The COVID Year – What Tech Changes Will Last?
In my 33 years in hotel technology, never has there been a year that brought more change than the past one. Obviously COVID was a major factor, generating new solutions or simply accelerating adoption of preexisting ones. But other factors were at play as well.
This week I want to review the changes and offer some thoughts as to which technologies will be permanent, which will fade, and which might evolve to something else. And why.
One thing that has changed permanently is hotels’ attitude towards technology. For as long as I can remember, hotels have adopted technology only at a glacial pace, and often slower. This was especially true for technologies that might substitute for personal service. At the property level, managers feared it would undermine guest satisfaction, alienate staff, and scare non-technical managers. COVID has shown that while these fears might have some basis, there are also many technologies that can support service perceptions by giving guests the choice of whether and how they interact with staff; that can allow staff to focus on the most impactful tasks; that can reduce the time managers spend on busywork; and that can service guests faster. It has also shown that many customers sometimes prefer interacting digitally, even at five-star hotels, and that offering them that option cannot hurt. Specific individuals may choose the digital option never, rarely, sometimes, or frequently, but most guests will value having the choice.
In the past year, many hotel groups have restructured how they manage technology and/or brought in new technology leaders to drive change. As a result, the “technology quotient” in hotel leadership ranks has risen almost across the board, more than I can ever recall in such a short time. Hotels cut staff during COVID, and many adopted targeted technologies to help limit the impact on service. I now hear more rumblings from the C-suites of major hotel groups about longer-term plans to shift to more and better technology and less labor.
Many hotels today cannot find enough staff for the looming recovery. While labor shortages are caused in part by short-term issues resulting from government subsidies and immigration restrictions, many executives believe that hospitality (and more broadly, travel) lost a lot of its appeal as a stable and desirable place to work. If so, it may never fully regain the ability to employ the pre-pandemic levels of workers (which even before COVID were often insufficient). In the coming year and beyond, tech spending may increase both because of the recovery in travel, and because it can often help compensate for labor shortages.
So where will hotels spend their money on tech? While some spending will go to the traditional categories, my primary focus this week will be on solutions and approaches that first appeared, or that gained significant traction, during the past year. With the understanding we now have of how COVID has changed consumer behavior and hotel operations, I am ready to predict some approaches that will be future winners, and some … well, not.
Food & Beverage Technology
Restaurant operations were upended by the pandemic, and one common reaction was implementing technology to reduce the need for contact, such as through digital menus, ordering, and payment. These innovations represent, for most diners and most restaurants, a better experience for the diner and labor savings for the operator. In most cases, they represent a permanent change.
To be sure, we may never see digital ordering at the highest-end restaurants, or diners may be offered a choice of traditional paper menus or digital ones. But the technology itself is a no-brainer if done correctly. Guests can order at their leisure (even before arriving, if they are time-limited); they need never wait for the wait staff (did you ever wonder why they are called wait staff?); they can see visual images of what they are ordering; they can view ingredient information in their own language; and they will almost never order something only to find out ten minutes later that it is sold out. And the chef can change the menu in minutes, at any time.
Some restaurants have shifted to fully digital ordering, employing no wait staff at all, and this will be a permanent change in some higher-volume, lower-cost, fast-turn, or staff-constrained settings. But for most table service restaurants, I see each table choosing how they want to order. This will result in a mix: some diners will want the traditional approach, others will prefer all-digital, and perhaps the majority will use the digital menu first if it is available when they are seated, but still want to talk to a human before ordering. The important thing is choice: where the guest finds that either a digital approach or the personal touch better meets their needs, their service perception will be increased if the restaurant provides it. If enough guests choose digital enough of the time, cost savings will result. And if the restaurant cannot hire enough staff, the digital solution can still reduce dissatisfaction with long waits.
The past year has also seen many new products for digital food ordering, delivery, and pickup. Many restaurants, including those in hotels, have found new markets with local delivery and pickup in addition to dine-in and room service; these require automation support. Hotels have also found revenue sources through partnerships with local restaurants offering delivery. While local delivery and Uber Eats have long been go-to options for guests staying at limited-service hotels, it is hard for a hotel to monetize these relationships unless orders are placed with a specific partner via the hotel’s app or using a dedicated QR code. Some large five-star hotels are now even plating meals from outside restaurants and delivering them to guest rooms. This avoids a flood of third-party delivery personnel who cannot access guest floors and therefore congregate in the lobby waiting for guests to meet them. It also means the guest never has to leave their room, and it may allow the hotel to shorten kitchen hours while still meeting guests’ needs.
