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Who will Lead the Digital Transformation in Hospitality?

The digital transformation, driven by data and next-gen technologies, is changing hospitality in unprecedented pace and hoteliers are caught largely unprepared. According McKinsey, the pandemic accelerated digital transformation by 10 years and today’s travel consumers have become even more digitally-savvy than ever.

Today’s hospitality is fast becoming a technology-enabled service industry powered by online, mobile, cloud, IoT, AI, robotics, automation and blockchain tools and applications. Accelerated Investments in technology are necessitated by the exceedingly tech-savvy guests and their exceedingly high technology expectations. Gone are the days when hotels offered “a home away from home” with comparable technology amenities. Unfortunately, many hotels nowadays offer “a subpar home away from home” experience as far as technology is concerned.

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Another reason for the urgent need for digital and technology transformation of the industry is the persistent labor shortages and unsustainable labor costs. Changing the business model, hiring more gig workers to do the job, streamlining operations are some of the immediate temporary measures. But the only long-term solution is investing in technology that can solve the current labor shortages through innovations, automation, mobility, robotization and next gen technology applications.

Technology to the rescue

Hospitality technologies, especially next gen technologies like AI, robotics, automation, mobility and IoT are called upon to solve a number of issues in the hospitality industry:

  • Solve labor shortage of entry-level and unskilled workers, which plague the industry in “normal” times.
  • Solve high turnover of trained employees (20%-30%).
  • Solve dull, repetitive, dirty or dangerous jobs.
  • Solve problems like poor discipline, lack of motivation, etc.
  • Lower labor costs, which are especially burdensome now.
  • Dramatically increase productivity.

Max Starkov believes that within the next five years many hotels will operate at half the pre-coronavirus staff levels and we will be seeing more and more examples of data and technology-driven, semi- and fully automated hotels. The savings from labor costs and technology-derived new efficiencies will be more than sufficient to pay for the technologies required to operate tomorrow’s hotel and its investments in next gen technologies.

Just to illustrate this rapid transformation in the hospitality industry, in the near to mid-term, any full-service 3-4-5-star hotel will need over 100 plus APIs (application programming interfaces) with third-party tech applications and solutions to be able to function and meet the basic needs and wants of today’s tech-savvy travelers. These include mobile and contactless guest experience, mobile locks, issue resolution apps, guest messaging, virtual concierge, IoT devices and utility management, smart room technology, entertainment hubs, CRM programs, etc. Who at today’s property is fully equipped to understand, evaluate, choose, implement and manage these technology applications?

How ready is the hospitality industry?

The hospitality industry is vastly unprepared for this new digital reality. Most hotels are desperately lagging behind as far as technology is concerned: knowledge, devices, applications.

Many hospitality owners and managers are lacking the education in or knowledge of hospitality technology and even the motivation to learn about the latest technology innovations, trends and best practices. Interestingly, in their personal lives, hotel owners and managers are avid users of technology: mobility, apps, messaging, voice assistants, streaming services, social media, online retail, etc., while in their professional lives they operate their properties in a technology-averse fashion.

What are the reasons for the technology backwardness of the industry?

Systemic under-investment in technology

The current big gap of hospitality’s technology preparedness and customer tech expectations is the systemic under-investment in technology due to deeply-rooted tech aversion in the hospitality industry. Earlier this year, STR released some troubling data, clearly showing that IT spending in U.S. hospitality has declined significantly throughout the pandemic to as low as 29% of the pre-pandemic level. Since then, IT spending has rebounded somewhat to the 50% level compared to before the crisis.

What are the immediate results of this technology under-investment? Hoteliers are not investing enough in technology in spite of the urgent demands imposed by the pandemic for new technology implementations such as:

  • Contactless guest experience and mobility, including mobile check-in and checkout technology, mobile keys, mobile issue resolution applications, virtual concierge, voice assistants, IoT enabled guest rooms, guest messaging applications, touch-less upsell and upgrade applications, etc.
  • Cloud PMS with Open API and integration hub that instantly solves the problem of connecting to the myriad of third-party applications that are much needed for the mere existence of any property and demanded by tech-savvy customers.
  • Next-gen cloud RMS (Revenue Management System) to enable intelligent decisions based on forward-looking demand and pricing capabilities as opposed to the now completely irrelevant historic data and comp set pricing data.
  • CRM technology to increase repeat business. Today it is 15-20 times more expensive to acquire a new customer than retain past customers. In the post-crisis era, success in bringing repeat business will make or break the property. And no, you cannot increase your repeat business without implementing a robust CRM technology, enabling a 360-degree view of your guests, guest appreciation program implementation and marketing automation.
  • Cleanliness technology: UV-C light devices and robots, electrostatic sprayers and housekeeping robots to assure cleanliness protocols and replace the highly ineffective spray-and-swipe techniques.

Lack of educated and motivated digital transformation leaders

The second reason is the lack of properly educated and motivated staff members to lead the transformation of our beloved industry from a technology-averse, real estate-minded, number-crunching industry to a technology-enabled service industry powered by online, mobile, cloud, IoT, AI, robotics and blockchain tools and applications. Lead an industry where digital technology has made its way into every aspect of the industry: hotel operations, guest services, communications, revenue management, distribution, CRM and marketing.
Where will the digital transformation leaders come from? How to create – educate, recruit, motivate, retain – these much-needed digital transformation leaders in hospitality? I see three intersecting forces joining their efforts to achieve that:

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  • Hospitality Schools – Very few hospitality schools today teach hospitality technology courses. It’s not the job of hospitality schools to create database engineers, software engineers, front-end developers, IT specialists, etc., they should teach students about the business applications of hospitality technologies, to educate them to become Technologists i.e. experts on how to understand, evaluate, choose, implement and manage technology applications in hospitality. In addition to undergraduate and graduate courses and degrees in hospitality technologies, another way hospitality schools can help the industry is via Executive Education and Certifications, geared toward managers and executives. These can play an important role by providing advanced and big picture technology knowledge to experienced hospitality professionals and prepare them for the next phase of their careers or to switch careers within the industry.
  • Technology Vendor Community – There are over 5,000 hotel tech vendors around the world working around the clock to develop new and innovative solutions to common problems or applications to elevate service delivery in hotel operations, guest communications, revenue management, marketing, etc. This education is in the form of certifications, trainings, product presentations, webinars, seminars and user conferences, white papers and articles. It is customary for hotel tech platforms to provide training courses and certifications to make sure their applications are used optimally. Naturally, it is important for the hotel tech vendors not just to be pushing their solutions, but to educate hoteliers on what is the core value proposition of their technology, how does it fit into the optimum hotel tech stack, and how it can solve business needs, introduce efficiencies, alleviate labor shortages and lower labor costs.
  • Industry Professional Organizations – Hospitality industry organizations like HFTP and HSMAI are doing a phenomenal job at training hospitality professionals via their certification programs and industry events and workshops. These certifications provide much-needed “industry deep dive” knowledge in hospitality technology, digital marketing and revenue management and are not only a great asset to the hospitality industry, but are very beneficial to hospitality professionals career-wise.

Digital technology is making its way into every aspect of the industry: hotel operations, guest services and communications, revenue management, distribution, CRM and marketing. This necessitates the emergence of a new type of digital transformation leaders and managers – technologists – who understand the business applications of technology, the latest technology innovations, trends and best practices in hospitality technology, experts on how to understand, evaluate, choose, implement and manage technology applications in hospitality.