Digital Transformation – The silent side of hospitality

In hospitality, the term digital transformation is misused and frequently refers to the “wrapping” of existing services in a digital environment. Digital transformation requires more.

3 min read

In a matter of months, our industry has halted. Demand is below anything seen before. Many defend that strong commitment to digital technology is the answer to the new guest experience and an enabler of recovery. Companies well-funded will surely take advantage of the opportunity to leapfrog a few generations in technology and gain some digital transformation capabilities.

This does not mean at all that digital transformation is occurring.

Too many organisations are approaching digital with the idea that means wrapping interfaces around existing services. But they have not digitally transformed. They haven’t changed data flows and processes. They haven’t reviewed or revised the underlying economics of what they do.”
Quoting Michael Schrage (MIT Sloan School of Management)

In hospitality, the term digital transformation is also misused and frequently refers to the “wrapping” of existing services in a digital environment. Online chat agents or the effort to digitalise the check-in process are just two examples of some common initiatives in many hotels reopening this summer.

Digital transformation requires more

I have doubts about how deep the industry can enrol in this process right now. Facing reality: there are scarce resources after months of extremely low or no revenue. The massive effort in sanitation is gaining priority in the spending decisions and cost reduction being the tone of many owners, asset managers and operators.

Cloud computing, new generation PMS, guest management systems, AI, Facial recognition, contact-less guest experience are well-heard terms. Some will get funding but not all. There is not enough money.

Curiously, this excessive focus on customer-facing digital experience leaves money on the table. By not digitising the back-office functions, which usually requires lower investment levels and have a visible short-term impact on the bottom line. Some examples:

  • Evolution to P2P (Procurement to Pay) cloud platforms
  • Brings high levels of automation in, e.g., invoice / PO reconciliation. Dynamic price seeking in global and local markets. 3rd party catalogues integration allowing immediate and automatic purchase based on stock levels (existing and forecasted by an AI engine).All these revised processes bring costs of acquisition down and optimise stock levels.

  • BPO (Business Process Outsourcing) of the financial function.
  • Outsource the entire activity of the financial department. All tasks are executed by a 3rd party in a digital cooperative environment with selected key financial positions (e.g. CFO) that the hotel/chain might want to keep in-house.

  • Implement a real digital workplace. 
  • This option allows reallocating the majority of non-guest facing functions (e.g. reservations) permanently to a remote work environment. Optioning for this scenario means significant cost-reductions in office space. It improves employee satisfaction by avoiding time-consuming and unnecessary commuting. Additionally, this option opens the poll of potential associates to the virtual community allowing focus on talent and skills regardless of location.

  • Free up HR resources by using a cloud-based ATS
  • (applicant tracking system) to automate and streamline the core moments of the recruitment process. 

  • Automate Revenue Management.
  • Revenue management teams rely on historical data sets that have become useless in the current scenario. Many companies are taking this opportunity to hit the reset button on their actual RMS. Reduce the size of revenue management teams and adapting real-time pricing intelligence tools. The automatic analysis of trends and consumer behaviour empowers computer-generated pricing strategies that require much less human intervention. 

By no means we are saying that digital transformation initiatives focused on the guest journey are not important. They are, and the quality of the digital experience will have an increasingly significant weight on the overall satisfaction of the customer. Our goal is to call the decision-makers’ attention to this silent side of the digital transformation in our industry. As stated at the beginning of this article, digital transformation goes far beyond what the guest sees and experiences.

Vision and courage are necessary to move Companies towards the enterprise of XXI’s century.