Waitlist management has also seen a change that will be permanent. The vibrating paging disks that told you that your table was ready at a busy restaurant have largely been supplanted by text messages delivered to the diner’s mobile phone. This could have happened years ago, but most restaurants lacked the technology to manage it. As more restaurants were forced by COVID to take reservations or enable remote ordering and pickup, the often-simple systems they implemented to manage these needs were also able to transform waitlists from manual or disk-based approaches to something that is both touchless and lower cost.
Contactless payment is another change that will outlast the pandemic. Leaving aside any actual or perceived reduction in infection risks from contactless payment, once you know how to use it, it is simply more convenient. If a guest places a restaurant order through a mobile phone, why should they not be able to settle the bill the same way? Mobile payment options like Apple Pay and Google Pay gained significant traction during COVID; a Visa study showed 78% of consumers worldwide changed how they pay for items in the wake of intensified safety concerns. Numerous other studies show shifts away from cash and contact credit cards towards all contactless methods. Paying through a mobile app has a distinct advantage for labor costs as well: it does not require the wait staff to deliver the check, retrieve the card, process the sale, obtain a signature, and update the tip. Contactless both saves labor and avoids customer dissatisfaction at having to wait when they are finished and ready to leave.
Similarly, I expect digital tipping to expand in those parts of the world where tipping is common. Room attendants, bell staff, valet parking attendants, and others have historically been tipped primarily in cash. Yet cash is disappearing from many economies, and it is increasingly inconvenient for guests to ensure that they always have the right denominations. Digital tipping makes it easier for cashless guests to tip, meaning better-compensated employees, less upward pressure on wages, and less turnover. I covered some of the approaches and products in this blog last summer, and since then new solutions, such as Youtip, TipBrightly, StrikePay, Etip, and TipTapGo have also gained traction.
Chatbots powered by Artificial Intelligence (AI) made their first appearance around 2019 but gained real traction last year (see this blog). I expect this will continue, both because the technology continues to improve, and because of the labor shortages many hotels are now facing. Chatbots are still far from perfect, but they can give guests quick answers to many questions or can dispatch staff to meet requests, all without human interaction. The guest gets faster response and staff time is minimized.
While chatbots can seem impersonal, some of the better ones have personalities that can be entertaining even if they still cannot pass the Turing test. I predict that chatbots that are not AI-supported will gradually be replaced by ones that are. Those that rely on manual staff responses are simply going to result in too much frustration when the hotel is understaffed. Even pre-pandemic, I often had to wait hours for busy hotel staff to respond to queries I submitted through one major brand’s in-app messaging function. For most simple questions and requests, that frustration is entirely avoidable with a good AI agent. And using them helps free up staff to handle more complex guest needs where a personal touch is needed.
Sensitive Personal Information
In recent months there has been much media coverage of so-called vaccine passports, and discussion as to whether hotels should require them. I will not offer an opinion on that, but I do want to highlight some of the impact this has had on the technology space, because it has far more important longer-term implications.
First, I think the term vaccine passport itself is in most cases a misnomer. It implies some government-sanctioned requirement such as the one to present a passport when crossing an international border. While there may be a few countries that make proof of vaccination a requirement for certain activities, there is no global trend in this direction, nor would one be practical when there are many legitimate reasons why people cannot be, do not need to be, or do not want to be, vaccinated.
Second, businesses in most of the world, including hotels, have always been able to decide on their own whether to impose exclusionary requirements on customers. Many have imposed age requirements, dress codes, or the need for a credit card. Some have had exclusionary policies regarding children or pets. Others, even pre-COVID, have required evidence that the customer is free from contagious diseases. Requirements like these are nothing new; what is new is the technology that can verify some of them.
