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Can Artificial Intelligence Boost Hospitality Business

Ivanka Vranješ, Director of Software Engineering

Artificial Intelligence (AI) is dramatically changing the way we use and communicate with technology. It has been shown that AI can help us solve complex problems and even take over certain jobs, reducing or completely replacing human labour where possible.

The hospitality industry and similar service sectors are primarily focused on customer satisfaction and presenting experience that guest can get, including the atmosphere, storytelling, new experiences and attractiveness.

Can artificial intelligence offer something better than a person who personally presents a specific service to a guest and checks their satisfaction? How will we address data security and privacy issues for guests and service providers? Are open-source AI tools good and safe enough for implementation in the hospitality industry? These are the questions and situations that arise with the use of artificial intelligence.

Applications of Artificial Intelligence in hospitality

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Let's first look at the challenges encountered in the hospitality industry. Some of the industry features include seasonality, increasing guest demands and growing market competitiveness. Advertising, tracking and adapting to various forms of advertising, especially through social media platforms, are crucial. Qualified workforce that is proficient in foreign languages and adept in online or offline sales methods and tools is needed.

Now, let's see how artificial intelligence can help address these challenges, particularly in terms of service personalization, revenue management, chatbot implementation and others.

Service Personalization

Since artificial intelligence allows the analysis of large amounts of guest data, it is natural to use it for trend  forecasting and offer personalization. Based on the analysis of available guest data, such as activities during their stay, spending, demographic information, preferences, reservation history, purchases, and more, AI can identify similarities among guests, define groups based on these similarities and patterns using machine learning techniques and cluster analysis. Examples of segmentation include business travellers or guests who prefer luxury services. Machine learning algorithms, such as logistic regression, Random Forests, Support Vector Machines (SVM) and neural networks, are commonly used for guest segmentation or classification.

Of course, the quality, quantity and comprehensiveness of the data are crucial for accurate segmentation and useful personalized offerings. With guest segmentation obtained from these algorithms, marketing campaigns can be tailored, special offers can be devised, personalized recommendations can be provided, activities, restaurants, accommodations can be recommended, special menus can be offered, and unique experiences can be provided for each guest. This ensures maximum guest satisfaction, increases spending, and potentially creates long-term guest loyalty.

Additionally, a technological tool like a recommendation engine can be used to generate personalized recommendations related to accommodations, restaurants, activities and attractions, and additional services like spa, fitness, transportation and events.

Revenue Management

The next important application would undoubtedly be in the area of Revenue Management, whose main goal is, simply put, to sell the right product to the right customer at the right time and, of course, at the right price.

"Offer the right room to the right customer at the right price, at the right point in time." Essentially, the aim is to achieve maximum occupancy while attaining the highest possible price for the service and minimizing costs, all while ensuring satisfied guests.

In this segment, Artificial Intelligence assists in dynamic pricing, i.e., defining the prices of accommodation units based on various factors such as demand, supply, events during a specific period, weather forecast, season and other relevant data. Artificial intelligence can predict trends in demand, analyse competitor information, provide insights into current market conditions, and suggest competitive pricing. Moreover, AI can automate the pricing decision-making process according to predefined rules and parameters set by users.

Machine learning algorithms and predictive analytics techniques are utilized in this field. Machine learning algorithms are used to analyse historical data on bookings, demand and other factors to predict future demand. Optimization algorithms are used to find optimal sets of prices, while natural language processing (NLP) is used for analysing textual data such as reviews, social media comments and feedback.

All of these algorithms can be used together or separately to optimize revenue management. In this way, artificial intelligence can identify "nonproductive" discounts and free up financial resources for areas that contribute more to profit. Additionally, AI-driven price determination in revenue management systems can increase overall revenue by 5% (according to the Boston Consulting Group).

It can be said that AI helps increase revenue and profitability by finding rules on how much a particular guest is willing to spend on a specific service, optimizing prices in combination with customer segments and products.

Customer Care

In addition to the above, the use of chatbots in the hospitality industry is important because they significantly reduce the burden on customer support teams and are used for automated responses to guest inquiries and providing information about reservations, hotel services, local attractions and more.

With the support of ChatGPT and similar tools, chatbots will become far more advanced than they have been thus far. AI-powered automated responses reduce response times, minimize the possibility of human error, enable responses in the same language as the initial query and speed up the entire process. They also enhance the customer experience by being available at all times and providing responses in near-real-time, equipped with all the relevant information.

ChatGPT is a generative language model developed on the basis of the GPT-3 architecture. It is a solution based on a statistical algorithm that observes statistical patterns and linguistic features through the processing of large amounts of text. Simply put, ChatGPT adds words to text based on the calculation of the probability of the next word. It is used for automated translation, text generation, answering questions, providing summaries, sentiment analysis, and more. In general, such tools serve as the foundation for systems like virtual assistants chatbots, and automated text processing systems.

Additional applications

Artificial intelligence can be utilized for monitoring and predicting maintenance needs of hotel rooms, optimizing energy consumption, and reducing costs associated with hotel management or other resources. Smart room technology integrated with artificial intelligence can provide guests with a more comfortable and convenient stay. Additionally, artificial intelligence can enhance security and protection by monitoring potential threats.

Furthermore, artificial intelligence offers the potential for integration with virtual and augmented reality, offering guests opportunities such as virtual tours, virtual room selection and virtual events.

Therefore, with all these possibilities, one might question if there are any areas where AI will not be applied.

In conclusion: Boundless Potential of AI in hospitality

The greatest benefit of implementing artificial intelligence in the hospitality is that it allows hotel staff to focus on strategic activities such as building relationships with key clients and providing personalized services to guests.

Hoteliers who understand which artificial intelligence tools to leverage and how to do it will undoubtedly have a significant advantage over those who are hesitant about using AI.

We can say that we are only beginning to witness the advanced use of artificial intelligence. The possibilities for its application are present in almost every segment of hotel business processes. We see that AI can be used in operational tasks to assist staff in their daily work, as well as in providing essential information for strategic decision-making and management actions, including integration with virtual reality and other advanced services for guests. In you are wondering how you can increase your digital competitiveness, feel free to read our client story about Digital Competitiveness In Hospitality. 

For more information about Technology Trends in Hospitality, here you can download our whitepaper.

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