Adopting Automation to Improve Operational Efficiency
Table of Contents
Crescent Hotels and Resorts
Solving Hospitality’s Biggest Challenge
At the beginning of 2023, the overall U.S. economy added 517,000 jobs, according to the U.S. Bureau of Labor Statistics. And the leisure and hospitality sector accounted for about 25% of that, adding more jobs than any other sector.
At the same time, however, the industry had 2 million open jobs despite returning to pre-pandemic employment levels, according to the U.S. Travel Association. While many industries have recovered their workforce, the leisure and hospitality sector is still about half a million employees short of its pre-pandemic levels.
The labor shortage figures dive even more dire, according to research from the American Hotel & Lodging Association (AHLA). The association’s research shows that 79% of hoteliers say their hotels are understaffed. Due to the lack of staffing, 71% of hoteliers are increasing wages, 64% are offering more flexible hours, and 33% are expanding benefits. However, 81% of hoteliers are still unable to fill open positions, according to the AHLA.
The hotel industry has long been plagued by labor shortages and high employee turnover. While labor shortage is certainly affecting many industries, the hotel industry is feeling the strain now more than ever. As a result, many hoteliers are focusing on finding creative ways to increase efficiency so they can do more with smaller teams.
Chris Green, President at Remington Hotels, said the COVID pandemic forced hoteliers to learn very quickly about new tools to communicate with guests and operate with fewer staff members in a more efficient manner.
“We weren’t doing any business so we couldn’t afford to have any people,” he said. “So we had to move into a more tech forward space, whether that meant adopting housekeeping software that allows us to organize the day or mobile-based apps for hiring service staff on a per-shift basis.
“All of these things that previously seemed like great ideas all of a sudden became necessary, and the best companies became rapid adopters,” he continued. “And what we learned was that some of these ways of doing things are just better.”
Throughout this special report, hoteliers will find valuable insights on how to automate typically manual processes. You’ll learn:
- Why automation is critical to the hotel industry’s longevity
- How automation and technology can streamline back-office communication and collaboration
- What automation is helping hoteliers to offset rising costs to positively impact their bottom line.
Automation is Critical to the Hotel Industry’s Longevity
The hospitality industry recovered from a sudden halt in demand quicker than most expected, and three years of growth since has owners and operators again feeling confident about the state of their businesses. While a reduced labor force and increased wages remain a challenge, in general, the industry finds itself on solid footing.
But year-over-year growth, when you’re starting from near zero, will inevitably get smaller. Demand and top-line revenue growth in 2023 is expected to soften, and leaders across many industries are calling 2023 the “Year of Efficiency,” shifting their focus to managing expenses and bottom-line growth.
Hospitality marketing consultant Martin Soler recently wrote that an emerging competitor – Airbnb – already has a leg up when it comes to the guest experience. Soler outlines several areas where Airbnb is providing a better guest experience mainly through a mobile-first strategy around guest communications, payments, and digital keys.
But it’s not just guest-facing amenities where Airbnb has proven innovative. Many Airbnb owners have managed to build next-generation businesses by automating much of the back-office infrastructure, too.
The Airbnb and hospitality models differ vastly – and rules that apply to one may not apply to the other – but it’s clear there are automation strategies and operational efficiencies that hoteliers can learn from Airbnb.
Automation for Efficient Operations
While providing a more seamless guest journey is imperative, perhaps more crucial is adopting tools to optimize your hotel’s operations to run as efficiently as possible. Consider all the small tasks your front desk, GMs, and accounting teams can automate with technology.
Look at the Airbnb model where, in some cases, owners are able to skirt entire accounting, finance, revenue, sales and marketing departments. For larger portfolios where property managers are involved, they’re operating with smaller teams and larger margins.
A good place to start is by automating the transfer of information across systems, and keeping it secure and accurate along the way, which will help maintain operational efficiency. Look to technology that captures data that will simplify otherwise manual tasks.
In the accounting department, by streamlining processes, projects that used to take a day to complete can now be done in a couple of hours.
Start small by adopting digital tools that replace printing documents and scanning them to email or fax. Consolidate the single-daily reporting and reconciliation process for all the properties in your portfolio, replacing the construction of multiple manual excel sheets for each property.
When staff and management spend too much time on redundant back-office operational tasks, they struggle to serve guests and ultimately run an efficient hotel. Automation will continue to assist hoteliers in becoming more efficient and cost-effective, allowing them to streamline operations while improving guest experience.
Hospitality Consultant Adam Mogelonsky says he works with operators to help them look at a hotel more as a multi-source profit center, where the bar, restaurant, spa, golf and other amenities become part of a holistic guest experience. Automating the communication, data-sharing and operational workflows between these siloed departments is critical, and “will become a huge profit center in the future,” he says.
