How Hotels Can Maximize Artificial Intelligence

SAN FRANCISCO—Artificial intelligence (AI) is disrupting the hotel industry as we know it from surprisingly engaging chatbots, to voice-activated in-room devices, to solutions that manage energy usage. It’s also crucial for personalizing the guest experience with tailored services and offers that meet the specific needs and interests of the guest.

With all the ways AI is being integrated on the property level, it would seem that hoteliers are on the fast track to wide adoption and execution. CEO Stephen Pratt disagrees. He believes hotels are missing out on opportunities when it comes to artificial intelligence.

The team at has produced an AI Index—Enterprise Artificial Intelligence Index—to measure its adoption compared to stock value. There appears to be a direct correlation. Essentially, as prowess increases, so do stock prices.

“We use return on invested capital (ROIC) as the key determining factor for stock value. Revenue per available room (RevPAR) is a more narrow but useful metric as well,” he said. “Learning algorithms applied properly can drive net operation profit (revenue, cost reduction) and capital efficiency (fixed and working). The core of all of these levers is forecasting and influencing customer behaviors. AI is tailor-made for this.”

Pratt explained the methodology for the index: “The X-axis measures the AI skillsets represented within a company, including data science, data analytics, machine learning, big data and supercomputing experience and knowledge—as well as external commitments that company has made to AI. The Y-axis represents the performance of the company’s stock versus industry average. We consistently see a correlation between AI implementation and stock value.”

In terms of the findings, he added, “The big takeaway is that there is a separation happening between companies that have invested in AI and are making more informed business decisions, and those that are using older technology with limited predictive power. The gap is showing up in financial results.”

Compared to other industries, like financial services, the hospitality industry has a long way to go, noted Pratt.

“Traditional hospitality companies are only beginning to tap the power of learning algorithms in their core operations,” he said. “Revenue management and demand forecasting are areas where we see adding the highest value in hospitality.”

So, how can hoteliers maximize the technology?

“Hospitality chains have so much rich, diverse data that have true potential,” said Pratt. “Combining this with advanced analytics, learning algorithms and supercomputing power will allow hotels to begin deriving insights that can inform the most complex business decisions for better business outcomes.”

The technology race is a fast one, and it’s constantly evolving. For hoteliers to keep pace with the technological advances, Pratt recommends hotels build internal capabilities and choose partners wisely.

“AI is a field that requires a rare combination of skills in mathematics, computer science and computer engineering. We see an AI-as-a-Service model for hotels to be the best, fastest and least expensive path for AI adoption without having to worry about building home-grown solutions, recruitment, hiring or the high salary and technology expenses,” he said. “The benefits of AI are attainable for hotels. As Mark Twain said, ‘The trick to getting ahead is to get started.’”

A lack of understanding about what type of AI will bring in the highest return on investment could be what’s holding up the progression. “There are some companies that are doing flashy things, like having robots in the lobby, and some hotels are spending money on chatbots, but that isn’t going to move the needle for them,” he said. “Hotels need to start looking at where there are gaps in their operational efficiencies like inventory management, pricing, customer promotions, to name a few. AI can close those gaps, increasing efficiency quickly to give hotels an advantage over the competition.”