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Fueling Exponential Revenue Growth in Hospitality Through Gen AI

Harnessing Exponential IT with generative AI.

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  • 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 Research & Tools

1. Fueling Exponential Revenue Growth in Hospitality Through GenAI Storyboard – Understand the prospective generative AI initiatives that can expedite value generation in revenue management.

These use cases provide unique insights into the future of hospitality and how IT leaders can combat typical industry challenges.

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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

Elizabeth Silva
Senior Research Analyst
Gaming, Hospitality, Sports & Entertainment Industries
Info-Tech Research Group


Executive Summary

Your Challenge

Common Obstacles

Info-Tech’s Approach

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

The image contains a Venn Diagram that demonstrates the shared characteristics between commercial real estate, transportation, and hospitality.

Generative AI will create new revenue capabilities

Current-State Revenue Management Value Chain

Market Analysis

Using historical data and manual analysis to understand market trends and competitor pricing

Inventory Management

Using historical data and manual analysis to understand market trends and competitor pricing, and predict demand

Pricing Optimization

Manipulating prices based on trends and manual data analysis

Channel Distribution

Selling rooms through a variety of traditional channels, such as OTAs

Segmenting & Targeting

Applying wide segments to guests with little to no personalized marketing

Promotions & Incentives

Implementing standard promotions without customization

Analytics & Reporting

Using typical reporting tools with limited insights into real-time data

Future-State Revenue Management Value Chain

Market Analysis

Using AI algorithms to analyze large data sets for market and competitor insights

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

Channel Distribution

Selling rooms through a diverse range of channels enabled by Gen AI

Hyper-Personalized Promotions and Incentives

Implementing Gen AI dynamic, real-time, and hyper-personalized feature offers autonomously, based on AI-driven guest segmentation

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

The image contains a screenshot example of Generative AI Impacts of Change.

Unlock immense value with Gen AI

Integrated Inventory Management
& Pricing Optimization

Channel Distribution

Targeted Promotions & Incentives

Analytics & Reporting

SMART INVENTORY

DYNAMIC PRICING

CONVERSATIONAL DIGITAL BOOKING

ATTRIBUTE-BASED SELLING & RETAILING

TAILORED & REAL-TIME REPORTING

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
Gen AI to offer dynamic and hyper-personalized features
that have value for a guest and customize the guest’s stay.

Develop custom reports and visualizations that speak to stakeholders and improve decision making through autonomous reporting and analytic processes.

Examples

Inventory management:

  • Room bookings
  • Group bookings
  • Food and beverage stock
  • Restaurant reservations
  • Housekeeping stock

Pricing optimization:

  • Market demand
  • Seasonality
  • Peak rates
  • Guest behaviors

Channel distribution:

  • Chatbots
  • Digital concierge/virtual assistant
  • Voice assistants

Hyper-personalized incentives:

  • Room size and layout
  • Room location
  • Room view
  • Balcony
  • Work desk

Reporting & analytics:

  • Balance sheets
  • Cash flow statements
  • Day-to-day performance
  • Forecast report
  • Night audit report

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.

The image contains a screenshot of diagram that demonstrates the future landscape of hospitality with generative AI.

Info-Tech’s approach and team can help, irrespective of where you are in your digital journey

Starting Benefiting

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

Set aspiration: Vision setting with key business unit (BU) stakeholders to discuss and align on digital aspiration (e.g. big T vs. mini T,
self-funded/slow burn vs. investments)

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

Examples of how Info-Tech can help

Digital North Star placement
(e.g. industry trends, top-down opportunity, high-level planning)

Digital maturity assessments
(e.g. current-state digital adoption and transformation readiness)

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
(e.g. zero-based process redesign with technology)

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
(e.g. transformation program design, transformation office)

IT modernization
(e.g. technology infrastructure required to execute digital levers)

Change management(e.g. org-wide change program and stories, comms., governance)

Performance management
(e.g. leading/lagging KPIs, people mgmt. for continuous improvement)\

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.

Fueling Exponential Revenue Growth in Hospitality Through Gen AI preview picture

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

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Author

Elizabeth Silva

Contributors

  • Jasen Lew, CEO & Founder, Glowing
  • Blake Rampmaier, Chief Digital Officer, Boyd Gaming
  • Eric Bowers, Chief Technology Officer, Boyd Gaming
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