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Are hoteliers finally realizing that technology can save the day?

Are hoteliers finally realizing that technology can save the day?
Written by Publishing Team

Background

In “normal” years, the hospitality industry spends, on average, less than 2.5% of net room revenue on IT, telecom and IT personnel payroll/benefits. This is it! Compare this to Expedia’s spend of 28%-30% of net revenue.

The pandemic further reduced technology investments in hospitality and dealt an even more severe setback to our traditionally technology-averse industry, a setback with significant long-term implications.

In 2020 IT spending in US hospitality declined significantly throughout the year to as low as 29% of the level at the start of the year, rebounding somewhat to the 50% level compared to before the crisis. Even worse was the drop in payroll (wages and benefits) to hotel IT personnel throughout 2020, ending the year at 31% of the level at the start of the year (STR).

What was the technology spending in 2021?

STR just released their latest technology spending data for 2021, clearly showing that US hospitality IT spending in 2021 did not rebound to pre-Covid levels, despite the overall industry rebound and increased tech demands by the tech-savvy travel consumers. Last year RevPAR in the US was -17% compared to 2019, while IT spending was -25%.

Technology spending in Europe and APAC during the last two years is estimated to be even worse.

Even more worrisome is the drop in payroll (wages and benefits) to US hotel IT personnel in 2021, ending the year at 46% of the 2019 level. One can speculate that this sharp decrease is because hoteliers have been more inclined to outsource their technology needs to third-party tech vendors. This may be true, but who at the property or corporate can possibly evaluate, implement, manage, and troubleshoot these third-party applications or solutions if you have let go of more than half of your IT personnel?

This troubling decline in hospitality technology and IT personnel spending is in sharp contrast to the accelerated adoption of digital technology in the general economy. The pandemic accelerated digital transformation by 10 years (McKinsey & Company) and today’s travel consumers have become more digitally and tech-savvy than ever. Many of today’s travelers’ service expectations are around self-service, around do-it-yourself, from online planning and booking, to preferences for contactless check-in, mobile keys, voice assistants and communication with hotel staff via messaging ie these are all technology solutions and applications.

The technology underspend has clearly increased hoteliers’ dependency on the OTAs: unlike hoteliers, the OTAs spent billions on technology during the pandemic. It’s no wonder that over the last 6 years the OTAs have increased their market share by nearly 50% at the expense of the hotel direct channel. By investing heavily in technology applications to engage the traveler at all possible touchpoints of the digital customer journey, the OTAs have monopolized the guest relationships and left hoteliers to do…the housekeeping and dirty laundry.

What are the trends in 2022?

Over the past year, hoteliers tried, unsuccessfully, to deal with acute labor shortages by luring new hires with sign-up bonuses, higher wages or even cash payments to candidates just to show up for an interview. All of these attempts to “bribe our way through the labor shortages” have led to unsustainable labor costs but have not mitigated the workforce crisis. Today, there are still 1.73 million open positions in hospitality in the US alone, out of nearly 11 million open positions across the economy.

Due to all the lingering pandemic-related uncertainties, I do not expect that hoteliers would double or triple their technology investments in 2022. Yet, there are some hopeful trends on the horizon.

The newly released “2022 Hotelier Technology Sentiment Report” by StaynTouch and NYU Tisch Center of Hospitality clearly shows that hoteliers are on their way to embrace technology in ways. This very timely survey clearly shows that hoteliers have learned their lesson and have realized that the only way out of the current labor crisis is by investing in technology to solve the current labor shortages through innovations, automation, mobile technology, AI, robotization and next gen technology applications.

Key findings of the report include:

  • 81.7 percent of all respondents reported implementing at least one technology during the pandemic, and/or planning to implement new technology during 2022.
  • Adoption of contactless technology, including self-service check-in, in-room technology, mobile keys, and digital payments increased by 66 percent during the pandemic and are projected to increase further during 2022.
  • Hotels continue to adopt more automation to improve efficiency, particularly as staff sizes remain small.
  • Nearly 75 percent of respondents believe that contactless technology will become a long-term trend.

Hoteliers’ objective in 2022 and beyond is crystal clear: do more with fewer employees by using technology and reduce staffing needs by a significant percentage compared to pre-pandemic levels.

What should hoteliers focus on in 2022?

I believe the following are the more realistic technology applications and solutions that, if implemented by hoteliers, can have the greatest impact in hospitality in 2022 and beyond:

Contactless Guest Experience: Implementing contactless guest experience is the one of the few realistic ways this year to lessen the negative impact of the current labor shortages and unsustainable labor costs.

