Definitely Doug 12/8/23: Top 5 Hotel Technology Trends from 2023

Technology in the hotel industry does not change quickly. Every year, we see a few new ideas emerge.

Some turn out to be fads and never get much traction. Many others get a fair amount of adoption, but only within certain niche markets. Only a few really start to take hold. Today I will assess which of the new technologies that have emerged in recent years are likely to be in this last (and most important) category, recognizing that they can still take years (often decades) to work their way through the industry.

‍Driving Forces

‍Several underlying factors are responsible for many of the innovations of the past few years and especially in 2023. These include:

• Continued shortages of, and increased costs for, labor in most parts of the world

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• Increased environmental awareness, sharply increased costs for energy (particularly in Europe), introduction of much more stringent environmental regulations in many countries, and a rapid shift towards electric vehicles in major world markets

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• The evolution of artificial intelligence, driving new solutions that were previously impractical to automate

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• Maturation of cloud computing and the continued expansion of open-source libraries and no-code/low-code tools that make software development much faster, and that have led to a proliferation of tech startups focusing on hotels

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• A growing guest preference for self-service digital options, particularly among younger consumers; and

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• A shift from the historical focus on rooms revenue towards total revenue, including both from ancillary products and services within the hotel, and from monetization of the local environment.

These factors are underlying drivers behind every one of the “top trends to watch” I have selected from the past year.  Here are the top five, plus a few bonus ones at the end.

‍1.     Generative AI Changes the Landscape

‍In recent memory, nothing in the technology world grabbed the headlines as completely as ChatGPT did when it was announced just a year ago. It represents a major advance especially in content creation, especially for marketing content that needs to be compelling but that many hotels find challenging to write and keep current. Even if what Generative AI creates is rarely perfect, it is usually good enough that humans need only focus on a final polishing. And where 100% accuracy is not required, it can satisfy needs that were not previously addressable.

For example, as a traveler, I find the AI-generated review summaries that TripAdvisor is now including on many hotel listings to be a great help when I am searching for a hotel. Similarly, while hotel chat tools that have incorporated Generative AI are far from perfect, they can be as good or even better than the newly hired 19-year-old front desk clerk that might answer chat requests in the absence of AI.

Just one year in, there are many ways that hotels are using Generative AI. I covered some of them a few months back in this article and will not repeat them here. But I also see companies trying to apply it to problems it cannot solve very well. Generative AI is based on language modeling, and as such can respond in very human-like ways. It can often provide the right answer to many general questions and to some specific ones.

But it fails miserably at tasks like itinerary planning, which requires consideration of prerequisites, logistics, logic, constraints, and time planning. I have tried many times to use ChatGPT or Bing to suggest leisure trip itineraries, and while it can recommend a good selection and sequence of things to see and do, it has almost no sense of how long the itinerary will take, whether the necessary transportation will be available at the times and locations needed, whether attractions will be open when you get there, or any other constraints that you or the providers may have. These aspects are not solvable with language patterns; additional overlays to large language models (which have yet to emerge) will be needed to address them.

Generative AI cannot solve everything (at least, not yet) but it can enable hotels to produce much more compelling and useful marketing content with less human input, and it is starting to emerge as a component of service as well, for its ability to address common guest questions and requests faster and less expensively than humans. It is not surprising that surveys indicate that nearly half of hotels are using Generative AI – just a year after ChatGPT was launched. In my 35 years in the hotel technology space, I cannot recall a technology that was adopted faster.

‍2.     Closed Systems are Fading Away

‍This year marked a milestone as the last major hotel company, Marriott, finally announced a plan to replace the 1980s-era property management system (PMS) that is used in most of its hotels. Older PMSs were built in an era when system interconnectivity was poor and inter-system cooperation was less essential. Interfaces were often accomplished by having one system drop a file with a transaction into a folder on an interface PC, which another system could pick up and process whenever it was ready. These closed-system designs led to integrations that were often expensive, unreliable, difficult to monitor, and hard to repair when things went wrong or to update when needs changed. And because these systems operated on local computers, it was difficult, expensive, and often disruptive to update them.

