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AI's transformative role in the hospitality industry

The hospitality industry, once dependent on traditional methods of guest service and operational management, is experiencing a technological revolution. The continual advancements in Artificial Intelligence (AI) are not just reshaping, but fundamentally reinventing how hotels interact with guests, streamline operations and envisage the future of travel. As we navigate this AI-driven era, the sector stands on the brink of a new age marked by innovation, personalisation and efficiency.


AI in hospitality: Enhancing personalisation

 

At the core of AI's impact is its ability to personalise the guest experience, which has the potential to transform service models across a range of hotel categories. According to Deloitte’s latest European Hospitality Industry Conference survey, 52% of customers believe generative AI will be used for customer interactions, and 44% stated that generative AI will be employed for guest engagement. However, understanding future consumers' needs and anticipating the customer journey is crucial for the effective implementation of front-end technology. Improper deployment of AI can harm brand reputation and guest satisfaction.

“The hospitality sector globally is indeed at the cusp of AI-driven transformation. Through enhanced personalization, AI can help enrich guest experiences while preserving the human touch, thus redefining luxury hospitality.”

– Puneet Chhatwal, M.D and CEO, The Indian Hotels Company Limited (IHCL)

In luxury hotels, AI should be used to enhance, not replace, human interaction, therefore enriching guest experiences while retaining a personal touch. An example can be seen in hotels where receptionists have been transformed into ‘experience officers’, using AI to automate routine check-in tasks so they can focus on guest engagement and personalisation. On the other hand, budget hotels will use AI for functional efficiency, essential guest services and with less emphasis.


Operational transformation

 

Beyond enhancing guest personalisation, AI will be a significant enabler of operational improvements across all segments, extending its role to back-office operations. AI already plays a crucial part in revenue management, with departments using algorithms to refine pricing strategies and forecast demand. Now, hoteliers are exploring AI's application in areas such as investment analysis, where AI can assist in evaluating potential property investments or renovations, indicating a move towards more strategic human resource utilisation.

Moreover, AI's integration into operational metrics like property reviews and Net Promoter Scores promises deeper insights into guest satisfaction and performance, signalling a shift towards a data-driven, customer-focused industry approach.

”While the use of AI is still in its infancy, it’s exciting to consider how it could fundamentally change hotels and the experience for guests. As with many industries, AI in hospitality is currently considered as a cost-saving tool, with technology standing in for people and performing basic tasks. But, the direction of travel suggests AI will transform guest personalization, enabling truly remarkable experiences. Intelligent technology - powered by data - will enable hoteliers to better predict their customer needs and should be seen as a tool to enhance human connection between hotel staff and their guests.”

– Richard Valtr, Founder, Mews

Challenges and strategic adoption

 

Despite the opportunities, adopting AI in the hospitality sector presents challenges and risks. A major concern is the cost of implementation, which is particularly challenging for smaller hotel chains. This expense is more than just the initial investment and includes allocating resources for training and ongoing maintenance of the technology. Furthermore, the risk to brand reputation is significant if hotels fail to align AI with their customers' unique needs across different segments and locations. Misaligned AI applications could adversely affect guest experiences and perceptions.

Aligning AI applications with established brand standards poses a fine balance too, demanding innovation while maintaining the core values of a brand. The rapid evolution of technology increases complexity, making it essential to continuously update and enhance AI systems to stay current with the latest advancements. This ongoing development, coupled with the need for clearly defined customer segmentation, highlights the importance of a thoughtful and strategic approach to AI integration.


Looking Ahead

 

The future of AI in hospitality promises a significant transformation in both front-of-house interactions and back-office operations. For hoteliers, understanding the changing needs and desires of future consumers is essential to effectively implement innovative technologies. As we embrace AI's transformative role in the hospitality industry, several themes emerge:

  1. Embracing AI in the hospitality industry is essential for enhancing the guest experience, but striking the right balance between technology and the human touch is key.
  2. Tailoring AI solutions to meet the varying preferences of future consumers on a micro-segment basis, considering different brands and locations, is crucial for successful implementation.
  3. Preparing the workforce for the technological shift brought about by AI is vital. Employees need to adapt to a data-driven environment to remain integral to operations.
  4. Addressing ethical and privacy concerns in AI usage, especially concerning sensitive guest data and ensuring transparent interactions, is a top priority to maintain trust and compliance.
  5. Managing the rapid advancement of AI technology while maintaining stability in guest services and operations is a challenge that requires a thoughtful and strategic approach.

Navigating these themes is crucial for augmenting AI with the human element, steering the hospitality industry towards a future enhanced by exceptional guest experiences and operational excellence.

Meet the authors

Ryan Dodds

Manager

Ryan is a Manager in the THL Advisory practice and has over five years of professional experience in the travel industry. His expertise spans strategic planning, financial modelling and valuations, project management, budgeting, forecasting, and investment analysis. This includes assessments of business and industry attractiveness and business case development. Before joining Deloitte THL Advisory, he worked with a global travel technology company, aiding in the advancement of their corporate strategy agenda and facilitating an enterprise transformation. Ryan has held various roles, including positions in finance and corporate development. His responsibilities encompassed the divestment of non-core assets, analysing potential M&A and strategic partnership opportunities, providing financial modelling support for the negotiation of multiple airline distribution deals across APAC and EMEA, and assisting with the development of annual budgets and periodic forecasts. Ryan holds an MSc in International Economics and Finance from Newcastle University.

Leila Jiwnani

Hospitality Advisory Lead

Leila Jiwnani is a Director in the Travel, Hospitality and Leisure Advisory team in London. She has significant operations, consultancy and M&A experience across the UK, Europe and Middle East. Her key areas of expertise include value creation services in deal and non-deal scenarios, commercial and operational diligence, post-merger integration, carve-out, operator search & selection, feasibility and market analysis, particularly in the luxury segment. Additionally, Leila has worked on a number of engagements across wider hospitality, F&B and leisure, providing performance improvement support, operational reviews, synergy identification and delivery, as well as strategic growth and branding advice. She works with a variety of clients, including leading global brands, private equity and sovereign wealth funds. Prior to Deloitte, Leila spent 6 years at PwC working on M&A engagements across the Retail, Consumer and Leisure industries. She also previously held operational roles at a number of luxury hotel brands, such as Four Seasons Hotels & Resorts, Marriott and Belmond, in the UK and Europe.  

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