Contrary to what some in the industry believe, contactless guest experience DOES not mean only mobile check-in, but the full guest experience pre-, during- and post-stay: from mobile check-in and mobile keys or self-check-in kiosks, issue resolution and guest communications via messaging, housekeeping-on-demand program, self-selection of room from digital floor plans similar to how you choose your airline seat, guest messaging or voice assistant in the room with issue resolution applications to handle customer Service requests by stay-in guests, virtual concierge, IoT-controlled utilities, self-ordering kiosks in F&B, self-service vending machines, chatbots on the property website, CRM technology to engage customers and keep the conversation going.

Example: You can reduce your front desk staff by 50% or more by implementing a complete contactless guest experience at fraction of the payroll expenses.

Today’s cloud PMS lime Opera Cloud, Stayntouch, Protel, CloudBeds, Mews, etc. all offer various mobile checking and all aspects of the contactless guest experience via native or third-party applications.

In 2019 only 38.3% of hoteliers offered self-check-in; 75.4% are expected to do so before the end of 2022 (Stayntouch/NYU Tisch Center of Hospitality Report)

Guest Communications: Introduce guest-to-property communications and issue resolution technology via messaging and voice assistants in the room. When guests call the front desk, someone there – an understaffed, over-worked and under-paid front desk clerk – has to pick up the phone and waste precious bandwidth to handle quite often mundane requests or issues.

There over 4 billion users of messaging services worldwide, so no wonder that 64% of guests want to communicate with hotel staff via their own smartphones. Adopting guest messaging and issue resolution applications like Knowcross, Runtriz, Zingle, Guestware, Beekeeper, etc. via guests’ own smartphones or voice assistants in the room like Volara and Intelity not only improve customer satisfaction and staff efficiency but reduce the need for human customer service.

In 2019 only 52.6% of hoteliers offered guest messaging; 81% are expected to do so before the end of 2022 (Stayntouch/NYU Tisch Center of Hospitality Report).

Chatbot: Implement a chatbot on the property website to enable the hotel to engage users, answer their questions and steer them toward making a booking in a 24/7 fashion. Over 60% of interactions with the chatbot happen outside of business hours and over the weekend, when the hotel is severely understaffed (Asksuite). Chatbots provide users with information through text, images, video, audio, etc. and serve as your property’s 24/7 virtual customer service department. Ex. Edward, the chatbot of Edwardian hotels in London responds in real-time and round-the-clock to inform us on hotel services and amenities, make recommendations, handle customer complaints, etc., thus relieving the workload of the front desk.

In 2019 only 14.5% of hoteliers offered chatbots on their websites; 29.2% are expected to implement this technology before the end of 2022 (Stayntouch/NYU Tisch Center of Hospitality Report).

CRM Technology: Implement a CRM technology and guest appreciation program. In the post-pandemic era, success in bringing repeat business will make or break the property. You cannot have a meaningful repeat business (15-20 times cheaper than accquiring new guests) without a CRM technology and program in place.

Only a meaningful CRM technology application – as part of your hotel tech stack – can ensure deep engagement with your past and future guests. CRM tech not only provides automated pre-, during- and post-stay communications, guest satisfaction surveys, guest retention marketing automation and drip marketing campaigns, but takes it a step further via guest recognition program management and loyalty marketing. All of these fully automated CRM initiatives keep “the conversation going” with your upcoming and past guests, keeps them engaged and steers them in the right direction: to book your hotel when it’s time for them to visit your destination again.

In addition, you can use your CRM first party data about your best guests to launch similar audiences marketing on Google, Facebook, Instagram, etc. to target potential customers with similar characteristics as your best guests.

CRM initiatives in combination with ORM (Online Reputation Management) tech can turn your happy guests into brand ambassadors and avid social media influencers.

CRM technology has become widely available and reasonably priced via hospitality-specialized vendors like Cendyn CRM, Revinate CRM, TravelCLICK GMS, etc. Inexplicably, less than 10% of independent hotels have implemented CRM technology and program in place.

Conclusion

The list of possible technology implementation that can make a difference goes on and on. Technologies that exist today can significantly reduce staffing needs and labor costs in all stages of service delivery, from pre-arrival customer engagements to on-property guest services and post-stay customer retention.

In my view, Only through accelerated investments in technology – cloud, mobility, AI, robotics, IoT and other next gen technology applications and innovations – can the hospitality industry reduce staffing needs and unsustainable labor costs, and “appease” the exceedingly tech-savvy guests and their exceedingly high technology expectations.

Max Starkov
NYU

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Publishing Team