AI for hospitality SMEs

April 11, 2024 •

7 min reading

Unlocking AI in Hospitality SMEs: Q&A with Ian Millar

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Amidst the current discussions about AI's transformative potential, there's a common industry misconception that it primarily benefits large-scale hotels and enterprises, leaving smaller and medium-sized firms behind in the dark ages. To shed light on the nuanced reality, we sat down with EHL’s Ian Millar, Senior Lecturer in Hospitality Technology, to discuss how AI is not just a tool for hospitality giants but can also be a game-changer for SME hotels and firms with an innovative mindset.

How is the hospitality industry gearing up to AI?

PwC are describing the advent of AI as the “$15.7 trillion game changer”, so although the hospitality sector has only been taking baby steps towards it for now, this is certainly the right time for us to be learning how to harness it effectively. Admittedly, it’s a vast and complex area, especially in terms of legalities and ethics, but let’s look at the win-wins where AI is helping the hospitality taskforce work quicker and more efficiently.

While the hospitality frontline is sacrosanct and will always need the human touch, many back office operations such as staffing timetables, P&L statements, inventory management and pricing strategies are already benefiting from AI assistance. For content creation, it can help operators write quick marketing slogans, social media posts, design posters and make recommendations for – let’s say – a day out in Montreux in Chinese. In terms of speed, improving systems and removing language barriers, AI is undeniably a step up for hospitality performance.

Chatbots and virtual assistants, as robotic as they might sound, are effectively being used for answering routine questions, (“What time is breakfast?”), booking enquiries and customer service requests. Sometimes they don’t have all the nuanced answers, and yes, one might yearn for a human voice at the end of the line, but they do free up a lot of employee time that can then be dedicated to enhancing the customer experience in other ways.

AI algorithms are helping to analyze demand patterns, competitor pricing and other factors in real-time (e.g., the impact of the weather or a big event) to optimize pricing strategies. By implementing dynamic pricing, hotels can adjust room rates, package deals and promotions to maximize revenue and occupancy rates. These algorithms also crunch guest data, preferences and habits to personalize their hospitality experience so that services and activities can be tailor-made.

In terms of physical buildings, AI predictive maintenance systems analyze equipment and facility data to identify potential issues before they occur, e.g., an unoccupied room whose temperature is registering very low may suggest a badly closed window or a faulty radiator. By spotting maintenance needs and scheduling repairs proactively, hotel managers are able to minimize breakdown time, reduce maintenance costs and ensure optimal performance of facilities.

Overall, AI needs a lot of context and critical faculties in order to get the best from its high level of analysis. Small hospitality firms need to carefully consider their needs before investing in AI solutions, ensuring alignment with specific business goals, operational workflows and customer experience objectives. Admittedly, the cost of tech implementation is one of the main issues why SMEs are finding it hard to jump on the AI bandwagon today.


Why are many SMEs struggling to get on board with AI?

The problem here is essentially to do with culture, mindset and costs. Some SMEs believe that AI adoption is not for them because a) they’re not quite sure what AI would bring them or how to implement it, and b) they are skeptical of the costs involved, and c) they feel that things are working fine as they are now, so why change?

Imagine the mindset of a traditional, family-run hotel in a remote setting - it tends to be quite conservative. During a recent Association Romande des Hôteliers conference at EHL, some SME hotel managers admitted that they’d be open to using more AI systems in their daily operations if only they could receive some training and insights on how to best implement them. (This has given rise to a short 2-day course I am currently building aimed at exactly this audience. Dates to be set later in the year!)

I call it the ‘Lost in Translation’ syndrome where the mindset and language of a small hotelier and a tech expert are worlds apart. It’s a case of “How much is this going to cost me?” vs. “What new possibilities is this going to bring me?” In today’s fast-evolving world, the hospitality sector needs leaders who can speak both languages to help build the tech side while bearing in mind a hotelier’s sensibilities.

The perception of AI as a ‘luxury’ or ‘big business’ solution needs to be replaced by a more ‘innovation-drives-profitability’ mindset. Typically, larger enterprises with greater resources and volume capacity do not wince at investing in AI systems, but small-scale operations should also be looking at the long-term benefits that better pricing strategies, speedier operations and more effective staffing methods could bring them. Many of these tech advancements can be implemented in incremental stages and at reasonable prices. Lack of awareness and resistance to change are undermining SMEs opportunities to enhance operational efficiency and profitability.


