As digitization in the hospitality industry is a fundamental part of the value chain, this year's global study has a special focus on digital hotel operations in the area of the guest journey and is based on feedback from 84 unique hotel chains representing more than 2 million rooms worldwide.

While hotel companies and suppliers now offer solid technology solutions that consumers are increasingly relying on, from the perspective of hotel chains, they are still in the middle of the pack in terms of digitalization (on a scale of 0 to 10), leaving plenty of room for improvement in both digitalization and personalization. The following insights and key findings will help you better understand the challenges and opportunities.

Insights

• Record online direct bookings are driving innovation as guest data becomes more accessible through a growing base of loyal customers who are either enrolled in loyalty or instant gratification membership programs. Data-driven customer insights are strongly supported by hotel chains' mobile websites and proprietary apps, multiplying service and sales opportunities. While CRM systems were used by only 54% of respondents in h2c's Global Hospitality Distribution Study in 2022, the share has grown to 76%, making it an essential tool for customer success.

• The quality of system integrations, with the PMS as the core management system for operations, has improved very significantly since 2017. The biggest improvements are revenue related and include the following systems: IBE, CRS and/or Channel Manager, and RMS. The level of system integration (defined as fully and largely integrated) has risen sharply over the 5-year period, by 65% for IBE and a whopping 91% for CRS/Channel Manager.

• Improving guest satisfaction is the ultimate digitalization goal for nearly all hotel chains. Associated cost reductions are a welcome by-product, but not the primary focus.

Hotel Chains' biggest digitization challenges

• System integration remains the biggest challenge in digitizing operations. While revenue-generating systems, such as IBE, have reached a high level of integration, more operations-related systems, such as spa, golf and other service management systems, have the lowest level of integration. ORM systems have the second lowest level of integration, which is a missed opportunity as guest feedback could be immediately actionable.
• According to hoteliers' self-assessments, their level of digitalization ranks only six out of ten. In addition to a lack of high-quality system integrations, the lack of a coherent digital strategy, a. shortage of staff, and insufficient skills are among the major shortcomings.
• Large chains consider themselves to be the most digitized. However, this self-assessment is reversed when it comes to personalization, with small chains considering themselves to be more advanced. We believe that many small chains are more flexible and experimental in using new/innovative systems than their large counterparts. Overall, the level of personalization shows a clear upward trend compared to 2021.
• As inflation and higher supplier wages have taken their toll on hotel chains' purchasing power, total system cost is a major concern when acquiring new technology. 83% of respondents said system costs were too high, an increase of 14 percentage points in one year compared to h2c's 2022 survey.

Digital Operations Offer a Wide Range of Operations

• Within the guest journey, the greatest potential for improving the guest experience through digital operations is in the arrival and stay phases. 34% of chains offer online check-in with digital keys today, and the same percentage (34%) plan to do so in the future. Automated guest recognition is used by 25% of chains and 36% plan to implement this feature. Real-time, on-demand housekeeping is used by only 14% of chains today, but twice as many plan to use it. Digital ordering, on-demand services and energy control are planned by about 30% of chains.
• Although hotel chains rate fully integrated payment solutions as very important, automated payment processing still lacks full integration. Today, only 34% of hotel chains have a fully integrated payment solution, while 59% have a payment gateway and 7% process payments manually, which will soon be a relic of the past.
• Smart ancillary sales during the stay (through an app, mobile website or digital ordering) are only used by 27% of hotel chains today. Mobile technology with a voice-first approach is expected to drive incremental revenue during the guest's stay over the next 2-3 years. These growth projections are underscored by hoteliers' belief that their ancillary revenues could nearly double from 15% of total revenues today to 29%.
• Increasing online knowledge transfer within departments and beyond is critical to customer success. Although 78% of the chains use virtual meetings, online training and e-learning, only 44% of the companies organize a structured/continuous online knowledge transfer.
• Both environmental (ESG) and energy cost pressures are impacting the hotel chains’ bottom line. Therefore, investments in smart buildings, such as occupancy-based energy management systems are profitable investments. Today, 25% of the chains' properties are smart buildings, and the share is expected to grow rapidly.
• The use of AI-powered systems will innovate a wide range of hospitality solutions, including marketing and distribution, personalized/on-demand services, and energy management, to name a few. For six of the seven AI applications pre-selected in the questionnaire, the share of hotel chains that see opportunities in these areas has increased by a large margin compared to 2021 (one AI opportunity stayed about the same). Clearly, the power of AI and machine learning has arrived in the hospitality industry.
• Hoteliers expect the highest level of innovation in AI, energy management and ESG (top 3), followed by augmented reality/virtual reality and robotic process automation.

o Because h2c's 2022 survey was conducted prior to the introduction of ChatGPT, the impact on this year's survey is an eye-popping 53 percentage point increase in potential AI applications, reaching 86%. With real-world examples of ChatGPT, AI has become a viable solution for more hoteliers.

o Although not included in the 2022 study, energy management immediately emerged as the second most important area of innovation, at 74%.

o ESG (60%), AR/VR (45%) and robotic process automation (41%) all increased their rankings from 2022.

• As system capabilities and their integrations have evolved significantly over the past 5 years, implementing a structured innovation management process that involves all levels of the organization is a must today. Innovation management is not given the priority it deserves, as only 35% of hotel chains have a structured innovation management process in place, leaving room for improvement.

1. Introduction
2. Insights
3. Key Findings
4. Conclusion