Fueling Exponential Revenue Growth in Hospitality Through Gen AI
Harnessing Exponential IT with generative AI.
- Revenue growth and profitability within the hospitality industry continues to be a challenge post-COVID-19.
- Labor shortages and retention challenges cause low service levels and skills, which are crucial to maintaining service quality and value.
- A decrease in guest satisfaction and value perception within the hospitality industry are difficult to address because of to siloed communication and a lack of innovative strategies.
Our Advice
Critical Insight
Exponential IT enables profit maximization and overcomes industry challenges. Hospitality leaders should plan to use and manage generative AI as a business platform.
Impact and Result
- Introduce a curated list of hospitality Gen AI use cases to drive revenue supported by a value-driven analysis.
- Assist hospitality leaders in comprehending and discovering the future of hospitality capabilities that enable major transformative initiatives such as dynamic pricing and attribute-based selling.
- Provide practical insights from use cases to increase the odds of success.
Fueling Exponential Revenue Growth in Hospitality Through Gen AI
Harnessing Exponential IT with generative AI.
Analyst Perspective
Maximize property profitability with generative AI
The hospitality industry is facing many challenges due to the rapid advancements in technology and innovation within adjacent industries. The use of generative AI (Gen AI) to optimize pricing, promotions, and incentives, and the integration of Gen AI into real-time dynamic pricing and attribute-based selling are only some of the possibilities that other industries have embraced. The hospitality industry, however, has been slower to adopt these advancements.
The current economic landscape requires the hospitality industry to respond and adapt to Gen AI in order to embrace and identify opportunities for its business. To stay competitive, the hospitality industry must leverage advanced technologies to sustain long-term success and embrace novel approaches to disrupt traditional methods of revenue generation.
Elizabeth Silva
Senior Research Analyst
Gaming, Hospitality, Sports & Entertainment Industries
Info-Tech Research Group
Executive Summary
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Your Challenge |
Common Obstacles |
Info-Tech’s Approach |
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Revenue growth and profitability within the hospitality industry is a continuing challenge since COVID-19. Labor shortages and retention challenges cause low service levels and skills, which negatively affect service quality and value. A decrease in guest satisfaction and value perception within the hospitality industry is challenging to improve, due to siloed communication and a lack of innovative strategies. |
The hospitality industry struggles to differentiate offerings, such as direct bookings vs. online travel agents (OTAs), and to communicate this effectively with guests. The adoption of new technology to improve operational efficiencies is difficult within the industry, due to change management barriers. Complexity in sales and distribution channels and strategies leads to a lack of actionable insights and visibility into different data points to grow profitability. |
Introduce a curated list of hospitality Gen AI use cases to drive revenue, supported by a value-driven analysis. Support hospitality leaders as they discover and understand the future of hospitality capabilities that can enable major transformative initiatives, such as dynamic pricing and attribute-based selling. Provide practical insights from use cases to increase the odds of success. |
Info-Tech Insight
Exponential information technology (IT) enables profit maximization and overcomes industry challenges. Hospitality leaders should plan to use and manage Gen AI as a business platform.
Gen AI is an innovation in machine learning
Generative AI (Gen AI)
Gen AI is a form of machine learning. In response to prompts, a Gen AI platform can generate new outputs based on training data. Depending on its foundational model, a Gen AI platform will provide different modalities, resulting in different use case applications.
Machine Learning (ML)
ML is an approach to implementing AI in which the system is instructed to search for patterns in a dataset and then make predictions based on that set. In this way, the system iteratively “learns” to provide more accurate content over time. (Think of Google’s search recommendations.)
Artificial Intelligence (AI)
AI is a field of computer science that focuses on building systems to imitate human behavior. Not all AI systems have learning behavior; many systems (e.g. customer service chatbots) operate on preset rules.
Info-Tech Insight
Many vendors have jumped on “Gen AI“ as the latest marketing buzzword. When vendors claim to offer Gen AI functionality, you need to pin down exactly what is “generative” about it. The solution must be able to generate new outputs – not just predictive ones.
Generative AI can have a tremendous impact on transforming the hospitality industry
Core
Identify overlooked areas for growth in your core business. Whether rooms, events, or group bookings, look for powerful ways to further deploy your existing capabilities and grow the core of your business.
Expansion
Expand the boundaries of your organization. Gain a robust view of the capabilities that differentiate your organization. Expand into adjacent capabilities, where existing strengths can be further developed, rather than diversifying into new capabilities.
Disruption
Disrupt and respond to change with new business models. As the traditional model for the hospitality industry is being disrupted, consider market insights to identify new opportunities. Look for ways to disrupt your own revenue model by using some of your existing capabilities, but be clear about the new capabilities required.
Source: PwC, 2021
The hospitality industry has multiple challenges
Top Challenges Within the Hospitality Industry
Revenue Growth & Profitability
- Growth of revenue based on revenue per available room (RevPAR), not just average daily rate (ADR)
- Improved focus on profit contribution due to increases in operating costs
- Complexity of sales and distribution channels and strategies
- Increased shift to online retail booking
- Lack of actional insights/visibility into different revenue data points simultaneously
- Upended reliance on historical data and trends caused by the unpredictability of the pandemic
Operational Efficiency & Technology Adoption
- The need to reduce low-value tasks
- Hiring and retention of staffing levels and skills, which are crucial for maintaining service quality
- General industry reluctance to try new automation
- The need to manage an increased online retail booking shift
Guest Satisfaction & Value Perception
- Difficulties in increasing guest satisfaction
- Desire of guests to feel they are getting value for money in their purchases
- The struggle to differentiate offerings, such as direct bookings vs. OTAs, and to communicate this effectively to customers
Hospitality organizations face a 55.2% increase in operating costs.
