The rapid rise in artificial intelligence has businesses in every segment reevaluating where the technology can help them get ahead.
Like with most new technology, the hotel industry is far behind other sectors in implementing AI processes. However, amid all the regulations and due diligence, it could be prudent for hoteliers not to rush in headfirst, experts say.
During a webinar on data and artificial intelligence in hospitality, Olivier Abtan, managing director for Paris at business advisory AlixPartners, said hoteliers need to determine how to make the most of data to create value and how to manage associated risks.
“Seventy percent of guests find AI-powered chatbots helpful for simple inquiries but prefer human interaction for more complex requests,” he said, giving one example of how data must be managed.
There are as many concerns as there are benefits of artificial intelligence in the hotel business, Abtan said. First, if it is not properly implemented, guest dissatisfaction can be immediate and damaging, and customer worry usually centers in data privacy and security. Implementation can be costly, but perhaps not as costly as it would be not to implement it.
How AI technology supports hospitality
Every hotel company must assess all AI risks across sales and marketing, guest experience and operations, said Heather Catchpole, associate of privacy and data protection at legal firm Bird & Bird.
Neil Kirk, CEO of London & Regional Hotels, said the hotel industry is foremost a people industry and any form of AI adoption must support guests and employees.
“AI assists operations. It is probably not the savior in all of what we do. It is the acorn, not quite yet the tree. But we can ask how can it improve systems and data … placed alongside other elements,” Kirk said.
David Campbell, chairman of Rare Restaurants, said he looks at AI as being complementary to guest experience and employee efficiency, not a wholesale game-changer.
AI can assist in “saving costs when staff are not needed and get more staff at the right time to sell more, but it must work for employees. Just like Uber, where both customers and drivers can rate each other, it should be the case between employer and employee after a shift,” he said.
Campbell said AI must avoid gimmicks and must be integrated into loyalty to help build businesses on the backs of current guests.
Joanna Kurowska, vice president and managing director for the United Kingdom and Ireland at IHG Hotels & Resorts, said understanding AI is an exercise “in trying to understand how this new world will unveil itself.”
She said sound AI ideas center on “retention and analyzing relationships, with contractors that might not be as strong as they could be, and growth opportunities. AI is a tool of active decisions and insights.”
Kirk said the next generation of franchise agreements between hotel owners and brands must have more clarity.
Philipp Rohweder, director of real estate at NUMA, said another consideration is that the notable percentage of independent hotels in Europe means that AI integration, use and compliance might be delivered at various times to the detriment of the hotel industry.
It should not just be in the hands of the “big brands with the deep pockets” and robust profit-and-loss statements.
Legal concerns
The nature, origin and ownership of any data is a major consideration and will determine how the hotel industry implements artificial intelligence. Ina Plunien, vice president of owner Cedar Capital Partners, said compliance is a complex consideration.
“Who owns the data?" she asked. "How do we share it? Where is it stored? Where do the contracts with local vendors sit? The people who direct the data are employed at different times by different firms. There must be stringent processes and regulations."
Plunien said the regulations and processes often appear, “to use an English expression, as clear as mud.”
Legislation and regulation are coming thick and fast. In the European Union, the AI Act came in force in August and will become law in phases over the next two years. There's also the Digital Services Act, the Data Act and the almost decade-old General Data Protection Regulation. The EU also has created a privacy watchdog for OpenAI's large language model ChatGPT.
Catchpole said hotel companies must engage legal teams “at the very earliest instance” when conducting new marketing and ad campaigns.
“There are key new transparency obligations under the AI Act, and the Data Act, albeit not very imaginatively named, [that state] companies must make data accessible,” she said, adding there also are rules as to who must hold data and when they must release it if asked.
On the bright side, hoteliers might benefit this time around by being a late adopter of artificial intelligence, Rohweder said.
Since hoteliers have been slow to introduce AI, “it is unlikely laws will slow us down now that we are adopting it” as the requirement for regulations have been analyzed and instigated based on their implementation by other industries, Rohweder said.
But the rest of the world is moving rapidly to embrace AI, Kirk said.
“The next step is how the various devices we use, use AI. How will AI move to mobile, something that has not happened yet?” he said.
Rohweder said hotel guests’ expectations of artificial intelligence technology is changing just as fast.
Hoteliers must balance what drives costs and complexity in a business with guest expectations as to what an improved customer experience should look like, Abtan said.
He advised the hotel industry should heed Amara’s Law: “That we tend to overestimate the effect of technology in the short run and underestimate the effect in the long run.”