Article from the pen of our Global CEO Roger Allen is accessible at HotelExecutive.com.
Cutting-edge client-facing technologies can help hotels not only boost revenue but also adapt to fast-evolving customer preferences.
Rolling out new digital tools has never been more important as the industry is emerging from the Covid-19 pandemic, which transformed the technology use and purchasing patterns of customers. For example, guest demand rose significantly for contactless, self-service and mobile-based solutions, prompting operators to rapidly update their services.
The majority of hotels already offer or is planning to introduce over the next year mobile booking, mobile check-in and mobile room keys (100% of participants), two-way messaging with guests (95%), contactless payments (88%), check-in and check-out kiosks (62%) and voice-controlled devices (54%), Hospitality Technology said in its 2023 Lodging Technology Study, which surveyed hotel industry professionals representing more than 18,000 properties worldwide.
The customer appeal of some of the more sophisticated technologies appears to be less pronounced, at least for now. For example, just 18% and 16% of travelers rated virtual reality spaces and hotel robots providing contactless services important in the 2022 Customer Engagement Technology Study. The uptake of cutting-edge technologies might have also been affected by challenges in the hotel sector, such as limited IT budgets or difficulties in measuring return on investment (ROI) in technology.
But in a positive development, the average IT budget of hotels globally rose to more than 4% of total revenue in 2022 from less than 3% in 2021, and 74% of hoteliers are now willing to consider using alternative investment metrics for technology projects, Hospitality Technology found. It also said hoteliers can pass on some of the expenses of their developments to customers, about 76% of whom are willing to pay a premium for technology features and services that are important to them.
It is also good news that customers are open to using certain types of advanced technologies if they improve their hotel experience. For example, 73.4% of travelers are interested in hotels using artificial intelligence to analyze their travel data for more targeted and relevant advertisements and offers, according to a 2022 study by Oracle and Skift. It said 51.5% of hoteliers plan to use artificial intelligence and analytics to learn about guest behaviors so that they can offer more personalized offers.
AI Chatbots and Voice Assistants Boost Direct Bookings, Upsells
Artificial intelligence – which refers to the capability of computer systems to carry out tasks that normally require human intelligence – is already used for various tasks, from improving efficiency through automation in back-office operations to enhancing guest experience through personalization in customer service. According to Accenture, the share of travel industry revenue that is "AI-influenced" climbed to 21% in 2021 from just 9% in 2018 and will rise further to 32% in 2024.
Growth will be supported by the accelerating adoption of AI and its machine learning (ML) subcategory – which refers to systems using algorithms and statistical models to analyze and learn from data without explicit instructions. About 73% of IT decision-makers in the travel and hospitality sectors said in a 2023 survey by Rackspace Technology that AI and ML lead their current strategy. Some 74% have already seen certain benefits from AI and ML, with 73% of participants mentioning increased revenue streams and personalized marketing, and 69% improved customer satisfaction and higher sales.
Chatbots offer an outstanding opportunity to integrate AI into customer-facing solutions and unlock its sales and marketing potential. AI-driven chatbots, which are fast becoming a must-have for operators, can work as booking assistants. They learn with each interaction, which constantly improves their capability to generate bookings and reduce the number of abandoned transactions. AI chatbots can reduce customer service costs by up to 30% and have the potential to increase direct bookings by 30%, management platform provider Little Hotelier said.
In an example, Spanish family-owned Zafiro Hotels has contracted French vendor Quicktext to install its Velma conversational AI chatbot to reduce the inflow of customer calls and e-mails with repetitive questions and increase direct online revenue. The chatbot was integrated with Zafiro's booking engine and customer relations management (CRM) system and third-party platforms, like Facebook Messenger. In the first five months of its operation, Velma had more than 3,600 conversations, 85% of which were resolved without the need for human support, and boosted direct sales by 11%.
In another case, UK-based Lake District Hotels with six properties in northwest England saw a significant rise in bookings in the second half of 2021, which led to an unprecedented increase in guest queries. It commissioned Portuguese software firm HiJiffy to implement a chatbot partially to free up the capacity of the reservation team. As a result of the project, Lake District Hotels recorded a 70% drop in phone calls and more than £50,000 of direct bookings in the first six months of the chatbot's operation. The chain later extended the use of HiJiffy's solution to dining reservations as well.
Voice assistants powered by AI have also gained popularity at hotels, partially as they can create new revenue streams. Operators can use them not only to send guests personalized recommendations or promotions, upsell room services or cross-sell additional services at the hotel's restaurants, spas or other facilities, but also to generate revenue from third parties. Hotels can place greeting messages on the in-room device from sponsors or organizers of events to be held at the property, sell ads for local service providers or establish partnerships with tourist attractions outside the hotel.