Newer systems, now adopted or in progress for all major hotel brands, provide much more accessible (and often free or nearly free) connectivity through open Application Programming Interfaces (APIs). Often available to partners either publicly or upon registration, these enable other systems to make processing or data requests to the PMS (and vice versa). And because these newer systems are cloud-based, they are relatively easy to update. Most updates require little or no effort on the part of the hotels using them. Major hotel groups that have migrated or are migrating to platforms such as from Agilysys, HotelKey, Infor, Sabre Hospitality, and SkyTouch Technology, have greatly reduced technology friction and will continue to reap benefits over time. Many smaller hotel groups are also benefiting, with hundreds of vendors to choose from and a few, such as Cloudbeds and Mews, starting to achieve real scale.

For many years, the elephant in the room was Oracle’s Opera PMS, by far the most common system globally. It has been widely seen as the most functional system, especially for larger and more complex or upscale hotels, and can be deployed in more countries than any of its competitors.

However, Opera long had a legacy design and business process that were less than welcoming to third-party integrations. It was also designed for deployment on premise-based servers (or in later years, hosted single-tenancy instances, which was only marginally better). Oracle (and MICROS in the two decades before it was acquired) also had a reputation for charging high fees for interfaces; the ROI impact hampered both innovation on the vendor side (if it required integration with the PMS) and adoption of those innovations by hotels.However, Oracle’s corporate DNA (dating to long before its acquisition of MICROS in 2014) has always been open systems, and after several years of false starts, they have within the past four to five years made significant inroads at opening up Opera’s APIs and reducing or eliminating the costs for both other vendors and customers who need to use them. In 2023, Oracle started aggressively moving customers to the new Opera Cloud platform as well. These changes are still works in progress and may take a few more years to fully play out, but the level of complaints from both customers and other vendors in the hotel ecosystem has been greatly reduced. If Oracle is not yet as “open” as some of its newer counterparts, it is at least well on the way.

Open systems create the opportunity for better delivery of guest self-service options as well. So far, only a few PMS companies have taken that to heart and started delivering a single solution that has both staff- and guest-facing user interfaces (as discussed in this recent blog), but hundreds of add-on modules have appeared and are able to connect easily with many of the more open PMSs on the market.

Finally, the launch and early adoption trends of the new HTNG Express standards are starting to simplify many of the simpler PMS connectivity requirements that previously required more work to implement than many vendors found practical. Among PMSs, Agilysys, Oracle Opera, and Visual Matrix have already adopted these standards, along with at least 15 non-PMS vendors. The new standards do not address some of the more complex integration requirements for PMSs (such as for distribution systems) but greatly reduce the workload required to implement many post-booking and operational use cases.

‍3.     Green Technology Pays Off

‍Sustainability emerged as a priority for a few hotels and vendors about 15 years ago, but for many years the uptake was anemic and growing only slowly. That started to change a few years ago but has gotten major boosts within the past two years, especially in Europe. The impact of the Ukraine war on European energy costs was a major driver, but so has been increasingly aggressive legislation. Additionally, more hotel buyers (notably corporate travel managers, meeting planners, and Gen Z and millennial consumers) worldwide are prioritizing sustainability when they select hotels.

To be sure, much of the attention to sustainability is still lip service, but that is changing. Certification programs, such as LEED, BREEAM, Green Globe, GreenLeaders from TripAdvisor, Green Key Global, and many others are making it easier for buyers to impartially assess hotels’ environmental footprint. Legislation with teeth is starting to be introduced as well; the United Kingdom has targeted a 68% reduction in energy intensity for hotels by 2034, and hotels that fail to meet requirements may have their operating licenses revoked. An interesting CBRE study summarizes progress especially in Europe. While most European hoteliers will already be familiar with many of the developments, U.S. hoteliers would be wise to pay heed.

Sustainability products, and particularly those that can reduce energy consumption, are getting more attention in the industry. Most common are energy management solutions for guest rooms, which are the greatest energy users in most hotels. But we are also starting to see a maturation of solutions for water management, kitchens, food waste, laundry, lighting, and other applications. Power management is another emerging area, with some hotels utilizing self-generated energy, most commonly from solar panels, and energy storage solutions.

‍4.     Revenue Beyond the Guest Room

‍Many real estate investors are now realizing that the digitization of the hotel experience can open up new revenue opportunities that were previously too costly to justify. These are now often supported via low-cost and/or zero-risk (e.g., commission-based) software products. Resorts and some high-end hotels have long offered ancillary services such as spa, dining, golf, ski lift tickets, or water sports, but these were often booked manually, or with clumsy digital interfaces.

