Embracing the future: AI's transformative impact on travel and hospitality

The travel and hospitality industry is undergoing a transformation driven by Artificial Intelligence (AI). This AI-powered future will enable the industry to cater to a diverse customer base with a wide array of preferences. Consumers recognise the potential benefits of AI such as Generative AI (Gen AI) and expect that it will improve their personal and societal well-being, as well as their health. While most people are aware that AI will likely change how they do their jobs, the majority believe that the changes will be positive and will enhance speed and efficiency. Excitement outweighs concern, however, there are reservations about the impact of the technology, and a cooperative strategy involving governments, corporations, and the public, is needed. In this article, we explore trends on the topic of AI's transformative potential, particularly in the travel and hospitality sectors.
 

AI is likely to change what product or service is sold and to who
 

There has been significant growth in digital goods and services, including hybrid options that blend physical products with digital elements, like subscriptions for digital mental health services, home fitness programs, new weapons for video game characters, digital video and content, personal finance applications, and non-fungible tokens. According to Deloitte’s 2023 study on digital goods and services in the United States, 2.9% of the consumer wallet is now spent on digital goods and services, and this category is expected to grow significantly and is beginning to stand side by side with major categories such as clothing (3.8%) and electronics (3.4%). Younger consumers spend even more on digital goods and services, with Gen Zs spending as much as 3.2%. Furthermore, these technological and analytical capabilities will enhance the precision, efficiency, and effectiveness of operations and customer experiences, while also allowing consumer companies to better connect with real-time customer demand signals. A recent research highlights that AI's impact seems to be most pronounced among the online population outside of the United States and Europe, with the Asia-Pacific region and emerging markets perceiving the most positive impact. More than two-thirds of respondents from emerging markets such as Brazil, South Africa, Mexico, and the United Arab Emirates believe AI will have a positive impact on the ‘way they access information’, while in the US only 51% of the respondents share this belief.  Similar patterns are seen in responses with regards to the ‘way they learn’ and the ‘way they work’.
 

AI is expected to impact those who provide goods or services
 

The research also indicates that workers believe that AI will have a positive impact on how they work in the near future. Specifically, 51% of workers believe that AI will have a positive impact on their jobs, while a quarter believe it will have no impact, and 16% believe it will have a negative impact in the next five years.

The move towards automation will lead to a widening gap in the workforce. At one end of the spectrum, there will be certain jobs and skills in high demand in fields like data science and automation technologies. On the other end, there will be positions that will be permanently displaced. At the same time, new job categories will emerge.

The study observed that across countries and regions, workers who believe AI will impact their job or their industry, identify two main issues in adapting to life with AI: learning how to use the technology and potential job displacement. Nearly 1 in 5 of these workers (19%) believe that they will have to find an entirely new industry or role within the next 5 years as a result of AI, and 44% anticipate having to learn how to utilise AI for their jobs. On the other hand, when it comes to technological advances such as Gen AI, Deloitte research suggests that only 47% of respondents agree that their organisations are sufficiently educating employees on the capabilities, benefits, and value of Gen AI. In fact, respondents attribute a lack of technical talent and skills as the single biggest barrier to Gen AI adoption. Only 22% of respondents believe their organisations are “highly” or “very highly” prepared to address talent-related issues related to Gen AI adoption. 
 

AI will also impact which goods and services are valued and how an industry creates value
 

AI can be a vehicle to build a healthier, safer, and more knowledgeable world. The potential applications of AI in medical breakthroughs (45%), climate change solutions (37%), and R&D (36%) are top priorities for society. There are also positive perceived implications for AI and security (42%). AI-enabled technology can serve as a virtual team member codifying documents, automating data abstraction and deriving meaning from medical records. Helping clinicians focus on higher-value work can improve productivity by 250% over manual processes, driving higher reimbursements and improved patient outcomes. Furthermore, advancements in food production and consumer technology are expected to drive the reinvention of existing products and the creation of new markets, sustainable products, and improved services. As per another study, AI can help reduce production costs by almost 20% in the agriculture sector. The study estimates that the market size of AI in the food and beverage industry will grow at a 38% CAGR between 2024 and 2029.
 

AI will require a greater need for partnership
 

It is observed that there is widespread agreement on the importance of public-private partnerships to responsibly harness the opportunity AI brings. Three-fourths of those surveyed in a study carried out by Google, (78%) agree that “government and technology companies should work together to oversee the development of AI.” There is a similar agreement among respondents globally that government and tech companies should work together to ensure everyone is able to access (74%) and benefit from (77%) advancements in AI. 

When it comes to more recent advances such as Gen AI, Deloitte’s 2024 State of Generative AI study highlights that governance and risk are barriers to Gen AI adoption. Only a quarter (25%) of business leaders believe their organisations are “highly” or “very highly” prepared to address governance and risk issues related to Gen AI adoption. Respondents’ biggest governance-related concerns are, firstly, the lack of confidence in results (36%), followed by intellectual property concerns (35%), misuse of client or customer data (34%), ability to comply with regulations (33%), and the lack of ability to explain/ transparency (31%).

To seize the opportunities that the advancement of AI presents and ensure that they are mutually beneficial to consumers and businesses, there is a growing need for partnerships to responsibly deploy and develop AI without stifling innovation.
 

Key considerations
 

• Are AI advances part of your strategic direction? If not, do you understand the benefits and business impact they could result in?
• What are the potential risks and challenges associated with implementing AI, particularly gen AI in the travel and hospitality industry, such as reputation and regulation
• What skills and expertise are needed to successfully implement and manage AI-enabled systems in the travel and hospitality industry?
• Do your leaders understand how your employees are using AI, particularly Gen AI if at all?
• Are you supporting your employees with AI? If so, how are you upskilling them? If not, why not?