A better name for the technology commonly referred to as health passports is “digital health credentials.” The best of these use newer technologies based on self-sovereign identity (SSI, discussed in detail in this earlier blog). SSI puts the individual, rather than governments or corporations, in control of their own sensitive health information. This approach enables consumers to share sensitive information only when they want to, and only to the extent needed. SSI enables someone to prove that they are a low risk for transmitting a disease without having to share details of how or why (e.g. vaccination, negative PCR test, positive antibody test, under age 16, etc.) and without creating any centralized health database that could be subject to hacking or abuse. Properly implemented, it identifies the individual biometrically and can certify that they pass specific health requirements and is not susceptible to forgery.
It is too early to say whether digital health credentials will become commonplace; that will depend on the course of the pandemic and societal attitudes. A few countries have adopted them at a national level for COVID, but most have not. It is not too early, however, to say that wherever verifiable health requirements are put in place, SSI technology provides the most privacy-centric and consumer-friendly approach to administer and enforce them.
Although digital health credentials may fade away post-COVID, the current interest is serving as a huge accelerator for the underlying SSI technology. This field is still young and immature, but major tech leaders are making very significant investments in its future, and it holds the promise of addressing many other, often far-reaching privacy, security, marketing, and even payment issues for hotels. I believe it will over time be a game-changer for hotels and other travel providers, for reasons detailed in the blog linked above.
Just a year-ago those other applications seemed to be five or more years in the future. However, the imperative to get the travel and hospitality industries moving again has led to the launch of digital health credentials in a growing number of locations around the world. That has in turn advanced the underlying SSI technologies, and the timeframe for other applications, by years. Even if digital health credentials themselves never become commonplace, they will leave behind a legacy of having accelerated much more important technology changes.
Some early travel-related applications of SSI have already started to appear in airports, on airlines, and at border crossings, and I expect many more to be launched in coming months. Influential global organizations like IATA and the World Economic Forum have made major investments that are behind some of these early deployments. To be sure, many applications are still years away, but we can expect to see significant traction on a few within the next 12 to 24 months. Interested readers should follow (for free) the progress of the Hospitality and Travel Special Interest Group of the Decentralized Identity Foundation, a global nonprofit that, in cooperation with the World Wide Web Consortium, is helping to drive the creation and adoption of open standards for these technologies. Many well-known hospitality technology leaders are already actively engaged with this effort, and everyone is welcome.
Sanitation and Health Monitoring
Sanitation expectations from guests have undergone a change that will be long-lasting if not permanent. There is much greater public awareness of infection risk and mitigation measures, and the population of germophobes has reportedly risen because of COVID. However, some of the early tech solutions to appear in the hotel market were overkill, especially based on the current scientific wisdom that the virus is spread mostly by aerosol exposure from extended close contact, rather than via surfaces or brief aerosol exposure at a distance.
While many sanitation solutions on the market are high-tech, such as robotic sprayers or UV light disinfectors, they mostly address either ambient air in unoccupied or sparsely populated spaces, or surface disinfection. Neither of these is now believed to be a common transmission vector for COVID. As a result, while hand sanitizer dispensers may well be here to stay, other health-related technologies like temperature sensing, proximity alarms, and video surveillance for social distancing or masking, are already seeing reduced interest due to a combination of capital and operating cost, intrusiveness, limited reliability, and (in many countries) a growing share of the population that is vaccinated.
Some highly visible sanitation practices, such as UV-light and robotic spray disinfection in public spaces, may continue for a time. But increasingly, they serve more of a marketing role (or as Cameron Sperance writes, hotel hygiene theater). They can help increase customer confidence, but are not very effective at preventing disease transmission. Absent a significant reversal in the course of the current pandemic or the emergence of a new one, I expect use of these solutions to decline over time, probably to their very low pre-pandemic levels.
This same germophobia trend has supported the rise of contactless technologies. While restaurants have their own complexities (see above), the hotel check-in and check-out process have also changed. Mobile check-in, mobile key, and mobile check-out were around long before COVID, but mobile-key usage was generally below 10% at hotels that offered it, and more commonly in the low single digits. Mobile check-in and check-out usage were modestly higher.
As consumers get used to more contactless tech elsewhere, they have started using more of these mobile options at hotels, and more hotels are implementing them. Some of the COVID-related shift will be permanent. Many travelers have become more comfortable with technologies they may not have previously tried. Others will, when the situation returns to something closer to normal, still want human contact at the front desk. On balance, usage of mobile check-in and check-out will be significantly higher post-COVID, both because it meets the demographic preferences of more and more travelers, and also because COVID accelerated the rate of familiarization with mobile options across all demographic groups.
