PwC Report – Hotel Industry Digital Transformation – The Current State of Play

The right combination of technology investments can improve guest experience, boost profitability and equip the industry for growth

The hotel business ecosystem is exceptionally complex: Brands, owners and operators all strive to maintain profitability in an inherently low-margin, highly competitive sector. The goal? To satisfy investors while also meeting — ideally, exceeding — guest expectations.

Hotels also need to attract and maintain skilled talent in the constrained late-pandemic labor market. Facing rising wages and a diminished worker pool, more than 70% of hotel executives are turning to technology tools to automate a portion of their operations and boost employee efficiency.¹

PwC experience corroborates the benefits of technology investments. One brand, for example, recorded an 85% reduction in billing-cycle processing time after modernizing its loyalty program, reducing what used to take up to 48 hours down to seven. By deploying a scalable, extensible platform requiring minimal infrastructure management, the brand also recorded 50% fewer missed or adjusted guest stays year over year within loyalty-member billing.

Until recently, many brands, owners and operators had not prioritized the complex array of tasks involved in updating their sometimes decades-old legacy technology systems. Across the industry, stakeholders are now beginning to recognize the urgent need to move to cloud-enabled solutions — to upgrade both front- and back-office technologies and the supporting infrastructure.

Hotel business ecosystem = multiple stakeholders + focus areas + change drivers

In the spring of 2023, NYU and PwC collaborated to examine the state of play in hospitality technology innovation today.²

• We focused on five key areas:

1. Automation
2. Integration
3. Data and analytics
4. Artificial intelligence (AI)
5. Technology investments

• In each, we aimed to elicit candid insights by asking these essential questions:
  • What is the level of digital transformation in your industry and what are the factors affecting it?
  • What is the business case for investment in hotel-specific technologies to achieve strategic ambitions? What existing back-office technologies can be leveraged now? Which areas require new investment?
  • What are the current hurdles confronting digital transformation in your industry? What are the main obstacles preventing your strategic objectives?
  • Are you seeing tangible evidence of the positive effects of digital transformation on profitability?
  • What are the future hotel technology investments that could accelerate digital transformation?

In our interviews and focus groups with executives representing major hotel brands, operators and owners — as well as a diverse array of technology vendors — we uncovered a road map for a human-powered, tech-enabled future in hospitality. Here’s what they told us:

1. Secure buy-in from all stakeholders for successful automation

Automation across the hotel ecosystem is driving efficiency by minimizing routine data collection and entry. This helps free up back-office employees to focus on real-time data analysis and reporting, insights generation and decision-making.

Brands are focused on automating a range of back-office workflows and systems, including procurement, workflow approvals and accounting. Their challenge lies in helping owners and operators evolve from legacy software systems and adopt cloud-based solutions with standardized application programming interfaces (APIs) and system architecture. To do so, they are illustrating the power of data analytics for added productivity.

2. Establish an integration gameplan at the outset

Brands are looking at opportunities to modernize their legacy systems and leverage the power of cloud and software as a service. A common set of standards driving decisions, integration approaches and interoperability capabilities can help the entire industry transform back-office operations and streamline integrations.

With a plethora of applications to manage — combined with too few people to manage them and legacy systems that struggle to interact — the right application programming interface (API) becomes a necessity. Vendors offer options that connect all the disparate systems.

However, data security and privacy are challenging. The key is to build effective controls and governance into design and implementation from the outset — to help protect the guest data being used to enrich and personalize the overall experience.

3. Generate insights from quality data with the right talent

To unleash the power of data analytics, brands and owners need quality data, talent and a data-driven culture — powered by a cloud-based technology ecosystem — that goes beyond reporting. Rather, it emphasizes insight generation.

Leading data analytics opportunities include business intelligence (BI) and smart revenue management systems that ingest market data to aid decision-making. Today’s brands are gathering data via their customer-interface platforms and mobile apps. However, they also depend on hotel owners and operators who manage day-to-day interactions with guests.

A key takeaway from our discussions was that none of the technologies can function without skilled workers using them. For an analytics-enabled, cloud-powered culture to succeed, organizations need the right talent — achieved through proactive recruitment and training, upskilling and effective change management. While they recognize the value that effective data analytics can bring to multiple key business processes — including regulatory compliance — operators face an ongoing challenge: providing the right data to the right people at the right time.

4. Deploy AI to enhance guest interactions and cement loyalty

As AI democratizes revenue management across all segments of hotels, technology vendors are diversifying AI-enabled pricing tools beyond hotel rooms. For instance, one hotel brand is investing in tools to make decisions on hotel room allocation, conference rooms and restaurant pricing.

However, the industry is fundamentally about serving people. So brands are combining the best of technology innovation with a human touch to create a personalized, seamless guest experience that fosters loyalty and deepens the human connection.

In fact, the majority — 76% — of hospitality executives told PwC that personalizing the customer experience to boost loyalty is a high priority (vs 61% for all industries). A key element in this strategy involves deploying AI to analyze guest data from loyalty programs and mobile apps. To secure the benefits of AI while protecting guest data, companies are building effective controls and governance at the outset.

With 52% of executives seeing their loyalty programs as the top factor keeping guests coming back (vs 31% for all industries), leading brands already have the capacity to send push notifications outlining customized, discounted trips created from customer preferences.

5. Drive tech investment by underscoring a shared future

The current state of investment in hospitality technology reveals a nuanced picture. Migrating from legacy systems is rarely simple, compounded by stakeholders with varying needs. While technology investments have been proven to boost profitability and deepen brand loyalty, some of the tech-focused partnerships forged by brands and owners or operators as a result of the pandemic highlighted divergent investment goals.

Brands tend to prioritize upgrades that drive customer loyalty. For example, they can use the rich trove of consumer data from branded apps to help cement brand loyalty as the route to top-line growth. They also want scalable solutions to onboard employees. By leveraging technology and streamlining the employee onboarding process, brands can improve operational efficiency and reduce turnover.

Owners and operators meanwhile, typically focus on investments that boost revenue. They are interested in systems that provide an aggregated view of data that illustrates performance in real-time at the enterprise level. A collaborative approach demonstrating long-term value for all stakeholders — as well as governance standards for integration — is key to bridging this gap.

Human-powered, tech-enabled growth

Ultimately, delivering inventory at the right price and at the right time — combined with a memorable experience — is essential to driving growth while nurturing customer loyalty over the long term.

While technology can be the enabler, the technological profile of the industry reflects its complexity. In practical terms, that means various fragmented, sometimes incompatible, systems. Moving beyond legacy technology systems continues to be a challenge — one that requires a clear definition of vision and objectives, broad co-operation and a cogent demonstration of long-term value.

Not only does this mean aligning technology investment with overall strategy, it also requires making a range of thoughtful choices along the way. Our discussions with stakeholders across the industry revealed that now is the time to make those choices by investing strategically in the human-powered, tech-enabled experiences that have already been proven to boost profitability for brands and owners alike.

Download >>> Hotel industry digital transformation: The current state of play

_{¹ NYU-Stayntouch 2022 Hotelier Technology Sentiment Report, https://www.stayntouch.com/2022-hotelier-technology-sentiment-report-2/
² In advance of the 45th Annual New York University (NYU) International Hospitality Industry Investment Conference, the Jonathan M. Tisch Center of Hospitality at NYU’s School of Professional Studies and its HI Hub Experiential Learning Lab collaborated with PwC to conduct interviews and focus groups with executives representing major hotel brands, operators and owners — as well as a diverse array of technology vendors — to examine the state of play in hospitality technology innovation today.}