By Leo Barrit
Artificial intelligence (AI) is more than just a buzzword; it’s a transformative tool that can revolutionize the hospitality industry. Its practical use can empower hotels to anticipate guest preferences, tailor services accordingly, and deliver them through the right channels. This not only enhances the guest experience but also opens doors to increased profitability. However, it’s crucial to understand and navigate the challenges and considerations of implementing AI to align with a hotel’s business goals.
The economic gains from AI are not to be underestimated. A study by PwC predicts that the most significant boosts to GDP from AI will be in China (26% in 2030) and North America (14.5%), totaling a staggering $10.7 trillion and accounting for nearly 70% of the global economic impact. The potential of AI in the travel and hospitality sector is enormous, with the market estimated to exceed $1.2 billion by 2026, growing at a CAGR of over 9.7% from 2021 to 2026. These figures underscore the financial benefits that AI can bring to the hotel industry, motivating hoteliers to explore this avenue.
The fusion of AI with ancillary revenue strategies in the hotel industry is revolutionizing the field. It equips hotels with the ability to analyze vast amounts of data on guest preferences, behavior, and spending patterns, enabling the creation of highly targeted and appealing ancillary services. A report from Skift reveals that over 85% of hoteliers anticipate ancillary revenues to constitute a larger share of their annual revenue by 2025, and 49% strongly believe that unique amenities and upselling are pivotal to their revenue strategy.
Beyond financial benefits, AI-driven ancillary revenue is a key differentiator in today’s competitive landscape. It will diversify income streams, maximize the profitability of each guest, and contribute to improved guest satisfaction. In a somewhat vanilla hotel industry, ancillary revenue is vital for enhancing guest experiences, increasing guest loyalty, and improving financial performance. It also allows hotels to offer customized services and packages, catering to their guests’ unique preferences and needs, thus creating a more personalized and memorable stay, emphasizing the value of each guest’s unique preferences.
Hoteliers can drive additional revenues in many ways, especially when entering the Guest Experience Era. Guests are now looking for more than an airline ticket and a hotel room; they want to experience everything a specific location or region offers. With this newfound passion, hoteliers have the chance to not only differentiate their offerings but also opportunistically capture more revenue.
Here are a few examples of ancillary revenue sources in hotels:
- Food and Beverage: Revenue from hotel restaurants, bars, room service, and mini-bars.
- Spa and Wellness Services: Income from spa treatments, gym memberships, and wellness programs.
- Transportation Services: Charges for airport shuttles, local tours, and car rentals.
- Event and Conference Facilities: Fees for hosting meetings, conferences, weddings, and other events.
- In-Room Entertainment and Connectivity: Charges for premium Wi-Fi, on-demand movies, and other in-room technology features.
- Retail and Merchandising: Profits from the sale of goods in hotel gift shops, boutiques, and vending machines.
- Cross-sell initiatives for restaurants, shopping, and entertainment referrals.
The opportunities for developing strategies that include introducing AI in conjunction with ancillary spending initiatives are limitless. For instance, AI-driven upselling and cross-selling can be amplified by utilizing advanced algorithms to analyze guest preferences and past behavior to offer tailored add-on services. This could involve suggesting spa services to guests interested in wellness activities or recommending local tours to guests who enjoy exploring their surroundings.
Hoteliers can also employ AI to dynamically adjust prices for ancillaries based on demand, seasonality, and guest profiles, maximizing revenue opportunities. When analyzing how to price ancillary products or services correctly, predictive analytics can be developed to identify trends and forecast demand for various services. This can help hotels prepare and tailor their offerings, ensuring they meet guest expectations and maximize sales potential.
AI can analyze the performance of various sales channels (e.g., direct booking vs. OTAs) for add-on services and products, optimizing distribution strategies to focus on the most profitable channels. This puts hoteliers in the driver’s seat and empowers them to make better decisions and, thus, more money.
While AI offers immense potential for revenue enhancement, it’s crucial to balance this with data privacy and security. Using guest data for personalization must be accompanied by robust measures to protect privacy and comply with data protection regulations like GDPR. Hoteliers and their technology partners must implement stringent cybersecurity measures to safeguard guest data from critical breaches. This ensures that AI is not just a revenue enhancement tool but a responsible and secure solution for the hospitality industry, providing reassurance about the responsible use of AI.
The hotel industry and its respective hotel companies also need to balance personalized offerings and perceived intrusiveness. Now more than ever, guests must feel valued, not monitored, helped, not bothered, and most importantly, they need to feel special.
Overcoming these challenges involves planning, constant evaluation, and a willingness to adapt. Successful implementation of AI in enhancing ancillary revenues hinges on a thoughtful approach that considers the technology’s impact on guests, employees, and the hotel’s bottom line. As technology advances, the scope for creativity and innovation widens, offering a glimpse into a future where AI seamlessly blends into every aspect of the hotel experience.
In the future, hotels can adjust their service offerings or products based on guests’ emotions. Yes, this sounds a little like “Big Brother,” but with AI, literally nothing is out of reach. Feeling stressed? AI could suggest a calming spa deal. Excited? Perhaps suggesting an adventure tour would be a good idea. This technology could dynamically upsell services that guests are more inclined to enjoy based on their emotional state. It may all come down to whether it will be responsive to this level of innovation.
An extraordinary paradigm shift in the hospitality industry is upon us. We are poised for disruptive change, with AI’s utilization to optimize ancillary revenue streams marking just one avenue for such transformation. It’s a testament to the power of AI and its application to boost productivity and uncover strategies that keep hoteliers thriving in a dynamic and competitive landscape.
