By CBRE Limited
Artificial Intelligence (AI) is increasingly being adopted across sectors to automate tasks and increase efficiency in the workplace. While the hospitality sector’s adoption has been slower than other office-based industries, it’s increasingly gaining traction. AI provides an opportunity for hotel operators to manage escalating demand while keeping costs low. It does this by boosting productivity, increasing operational efficiency, and enhancing guest stays. Hotel operators have already been exploring how to best adapt and integrate new technology, but this can look different based on the type of hotel.
Operational Efficiency
Currently, hotels are utilizing AI to enhance operational efficiency to cut costs and increase revenue. Hotels are staying competitive by using AI systems to analyze large volumes of booking data, occupancy rates and market trends to adjust pricing in real time. Available rooms can then be matched to customers based on their revenue potential, budget and likelihood of this translating into a sale, according to CBRE. With margins already tight, operators must balance the cost-benefit of investing in further data sources.
Predictive AI can leverage the same data, in conjunction with check-in patterns and guest preferences, to anticipate levels of stock and maintenance requirements. This enables operators to effectively manage inventories, reduce overspending and waste. The market for hospitality technology systems is growing. FLYR is an AI-driven revenue-strategy platform created to address previous delays and inaccuracies in hospitality data. It provides hotels with analytics on their operations and market data, enabling the generation of micro-targeted pricing and recommendations for improving efficiencies. Integrating AI platforms can help operators to stay competitive, improve productivity, and streamline processes.
With rising costs and labour shortages being at the forefront of operators’ concerns, there are opportunities for hospitality services, such as customer check-in, room service, and requests to be automated, which reduces the time pressure on staff and staffing costs. Automation is already common across several budget hotel chains. They can reduce their staff overheads, whilst still satisfying their clientele who tend to stay for shorter periods, value efficiency, and may be happy to forgo the guest interaction that customers staying in a luxury chain would expect. Hotel chain Yotel has fully embraced smart technology via an app where guests can check in, create their room key, make service requests, and access useful information about the area. In some branches, AI robots store luggage, make room deliveries and interact with guests.
Generative AI (Gen AI) is transforming the guest experience in the form of virtual assistants and chatbots. Hilton has implemented an AI concierge called “Connie” who assists guests with check in, information about amenities, and restaurant or spa treatment recommendations. Other hotels have deployed mobile chatbots that are available 24/7 to respond to guest requests and questions. Hotels therefore require fewer staff to handle requests, reduce wait times, and enhance guest engagement. However, there’s a risk that customers will find chatbots frustrating if they lack contextual awareness or are repetitive. Gen AI differs from traditional chatbots by learning from previous interactions, thereby the customer experience becomes more personalized over time and generates new content, rather than automated responses. Nonetheless, hotel operators should monitor how guests receive new virtual assistants.
Despite an increase in the use of AI virtual assistants, a human presence will remain essential. Luxury hotels risk alienating their guests if they over rely on AI for customer service. Part of what guests pay for at these hotels is human attention, and often an opportunity to disconnect from technology, which chatbots or robots disrupt.
AI systems that improve operational efficiency are still advantageous, but the level of interaction between guests and technology should be monitored to avoid losing the luxury proposition. Instead of having virtual assistants engage directly with guests, hotel staff could leverage Gen AI’s insights into guest preferences to tailor their own customer service. Budget hotel chains are likely to continue a trajectory of self-service, but high-end hotels will need to tread with caution, focusing on how AI can enhance the guest experience without replacing the human touch.
Another concern with AI tends to be around data and privacy. While data has the ability to transform targeting and personalization, the use of personal data is contentious and older generations tend to be more resistant to new technologies. Furthermore, a report by McKinsey & Company stated that inaccuracy is the biggest concern among organizations related to Gen AI use. Hotel operators may be concerned that AI could provide inaccurate information or misalign with the hotel’s brand.
But to mitigate concerns, it does seem as though the technology is continuously improving. Software company Canary Technologies has developed an AI messaging service designed for hotels to send customized messages to guests’ mobiles which reflect the hotel brand and the guest profile, reducing the chances of sending incorrect or irrelevant information. The service also gathers customer feedback and data, enabling more effective future targeting. Using a reputable software company can help hotels ensure that they comply with data-privacy regulations.
While improvements are made, hotel operators will need to ensure they are addressing ethical and privacy concerns to maintain trust with customers and avoid excluding technology-resistant demographics. Physical staff still have a role to play in monitoring AI and upholding brand standards.
Opportunities to Optimize Hotel Real Estate
Beyond being used as a tool to optimise revenue, AI provides an opportunity for hotels to meet their sustainability targets. Algorithms can use occupancy rates, past guest behaviours and the weather forecast to calculate the exact amount of air conditioning, heating, and lighting needed to optimise energy use. AI is also increasingly used in buildings to monitor waste, water and energy consumption. In CBRE’s Strengthening Value through ESG survey, 84 per cent of respondents cited features that reduce energy consumption as having an impact on real-estate decisions. And more recently, one fifth of investors said they would a pay a premium for ESG-compliant assets. Pressures to reduce energy consumption are increasing, so operators might welcome AI as a tool to help meet targets and add value to properties.
One third of the companies asked in CBRE’s European Occupier Sentiment Survey 2024 are already deploying AI in their real-estate processes. For hotels, predictive AI has the ability to analyze historical and live data, travel patterns and market trends to forecast hotel occupancy rates, operational costs, supply and demand, and returns. AI-driven valuation models can further estimate hotel values by analyzing sector sales, rents, operational costs, and other financial metrics. The availability and quality of data should improve as the hospitality sector continues to digitalize. Gen AI can assist with simplifying lease documents and providing information on key transactions and listings, to enable quicker decision making.
AI has the potential to transform the ways hotels operate and provide customer service. Improving operational efficiencies to reduce costs is undoubtedly attractive to all operators. However, hotel chains can opt for complete self-service solutions, whilst luxury hotels will need to ensure human interactions are enhanced, rather than replaced by AI. We can expect AI to impact other aspects of the real-estate value chain such as monitoring, leasing, and valuations, which will shape how hotel investment decisions are made.