Within the past couple of years, however, a tsunami of new vendors (and in a few cases enhancements from existing vendors) have begun offering revenue-producing add-ons that are used during the booking experience, in pre-stay emails or text messages, or onsite via chat, guest app, QR code, or kiosk. They sell what the more basic booking engines and online travel agencies often cannot: amenities, spa experiences, tennis lessons, cooking classes, kayak rentals … you name it, and you can sell it. And of course, they can also enhance room revenue by selling early check-in, late check-out, or room upgrades. A few can even guarantee (for a price) room features such as fireplaces, balconies, kitchenettes, or even a specific room, using some form of attribute based selling (covered in a two-part blog last spring here and here).

Increasingly, the quest for additional revenue is extending beyond the hotel building and into the local community. Hotel bookings are usually the first thing a traveler books in a city, and who better than the hotel to suggest (and sell and even earn a commission from) the activities that are of the most interest to, and most convenient for, their guests? Dozens of new vendors provide solutions to help hotels monetize these opportunities (I covered some of them in an earlier blog here).

The big hotel brands have taken note and started to incorporate some of these products into their loyalty apps. But hotels may not want to stop there, since these apps often reach only a small percentage of guests (and especially of leisure guests). More and more hotels are reporting success with reaching out to guests pre-arrival (especially via text message) to make them aware of things to do during their stay and to book them. Unlike the brand apps, text messages or emails can reach almost all guests – and also unlike many brand apps, any commissions go to the hotel rather than to the franchisor.

‍5.     Robot Labor

‍Robots were launched in hotels several years ago, mostly as a novelty. However, adoption has accelerated markedly in the past year or so as capabilities improve and costs decline. And despite concerns that robots carry the risk of de-humanizing hospitality, the most commonly adopted robotics applications have not done that. Rather, robots are finding steady applications in and around kitchen and food preparation areas, busing food between kitchens and function space, providing security in the building and parking lots, and for cleaning tasks (especially vacuuming). Robots can replace some of the less skilled staff that are proving impossible for many hotels to hire, and they can be significantly cheaper as well (especially when you factor in costs of shift coverage, training time, and turnover).

I covered some of the interesting applications in a two-part blog (here and here) earlier this year. Robots can also interact with guests and enhance the guest experience, although whether this is appropriate will vary from hotel to hotel and guest to guest. Robots can wander the lobby, interact with guests waiting in line (and in some cases address whatever they were there for autonomously), offer welcome drinks, entertain children, and even escort guests to their room or to hotel facilities. Many guests find them entertaining, as well. They generally get very positive reviews from both staff and guests, across hotel categories ranging from select service to upscale; applications in the economy and luxury sectors have been more limited to date.

The adoption of robotics by hotels is still in the early days, but the robotics companies I have spoken with have all reported major increases in interest (and orders) from hotels within the past 12-18 months. The robot revolution has already largely played out in the Chinese hotel market, and there is little reason to think it will not continue to grow in other markets as well.

‍Beyond the Top 5

‍Three other technologies of note likely passed the tipping point in 2023. One of them is digital tipping, which several large brands are now rolling out. It is a no-brainer to offer something that enables guests to pay hotels’ staff more, improving the well-being of low-wage workers at little or no cost to the hotel owner. I wrote about this a bit over a year ago (link) and interest has skyrocketed in the time since, as more and better solutions have emerged on the market.

Another key technology is electric vehicle (EV) charging. The need is growing rapidly, and it is often a key differentiator for EV drivers when selecting a hotel. Whether they offer low-cost (slower) charging as amenity, fast charging at a markup, or something in between, hotels that offer EV charging will get the lion’s share of business from EV drivers. Government financial incentives also apply in many markets and have been helping persuade hotels to install chargers. I covered this about a year ago in this blog; since then the momentum has continued to build, with Hilton recently announcing a major deal with Tesla that will cover 2,000 hotels.

Finally, I am seeing much greater interest in financial reconciliations. As systems become easier to connect, it becomes easier to automate the labor-intensive, spreadsheet-centric process of verifying that financial obligations created in one system (like the PMS) are fully resolved in another (like the bank’s). In many cases due to labor shortages, discrepancies were never being found at all, and that represents revenue that is never collected or costs that are overpaid. There has been an explosion of new applications across a wide range of use cases, such as OTA commissions, gratuity management, reimbursement for award stays. Watch my next column for an in-depth review of this area.

That’s a wrap for my year in review. Happy holidays to all, and see you next year!