Artificial intelligence can provide the space in which hoteliers can excel and have less need for online travel agencies, but getting the correct tech stack and operations landscape requires disciplined leadership and flush wallets, according to sources.
The accessibility of AI likely will increase, and the cost of it likely will decrease, but this particular tech arena for now could still be described as the wild west.
At a panel held on July 1 in the London office of CoStar, Laura Brinkmann, founder of Effizia Strategic Partners, said in the hotel industry there is a sense of FOMO — the fear of missing out — around AI, but that does not mean much has been done yet.
“So far there is not a lot of groundbreaking activity in our dinosaur industry,” she said.
She said AI will disrupt the online travel agencies but added she wondered if that would equate to cost savings for hoteliers.
“Basically, [AI] is a data-cleaning exercise. … If your data is clean, detailed and accurate, and if you are discoverable, you no longer will have to pay for Google ads, OTA fees … but it takes housekeeping, people, finance and systems.
“If you are discoverable by AI, you own your product.”
She said this is yet one more chance in the industry for hoteliers to own guest preferences.
As guests change, OTAs will be slower than AI in understanding what that change is and what guests’ new booking journeys and stay preferences now entail, Brinkmann said.
“You need backbone tech stack,” she said. “AI is a new unlock, particularly for independents, that could catapult you to a level of visibility and accessibility that were not previously available. … It is not for free and requires upload investment … but it opens doors and changes the landscape in the way we know it.
“For now, [AI will] not take [room] payment and manage that process because it doesn’t have the infrastructure. It’s not looking to add that infrastructure in a near term. But I think, and this is a personal opinion, that is going to come.”
Getting a grip on AI is becoming more important, said Dave Goodger, managing director, Europe, Middle East and Africa at Tourism Economics, because the prize pot is getting larger.
“How much people are spending on travel as a percentage of their income bucket is at a historic high … [but] where they are traveling is changing,” he said.
He added that since the end of the COVID-19 pandemic there has been massive growth in hotel bookings and tourism, which he said has been since fueled since by events, many of them being concert tours.
“We have talked about the Taylor Swift effect, the Oasis effect. What’s next? The Harry Styles effect, the Bad Bunny effect? I was in Paris a couple of weeks ago, and Celine Dion is going to have a huge impact, and Adele, too,” he said.
Despite these successes, hoteliers also are under pressure from increased operational costs and increased taxes and business rates.
“Hoteliers are more and more commercially aware … looking more now at return, what the risks will be. Everyone is looking for commercially viable assets,” said Jade Humphrey, hotel development sales director at BWH Hotels GB.
Sarah Green, director at Hotel Finance, said the United Kingdom — and many other markets — is a buyers’ market.
She added banks are lending again.
“Pre-COVID-19, it was about leverage; now is it about location, and if [a hotel is] not on the location list, there is no appetite. In secondary and tertiary markets, there is no demand for midmarket hotels,” she said.
Burdens
Prime locations, and the increased revenue that they can attract, help offset increased taxes, which in the U.K. will soon include in many geographies new roomnights levies, the implication of which has been given to individual city mayors.
Such levies have been instigated in other European markets, notably Amsterdam, which has attempted to curtail new-build hotels and alternative accommodations.
“[A levy] is going to be a tax on top of value-added taxes. It going to be on top of other costs … so it will be a lot harder for it to be completely absorbed. … Amsterdam is a real outlier, and that’s their strategy. But, generally, across Europe, what you see is where there is a tourism levy, it’s offset by some reduced VAT. … In the U.K. it’s partly a passing exercise, so it seems, from central government. It is a devolved issue, with local mayors, devolved administrations,” Goodger said.
He added in his calculations a 5% tourism levy in the U.K. will see tourism numbers down by about 2%.
“That’s around 12 million nights being taken out of the market. Mostly, it’s going to hit the lower end. That’s where we see the price sensitivity. It is going to hit the domestic travel, regional U.K., which has much more midscale and is much more reliant on domestic travel,” he said.
Aoife Roche, vice president, sales, Europe, Middle East and Africa at STR, said one positive aspect is that supply remains very muted.
She said supply is trending down, approximately at 1% growth.
In Europe, she said, there are 185,000 rooms in construction, representing approximately a 3% rise over the next few years.
“It is skewed to the luxury end of the market, which enjoys the highest effect from [average daily rate],” she added.
She said, however, that “London is a problem.”
“Its pricing power is limited by the absent [or] cautious consumer,” she said, adding that STR’s full-year forecast for regional U.K. is a 0.1% increase for full-year 2026, a forecast that has been lowered due to the Middle East crisis.