Why AI might be checking into hotels sooner than you think
In crisis and chaos there is always opportunity, and this might be the time for a levelling up of the travel industry landscape. Pamela Whitby reports
In the South Pacific’s Cook Islands, Tata Crocombe has mothballed his hotels as governments around the world grounded flights and imposed strict travel restrictions, slashing occupancy rates everywhere. “This is not the end of the world but Coronavirus is going to make the global financial crisis of 2008 look like a Sunday school picnic,” he says.
Although Crocombe is under no illusions about the gravity of the situation, the chairman of two resorts and a private island, and the founder of an AI business in San Francisco, remains hopeful. “There is opportunity in chaos, and I sense that new orders are being created in these unprecedented times,” he says.
As tens of millions of people lose their jobs, and more are expected to, the hope is that this will happen soon. The travel and tourism industry, employer of 319-million people and contributor of 10% to GDP, according to the World Tourism and Travel Council (WTTC), needs all the help it can get and Crocombe believes AI could be part of the solution.
Coronavirus is going to make the global financial crisis of 2008 look like a Sunday school picnic
Under the umbrella of his AI company hospitable.tech.ai, he is working day and night with partners in the US and Japan to accelerate efforts to introduce a chatbot that specifically addresses COVID-19. The bot will allow hotels, airlines, destination marketing organisations and more to provide individually tailored responses with timely and relevant information about how to respond to the virus. This information will also be aggregated for public health officials. “We hope to be in beta in my hotels and others in the Cook Islands within weeks, and once tested it will be available for global release,” he says.
At the same time, the beta testing of a separate AI, which has been developed over the past year and trained on four hundred million online reviews, is being ramped up. The aim of this is to help travel suppliers develop sales and marketing programmes based on actual real-time guest reviews. A further AI, also in beta, will allow guests to find a perfectly tailored and curated list of hotels at the best possible rate. Because, although the OTAs are a useful search engine for customers, people no longer want to trail through a long list of random hotels.
As the world reels, Crocombe is trying to look ahead. In his crystal ball, he sees curated lists of rooms and pricing structures that are personalised rather than dynamic. Guests who buy higher category rooms, are good to his staff, bring their friends along and write great reviews are much more valuable than the stingy moaners and complainers. At the moment everyone gets to pay the same price - whether they are good customers or bad - gets to pay the same price. AI could change this and the face of customer loyalty.
Levelling the field
In a market where 70% of reservations are still controlled by Booking.com and Expedia, essentially the shop fronts to Google’s $100-billion travel empire, hotels are still paying commissions of anything between 15 and 25%. For small and independent hotels struggling to pay employees and stay open, the Coronavirus crisis has thrown the unfairness of those high commissions into sharp relief. It also highlighted how vulnerable the industry is to shocks in the market. At the same time, many hotels have been less than impressed by the unilateral demands placed on hotels to refund any pre-payments and waive cancellation costs due to ‘forced circumstances’. It has also called into question the ethics of travel insurance providers. Put it this way: the hotels are being slammed from all sides.
Booking.com and Expedia's rationale for requiring hotel partners to stump up is predictable: concern for the safety and security of customers, partners and colleagues, all of which are dealing with high levels of anxiety. A spokesperson for Booking.com said: “We believe that working with our partners to make it relatively easy for our mutual guests to change their plans is both the right thing to do and means they will be faster to return to travel when the situation improves, which in turn protects the future of our industry.” Expedia’s official statement is along similar lines.
Working with our partners to make it relatively easy for our mutual guests to change their plans is the right thing to do
Even before this crisis, the business of major OTAs were under pressure with dismal share financial results, plummeting share prices and job losses. They had even approached the EU competition commissioner Margrethe Vestager to complain about Google. In a letter that is signed by 34 companies including Expedia, TripAdviser and e-Dreams, the world’s largest search giant is accused of being nothing more than one-stop shop for any travel industry product.
Yesterday, a statement from Booking.com CEO Glenn Fogel was a clear indication that there is a lot more pain to come for the OTAs whose business depends on the hotels staying open. The group is taking tough action including cutting non-essential business travel, cancelling internal events and off sites, slashing marketing spend, and freezing new hires.
At the same time, Fogel as well as brand CEOs Steve Hafner, John Brown and Brett Keller, will forego their salaries during the crisis, effective immediately. As hoteliers struggle to keep their doors open, they might well say this has come not a moment too soon. The Google, Booking.com and Expedia trinity, they say, earn more from the travel than the entire industry itself, and their unregulated market dominance places gives them an unfair advantage. Many hotels have had enough.
The long road
There may be opportunity in the future but the road to recovery is going to be a long one. “This not a great time to be in the travel industry,” admits Kris Naudts, a psychiatrist who is also the founder and CEO of Culture Trip. He worries that what is not being taken fully into account in corona modelling is panic and fear, which are the main drivers for behaviour. "In times of fear and worry, people cannot and will not travel. We are still early in the panic phase and we will see a waxing and waning of the virus situation where people do travel for periods of time and then they do not.” In any event, this could last anything from six months to two years. On a positive note, Culture Trip, which has been tracking the crisis since it began in China in November, argues that people will still want high quality escapist content, and Naudts says his company is well placed to fulfill that need.
Travel opens our hearts and teaches humans not to be so stupid. Humans that don’t travel are dangerous people
Meanwhile, Crocombe believes that around the world companies will be ramping up their efforts to develop AI. “AI in travel is going to be accelerated by Coronavirus. Our industry has such low margins and high costs and we are going to have to find a different way of doing things better, faster and cheaper,” he says.
With the skies silenced and doors shut in many places onto silent streets, the road to recovery for the travel industry looks long. If the airline industry is the measure the immediate future is bleak. Passenger numbers are down 85% on a year ago, according to the Transport Security Association. But Crocombe believes people will travel again and indeed they must. “Travel opens our hearts and teaches humans not to be so stupid. Humans that don’t travel are dangerous people,” he says.
With many people around the world now holed up behind closed doors everything does feel dangerously out of kilter.