Mobile key adoption will lag, not because it is a bad idea but because it is still too difficult to use. It needs to be as easy as waving your phone near the lock, which today it is not. You may have to turn the phone on, unlock it, enable wireless or Bluetooth, and open and log into an app to use it. The barrier to mobile key is commercial, not technical. Apple has still not enabled near-field communication (NFC) for hotel locks, as Google has with Android, and as Apple has for college dormitory locks, transit system turnstiles, and other uses. If and when Apple’s policy changes, I expect mobile key usage in hotels will grow much faster. Until then, a plastic card will remain easier – and thus preferable for most travelers.
Technologies that support better labor utilization, on the other hand, will flourish in coming months and years. Hotels have learned from COVID that they can manage with fewer staff than they previously thought. Many are now learning that they may have to do so even post-COVID, because they cannot find enough people to hire. To adapt to lower staff availability, hotels need better hiring, training, scheduling, communications, staff engagement, and task assignment, all of which technology can support. I focused on many of the specifics in my two most recent blogs (here and here), and I have seen significantly increased interest in these areas.
I believe we will see a permanent if modest shift away from staff and towards technology, with labor cost reductions perhaps in the range of 10%, offset by new technology costs of maybe 20%. Since labor costs are currently in the range of 8-10x larger than technology costs, this represents significant cost savings to hotels, and a big increase in labor productivity and profit. And it still leaves hotels as one of the industries spending the least on technology per employee.
Technology can be used to reduce the need for labor by capitalizing on guest preferences, and I expect we will see much more use of this going forward. The best example is housekeeping. Daily servicing was dropped by many hotels during COVID, and there is an open question as to how many will bring it back. Many guests are fine with less-than-daily housekeeping and some even prefer it, while others want daily service. Differential pricing can enable guests to express their choice, either through a surcharge to receive service or a discount for skipping it.
This is not a new idea; some brands previously offered loyalty program members extra points for turning down housekeeping on multi-night stays. But that limited the option to loyalty program members, who are usually in the minority. Technology can support offering the choice to every guest through a variety of channels: brand.com or brand app at booking, via pre-arrival email link, via mobile check-in, at the front desk, by chatbot or text messaging service, from a guest room tablet, or by the television or telephone menu.
In order to save labor, however, hotels will need to forecast how many guests will opt in vs. out, and then adjust staff schedules in response. This may vary by day of week or mix of guests. While some hotels may be able to do this manually, others may need technology support to get a lot of benefit. Hotels may need to pass most of the cost savings along to guests to incent them to decline housekeeping, but if they are unable hire enough housekeepers, they can still benefit by being able to better service guests who want daily service.
One of the most important developments of the last year was that the hotel industry finally hit the tipping point on open Application Programming Interfaces (APIs) – a holy grail sought by much of the industry for more than 25 years, but never really reached. Open APIs enable systems to share data and processes with the fewest possible commercial and technical barriers. In an industry where even small hotels may use dozens of interconnected systems, APIs are the oil that enables data to move and services to be delivered seamlessly and efficiently. And “open” is the oil that makes an API easy for developers to implement.
To be sure, many vendors have published open APIs or used open standards for years, and made their use by hotels or partners inexpensive or free. But others have hesitated, whether due to technical limitations, commercial concerns, or (in many cases) both. The announcement last month by Oracle that it was opening up its hospitality API specifications finally put the industry leading provider of core hotel systems on the right side of this important issue. I am not sure how much COVID had to do with Oracle’s decision – open APIs have always been Oracle’s approach in other product lines, and I have been expecting this change ever since it acquired MICROS almost seven years ago. The transition took too long, and to be sure it is still very much a work in progress. But kudos to Oracle Hospitality’s new top leadership team for finally getting it right. Where the market share leader goes, others will surely follow.
Oracle’s announcement starts to remove a huge barrier to innovation that has stymied hotels and the vendor community for decades, and puts the rest of the software providers on notice that if their APIs are not already open, they need to change. It will take some time to play out to be sure, but this is a permanent and welcome change to the structure of the industry.
A lot has changed in the past year, most importantly the attitude toward and the rate of adoption of new technologies by hotels. We are very early in this change and can only see the tip of the iceberg. The next few years should be very interesting!