Table of Contents
What is digital technology?
Digital technology is a term commonly used for internet applications. The rise of the internet, with its inexpensive and continued connectivity, unleashed the second wave of IT-driven business transformation.
The first wave automated manual information processing leading to efficiency improvement by reducing the time required to complete a task. The second wave is about internet applications disrupting existing business models and creating new ones. Internet applications are not stand-alone technologies; they must be integrated into the overall business value chain.
What does digital transformation mean for hospitality companies?
IT-enabled business transformation can be classified into three phases with phase II and III referred as digital transformation primarly driven by internet applications.
Phase I
The first phase of IT-enabled business transformation in the hospitality industry was the implementation of CRS (Central Reservation System), PMS(Property Management System), and RMS(Revenue Management System). The software replaced manual efforts in the information processing and allowed storage of information in digital format. The stored data could be analyzed to help in business decisions.
Phase II and III
Internet technologies have disrupted different business segments of the hospitality industry. Hotels and F&B services have felt the maximum impact with technology companies becoming competitors across the business value chain. With the fast pace of technology innovations, hotels need to assess and implement emerging technologies to digitally transform their business and remain competitive.
How hotels can create a digital transformation roadmap?
A hotel or hospitality business segment can use the following phase II digital transformation guideline to asssess and plan their roadmap.
| Function/ Technology | Details | Grade |
| Online distribution | Customers are offered online channels for room bookings. The online channels are the hotel website, OTA’s, and hotel directories. | |
| Digital marketing | Customers are being provided with direct communication channels through social media platforms. Hotels also use the platform for continued engagement with customers with the help of quality content. | |
| Data analytics | Hotels have a system and process for storage and analysis of structured and unstructured data. The data insights are utilized for product innovations, customer service improvement, and cross-sell and upsell. | |
| Online advertising | Hotels are leveraging internet advertising for brand awareness, customer acquisition, and event promotion. | |
| Cloud computing | Hotels are using cloud-hosted applications (SaaS), and leveraged cloud for hosting their own applications. | |
| Cybersecurity | Hotels have put in place proper cybersecurity measures. to protect their customer and business data. There is appropriate data privacy that conforms to regulations of different regions. |
A hotel or any hospitality business segment can grade digital capabilities on a score of 1 to 10. This will help determine their current status or maturity of digital transformation. This is a high-level assessment and a more accurate status can be arrived at with the help of consultants.
However, a detailed evaluation of online distribution for an optimal channel mix is definitely required which we have explained in a separate section.
Once a hotel or hospitality business segment has reached the desired state of maturity in phase II of their digital transformation initiatives then they can start their phase III as mentioned in the following table.
| Function / Technology | Details | Grade |
| Contactless systems | Mobile devices for for check-in and checkout will gain traction after Covid-19 as well as keyless entry. In the next stage facial recoginition will be used to identrify guests and as a means of secure access to rooms and amenities. | |
| Automation | Robotics lowers the cost of service via automation. Chatbots will be used to suggest amenities instead of the automated e-mails, increasing offer relevance by asking guests questions. By integrating into a property management system, AI-driven chatbots can be used for real-time alerts.. | |
| Automation | Automation will also be implemented in accounts receivable and payable, purchase to pay, and supply-chain management. | |
| Artificial Intelligence | Virtual Assistants such Alexa wsimplifies tasks for guests like playing music, checking the weather, calling the front desk, ordering room service, controlling in-room temperature or lighting, and even checking out. Deployment of VA’s will gain traction. | |
| Blockchain | Hotels use blockchain technology to manage the accrual and frictionless redemption of loyalty points. | |
| IoT | By connecting IoT sensors with mobile and wearable devices for staffs, hotels will be able to optimize operations. Sensors will be able to notify housekeeping when rooms are ready for cleaning. RFID-connected room-service carts will signal they’re ready for removal once guests wheel them into the hallway |
What is the impact of digital technologies on hotel distribution?
Internet-based distribution is the third phase of hotel distribution evolution but there is one important difference compared to the previous two phases.
The power has shifted from hotels to customers and third-party internet-based distribution. Internet provides buyers with easier access to information leading to greater transparency in prices and thus increasing the buyer bargaining power.
The third-party channels referred as room aggregators have seen an increase in rooms booked from their platforms even as hotels witness a decline in rooms booked through their website thereby impacting the room revenues
The challenge for the hotelier remains the same; to identify the channels that produce the best yield in terms of occupancy and rate.
Frequently Asked Question
Are assessment to be done separately for each function / technology or together as an integrated method?
We would suggest assessment to be done individually with each function/technology representing one separate module. There will be a set of criteria in each module for assessment.
There is potential to combine modules to address the digital disruption challenges of any specific business function. For example, online distribution, digital marketing, and data analytics can be combined to address the non-optimal distribution channel mix problem.
How to determine assessment criteria?
The identification of assessment criteria requires both business domain knowledge and technology understanding. The criteria are decided based on the problem that is to be addressed.
For example, digital technologies have disrupted hotel distribution with a higher proportion of room booking coming from expensive third-party distribution platforms. The assessment criteria will be determined to address this non-optimal distribution channel mix. Therefore the three modules of online distribution, digital marketing, and data analytics will accordingly include relevant criteria.
How will the outcome of assessment useful?
The outcome from each module or in combination will help to identify the problem areas and rectify them through an appropriate solution.
For example , the online distribution assessment module will help to find if hotels are correctly calculating the customer acqusition cost(CAC) which is key to determine the most economical online channel for room bookings. If hotels are not following the correct method then the problem needs to be addressed through a solution.
Similarly, digital marketing assessment will help to find if there is an appropriate mix of organic and paid marketing promotions in the most relevant platforms.