The paradox of digitalisation in the hotel sector – luxury clients seek human interactions

Community | 2023-02-27

Seems that digitalisation, smart and self-service technologies not only open new horizons in hotel management but also attract more customers and increase the rate of their satisfaction. However, the research made by the Kaunas University of Technology scholars, in collaboration with international partners, shows that implementing self-service technologies and robots should be carried out thoughtfully. If customers of budget hotels see most of the digital solutions as benefits, clients of luxury hotels expect to receive personalised and high-quality human service.

 Lack of knowledge

The digital revolution has dramatically changed the operations and management of hotels. Nowadays, digital technologies have been recognised as the primary sources of efficiency and competitive advantage in the hotel sector.

However, researchers noticed that quite a significant part of hotel managers still lack the understanding of how they can benefit from digitalisation.

Morteza Ghobakhloo, a researcher at the Kaunas University of Technology School of Economics and Business in the “In4Act” project

“Until now hotel sector is considered to have a low digital technology adoption rate. One of the main reasons for this is the lack of knowledge among hotel managers. Even the managers of hotels that have invested in digital technologies may understand the other benefits of the technologies that they have. For instance, a hotel may use big data analytics for pricing and marketing purposes but not be aware of the abilities of this technology to reduce operational waste”, says Morteza Ghobakhloo, a researcher at the Kaunas University of Technology School of Economics and Business in the “In4Act” project.

From robots to big data analytics

The team of researchers dedicated their attention to analysing digital technologies and their influence on the main fields that are significant for the success of every hotel: financial performance, competitiveness, quality of service, resource utilisation, flexibility, and innovation.

It turned out that to effectively transform the processes of hotel operation management and value chain, managers should focus on several important digital tools and systems.

First in the line are robots and self-service technologies. It creates competitive advantages by providing memorable and unique experiences and reducing waiting times. In addition to this, robotic experiences allow to free up employees so they can focus on added-value activities, or cut expenses if the country has high fairs for working hours.

Research showed that mobile apps are another important tool for attracting new customers and keeping current ones. Hotel managers found mobile apps to be a low-cost and effective platform for enhancing customer awareness and reaching potential clients. The hotels can enhance customer experience and reduce operational costs by using mobile apps for unlocking guestroom doors, checking in and out, making reservations, and adding loyalty points.

Another system that is recognised as one of the most important is e-commerce. These tools improve hotels’ operational efficiency by streamlining processes. Furthermore, social commerce reduces the response time to customer requests which, in turn, increases customer loyalty.

The authors of the research note that big data analytics is one of the most underestimated technologies in the hotel industry. It has various benefits, such as predicting hotel occupancy rates, optimising pricing, assisting market segmentation, and reducing operational waste. However, scholars noticed that many hotel managers use only part of the significant data. Most of the time, the hotels concentrate on pricing and marketing but miss out on the fields of operational waste and other abilities that these technologies can open up.

The power of social media

Among other important tools were virtual reality, information and smart systems, artificial intelligence, and front-desk technologies. However, one field that stands out from all the other emerging technologies in the research is social media.

“Social media is a crucial source of competitive advantages that is significant for attracting new clients, keeping current ones loyal, reducing costs in marketing, allowing managers to build direct relations with their audience and to know their needs,” says M. Ghobakhloo.

It is argued that hotels’ use of social media positively influences their financial performance through positive electronic word of mouth (further – e-WOM). e-WOM affects customers’ decisions on room purchases and hotel brand reputation.

 When to digitalise? When to personalise?

Researchers argue that most digital tools allow both to guarantee better customer experience and reduce operational costs.

However, in terms of customer satisfaction, the exact digital solutions could have quite the opposite effect on budget and luxury hotel clients. Therefore, to adopt appropriate technologies, hotel managers must know how various digital technologies may influence the performance of their specific hotel.

“Customer types, needs, and expectations depend on hotel type and size, and accordingly, the applications of digital technologies among luxury, budget, small, and large hotels can differ. Robots can have a positive influence on the brand experience of guests in small and budget hotels, they may negatively influence the experience of luxury hotels as guests pay expensive room rates and expect human staff interaction and customer service”, says M. Ghobakhloo.

The research was a part of the “In4Act” project, implemented by the Kaunas University of Technology School of Economics and Business researchers and financed by the European Union project “Horizon 2020”. More about “In4Act”: