Definitely Doug 1/13/23: Predictions for 2023

by Doug Rice

Before this week’s column, I’d like to ask you a favor. If you could complete this short survey, we can gather some data that may help a lot of my readers who are trying to assess the relative traction of the competing trade shows scheduled for the end of June. While it’s great to hear that AHLA and HFTP have now agreed to avoid conflicting dates in future years, this year both shows are scheduled for June 26-29. I know many attendees and even some exhibitors are still trying to decide which show(s) to attend. Many are taking a wait-and-see attitude but want to know what others are doing before deciding. I know I do.

As I thought about it, I realized that readers of this column are probably about as unbiased a population as it’s possible to survey about a hotel technology show. So, if you’ll indulge me, I’ll report the results in a future article.

Please participate even if you’re not sure or don’t plan to attend either event. Again, the link is here.

And now, we return to our regularly scheduled programming…

Predictions for 2023

If I have learned one thing in 35 years in hospitality, it’s that technology change is slow. The prediction “not much will change” is usually a safe one, and it is quite possibly foolhardy to make predictions with time frames shorter than five years. But many of us have observed a rapid acceleration in technology adoption over the past 18 months, so I have decided to break my rule and offer some directional predictions for 2023. These will not be revolutionary, overnight changes. Rather, they are mostly technologies that are still very early in the adoption phase of their lifecycles, that I think will get traction in 2023. They might go from a measurable but low penetration today like 1 or 2%, to double that in a year.

1. Operational efficiency

For as long as I can remember, a high percentage of non-essential tech spending in hotels (meaning anything not required to keep the lights on) went to revenue-related technologies: customer relationship management, loyalty, revenue management, distribution, digital marketing, and the like. But the labor shortage has finally put the focus on what I have long thought was an underused opportunity to use technology to reduce costs, primarily through efficiency in hiring, motivating, and utilizing labor.

Owners and managers are increasingly realizing that when labor is more expensive, scarcer, and harder to retain, we need better tools to manage it. This has given a boost to operational optimization software like housekeeping scheduling as well as to human resources tools that manage shift planning, employee engagement and communication, and training. It has also spurred the adoption of guest self-service options for check-in and room service ordering. These trends started in earnest in 2022 but are gaining steam rapidly; I expect to see many more hotels deciding to adopt these technologies in 2023.

2. Sustainability

Most hotels still pay lip service (at best) to sustainability, but this is changing. Energy costs were already the second largest controllable expense for most hotels after labor, and the long-term trend is clearly upwards. Yet many hotels either lack, or have largely disabled, basic energy management technologies that reliably reduce guest-room energy usage, typically by about 10% to 20%. More than half the hotels I stayed in last year had no ability to set back the temperature set-point in unoccupied rooms. At least three had purchased the technology but disabled it (and that’s only the ones where I could see that it had been disabled). From experience, I know that others will have been disabled invisibly, often by well-meaning engineers responding to a complaint from a single VIP guest that their room was too hot or too cold.

More and more of the energy management system providers now offer dashboards that can help catch anomalies and overrides, to ensure optimal usage. But too few general managers ever see these metrics, and as a result few hotel engineers bother to check them.

This is starting to change, however, as regulatory requirements become stricter and as hotel appraisal guidelines increasingly consider sustainability in valuations. These are getting the attention of owners and general managers. The trends have accelerated in the past year and will continue to do so.

In a similar vein, water shortages are leading to both regulatory and cost-induced awareness of hotel water usage in many parts of the world. Yet few hotels have any way to measure or control wasted water, despite the fact that low-cost IoT-capable meters and shutoff valves are now widely available. Even in existing hotels, putting in just a few of these at critical points can identify problems that, undetected, would otherwise waste thousands of gallons of water a day and in some cases even damage the facility. Experts say water leaks happen many times per year in most hotels (even daily in many), and each incident may not be detected for days, weeks or even longer – like ever. Do the math – it can add up to a big number, particularly if it’s hot water being wasted.

Even leaving cost aside, mandatory conservation requirements have started to appear in many water-parched climates that are forcing both major changes in new construction practices, and significant usage reductions in existing buildings. Adoption of water conservation technologies has been very slow in hotels in most parts of the world, but they are now starting to enter a much steeper part of the adoption curve.

In recognition of this, last month the American Hotel & Lodging Association announced Responsible Stay, an industry-wide commitment to (among other things) making hotels more environmentally responsible. This is hardly new at the global level; similar initiatives were already well established in many other major countries, and the U.S. has been a laggard. Hotels that don’t pay attention to energy and water usage will increasingly face penalties from environmentally conscious guests, meeting planners, and corporate accounts, not to mention regulators – all while spending a lot more than those who do.