InterContinental Kaohsiung in Taiwan installed Taipei-based provider Aiello's multilingual AVA voice assistant in its 253 rooms when it opened in 2021. Incorporating the AI-driven service helped the hotel save 372 hours of staff time on answering frequent customer queries and managing room service requests with a total value of $112,000. Guests often ask about city attractions, nearby restaurants and night markets, which allowed the hotel to explore and build partnerships with service providers outside the property. AVA's on-screen advertisement carousel ran 65,000 cycles in a year of use, providing opportunities to display in-house promotions or exclusive deals with local businesses.
Legoland Hotels implemented US provider Volara's voice solution running on custom Google Nest Hub devices in New York and California properties in 2021. Nearly 77% of the devices are used each day, with over a quarter used more than 13 times a day. The system allows operator Merlin Entertainments to save 10 hours of staff time every day by automating greetings, recommendations, queries and room service requests. It extends the theme park experience to rooms by telling bedtime stories in the voice of Legoland characters or providing clues for in-room treasure hunts. Guests can also scan QR codes to view a digital menu, book a table, or place an order, adding a new sales channel in the rooms.
Voice search on mobile phones, connected TVs or home devices with AI-enabled virtual assistants like Apple's Siri, Amazon Alexa or Google Assistant, have been widely anticipated to have transformative effects on travel booking. Destination marketing professionals have complained that this technology in its current form is yet to bring results in their field, but optimizing websites and launching marketing campaigns for voice searches can raise conversion rates for hotels. In addition, voice searches through in-room voice assistants can lead to upselling or cross-selling to guests during their stay.
Virtual and Augmented Reality Enhance Pre-Booking Experiences
Virtual reality – which refers to a digitally created environment with images and sounds that appear to be real and can be adjusted by the user – has been around in hospitality for several years now. Just think of Marriott, which launched the first ever in-room VR experience in 2015. Yet, VR is still considered an emerging technology in the industry, according to the 2022 report by Oracle and Skift. They found that just 7.8% of travelers are expecting in-room VR consoles to be a must-have in the future and 4% of hoteliers are planning to add VR consoles in rooms by 2025.
But the survey results paint a totally different picture when it comes to another application of VR. More than one third of travelers said they'd be interested in virtually exploring a hotel before booking and almost half of hoteliers said they are already developing or would develop in the next year VR maps of their properties to accommodate such tours. This is a strong indication that VR technology is going to play a more significant role in hotel sales and marketing going forward. Many properties are already offering 360-degree VR tours to potential customers on their websites.
Golf Hotel Vicenza in Italy, having completed a €4.5 million upgrade, hired UK firm Biztour in 2019 to compile a portfolio of new marketing materials, including a bespoke virtual tour of its key areas. Biztour worked with the hotel's operations director during the shoot. The custom-designed tour features drop-down menus to access 360-degree views of different types of guestrooms, event spaces, restaurants and wellness areas as well as a dynamic "book now" button allowing viewers to make reservations directly from the tour. The overall marketing portfolio, which also included food and other interior photography, helped the hotel increase enquiries and bookings by 58% and 37%, respectively.
Rosewood London, a luxury five-star hotel in the UK, has commissioned service provider 360 Virtual Tour to carry out a 3D scan of its wedding venue with the sophisticated Matterport 3D camera technology. The tour offers various views in floor plan, dollhouse and measurement modes and is also viewable with several types of VR headsets and handheld devices. The content includes annotations directly in the hotel's 3D space to highlight key features of the property and also provides analytics to help the operator track its marketing campaign performance with statistics on each space.
Augmented reality – which means enhancing or combining a real environment with digitally created content – is increasingly used as a marketing tool by operators to provide interactive mobile-based information about the hotel or other areas of interest outside the property. It can also be used to offer entertaining content in campaigns or send messages to guests when they are at certain locations. Similarly to VR, AR can also help potential customers explore the hotel before booking.
Moxy Hotels, a Marriott brand, launched a six-month campaign in 2022 to offer its guests a chance to win prizes in an AR game by exploring their hotel with their smartphones. Once they checked in at any of the participating 12 hotels in the Asia Pacific region, they could scan a QR code to unlock several challenges throughout the property. Their avatars were visible via the phone camera, which combined digital overlays with the real-world surroundings of the hotel. The campaign was geared toward millennial and Gen Z guests and could help Moxy Hotels better appeal to these age groups.
The Metaverse Has Great Market Potential In MICE... Or Does It?
The metaverse – a collective term for different immersive 3D virtual worlds, where participants use VR and AR devices to interact with each other's avatars and their surroundings in an enhanced extension of real life – is all the buzz in digital technology, attracting heavy investments from major tech companies. There are high expectations about its future business potential: company executives from various industries envisioned in a 2022 Accenture survey that 4.2% of their revenue, or a staggering $1 trillion globally, would come from the metaverse by 2025.
