By Max Starkov, Adjunct Professor NYU Tisch Center for Hospitality and Hospitality & Online Travel Tech Consultant
The classic philosophy in hospitality goes like this: customers – whether leisure, business, corporate group or SMERF members – require services provided by super nice, smiling, well-trained humans.
Think the Ritz Carlton’s employees and their little “Gold Standards” handbook that ensures above-and-beyond customer service. After all, the reasoning goes, this is the why our industry is called “hospitality,” because our guests supposedly expect their hosts – the hotel staff themselves – to provide “human” services at all touchpoints of the guest experience.
I believe the notion that guests are demanding human-provided services is greatly exaggerated, especially today. A great example of why guests do not care about human-provided services as much as some in our industry think comes from the vacation rental sector.
What can hotels learn from vacation rentals?
In 2021, close to a third of room nights in North America were consumed at vacation rentals/ short-term rentals: houses, villas, condos and apartments. One third! The vast majority of these short-term rental bookings were done online via Airbnb, Vrbo, FlipKey, Vacasa, etc.
Just imagine the whole vacation rental experience: you book online, receive online confirmation and pre-arrival information (directions, keyless entry info, destination info, etc.); upon arrival enter the unit using the mobile key or keyless entry; enjoy your stay; pack your bags and leave on day of departure.
All of this while having a completely humanless experience! All of the “behind the curtains” human involvement remains hidden from the actual guests: vacation rental management, IT and technology management, revenue management and distribution, marketing, housekeeping, utilities, maintenance, etc.
The “gold standard” at short-term rentals is customer experience without any human contact between guests and hosts, and yet guests are not only not complaining, but gobbling up this “human-less” service and loving it! Over the past two pandemic years I have spent more than 150 room nights at short-term rentals without seeing any of my hosts in person even once!
This means that a third of travelers who consume accommodations have already experienced human-less hospitality and are prepared to do so at traditional accommodation types such as hotels, resorts, casinos, motels, etc.
Why is the subject of human-provided services in hospitality so important?
There are three extremely important issues plaguing the industry today that need immediate resolution: never-ending labor shortages, unsustainable labor costs and inability to provide adequate services to the exceedingly tech-savvy and DIY (do-it-yourself) customers.
According to the Bureau of Labor Statistics, in October of 2021 the number of unfilled positions in the U.S. reached 11 million, “only” 1.78 million of which were in leisure and hospitality, which means that labor shortages are not a hospitality-native problem.
We cannot simply “bribe” – with higher wages and sign-up bonuses – people to work in hospitality, since professional services, retail, transportation, utilities, manufacturing, construction, education, health and other industries that pay much higher average wages are equally affected.
The increased cost of labor in hospitality due to labor shortages is not to be taken lightly. Total labor costs per available room (LPAR) in North America came in at $47.50 in September, which is at 96% of the comparable level from 2019. Similar is the situation in Europe and APAC. Higher labor costs led to significant decreases in all key profitability metrics, including gross operating profit (GOP).
According to McKinsey, the pandemic accelerated digital transformation by 10 years, and today’s travel consumers have become more digitally and tech-savvy than ever. Many of today’s travelers’ service expectations are around self-service and do-it-yourself, from online planning and booking, to preferences for contactless check-in, mobile keys, voice assistants and communications with hotel staff via messaging.
It is time for our industry to give the DIY-obsessed customers what they want! Accelerated investments in technology are needed to “appease” these exceedingly tech-savvy guests and their exceedingly high technology expectations.
In my view, only through accelerated investments in technology – cloud, mobility, AI, robotics, IoT and other next gen technology applications and innovations – can the hospitality industry solve the three major industry issues outlined above.
The future: Do more with less
The ultimate goal imposed on hospitality by the marketplace is simple: do more with fewer employees by using technology and thus reducing the property’s staffing needs by a significant percentage.
Example: You can reduce your front desk staff by 50% or more by introducing mobile check-in and mobile keys, self-check in kiosks, a chatbot on the website to handle service and information requests, email reservation assistant app to handle email requests, an issue resolution application and voice assistants in the rooms to handle customer service for stay-in guests.
All of this can be achieved at a fraction of the payroll expenses.
Additionally, you can cut your housekeeping needs by half if you introduce housekeeping-on-demand as one of the steps during the mobile check-in or when checking in via the self-service kiosk in the lobby. The arriving guest should be able to choose in advance the type of housekeeping they are comfortable with during their stay: daily, once every three days, weekly, etc. or no housekeeping, just leave fresh towels by the door.
This allows better planning, scheduling and utilization of your housekeeping staff and results in significant reduction in labor costs.
The list goes on and on. Technologies that exist today can significantly reduce staffing needs and labor costs in all stages of service delivery, from pre-arrival customer engagements to on-property guest services and post-stay customer retention.
During an investor call earlier this year, Hilton CEO Chris Nassetta summarized nicely the direction the industry is moving toward: “The work we’re doing right now in every one of our brands is about making them higher-margin businesses and creating more labor efficiencies, particularly in the areas of housekeeping, food and beverage, and other areas.
“When we get out of the crisis, our brands will be higher margin and require less labor than they did pre-COVID.”
Is hospitality ready for human-less services?
The digital transformation, driven by data and next-gen technologies, is changing both customers and hospitality at an unprecedented rate and hoteliers are caught largely unprepared. What is stopping hospitality from adopting next-gen technologies like AI, mobility, robotics, IoT, cloud, etc. to rebuild the new hotel tech stack?
I believe at this time there are three main impediments to the accelerated adoption of next-gen technologies in our industry:
- Reluctance to invest in new technologies by the real-estate minded owners and operators, a mentality that has turned hospitality into one of the most technology-averse industries today
- Lack of understanding and fear of new technology: “Who will deal with it? I don’t have trained staff to deal with it. It makes operations very complex,” etc.
- The labor unions in major metropolitan areas with highly-unionized hospitality labor force are dead set against any robotization and automation or any technology advancement that can reduce the number of paying members.
In my view, none of the above can stop the rapid adoption of next-gen technologies in our industry, in the same manner as the Luddite movement in early 19th century England could not stop the Industrial Revolution.
Will technology ever replace humans in hospitality? A good question!
Over time, next-gen technology will undoubtedly replace or augment collaboratively all mundane, repetitive and dangerous jobs in hospitality like housekeepers, porters and baggage handlers, concierges, security guards, line cooks, bar tenders, waiters, etc. Technology will not be replacing anytime soon highly qualified hospitality jobs like highly skilled and educated hotel managers, revenue managers, digital marketers, technologists and IT managers, CRM experts, sales managers, etc.
Using AI, mobility, cloud, robots and cobots (collaborative robots), IoT and other next-gen technologies, the hotel – especially 4- and 5- star properties, can still keep a “human guest-facing facade” but automate all of the back-end operations, enable smart guest communications, and automate and personalize every touch point with the customer. And sure, add humans with a warm smile into the mix.
So how much human labor would a hotel need in the future? In my view, five years from now, the hospitality industry won’t be needing half the people it needed back in 2019, and the savings from payroll will mean the investments in next-gen technology will pay for themselves.