” said Heidi Nowak, CMO of Timbers Company, a hotel development and operations company focused on private residence clubs and resorts.

At the same time, she sees and understands how AI can enhance or ameliorate the guest experience by completing requests for items like fresh linens or other housekeeping needs. “There are opportunities for AI to not only automate certain tasks, but allow staff to focus on the guest-facing service and experience delivery that truly makes a difference in one’s stay.” As an example, she cited that guests prefer to place smaller requests through text, which can be sent from anywhere during the course of a stay versus needing to pick up the phone and dialing the front desk. “AI, in this case, acts as a digital assistant and because it’s all in writing, the possibility of human error is diminished greatly,” Nowak said.

THE FUTURE IS NOW 

AI is not a panacea, but it is fast becoming interconnected to most hotel-related tools and applications. “Eventually, we will see it integrated into most of our existing technologies as the software companies we work with determine how AI can be most impactful,” Hyatt’s Boyle said.  

PwC predicts that generative AI will change business models and how work gets done and, in the process, reinvent entire industries. AI, it predicts, could contribute up to $15.7 trillion to the global economy in 2030.  

A lot is still not known about AI, and as it evolves, the expectation is that there will be government oversight to make sure AI has guardrails. In October, President Biden issued an Executive Order on “Safe, Secure and Trustworthy Artificial Intelligence.” The order, among other things, establishes new standards for AI safety and security, protects privacy and promotes innovation and competition.  

The White House stated that the order is the most sweeping actions ever taken to protect Americans from the potential risks of AI.  

The idea that AI could become sentient is not new, but it is real. (The 2001 Steven Spielberg-directed “A.I. Artificial Intelligence” is about a childlike android uniquely programmed with the ability to love.) Leave the fantastical notion of robots taking over the world to Hollywood, but embrace its applications for improving the overall guest experience and streamlining certain processes.  

“The long-term applications of AI in the hospitality industry are evolving rapidly,” Boyle said. “It will be vital to work closely with industry leaders in the technology space to stay up to date on the latest AI solutions and continuously evaluate how they can be leveraged to the benefit of guests and owners.”