There are five key AI outcomes – prediction, classification, language, sensory, and intelligent agents.
NB: This is an article from Demand Calendar
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Today we will focus on prediction and classification and explore how each can transform hotel operations. Understanding how these AI-driven solutions can be applied in your hotel will streamline operations and unlock new avenues of profitability, allowing you to stay competitive and grow in a dynamic marketplace.
Let’s dive into the world of AI and discover what it could do for your hotel’s bottom line.
Prediction: How Much More Can AI Improve Revenue?
For many hotels, the ability to predict demand and adjust pricing dynamically is already a significant competitive advantage. Many hotels already use advanced revenue management systems (RMS) incorporating various data sources—competitor pricing, local events, online behavior, macroeconomic trends, and weather patterns. These incredibly sophisticated systems have a proven track record of driving profitability through accurate demand forecasting and dynamic pricing. A hotel with a solid Revenue Generation Index (RGI) above 1.00 already captures more of the market than its competitors. So, why would such a hotel consider adopting an AI-driven solution?
Marginal Gains vs. Investment
While AI can offer some incremental improvements, for many hotels, especially those small to mid-sized properties like a 100-room hotel, the benefits may not be substantial enough to justify the investment. Here’s why:
- Current RMSs are Advanced: Today’s RMSs go beyond essential demand forecasting. To optimize room rates, they analyze competitor pricing, local events, guest behavior, macroeconomic trends, and even weather data. AI might offer marginal improvements in prediction precision, but these gains—perhaps only 1-2%—are unlikely to revolutionize an already well-optimized system.
- Cost vs. Return on Investment (ROI): Switching to a total AI-driven solution involves a significant financial investment in implementation costs and ongoing system management. For a hotel already performing well, the potential uplift in revenue from AI-driven predictions might not offset these costs. The marginal revenue gain may not be enough to justify the expense.
Future Proofing with AI Enhancements in RMS
The good news for hoteliers is that many RMS providers are already beginning to integrate AI features. Rather than switching to an entirely new system, hotels can benefit by upgrading their existing RMS as vendors roll out AI-powered improvements. This approach allows hotels to access AI-driven precision without the heavy costs of a complete system overhaul.
When Might AI in Prediction Be Worth It?
There are specific scenarios where AI-driven prediction systems may have a more substantial impact:
- Large hotel operations with hundreds or thousands of rooms, where even small percentage improvements in forecasting or pricing can yield significant financial gains.
- Highly competitive markets, where a hotel needs every possible edge to capture incremental market share.
- Complex hotel operations with multiple revenue centers—such as resorts with F&B, spas, and activities—where AI might better optimize total revenue across departments.
For most small to mid-sized hotels, the incremental benefits of AI prediction may not yet justify the switch. Instead, focusing on incremental enhancements to existing RMS will allow hotels to stay competitive while adopting AI features over time as they become more accessible and cost-effective.
Improving Predictions with Better Data: The First Step for Hotels
Whether a hotel uses an advanced revenue management system (RMS) or an AI-driven solution, predictions are only as accurate as the data that feeds into these systems. One of the quickest and most impactful ways to improve predictive accuracy is to ensure that the data going into the system is high quality. Unfortunately, many hotels still lack robust data management processes, which limits the effectiveness of even the most advanced technologies.
