The Role of AI in the Future of Hospitality

Experts in all things branding, strategy and hospitality, Sarah Miller & Partners are perfectly placed to explore the huge potential of artificial intelligence in the hospitality industry, during ILTM Arabia this week.

While artificial intelligence hasn’t yet achieved world domination, it has certainly dominated conversations about today’s consumer trends, especially in travel and hospitality.

Despite widespread doubt, the rise of AI is much more than a passing phase, more than a blink-and-you’ll-miss-it fad. It’s a shift forward-thinking brands should pay attention to.

Its acceleration in recent months, which took off exponentially when ChatGPT was released in late November, will significantly alter the way hotels and resorts exist and operate.

The future is here. Major hotel chains are already using AI to automate and enhance guests’ experiences. In fact, they’ve been doing so for several years already – Hilton introduced customer service chatbots in 2020; Marriott piloted a building, designing and delivery AI tool in 2021 and Hyatt launched a luxury AI bed early in 2022.

According to a McKinsey study, AI adoption has more than doubled since 2017, and there continues to be an increase in the average number of AI capabilities used within an organisation, doubling between 2018 and 2022 from 1.9 to 3.8.

As AI tools become more widespread and tailored to specific industries, it’s only a matter of time before the hospitality industry undergoes a tech transformation that will change the way we imagine holidays, business trips and weekend getaways.

While the major users so far have been mid-range chains, luxury travel is slated to become the hottest destination for AI applications in 2023.

Up Close and Personal

Since the start of the pandemic, every consumer industry has had to evolve at breakneck speed to keep pace with an increasingly digi-native audience, remote or hybrid workforces and a host of financial challenges.

It’s not news to anyone that hospitality, in particular, suffered significant losses. Restaurants, hotels and resorts were severely impacted by lockdowns and restrictions – not merely because social distancing challenged the essence of hospitality, but because they had to reassess what kinds of experiences guests wanted to have in a new, unfamiliar era that arrived almost overnight.

We know experience is a valuable commodity in itself. But the experience economy is full of sub-par, even negative ones. It’s much harder to define and deploy an extraordinary travel experience, as it so often depends on the unique desires of the individual traveller.

Research conducted by McKinsey found that companies who perform in the top quartile for personalisation generate 40 percent more revenue than average players, hitting over $1 trillion in value across US industries.

These companies reached this top-tier level of performance by tailoring their products and services on the individual level, and by finding intelligent ways to reach the right audience at the right moment with the right experiences.

The ability to provide one-of-a-kind customer experiences is a key point of distinction for luxury companies, because they require resources many businesses can’t afford or aren’t willing to provide.

Bespoke experiences are time-consuming and expensive to create, and though they are indeed worth the higher price, consumers shaped by the instant gratification of smartphones have become increasingly demanding of efficiency – considering choice, convenience, price and ease – in their purchases.

AI-driven personalisation is the solution to tapping into the full potential of the experience economy.

Luxury business owners might have the initial impression that automation would devalue customer experience, replacing the human touch with a cold, robotic service. In reality, AI redirects human labour to roles that can’t be automated, allowing businesses to focus more on those special touches which attract and retain customers.

Loyalty programme databases, for example, can store information about guests’ previous visits and use AI to tailor their stay with the familiarity of a personal assistant, while human staff develop and implement the actual luxury services.

Luxury fashion labels such as Burberry, for example, are using AI to build an evolving customer history, which instore assistants can refer to and use to provide bespoke shopping experiences.

Businesses can implement personalisation throughout the customer journey, from initial advertising to check-out. In fact, some of the greatest revenue increases, as a result of AI, are reported in marketing and sales, where it is used for capturing and analysing customer data points.

Targeted campaigns use this data to attract potential customers by anticipating their preferences and presenting something they’re guaranteed to want – AI will be able to do this with even more irresistible precision and sophistication.

Google’s Bard chatbot will soon integrate human-created materials with its generative AI to produce campaigns that ‘remix’ them to more closely resemble those created by marketing agencies, according to a presentation seen by the Financial Times. Similar content-generating tools have already been rolled out by Microsoft and content creation software, Canva.

AI could cut out the intensive work of curating strategies to a range of specific markets and customer demographics. For international hotel and resort groups, whose clientele are diverse and spread across the globe, this can end up being a time- and attention-consuming task — a distraction from the craft of genuinely creative materials, the kind Bard would base its advertisements on.

However, there are concerns that AI (like social media algorithms) could take personalisation too far, only suggesting venues or destinations that appeal to its knowledge of a customer’s search history. There are false information fears; apprehension over what the industry coins ‘hallucinations’ in marketing ads with the aim of converting customers.