The metaverse is also appealing to the hospitality industry. Customers in the US expect to spend an average of 3.7 hours a day in the metaverse within five years, with 46% interested in traveling to other places in a virtual world, 43% in attending a live event and 37% in taking part in a work conference, McKinsey found in a 2022 survey. So it shouldn't come as a surprise that hotels are testing the waters for possible applications. Initial experiments include virtually replicating properties to reach new audiences, partially in the meetings, incentives, conferences and exhibitions (MICE) sector.
Accor's Mövenpick Hotel Amsterdam City Centre joined the Rendezverse metaverse development program for events, conferences and meetings in 2022 to virtually promote its venues to over 60,000 buyers globally. The program will connect buyers and hotel sales teams inside a 3D replica, or a digital twin, of the real-life venue, allowing event planners to move through the property and hear a hotel team member speak with the help of VR headsets. Buyers can also plan their event concept virtually to the last details, including decor, menus, presentations and schedules, reducing travel needs before the event. Rendezverse also works together with other hotels and venues, including the Madrid Marriott Auditorium, the JW Marriott Marquis Dubai, the InterContinental Paris Le Grand and the Atlantis, The Palm in Dubai. It is seeking to eventually expand into virtually hosted events.
Marriott teamed up with US education platform Immerse in 2022 to create a version of The Westin Seattle property in the metaverse. This digital twin features the hotel's branding, architectural and design elements and serves as a virtual location for Immerse's more than 3,000 students to learn languages while interacting with each other's avatars. Using VR devices, members can practice booking rooms or ordering room service in a foreign language. They also receive information about Westin's wellness schemes and will be invited to book a stay at the real-life hotel in a second phase of the program. Under the partnership, Marriott is actually sponsoring one of the existing virtual locations that Immerse has upgraded to showcase The Westin Seattle brand. Immerse drives members to the locations of its brand partners in its weekly schedules, provides data on engagements and conversions to its sponsors and lets them keep all revenues generated by their metaverse experiences.
CitizenM announced plans in 2022 to buy land in Sandbox, a popular gaming metaverse, and to start building a virtual hotel, partially as it wants to boost loyalty in the online world. Lands in Sandbox mean non-fungible tokens (NFTs) that represent virtual real estate. Once it purchases the land, the company will work to raise funding for its virtual hotel through the sale of an exclusive collection of art NFTs. These tokens will have real-world awards attached, such as discounts or free drinks, which will be redeemable at any brick-and-mortar CitizenM property. The chain is planning to showcase and sell art NFTs to user avatars visiting the hotel in Sandbox and collaborate with a wider roster of digital artists in the future. CitizenM would eventually use its profits from the metaverse to fully finance the construction of a new physical hotel, with NFT holders scheduled to vote on the future location.
While many players believe the metaverse is the next big thing in hospitality, others think it could still take a few years for it to mature, partially as both the industry and guests need to better understand its concept and the value it can provide. One-third of hospitality executives told Oracle and Skift in 2022 that they "want in on the ground floor" on VR events, although just 11.2% said investing in the metaverse is among their three highest priorities by 2025. This was the least popular response.
Uncertainties Abound for Hotel Searches After ChatGPT Turns Up
There are more uncertainties about the potential future applications of ChatGPT, a new conversational chatbot built on a large language model and powered by generative AI. It has sent tidal waves across the technology world since its launch in late 2022 because of its surprisingly sophisticated capabilities – and some unreliable and false responses. ChatGPT has caused concerns and stirred controversies, but experts seem to agree that it will likely have an impact on hospitality in the longer term.
Integrated into Microsoft's Bing browser, ChatGPT is expected to raise the bar on online searches, probably including travel and hotel searches. Big online travel agencies are already contemplating the future effects of generative AI tools on their operations and strategies, but some professionals currently predict ChatGPT still has a long way to go before it can actually plan a flawless trip.
Regardless, curious users flocked to try ChatGPT, which can write software codes, poems and even pass bar exams. Its website attracted more than 1 billion visits in February 2023, up from 266 million in December 2022. It may have become the fastest-growing application of all time, collecting 100 million monthly active users in three months. Whether or not users will stick around, this is a new landmark – it took Instagram 2.5 years and TikTok nine months to hit the 100 million threshold.
In conclusion, hotels and guests currently use some sophisticated digital tools more frequently than others, but the transformation of user expectations after Covid-19 or ChatGPT bursting onto the scene shows that customer preferences may change fast. This is why operators can't afford to disregard advanced technologies in their marketing and sales strategies – or they lose track of what their guests really want and easily miss out on benefiting from new waves of tech innovation in the future.