Source: Trail, 2023
81% of hoteliers believe that technology will become essential to the success of hospitality in the next five years.
Source: Hotel Tech Report, 2023
Price, rooms & Wi-Fi are the top three negative impacts of decreasing hotel performance.
Source: Hotel News Resource, 2023
Adjacent industry innovations have several overlapping characteristics for the hospitality industry to adopt
Generative AI will create new revenue capabilities
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Future-State Revenue Management Value Chain |
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Market Analysis Using AI algorithms to analyze large data sets for market and competitor insights |
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Integrated Inventory & Pricing Optimization Generating real-time insights using a dynamic forecasting analysis of trends and other factors, while leveraging Gen AI to create and adjust room prices autonomously in real time based on guest and market data, thus managing both product and pricing to maximize revenue strategically |
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Channel Distribution Selling rooms through a diverse range of channels enabled by Gen AI |
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Hyper-Personalized Promotions and Incentives Implementing Gen AI dynamic, real-time, and hyper-personalized feature offers autonomously, based on AI-driven guest segmentation |
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Analytics & Reporting Leveraging advanced analytics and AI insights to develop Gen AI custom reporting |
Info-Tech Insight
The merging of processes through generative AI allows for a faster, improved, and simultaneous analysis of data based on multiple factors, without the need for human intervention.
Innovation will autonomize the current processes of revenue management
Generative AI Impacts of Change
Unlock immense value with Gen AI
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Integrated Inventory Management |
Channel Distribution |
Targeted Promotions & Incentives |
Analytics & Reporting |
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SMART INVENTORY |
DYNAMIC PRICING |
CONVERSATIONAL DIGITAL BOOKING |
ATTRIBUTE-BASED SELLING & RETAILING |
TAILORED & REAL-TIME REPORTING |
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Value Added |
Generate real-time insights using dynamic forecasting analysis of market trends and other factors. |
Create a competitive edge by identifying patterns and trends in real time to develop and autonomously create personalized pricing with smart technologies and Gen AI. |
Apply new and direct methods of selling rooms and other amenities through channels enabled by Gen AI, thereby increasing direct booking rates. |
Use promotions and incentives developed by |
Develop custom reports and visualizations that speak to stakeholders and improve decision making through autonomous reporting and analytic processes. |
| Examples |
Inventory management:
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Pricing optimization:
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Channel distribution:
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Hyper-personalized incentives:
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Reporting & analytics:
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54% of IT leaders within the gaming, hospitality, and entertainment industries indicate that a key challenge to implementing Gen AI is the lack of knowledge/understanding of the technology, from vendor solutions to use cases.
Source: Info-Tech Research Group Polls, 2023 LIVE and Gaming & Leisure Roundtable, 2023; n=87
Fuel exponential revenue growth in hospitality through Gen AI
Exponential IT enables profit maximization and overcomes industry challenges. Hospitality leaders should plan to use and manage generative AI as a business platform.
Info-Tech’s approach and team can help, irrespective of where you are in your digital journey
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Where are you in the journey? |
Establish your digital North Star |
Quantify the value of digital use cases |
Create your digital roadmap |
Deliver digital use cases and realize their impact |
Create the infrastructure to drive and sustain change |
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Set aspiration: Vision setting with key business unit (BU) stakeholders to discuss and align on digital aspiration (e.g. big T vs. mini T, |
Assess opportunity: Comprehensive enterprise-to-enterprise (E2E) understanding of the digital opportunity across BU/functions (e.g. data analysis, process walks, interviews) |
Design and plan: Bottom-up initiative design and planning (e.g. opportunity to initiatives, financials, phasing, design principles) |
Execute: Detailed initiative builds and implementation; execution with rigor and transparency (e.g. optimize process then automate, test, measure, scale) |
Enable: Transformation infrastructure, operating model, and culture to drive value capture and sustain change |
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Examples of how Info-Tech can help |
Digital North Star placement |
Digital maturity assessments Opportunity assessments (e.g. BUs/function value creation diagnostics, opportunity levers) |
Initiative bottom-up design(e.g. initiative ideation and business case creation, work plan, investments) Holistic initiative planning(e.g. phasing, interdependencies, investments) |
Initiative build Initiative implementation(e.g. testing and pilot, scale-up roadmap, performance tracking) Value assurance assessment (e.g. course correcting and accelerating initiatives underway) |
Transformation infrastructure IT modernization Change management(e.g. org-wide change program and stories, comms., governance) Performance management Workforce management(e.g. upskilling, right people, right place, right time) |
The following content will provide an overview of Gen AI use cases in hospitality. This will support opportunity assessments across the organization’s value chain. Note: This does not provide the value/ROI specific to your organization. For that, detailed current-state and opportunity assessments must be executed.
Measure the value of this document
Document Objective
Highlight best-in-class use cases to spur the initiative planning and ideation process.
How to Measure Your Success Against That Objective
There are multiple qualitative and quantitative direct and indirect metrics you can use to measure the progress of your initiative pipeline’s development. Some examples are:
- Increased initiative pipeline value
- Number of capabilities impacted by the initiative pipeline
- Enhanced understanding of the impacts of the initiatives, aligned to your organization’s capability map
- Better understanding of which sources of value are being addressed or under-addressed in your organization’s initiative pipeline
See the Digital Transformation Center for more details about how to establish your transformation infrastructure.
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