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Skift Take
Many execs at hotels and online travel agencies are playing a fun game called “Guess How AI Will Disrupt Us Before It Actually Does.”
Hotel companies are continuing to game out how the innovations and disruptions brought about by generative AI will impact them. But it’s still early days.
“There’s been a lot of hype,” said Jess Petitt, SVP of commercial strategy, insights, and analytics at Hilton.
“The number of hotel bookings that are actually generated using Generative AI is infinitesimally small,” Petitt said. “But in the next five years, the [technology] will make a huge impact.”
Here are several themes we heard from Petitt and others who spoke on-stage at the Destination AI summit in Washington, D.C., on Thursday.
Distribution Will Get More Complex
Hotel executives frequently asked how device makers like Apple, Amazon (with its Alexa products), and Samsung might weave generative AI into their operating systems.
In one vision of the future, tech giants like Apple will apply generative AI to all of a person’s personal data on their phones. Gen AI will allow them to make more relevant travel recommendations than other companies.
“In a demo at the Google I/O conference this summer, a woman said, ‘I want to go to Chicago for four days with my husband and two kids,’” noted George Roukas, president of the consulting firm Gaipan.
“Boom! Out came not a static itinerary but a fully dynamic itinerary,” he said. “So when she wanted to wake up later on the second day, she could make that change, and the agent intelligently reflowed the itinerary because it knew how long it will take to get from here to there.”
Gen AI may be embedded in interfaces like your phone or voice-powered computers in your kitchen or car. Travelers may by default enjoy Gen AI’s knowledge of their history and inferences about their preferences — information suppliers like Marriott and online travel agencies like Expedia won’t have as ready access.
“What if it’s not pay-to-play?” asked Cindy Estis Green, co-founder and CEO of Kalibri Labs. “What if it’s happening in the background as this new form of super SEO? If you’re a supplier, how do you get to the consumer?”
Challenge to the Expedias of the World?
Some experts envision a future in which online travel agencies and hotel companies won’t be able to compete with what tech players know about customers, given that your phone may know more about you than they do.
“If an AI agent has a personalization capability, it should ultimately take the traveler to the best place to book a hotel that the user wants to actually sleep in rather than to another place that’s going to search for the best deal,” said Chris Hemmeter, managing director at Thayer Ventures. “So does it ultimately serve a direct channel better?”
“In the short run, the OTAs [online travel agencies] are going to harvest customers because they have thousands of engineers and a head start in investing in AI,” Hemmeter said. “Their business model will take a while to exhaust itself. But it seems this tech is taking us in a direction that has to be very threatening to the OTAs.”
Banks that issue popular travel credit cards might be another spoiler in the distribution wars, too, taking advantage of spending history data they have on customers and their brand-agnostic loyalty programs to customize recommendations for future trips.
Yet other experts are skeptical that Gen AI will significantly change the balance of power in how hotels acquire customers. If hotel companies don’t adequately invest in Gen AI and related capital, they’ll be out-competed technologically.
Some people see a vision of the internet first popularized by Sir Tim Berners-Lee, founder of the World Wide Web, when speaking at an Amadeus customer event in Madrid in 2019.
Roughly speaking, people will have their data and preferences stored on their devices and will have a mechanism to share parts of that with third parties — be it hotel companies or online travel agencies — to improve their experience when interacting with them.
“Theoretically, long-term, the consumer controls their identity via digital wallets and agrees to exchange data with companies like Uber, or hotel groups or airlines that are appropriate for something specific,” said Shane O’Flaherty, global director of travel, transportation, and hospitality at Microsoft.
“Ultimately, as I walk into a hotel, call it a Hilton, my AI assistant will know I’m on a business trip and will share my preferences with Hilton’s AI system to ensure I’ll get the best journey possible,” O’Flaherty said. “They’ll be giving me content to make my trip more personalized. That’s directionally where I think we’re going with this.”
Some hoteliers worry that they’ll have to pay fees to middlemen to make certain types of interactions with travelers work.
“I think it will be monetized somehow,” said Petitt of Hilton. “Our role as hoteliers is to make sure, unlike what’s happened [in third-party distribution] in the past, where we haven’t gotten the best possible terms, we’re going to have stay very close to it.”
Accommodations Sector Stock Index Performance Year-to-Date
What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.
The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more hotels and short-term rental financial sector performance.
Read the full methodology behind the Skift Travel 200.
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