Friday, June 14, 2024

How AI Is Stirring Up Hotel Distribution & How To Prepare For The Next Decade

This article is based on conversations with senior OTA executives, distribution statistics, and predicting how artificial intelligence will be applied by OTA companies in order to enhance customer experiences with AI-driven personalization.

Reflecting on the evolution of hotel distribution in the past 20 years

Back in the late 2000s, we knew that the future of hotel distribution was online. In the 2010s, we had been attempting to channel as much business as possible online, optimizing between OTAs and direct sales channels. 

Starting in the mid-2010s, when digital marketing knowledge and advertising technology had become widely available, hotel companies all around the world started investing in digital marketing which in turn led to massive competition.

Today, the hotel digital marketing landscape is a mature market with established practices and sophisticated tools. In the past few years, nothing groundbreaking has occurred and no game changing technologies have been released.

This is the perfect time to prepare for the new paradigm that artificial intelligence will bring to the hotel marketing and distribution game. While customers and top performers will reap the benefits, it will also challenge mediocre and low-performing hotel companies.

The future of hotel distribution is OTA, powered by artificial intelligence

In most cases, maintaining a brand website for an independent hotel is much like an online brochure with booking features spiced up with direct booking benefits – a tactic to take bookings away from OTAs. The obvious truth is that customers prefer to book on OTAs, and hotels need to offer more direct booking benefits and discounts to make direct booking an attractive option.

Artificial intelligence is everywhere around us; in our phones, operating systems, cars, social media, bank accounts – practically everywhere. Hospitality was always a late-adopting industry when it came to technology, but major travel players are already utilizing AI and developing their next level AI-fueled business solutions.

Leading data companies like Google, Facebook, Microsoft, and IBM are collecting information about our financial status, purchase habits, interests, online searches, marital status, and of course, travel plans. It is not new; they already have quite elaborate profiles of most of us.

Connecting to such data would enable OTAs to deliver personalized hotel suggestions to customers and build algorithms that maximize relevancy and conversion rate on a person-to-person level.

This means that each customer will get personalized hotel and resort recommendations based on their preferences, without the need of browsing and filtering. This is a total game changer, as such personalization would leave little to no space for hotels to show up if they are not relevant for that particular customer.

This would potentially replace the current popularity and price-performance algorithms, leaving less space for hotels to compete based on reviews and price. Similarly, how Amazon destroyed and/or absorbed independent online e-commerce stores and OTAs as marketplaces will have supreme advantages over independent hotel brand websites. 

What does it mean to hotel marketers? 

It is fairly obvious that a guest-preference based personalized algorithm would help hotels that stand out with popular, trending qualities. At the same time, hotels that are not rated high enough for trending qualities would find that they are pushed back to the end of the list.

Such an algorithmic categorization and matching system would not allow for hotel marketers to appear for customers to which they are not relevant for, and it would be impossible to communicate different values and qualities which they can actually offer to guests.

For hotel marketers, this would leave little to no space for marketing manipulation and the commercial performance of a hotel would largely depend on operational qualities, reviews, and how successfully they can adopt to trends.

What tools will remain to optimize production and performance?

Considering that AI-fueled OTAs would be super customer-centric marketplaces, non-operational hotel management teams will have four main tools to optimize performance: 

  1. Pricing
  2. Promotions and discounts
  3. Improving product presentation
  4. Managing OTA-specific sponsored listings

Should the above transformation take place, hotel marketers would need to switch to an OTA-first marketing and distribution strategy. The perceived value of independent hotel brands would likely lose value and relevancy and only the actual product would matter.

Daniel Diosi
Daniel Diosi
I enjoy a fantastic life in the Maldives, supporting some international clients and managing a spectacular portfolio of stock market investments. Earlier I used to manage my hotel digital marketing consulting company, dCommerce. I am open for business and investment opportunities, focusing on funding marketing technology startups.

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