As artificial intelligence (AI) becomes democratized, potential commoditization looms over the hotel industry: What happens when all hospitality providers are using the same tools?
“It's a bit like, ‘hey, you have a hammer,’” said Champa Magesh, CEO of Access Hospitality. “Well, a hammer is a hammer, right?”
What matters is how the hammer—or, the AI— is used and the context it’s used in, Magesh said.
The consensus among industry stakeholders is clear. AI itself is not the great differentiator for hotels. Instead, the battlefield lives behind the AI in data, the tech stack and in customer ownership.
The commoditization risk
Harman Singh Narula, co-founder and CEO of Canary Technologies, and Mark Hollyhead, chief transformation officer for Aven Hospitality, agreed that commoditization is likely. After all, most hotel companies will gain access to similar capabilities and AI models going forward.
Narula compared what’s happening to the internet and mobile technological transformations that the industry has gone through in the past.
“I think it, generally speaking, becomes universal, and to some degree kind of commoditized,” Narula said.
Hollyhead added: “What won't be equal is the quality of the data behind those systems, or the architecture to be able to scale cost efficiently.”
Though Narula said that commoditization could happen on some level, he doesn’t see that nixing the long-term benefits the hotel industry could see from AI.
“I don't know if the technology becoming universal or ‘commoditized’ is a natural kind of a curve that technology goes through, but it doesn't necessarily remove the impact that it can have for hoteliers broadly,” Narula said.
Even if everyone is using AI, the execution layer of hospitality—or the “last mile,” as Narula put it—is human-powered.
“AI is there to amplify hospitality,” Narula said. “It's not going to replace it.”
AI is there to amplify hospitality ... It's not going to replace it.
Harman Singh Narula, Canary Technologies
While some see a natural tech curve, Natalie Kimball, VP of strategic account management for the Americas and Europe, the Middle East and Africa at Shiji, views the threat of commoditization as moot. Instead, she believes the battle for hoteliers is already lost thanks to online travel agencies (OTAs).
“If you want to do a history lesson, we've already gone through this about 20 years ago with the OTAs,” Kimball said. “The hotels ended up losing. They didn't move fast enough to be able to establish all their direct bookings, so they ended up having to pay 25%-30% margins, and I think that's exactly what's going to happen in this space as well.”
For Kimball, commoditization is not really a relevant question because she sees the guest as owned by OTAs and, by extension, AI agents. She referenced ChatGPT apps as an example of OTAs’ presence on AI platforms.
“The guest is owned, in my opinion, by the AI agent,” she said. “Then the easiest way for the AI agent to serve up those results already … [is] through the OTA.”
While Kimball warned of OTA dominance, Jesús Olivares Sánchez, SVP of hospitality portfolio strategy and product marketing at Amadeus, dismissed the idea that AI will inherently commoditize the sector.
“I don't see it from a commoditization standpoint,” Sánchez said. “But I do see that hotels are going to need to probably hurry up and prepare themselves for this new channel in order to remain visible, remain critical and to be able to serve their guests.”
And, ultimately, Magesh said safeguarding against that risk rests on human intervention.
“There's always going to be a risk of commoditization,” she said, noting it matters how seriously humans take their role in interacting with AI.
Differentiation
Hotels themselves will need to serve as differentiators in an AI era. Data plays into that as a foundational element.
Hollyhead said that the guest experience, the hotel’s brand and how well it understands its customers become paramount factors.
“Two hotels can use exactly the same AI technology and get completely different results because one has richer guest data, better content, stronger pricing strategies and a clearer understanding of what makes its experience unique,” Hollyhead said. “Developing the ability to learn from data and understand context will become a core competency for hotels.”
In this phase, hotels will have to begin to communicate their uniqueness in a more effective manner, Hollyhead said.
He gave an example: If an AI agent is assisting a traveler in determining where to stay, it will need context to compare properties.
“Differentiation becomes even more important in that environment because AI tends to reward clarity, consistency and relevance,” Hollyhead said. “Hotels that can clearly express who they are and what they offer will have an advantage.”
Sánchez predicted that the next battleground for hospitality brands will be discovery.
Data, including guest profiles, availability rates, inventory, content, etc., offers the foundation that providers need to compete in a world of AI interfaces.
“I think it starts with data, but … it requires modernization of the tech stack and the orchestration of the full demand,” Sánchez said.
AI serves as a core component of that structure, giving hotels leeway to focus elsewhere, according to Jose Canelos, VP of product management, guest intelligence and engagement for Amadeus.
“AI that is going to enable hotels to focus on their high value activities,” Canelos said. “I'm not defining high-value activities because it differs by property or by brand, so with the opportunity to help enable them, they can shift their focus to what their true differentiator is.”
Additionally, Narula said that certain hospitality companies will be able to use AI in ways that others aren’t, based on the data structures they have in place. That means some will be able to offer improved personalization, for example.
But, bottom line, the “last mile of delivery” is whether a hotel is able to fulfill the promises that the technology enables, Narula said.