Transforming the hospitality sector with digital technologies

The disruption that digital technologies bring to a hospitality provider can be a differentiator in the globally competitive business

Transforming the hospitality sector with digital technologies - CIO&Leader

One of the industries that are in a state of disruption has been the travel and hospitality industry. At the core of this disruption are themes of mobility, flexibility and easy availability of information that help customers make informed choices. Gone are the days where travel meant visiting a travel agent for booking tickets or getting a good hotel deal. Aggregators like Airbnb and Skyscanner are adding to the disruption by providing customers with price comparisons and features that help them take informed decisions around their travel preferences and choices.

At the epicenter of this disruption are a set of digital technologies including Big Data Analytics, Mobile Apps, Internet of Things (IoT) and Artificial Intelligence (AI) which are helping hospitality providers reinvent themselves and provide a rich hospitality experience to customers.

Transforming the Hospitality Sector with Digital Technologies

At the cusp of digital disruption in the hospitality sector is ‘the insights from data’ generated at each stage of the value chain, that is empowering hotels and their partners to transform their business models. Let us examine the value chain and how digital transformation is a differentiator at each stage of the value chain.

  • Procurement and Supplier Management – Hospitality providers are dependent on procurement of goods and services to manage the properties. Examples of procurement could be furniture, soaps, towels, smart devices, security services, etc. Use of IoT devices and Big Data Analytics for managing the procurement processes efficiently as well as manage inventory. Supplier Performance analytics help hospitality providers gauge the performance of suppliers over time and identity potential areas of improvement.
  • Operations – Hospitality industry runs on narrow profit margins resulting in a need for streamlined and optimized operations. The key aspects of operations of a hospitality provider include house-keeping services, transportation services for guests and in-bound logistics around procurement of goods to run the operations. Data from operations is collected in near real-time through IoT sensors, operational systems and Big Data Analytics leveraged to perform Operations Analytics to ascertain the efficiency of end-to-end operations. Use of mobile housekeeping apps helps in keeping the staff aware of inventory which can be used as a feedback into the sourcing processes. The impact of planned events like conferences and disease outbreaks like the Coronavirus are also factored into the operations planning.
  • Guest Services – At the core of any hospitality business is the customer. Guest services are the key differentiator for hospitality providers and include Food and Beverages services (bars, restaurants, room service, etc.), Check-in/Check-out services (use of mobile apps as part of check-in services wherein electronic key cards for room access are provided to the customer’s mobile device; digital housekeeping apps can update the reception that a room is vacant and ready to check-in; check-out can trigger notifications to the transport desk in case a guest needs to be dropped to the airport), On-demand services (like doctor, physical training, room heating controls based on IoT sensors. etc.). Hotels like Marriott are leveraging AI-based chat bots to help customers make changes to reservations or check on status of redemption vouchers.
  • Sales and Marketing – Hospitality providers are increasingly driven by customer demands and preferences and are going all out to collect data around Customer Segmentation and Marketing Effectiveness of campaigns. Customer Segmentation helps understand customer demand based on buying behavior (room type, nature of guest services used, wish list, etc.) thereby creating opportunities for customized marketing campaigns.
  • Customer Servicing – For hospitality providers to succeed in an increasingly competitive market, they must serve customers well through the end-to-end life cycle. Customer Loyalty programs need to integrate data from multiple channels to provide a 360-degree view of customer preferences and design loyalty programs to meet the changing needs. The CRM process and systems need to provide inputs to the Customer Loyalty program to ensure effectiveness of campaigns and provide relevant offers.

The key disrupting technologies that are reshaping the way hospitality providers are making the transition to a digitally-savvy enterprise are as follows:

  • IoT – Use of IoT sensors to help control room temperature and capture customer preferences. IoT data can be leveraged to analyze when the customer visits a property and integrated with marketing campaigns to send out offers during a preferred season of travel.
  • AI and Big Data – AI and Big Data are crucial differentiators for hospitality by ingesting data from across the value chain that help optimize processes and operational costs. Real-time insights about inventory help hotels plan their procurement cycles better. Use of AI chat bots in guest reservation and e-concierge is helping make the customer experience better and providing these services 24*7.
  • Mobile Apps – Hospitality providers are creating a new customer experience by providing guests with facilities like mobile check-in, ordering room services though mobile apps and electronic key cards sent to mobile phones for unlocking room doors. Mobile apps could also provide services like food and beverage bills and making reservations/cancellations.
  • Virtual Reality – Virtual Reality is being leveraged by hotels in providing customers a virtual tour of the hotel to help customers understand the layout and services on offer. Interactive maps are provided in rooms to help customers explore the hotel layout and surroundings.

As is evident from the transformational impact of digital technologies at each stage of the hospitality value chain, companies are increasingly looking at leveraging these technologies not only for optimized operations and cost optimization but also as a differentiator in enhancing revenues through enhanced customer experience and targeted campaigns. The key benefits that digital disruption has provided are as follows:

  • Cost Optimization – Digital technologies have helped optimize the cost of operations by analyzing data integrated across the hospitality chain which can be analyzed to generate insights across Procurements, Operations, Guest Services, Sales and Marketing and Customer Servicing.
  • Customer Retention – Armed with digital technologies and enhanced customer service capabilities, hospitality providers are better placed to handle customer churn as well as acquire new customers by understanding customer preferences better. However, customer loyalty can be earned by continuous innovation in optimizing the value chain as well as enhancing the customer experience.
  • Reputation – Success in the hospitality industry is greatly driven by customer experience and feedback. Customers post reviews in travel websites like Trip Advisor and on social media sites like Facebook and Twitter. Hospitality providers not only promote themselves on social media by having their own pages/promotions but also need to learn from the feedback provided about their properties and guest experience. Social media data can provide unique insights about customer satisfactions and needs.
  • Revenue Models – With customer centricity at its focus, hospitality providers will look to create customized offers to meet customer-buying behavior. This creates an ability to generate new revenue streams as well as look at cross-selling opportunities-based on customer segmentation and competitive intelligence. The ability to merge multiple data sets and generate insights creates new revenue generating models and opportunities.

The global hotel industry had revenues of over USD 600 billion in 2018 and is growing at 6-7% annually. The disruption that digital technologies bring to a hospitality provider can be a differentiator in this globally competitive business. Customers are well informed with access to information and hospitality providers are leveraging digital technologies to engage better with customers. Some hotels like Marriott in China are exploring facial recognition technology for enhancing security and privacy.

The author is Data Platform Solutions Lead at the Services Integration Hub in IBM and has written three books


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