Beyond Check-In: The New AI Frontier of Travel
TLDR:
Technology at travel and hospitality companies is not a significant competitive advantage due to reliance on outdated, proprietary systems for core operations and third-party systems for secondary functions
These companies have started and likely will continue to invest in AI because they impact core functions of their business like revenue management, customer service, and brand
AI offer a unique opportunity to differentiate service; it unlocks personalization at scale so companies can deliver the right experience to the right guest at the right time
Professionally, I’ve spent most of my time working in the travel and hospitality sector for some of the largest US hotel chains and ‘big 4’ airlines. It’s allowed me to understand how these companies think about and deploy technologies that enable their businesses.
Technology is not currently a competitive advantage for these firms. Systems that cater to their core business lines are mostly homegrown and proprietary, whereas ‘secondary’ systems that are used to complement core business are typically purchased from 3rd party vendors. For example, Hilton will have their own Property Management System (PMS) to manage reservations, billings, and other property related items, but may use a vendor Point of Sale (POS) system for on property sales transactions and a vendor concierge system for front desk, housekeeping, and maintenance functions. Spend is highest on these core internal systems, though firms will allocate some dollars on consumer-facing tech as well (i.e. mobile apps, self-service kiosks, and in-flight entertainment systems). As you may imagine, these core, main systems are old, monolithic, and have code bases that have been continually rewritten over time. They’ve also caused pretty significant issues in the past.
These companies are mainly focused on three functions: revenue management, customer service, and brand (note the flywheel effect). In the future, I believe that these firms will invest much more heavily in AI technology because of its impact across these functions.
As an example, let’s assume I’m staying at a high end hotel with an AI model in Mexico. With the right training data, that hotel likely has a benchmarked persona to match me against when I check into the hotel. It’ll offer personalized moments to me during my stay across F&B, housekeeping, spa, and concierge. Moreover, the more things I do on property, the more information I’m giving the model. Soon the model will know that I like Mexican red wine (the hotel can then offer a discounted wine tasting) and that I like to cycle at the fitness center in the morning (the hotel can offer its morning bike expedition). These are simple examples, but the big picture is that the hotel can possess powerful data on how a guest likes to travel, the guest may spend more, and the guest will feel more loyalty to the brand. Surprisingly, hotels today do not maintain a complete record of guest data and activities from historical stays. AI systems will not only keep this record but amplify it.
Travel and hospitality firms are starting to make bets here. Hilton Hotels has begun experiments to roll out personalized “packages” that enable travelers to book add-ons to their stay that they would have otherwise added during their stay. Marriott has recently rolled out an AI-powered digital concierge service to a subset of Renaissance hotels that provides 24/7 localized recommendations. Delta uses AI to augment customer service operations and pricing. And perhaps most interestingly, Airbnb recently acquired a stealth AI company to build “the ultimate concierge” experience.
Recently, I’ve spent the past year as a product manager at Nomādo building an AI guest engagement platform for hotels and resorts. One of our biggest takeaways has been that AI unlocks personalization at scale. Today, hotel systems and processes aren't able to deliver unique, custom moments for every guest for a variety of reasons. In the future, the winners in this space will be those that deliver the right experience to the right guest at the right time.