3. Hotels as a Community Center

Historically, hotels were built for travelers, providing a place to sleep and perhaps work. Many also provide food and beverage, although not always of the highest quality or at competitive prices. In North America, few hotels give local community residents much reason to ever set foot inside them. Many hotel restaurants in the U.S. sit largely empty, offering cuisine, service, atmosphere, and prices designed for captive guests who don’t have the time or inclination to find something better; few even try to compete with local restaurants for local patrons. And while hotel restaurants are often popular with local residents in Europe and Asia, relatively few hotels anywhere in the world market many other services to the local market. When they do, it’s usually limited to the fitness center, spa, and golf course.

Lifestyle hotels are starting to change this trend. They are going far beyond food and beverage offerings to attract local business – and this is spurring the growth of new technologies to support the marketing, sales, and delivery of an astonishing array of goods and services that target not just travelers, but local residents. Banquet rooms that may go unused much of the time might now host classes for yoga or cooking lessons, lectures, or a myriad of other activities. Common spaces welcome local residents with free wi-fi but paid food and beverage options comparable to local watering holes, but often with better ambiance and other services than, say, the local Starbucks. Basic paid business services like printing, copying, and shipping can make the hotel lobby a better option for remote work than a typical coffee shop.

More hotels are also starting to understand that they can help their out-of-town guests experience the best of the destination and at the same time support local community businesses. Major brands have already started incorporating directories of local businesses and attractions on their mobile apps and websites, although most are still just static listings offering very little that guests could not find on sites like TripAdvisor. Lifestyle hotels and independents, however, are forming tighter relationships with neighborhood businesses, with direct links to book, buy, or order from them. This can be a new source of revenue for hotels from commissions: guests who trust the hotel are more likely to consider those local businesses and activities that the hotel recommends.

While the underlying trends are being driven by established and emerging lifestyle brands and some independent hotels, many of the technologies that are needed to support this model did not exist in the past. New offerings are filling the gap, providing hotels with the ability to curate, merchandise, and book or sell all types of activities from third parties. These range from deep integration into real-time event ticketing and restaurant reservation systems, to simple web links or the ability to request manual intervention by the hotel concierge or other staff to complete a request that cannot be supported digitally. A curated list in the hotel app of the top 10 local activities used by actual guests of that hotel, with links to booking pages where available, is a simple way to start; hotels that measure click-throughs can then identify opportunities for expanded partnerships and deeper relationships.

Operational software has not yet really adapted to the multiuse concept for common spaces. A function room might host Pilates lessons on Saturday morning, a wedding Saturday evening, and a cooking class on Sunday morning. Some time slots would still be sold like function space, but others might be a ticketed event hosted either by the hotel itself or by a local partner. Lifestyle hotels and even hostels have proven that non-room revenue can equal or exceed room revenue, and they are actively seeking better ways to manage common space, participants (in-house and local area), tickets, business arrangements such as referral commissions, local marketing, and analytics to manage and measure the business (including revenue management).

4. Payments

There has been a lot of innovation and consolidation in the hospitality payment space in the last couple of years, with both structural and functional changes that will continue and accelerate in 2023. On the functional side, we are seeing both more use of contactless technologies and the abstraction of actual credit card numbers into virtual cards issued by third parties as well as by mobile phone wallets such as Apple Pay and Google Pay.

Hospitality has been slow to adopt contactless payments (especially in the U.S.), and even many hotels that have your actual card details on file still require you to present a physical card at the front desk. But whereas 10 years ago hotels probably held actual payment card data (in raw or tokenized form) for 90-100% of their reservations, today that is probably down to 60-70%, due to payments via mobile phones or virtual cards. That will continue to drop, and in turn reduce the industry’s exposure to payment fraud.

For guests, more options are appearing to help guests avoid high foreign transaction fees. Some property management systems (PMSs) have partnered with payment providers to support payment options other than traditional credit cards. As the number of low-cost foreign exchange transfer platforms continues to grow, the number of ways to pay (both within country and cross-border) will also.

New payment platforms like Square have gone into partnership with PMS companies, underwriting some or all of the PMS platform cost with a revenue share from payment processing fees. Some PMSs have even gone so far as to make use of their partner’s payment platform mandatory. While this doesn’t work for all hotels, where it does it can both the hotel technology stack and back-office operational procedures, improve security, and offer guests more options to pay in the way that is most convenient and cost-effective for them. It often solves the age-old problem that many hotels with international clientele have experienced, where customers want to pay with instruments that are common in their own country but not where they are traveling.

