Will AI replace the loyalty programme - Editor’s letter

One of the key areas of interest around AI is what it’s going to replace. Is it going to replace all our jobs: bad? Or is it going to replace boring jobs and make us more efficient: good?

While we wait to find out which result we’re getting, the hotel sector is adopting AI at differing speeds and the current Q1 results season is illuminating the rates at which this is happening and the weight different companies are giving the technology.

The contrast so far has been between the companies where franchising is more of a focus, compared to those who have more of a full-service tradition. In this case, Wyndham and Choice were both eager to talk at length about their AI activity so far.

Pat Pacious, Choice president & CEO, told analysts: “Technology is an increasingly important differentiator for Choice… our AI-enabled platform is improving response time to group RFPs by approximately 30%, which is translating into conversion rates that are roughly 250 basis points higher and driving incremental group business for our franchisees.”

At Wyndham, CEO Geoff Ballotti described how, in an engaged, full-service hotel, AI could drive “up to $250,000 of additional NOI ancillary revenue. That is real money for those hotels.

“Nearly 5,000 franchisees already live on Wyndham’s proprietary AI-powered Wyndham Connect platform are collectively earning millions of incremental dollars by autonomously generating revenue from early check-ins, late check-outs, room upgrades and pet fees, incremental amenities and services, and so many other creative upsell opportunities they develop themselves. Together, these initiatives are creating a durable competitive advantage that we expect to compound as adoption continues to ramp.”

For both companies, the goal is lower operating costs, higher ancillary revenues and more direct bookings.

At Marriott, the largest of the global, branded stables, the group was more muted, with president and CEO Tony Capuano telling the assembled that the group was “increasingly leveraging AI … to assist our associates, serve our guests, and drive results for our owners”, as well as looking into how AI was being used by guests to search.

However, he said that “as AI platforms continue to enrich the trip planning experience, we believe our unparalleled depth of inventory and global reach are significant competitive advantages”. For Marriott, the game is ‘size matters’. Particularly the size of its loyalty programme, which had nearly 283 million members at the end of March.

Capuano said: “Our scale, combined with strong engagement, helps drive more direct bookings, more repeat stays, and value for owners across our worldwide system.”

But will the chance to provide cheaper operations and access those same guests using AI appeal to investors more than paying into a loyalty programme? In a time when stripping back costs is at the forefront of every investors’ mind, is the points game one owners will be willing to lose?