Will Hotels Fail the AI Tech Race?

Attend any conference over the past decade, and a common theme is the devilish ways of the online travel agents. Beware the OTAs, you are told. They will charge you high fees to sell your room. They will steal your data. They will steal your relationship with the guest. Beware, beware of the OTAs.

We have seen some nuance come into the argument over the years, with some independent operators running the numbers and concluding that, if you factor in the myriad brand charges out there, the OTAs come out pretty reasonably. 

The pandemic caused a further shift, when the corporate market vanished and hotels had to rely on the leisure traveler. The global operators, who had deployed loyalty programs as their defense against the OTAs, had pinned their strategies on the business traveler and their frequent flying. The leisure market, with its once-or-twice-a-year trips had been left to the OTAs as being of only passing interest, and the OTAs had stepped in with the promise of great rates and duly cleaned up.

The model now is one of compromise. The message is that belonging to a large brand will mean bargaining power with the OTAs, so a lower charge. They are part of the mix, unless your brand or hotel is so well known that all your booking is direct; and that is rare indeed. 

An uneasy ceasefire? If only. While the big hotel brands are busy thinking of new brands, thinking about the standards for their existing ones, trying to build their portfolios and then also thinking about how to fill beds, all the OTAs are thinking about is rooms and how to sell them. A hotel is the most complex asset class out there, requiring specialist knowledge acquired over many years. Selling a room is a matter of marketing and a very small part of the equation. In those circumstances, hotel brands are brave to even try.

While hotels are thinking about wellness trends and experience, the OTAs have been thinking about the latest developments in technology and how they might impact our sector. 

Earlier this year at Expedia, the group announced the beta launch of a new in-app travel planning experience powered by ChatGPT, which will start an open-ended conversation in the Expedia app and provide recommendations on places to go, where to stay, how to get around, and what to see and do. The app includes intelligent shopping by automatically saving hotels discussed in the conversation to a “trip” in the app.

To help travelers shop, AI and machine learning are used to deliver personalized and relevant trip options out of myriad variables like hotel location, room type, date ranges, price points and more.

Peter Kern, Vice Chairman & CEO, of Expedia Group, said: "By integrating ChatGPT into the Expedia app and combining it with our other AI-based shopping capabilities, like hotel comparison, price tracking for flights and trip collaboration tools, we can now offer travelers an even more intuitive way to build their perfect trip.”

It’s not just about the guest. There are also AI-driven partner offerings, including help with cancellation policies, revenue management and ad performance. 

Other OTAs are, of course, also available, and Booking has also launched an AI trip planner. Glenn Fogel, CEO of Booking.com, said: “Our primary aim at Booking.com has always been to leverage technology to make travel easier. The recent developments with generative AI are accelerating the work we’ve been doing for years with machine learning to enhance and improve every aspect of the customer experience on our platform, whether it’s optimizing the right order to display a hotel’s photos or surfacing the most relevant reviews. Our new AI Trip Planner is simply the next step in our ongoing journey to explore how we can bring even more value, and hopefully enjoyment, to the entire trip planning process.” 

We are looking on with jealousy. The opportunities offered by AI are beyond anything we can yet fully appreciate, but we are already seeing the potential in both guest experience and operations. We just can’t get our hands on it. 

The operators are starting to make inroads. Earlier this year, Marriott International expanded its Design Lab and created an AI Incubator. At the group’s recent security analysts’ meeting, Peggy Roe, EVP and chief customer officer said: “We believe there are three significant areas to unlock for our industry. First, accelerated content generation. Second, elevated customer experience. And third, augmented intelligence for our associates.”

It’s a start. But the OTAs are in the lead again. We believe that signing up to a brand should be access to the best, and that means keeping ahead of the competition so we can deliver for guests and investors. Or what does a brand promise mean? 

ABOUT THE AUTHOR

Alex Sogno has lived and breathed hotels throughout his working life, commencing his career
at HVS International in New York after his graduation from Ecole Hôtelière de Lausanne,
Switzerland.

Following a period with Cushman & Wakefield HQ in New York, Alex joined Kingdom Hotel
Investments (KHI), where he asset managed more than 20 hotels across multiple brands,
including Four Seasons, Fairmont, Raffles, Mövenpick, and Swissotel across EMEA and Asia.
Alex assisted in KHI’s listing on the London and Dubai stock exchanges prior to leaving to
establish a specialist hotel asset management and advisory practice, Global Asset Solutions, in
2007.

Global Asset Solutions provides independent asset management services, putting hotels at the
heart of what they do to help owners maximise the value of their assets. In addition, the Firm
offers a range of investment and consulting services in areas such as strategic planning,
acquisition, and portfolio build-up. Global Asset Solutions has a highly experienced team of
professionals able to operate worldwide, bringing a significant pool of expertise in
management and transactions across a vast array of brands, particularly in the luxury and
resort space. Clients include PE firms and institutional investors, as well as sovereign funds
and family offices, managing over $20bn of assets in Europe, Asia and the Middle East.
Alex has maintained his connection with Lausanne, creating and teaching the asset
management module as part of the MBA course at the School, whilst also offering an asset
management course available through the Global Asset Solutions educational platform.
He is a regular speaker at conferences around the world and is the founder of the Hospitality
Asset Managers Association Asia Pacific (HAMA AP) and Middle East Africa (HAMA MEA).
Alex is also the President of the EMEA chapter of the International Luxury Hotel
Association.