5. Attribute Sales

Attribute-based selling, where rooms are sold not by room type but by specific features or combinations of features, has been discussed for decades but is coming much closer to reality. To be sure, many hotels have found ways to sell ancillary products (items unrelated to the specific room, such as flowers delivered to the room or a massage in the spa), but this is a much easier problem to solve than selling by attributes (features embedded in the specific room).

I have yet to see what I would consider a full- fledged attribute-based selling model that will scale well and be manageable for the hotel. But there are some early iterations appearing now, and much more work is under way to develop more mature capabilities. I do not expect to see mass adoption within the next year or even the next three, but I would be surprised if there are not at least a few successful pilots at modest scale in 2023.

Attribute-based selling will come as an evolution, not a revolution. Any early success at the reservation system and website level will need to be followed by a total redesign of most third-party distribution systems, revenue management systems, and significant parts of PMSs. Airlines introduced ancillaries and some attributes about 15 years ago. It took years, and even today, third-party distribution networks are not there.

6. The Front Desk

Historically, the hotel front desk was where you went primarily to complete mechanical tasks related to registration, room assignment, payment, key issuance, and bill settlement. Luxury hotels in particular have long emphasized the “warm welcome” function of front desk staff, where they can also help familiarize the guest with the hotel and area. But few time-and-motion studies would support the notion that the “warm welcome” accounted for much of the time spent serving the average guest.

Some hotels have challenged the need for a front desk and some are eliminating it entirely. After all, if you really want to provide a “warm welcome,” shouldn’t you be greeting the guest in the lobby, not making them stand across from the staff at a transactional counter? With technology, all or many of the front desk check-in tasks can be completed pre-arrival by the guest, or by a tablet-equipped staff member stationed near the front door. Kiosks have also become far more reliable and capable than even just a few years ago, and can provide another option to speed up check-in and reduce front desk labor costs. The aesthetic of kiosks may not be right for every hotel, but I am starting to see some sleek, simple ones that might surprise you with their ability to fit in almost anywhere.

I have covered the technologies that enable hotels to redefine the front desk in prior articles, but there are literally dozens of companies that have introduced a wide array of capabilities (compatible with many common PMSs), and many of them have gained a lot of traction in the past year. I expect that to continue. And I love the out-of-the-box thinking of some hotels, which have found new ways to welcome guests in a welcome lounge or bar area – one that reused the space freed up by eliminating the traditional front desk!

7. Miscellaneous

The above six items represent significant areas where I expect to see change in the coming year, but there are many less prominent areas where emerging technologies will be evident.

  • Electric vehicle charging is still not exactly common at hotels, but it’s less of a rarity, and becoming more of a necessity. I would expect the number of charging stations at hotels to at least double in 2023.
  • A few hotels with limited or no kitchen facilities are finding new ways to deliver room service that are often a cross between the traditional model and the now-established food delivery services like Uber Eats and Postmates. These may entail partnerships with nearby ethnic, specialty, or fine-dining restaurants. The partnerships may even be invisible to the guest (who thinks they are ordering from room service), or for fine-dining restaurant partners may be clearly advertised. A few food ordering apps I have seen support his now, but I expect it will be a growth area in 2023. Even luxury hotels are getting into the game, partnering with fine-dining restaurants, replating the delivered food in-house to be delivered with their own staff.
  • Website content, especially for major brands, has often fallen well behind reality, in part because there are not enough people to write (and constantly update) the content. Look for applications to incorporate Generative AI capabilities like chatGPT to take over some of this writing, and to be baked into future generations of content management systems. I don’t expect to see more than a few pilots this year, but some of the web content published today is so bad that it can’t help but being better. While we would all like highly creative marketing language, the plain truth is hotels have a lot of content (such as room type descriptions) that might not be worth hiring human talent to develop from scratch (although I would still want them to review it). Generative AI can produce a pretty viable substitute – in 100 or more languages. Don’t believe me? Try entering “Give me a marketing-oriented room-type description for an ocean view hotel room on Wailea Beach suitable for publishing on a booking site” into chatGPT and see what happens!
  • Loyalty points will become more like cash. While a few hotel groups have supported paying for incidentals with points going back six or seven years, there are many more that now have this in their plans. Various point-of-sale systems (food and beverage, spa, retail, golf, etc.) are getting more and more requests to integrate with loyalty programs to support payment with points.

What do you think? Are there big areas I have missed where you expect significant change in 2023? I’d love to hear what you think they are.

Douglas Rice

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