Without the human expert behind our travel suggestions, we could easily become locked into a narrow corridor of the world and never look beyond our comfort zones. Similar scenarios have played out in tourist destinations which have become plagued by crowds, tour buses and pollution following social media algorithm’s persistent plugging and subsequent popularisation.

Smooth Operators

On the operational level, AI can be used to help the hospitality sector attain unforeseen levels of efficiency by giving managers more insight into the supply chain and their inventories, not only displaying current stock levels but predicting future shortages or surpluses and suggesting solutions.

AI can be used in restaurants and bars to optimise menus, divert crowds from busy areas, manage bookings and streamline the analysis of guests’ data. The seamless experience that luxury resorts and hotels aspire to provide will become smoother, freeing more time and financial resources for enhancing experiences and pursuits of innovation many haven’t yet had the chance to explore.

Other back-of-house operations such as managing waste and energy usage can be optimised by AI, resulting in a less financially daunting step — if not a positively rewarding one — towards sustainability for many hotels.

Each year, food waste costs the global economy nearly $1 trillion, according to the UNEP. Winnow, a food waste management company, claims that food waste costs the hospitality industry between 4 percent and 12 percent of its revenue, and has been developing AI tools cut waste.

Their technology analyses the type, quantity and value of food going to waste in kitchens, allowing hotels and restaurants to gain insight into where they need to make improvements to their operations, potentially cutting global waste by half.

Another growing trend in AI tools is the use of intelligent chatbots. While the ‘robot revolution’ got a bad reputation in 2019, with The Wall Street Journal outing a Japanese hotel for laying off half of its 243 robot-strong staff (including its Siri-inspired concierge), large language models have made ground-breaking developments in natural language processing.

OpenAI’s ChatGPT, despite its nascency, has already proven the potential for chatbots to simulate human interactions with uncanny similarity.

Since the end of last year, OpenAI has invited a limited number of developers to build plugins with the goal of giving the tool real-world use cases — allowing users on external sites and services to benefit from the AI tool, and enabling ChatGPT to integrate the information captured from those third-party conversations into its language model.

Some of those early partners include the travel companies Expedia and KAYAK, whose plugin features provide more unique booking recommendations and assistance in response to users’ queries, doing so through a conversational approach rather than a traditional search engine.

“Our platform generates over 600 billion AI predictions a year,” Expedia’s Chief Technology Officer Rathi Murthy told Condé Nast Traveler. “So AI is not new to us. We’ve just taken it one step further by taking advantage of the conversational aspects of ChatGPT.”

Chatbots are a strong first step for companies looking to implement AI, which is becoming easier through partnerships similar, if not identical, to the examples mapped out here.

If, or rather, when, this technology is applied to voice chatbots like Annette — the first conversational AI-powered voice bot launched last year — hotels and resorts can answer phone calls accurately, clearly, at any time and simultaneously.

You Can’t Code Creativity

According to Gartner, AI will replace one in ten call centre workers by 2026, saving $80 billion in labour costs. If this estimate were replicated across all business operations, not just call centres, ten percent of workers being made redundant would be unprecedented. The ramifications for the economy and for individuals would be serious and concerning. But should we be worried that AI is coming for human jobs?

Our human creativity remains the benchmark of AI’s success and our most valuable asset in business. As it stands, AI might be fast, but it often fails to match our thoroughness.

Ashlea Halpern documented her experience of trying to get ChatGPT to plan her familymoon for Condé Nast Traveller. She found that, while the chatbot provided helpful advice on everything from Airbnbs to cultural etiquette, it got a concerning amount of information wrong or omitted it completely. Two hours later, she still had to do the bulk of the trip research herself.

In the future, travel plugins and a broader dataset will make AI more accurate, but the problem still remains that AI solves problems merely by predicting the best response based on probability, rather than generating original ideas through the innately human process of divergent thinking.

‘Genuine creativity remains something of a mystery but most experts agree that it springs organically from a complex amalgam of genetics, environment, relationships, experiences and emotions – things that AI lacks.’

DOUG STEPHENS, BUSINESS OF FASHION

AI can also be seen as an answer to the demand for more meaningful work. The hospitality industry must continually strive to attract the best talent across front-of-house, management and operations. The assignment of non-innovative, mundane tasks to AI will reduce pressure on staff, freeing them to invest their creativity into their roles as well as enabling them to spend more time with family and loved ones.

When AI is able to create personalised yet automated marketing strategies, answer multiple phone lines at once, update inventories and track energy and food usage, it doesn’t mean we’ll see the resurgence of the robot hotel. It means the hospitality industry will have more time to use its human workforce’s skills to innovate on projects which require the kind of creativity AI can’t replicate. To ultimately be more human.

Partners:
Matter Of Form is a leading Brand & Digital Experience Design Consultancy designing what’s next for category-defining brands, championing ambitions of timelessness through future-first product and service innovation, thoughtful experience design and distinctive brand strategy.