What top 5 AI systems should hospitality SMEs be considering?

Here’s my list of AI suggestions for a hospitality SME wishing to use tech to enhance profitability for the business and all its stakeholders:

1. AI-powered chatbots

To automate customer interaction on social media platforms and messaging apps. There are many affordable chatbot platforms available that offer pre-built templates and customization options without requiring extensive coding knowledge.

2. Predictive analytics

To analyze historical data and forecast customer demand, optimize inventory levels, identify sales opportunities and improve marketing campaigns.

3. Automated marketing campaigns

To segment audiences, personalize content, schedule campaigns and analyze performance metrics.

4. AI-enhanced CRM (customer relationship management) systems

To help manage customer data, track interactions and automate follow-up tasks. These systems provide insights into customer preferences and engagement patterns, thereby helping to deliver more personalized experiences and improve customer retention.

5. Energy management systems (EMS)

To monitor and control energy usage in real-time, identifying areas of inefficiency and helping reduce costs.

When it comes to tech investment, I suggest small firms to consider the following questions: Does this expenditure help to a) reduce costs, b) increase customer satisfaction, c) increase staff satisfaction, d) increase revenue? If it can do one or multiples of these things, then it’s worth it.

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Can you give examples of hotel brands leading the way with AI?

For me, citizienM are a bright light in terms of AI adoption and a positive digital mindset. The hotel brand is somewhere between an SME and a big chain, but what sets them apart is their unique attitude in using tech innovation for embellishing the guest experience. Their focus is totally driven by responding to the needs of today’s modern, nomadic and tech savvy mobile citizen, hence their latest slogan “A truly human hotel for the modern traveller”. Real life ‘ambassadors’ are at reception to greet the guests, but those who prefer to be contactless can check in via the phone.

To quote Bojan Pavacic, citizenM’s Director of Technology and Digital: “AI cannot ever substitute the human touch. citizenM believes in human care supported by tech.” Tech implementation is part of citizenM’s innovation and development strategy. Despite having only 14m2 rooms, citizenM is the most valuable hotel company per room in the world right now. 5-star palace hotels barely have an IT manager – and if they do, the role is purely operational (e.g., fixing printers), not strategic.

The company now have a designated data scientist team working with their AI systems to help dissect the abundance of data and make sense of it. This results in optimal root cause analysis – which takes us back to a problem in the room. Choose how you want your staff to be spending their time: fixing a broken TV or reacting proactively before it breaks down?

For citizenM, “AI is like having a great concierge. Via the chatbot function, it answer comments and reviews from the hotel staff perspective, it runs better ads, personalizes tourism info, chooses best places to go. AI will soon be better than a travel agency!”


Do you think AI can help with talent acquisition?

Yes and no. Talent acquisition and retention is essentially a culture problem. Our industry still has to find a way of fixing the debatable rate of pay, long hours and split shifts. Sadly, AI can’t fix these problems. But it can help streamline the recruitment process with tools such as applicant tracking systems (ATS) that automatically screen CVs and identify candidates based on predefined criteria such as skills, personality and cultural fit.

Hospitality is full of seasonal work, here AI tools can help with seasonal contracts, onboarding processes and helping to source profiles who are suitable for this specific type of employment – which is often quite intense and tiring!

On a similar note, I don’t think AI can help much with staff productivity – much of this is down to training. AI might have tools for better managing food waste, but training your interns on how to use a knife correctly and not trash half the onion would eliminate much of the food waste in the first place.


What do you say people who fear the dehumanization of the hospitality industry due to AI?

Let me assure you that AI is NOT going to replace people! Robots are not coming to replace hotel workers – especially not in SMEs, nor in luxury establishment where the human connection is irreplaceable. (However, you might find yourself being served by a robot at McDonalds in Fort Worth, Texas, where last year they launched their first staff-less restaurant).

Hospitality is all about human connection and a welcoming exchange, but it’s also about choice, variety and efficient delivery. Here is where AI can play a role in personalization, speedier service delivery and more targeted offers. It is an enabler, not a solution per se. It has to be trained by a human and given a logic to follow.

No top chef of a fine dining restaurant would use an AI-generated recipe, (maybe a lower level F&B manager might, but even then they would add a personal spin into the mix). While AI and technology enhance operational efficiency, data analytics and certain aspects of guest service, they complement rather than replace the memorable real-life connections that hospitality is built upon.