Customer data platforms (CDP) and Large Language Models (LLM) are set to boost the productivity of hotel businesses, according to experts. A permanent reduction in staffing levels is making these tools an inevitable necessity.
So far, digital transformation has been relatively slow in the hotel industry compared to the banking, aviation, and retail sectors. This is largely because of the complexity involved in replacing and/or reconfiguring existing technology while simultaneously operating a customer-centric and resource-intensive business.
Early adopters and tech-first operators that have deployed high levels of automation back-of-house combined with personalised customer engagement, have seen a 20 to 30 percent GOP premium compared to traditional operators, claimed Michael Levie, co-founder of citizenM and now a board member of CDP vendor IreckonU.
One such business is Numa Group. Founded in 2019, the group has rapidly scaled to a portfolio of hotels and serviced apartments in 33 cities across Europe. In September 2023, Numa secured $59m of Series C funding led by Verlinvest.
Creating its entire tech stack from scratch has given the company a first-mover advantage, explained Dimitri Chandogin, president and co-founder, Numa Group.“When we started the company, the main thing we faced was that there is no one solution that fits all purposes. So we started to develop our own tech around three pillars: the guest journey, decreased opex and increased revenue.”
During the pandemic Chandogin found that there were no existing revenue management systems (RMS) to tackle high levels of cancellations, flexible rates, and the need to constantly overbook. So his team developed their own RMS.
It was the same story with housekeeping apps. Numa could not find one that would automatically create a task assignment for three people in a room.
“Hey, three people are checking in. Please prepare the sofa bed without calling, running around, writing emails and so on. It was non-existent in the market, so we developed it ourselves and we have automated more and more of the back end,” explained Chandogin.
He added that Numa has developed its own chatbot called Emma that handles 70 percent of guest enquiries.
The same CDP principles of getting to know customers better to deliver better service also apply to employees, said Michael McGraw, investment principal, Inovia Capital: “What is their background? Where are they coming from? How do we tailor the training to them so it’s 24 hours instead of five days?”
Younger generations who grew up with consumer-grade tech, are simply not prepared to do tedious data entry tasks or learn how to use archaic legacy systems, noted Tristan Gadsby, CEO, Alliants.
The journey to digital transformation is slow because hotel boardrooms do not prioritize productivity, argued Richard Valtr, founder, Mews, quoting a statistic that productivity in the hotel industry has fallen by 8 percent in the last ten years.
He added that every executive from every department needs to be involved when making technology investment decisions. To transform a business’s overarching technology architecture, Levie believed it’s better to bring in external consultants.
Valtr argued that it would be better to employ technology experts full-time to overcome the mindset of seeing tech upgrades as projects. Instead, it is necessary to see technology as a never-ending process, he said, and companies need to employ data scientists and AI experts.
There are several examples of tech-first businesses that deliver above average profits and productivity: Numa, citizenM, Airbnb. Why don’t more hotel companies take their lead?
“Don’t forget we as tech vendors look from the outside so we get to compare,” said Levie. “If you’re a hotelier you don’t necessarily know what your competitors are doing. You might guess but you don’t know and if your business processes don’t change, you don’t get there.”
LLMs are set to have a huge impact on distribution and will replace metasearch much quicker than we think, believed Valtr: “AI will kill cookies and it will find the rooms directly. It will basically find the easiest way to connect, without us needing to search or get coerced into some ad click universe.”
McGraw cited the long-term partnership between OTA Hopper and Capital One to improve the travel booking experience for the bank’s customers. He said: “What LLMs really allow you to do is take data, turn it into insights and then turn it into action a lot more efficiently.”
All the above quotes were taken from the IHIF EMEA 2024 panel: Unleashing Proptech Potential: Opportunities for Asset Optimization, Profitability and More