Artificial Intelligence (AI) and the Revenue Impact on the Guest Life Cycle
By Jason G. Bryant, Founder, CEO & Chairman of the Board at Nor1 | March 26, 2019
In 2013, Amazon filed a patent for what the company calls “anticipatory shipping.” The idea is that Amazon uses predictive analytics to know what consumers want before they want it. As a result, the company can have products pre-shipped to nearby warehouses, ready them for delivery, and when the consumer presses the purchase button, have the shipment there faster than ever before. According to some sources, Amazon might deliver the product before the consumer has ordered, but the concept is centered on ensuring products are in the right place at the right time. Increased speed in accurate decision-making equals greater revenue potential.
The benefits of anticipatory shipping would be numerous to both Amazon and the consumer. Amazon would prove that buying online—where a still relatively low overall percentage of retail product purchases are made—could be nearly as fast as brick and mortar. Additionally, the company would reduce cart abandonment rates for items that would previously have been marked “out of stock.” Consumers would save on shipping costs and get their purchases at lightning speed. While the large-scale status of anticipatory shipping is unclear, it is public knowledge that Amazon is using predictive forecasting to manage Amazon Prime Now deliveries. Amazon also uses an AI-powered app called Flex to forecast how many drivers are needed in an area, at any given time, based on neighborhoods, and the weight and number of packages scheduled to be delivered. For all the debate over whether or not anticipatory shipping is a good business model, the retail giant does understand that what benefits the consumer benefits the company. According to Phocuswright, 46% of companies believe that AI will pay off in creating better customer experiences, while 48% maintain that it will grow revenue and increase profits. Clearly, positive customer experience and revenue gains go hand-in-hand.
Predictive analytics and artificial intelligence are changing the consumer experience across industries, and the potential certainly isn’t limited to the most prominent players like Amazon. AI has the potential to improve retail experiences—the act of consumption—but it also has the potential to change lived experiences—the things we choose to do and the way we engage with the world. The ability to predict the experience a traveler wants and offer both AI-driven suggestions as well as AI-powered customer service is where hotels currently have the greatest opportunity to both improve the guest experience and generate revenue. And the opportunities span the entire guest lifecycle.
Last year, the TUI Group and AI Utrip partnered to offer a personalized travel planning service that creates traveler-specific itineraries. The technology crafts complete itineraries for an array of worldwide destinations using stored data, itinerary details, and traveler input. This is new territory in streamlining the travel planning process. As a result, travelers get more of what they want when traveling while investing far less time in the planning phase.
For hotels, the pre-stay AI opportunities include integrating chatbots into the booking process as well as providing AI-powered customer service. Few hotels can offer true round-the-clock coverage and handle overflow periods seamlessly, but chatbots are available 24/7 to answer questions and help travelers complete bookings. Most guest service chatbots have the ability to transfer the guest to a live agent should the traveler need something the chatbot can’t address. Further, AI-powered revenue management tools analyze yield and deliver up the best possible proactive opportunities for generating direct bookings. Revenue management technology combined with chatbot technology allows hotels to own the guest experience from start to finish in a way they can’t with OTAs in the middle.
After booking, AI-upgrade technology analyzes guest data and generates the right upgrade offer for the right guest. For instance, a family of four booked into a room with two doubles might receive an upgrade promotion for a junior suite with lanai access to the pool, while a business traveler would receive an offer for an Executive King, both priced according to what the data suggests is most likely to persuade the particular traveler to buy. According to Nor1 data analysis, guest demand for upgraded inventory is greater than $25 per booking; however, achieving this additional revenue requires knowing the specific offers that will improve the experience of the right guest.
In the same way that Amazon’s AI platform predicts what consumers want before they want it, AI can forecast what a traveler wants to do. Hotels can deliver AI-generated offers to guests as they arrive via front desk staff or mobile, from mini-bar drinks and spa appointments for a couple, to breakfast and executive-level amenities for business travelers. Every opportunity for ancillary revenue, when it is specifically crafted for the traveler, is also an opportunity to impact the guest experience, helping travelers build out the stay that will leave them feeling completely satisfied.
By generating offers via AI, hotel personnel are better informed about the guest and better able to serve. As noted in the 2019 Lodging Technology Study, “When used correctly this type of technology can be used to emphasize the human potential, especially in an industry like hospitality, where the human connection is so important. This is not about replacing humans; they provide strategic direction while the system is taking care of tactical optimization.”
Voice-activated in-room technologies, such as Alexa, can be integrated with back-of-house apps that will deliver service requests immediately to the relevant departments. For those hotels reluctant about voice technology, chatbots accomplish this similarly. Both alleviate the need for the guest to use a landline—perhaps the most archaic piece of guestroom technology still in use—and allow guests, instead, to correspond via their mobile device, an in-room tablet, or in-room voice technology. Using AI in this manner eliminates several steps in the guest service process and, when done well, makes hotels more responsive, faster, and less likely to make clumsy guest service mistakes.
Hotels often overlook the benefits of thoughtful post-stay communication toward generating loyalty, instead opting for static emails that frequently go unread. AI helps bridge the communication gap with guests after they depart by tailoring correspondence in a meaningful way. Hotels can feed guests questions in real-time and adapt each respective question to previous answers so that the guest has an opportunity to report on what mattered. An advanced approach to feedback gathering, AI-powered surveys give guests a more authentic, personalized experience—one that says the hotel genuinely cares about their specific experience—while affording hotels the data they need to effect change in areas that require immediate attention.
Econsultancy reports that only 17% of companies plan to use AI email marketing to “create personalization at scale”; however, using the technology to personalize email marketing can increase conversions materially. For instance, AI-generated subject lines alone are 95% more effective than those written by a marketer, says Phrasee. And as Salesforce notes, “AI can automatically track purchase and browsing behavior, interest levels, and online activity to create personalized product recommendations in the body of emails in real-time.” The highest level of personalization available is key to increasing conversions among that top-tier of guests who will account for much of a property’s long-term revenue.
Research by Colliers International indicates that personalization via AI has the potential to increase hotel revenues 10%+, reduce costs by 15%+, and eliminate 73% of manual activities, where there is the greatest opportunity for errors that negatively affect the guest experience. The goal is not to replace the human touch but instead to enhance performance while providing the highest degree of customization available. Crafting AI strategies across the entire guest pathway generates higher conversion rates, untapped ancillary revenue via upgrades and merchandising, and long-term loyalty, merely due to a more robust guest experience that couldn’t otherwise be achieved by manual means.
About Nor1, Inc.
Nor1 is founded on a rich heritage of hospitality technology innovation. Using our wealth of industry knowledge, we are committed in the task of helping hotels upsell their rooms and attributes using our proprietary decision engine.
With over 3500 installs worldwide, Nor1 has developed new and innovative products and consultative services that empower today’s hotels take control of their guest engagement and revenue destiny and grow their business more effectively.
Nor1′s real-time pricing and merchandising intelligence engine, PRiME®, powers eStandby Upgrade®, eXpress Upgrade™, CheckIn Merchandising™, eReach™, and eDirect™ to recommend the most relevant upgrade to the right guest at the right time for the most optimal price.
Our investors include Concur Technologies, Goldman Sachs, and Accel Partners.
For more information, please visit www.nor1.com.
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