Tech-Enabled Life House Automates BOH Functions
One company bringing a more digital-first approach to hotel operations is Life House, a tech-enabled management company with 75 hotels. Life House aims to automate the complex back-office and redundant functions, such as accounting, finance, pricing, and housekeeping scheduling, according to Founder and CEO Rami Zeidan.
“Life House is trying to turn to automation to enable the onsite team to provide a better guest experience at a lower-cost operating model,” Zeidan said. “Independent hoteliers are way more receptive to automation. For example, many independent hotels don’t have revenue management teams, they’re yearning for solutions, and we automate the entire revenue management function from pricing, distribution and metasearch marketing.”
Automation to Streamline Back-Office Communication & Collaboration
With smaller hotel teams handling more responsibility, improving back-office communication and collaboration is fundamental to efficient operations within your properties and organization as a whole. By better communicating among each other and collaborating with each other, hoteliers can streamline operations and ensure no task goes unperformed.
There are a wide variety of ways to approach better collaboration, and key to each is relying on new, digital capabilities to automate as many time-consuming and repetitive tasks as possible. Automation will help to reduce errors and improve accuracy, as well as provide better visibility into operations.
Automating the way your staff communicates – between shifts, between departments and with corporate – helps reduce the amount of time spent on mundane tasks, freeing up staff to focus on more valuable functions. Automating the way they collaborate – by sharing daily reports and centralizing critical information like performance metrics and goals – aligns departments and team members on the same priorities.
Everything from simple tasks like copy-pasting data for reports or sending update emails to very complicated tasks like rate-loading or new hotel onboarding can be largely left to bots, suggests longtime hospitality evangelist Kelly McGuire, Managing Principal at ZS.
“Familiarize yourself with the potential of automation techniques, such as robotic process automation, that replicate the routine actions of humans in a workflow or process,” McGuire writes. “Advocate for bringing these types of solutions into your organization. You’d be surprised to learn how many of even the most complex tasks such as reading emails or tagging images can be accomplished with artificial intelligence-infused process automation.”
What makes the hotel industry different from most other industries is that it’s a 24-hour business divided usually by three shifts: 1) Early shift, 2) Late shift, and 3) Overnight shift.
Employees working these different shifts don’t spend much time interacting with each other, and therefore staff-wide communication, while critical for the guest experience and more efficient operations, can be challenging.
“There’s not a whole lot of time in between those shifts – maybe 10 or 15 minutes – you’re just essentially passing each other,” says Scott Curran, COO at Reneson Hotels, which owns and operates eight hotels in California. “So it’s important to keep and share notes about what’s happening during your shift.”
In the early days, hotels kept a Red Book at the front desk, in which team members could add and share notes. Over time, that cross-shift communication gradually moved toward email… until inboxes became unwieldy and tough to organize. Today, there are digital tools that keep these notes and records in a centralized, cloud-based location, which increases accountability by ensuring everyone on the team can easily view and access them.
The Role of the Night Auditor
In addition to sharing guest notes, many of the critical reports needed to run a smooth daily operation are generated by an employee working third shift – the Night Auditor. The Night Auditor will run all of the reports from the previous day and use that information to prepare the team for the following day.
“There’s a lot the Night Auditor can do to set up the next day for success,” says Eduardo Burkard, Account Executive at MDO. “The problem is: the Night Auditor is usually sleeping during the day, so communicating with them can be challenging. This is why it’s important to be able to share the exact report with notes in a system.”
Before digital tools were available, team leaders would arrive at the hotel in the morning and find a stack of papers from the Night Auditor in their mailboxes to review. Mailboxes were lined up from General Manager to Assistant GM to Front Office Manager to Housekeeping Manager, and so on, and critical reports would get initialed and passed down the list.
“In the old days, the Night Auditor would normally be by themselves, and on one screen they’d have the PMS open and they’d be checking in guests, and on another screen they’re putting in restaurant covers and trying to balance cash and all these things,” said Chris Green, President at Remington Hotels. “Now it’s all one-click Night Audit, and technology handles it all and stores everything in the cloud.
“We used to store packets, envelopes full of reports for every day. Heaven forbid if you had an audit or needed to go back and find a receipt,” Green continued. “Now it’s all in the cloud; It’s just one click, go in, scroll through and send it out. It’s super fast and efficient.”
Today, the Night Auditor can drop critical documents and reports directly into a centralized location, and from there they enter the same workflow as above, but through a more efficient, accessible and secure platform.
For example, part of that night audit packet is a redemption rewards report that shows how many guests redeemed points for a free or partial night stay, which is sent to the brand loyalty program for reconciliation. There is also often a rate differential report, which shows any discounts or changes that were applied and why.
Now, if questions about the data on these reports arise, there is a clearer and easily accessible channel to communicate than email, where conversations with multiple people can get convoluted or overlooked entirely. Indexing this information is critical because it allows your team to go back and view past reports, such as guest charges or specific incidents, at any time.
These reports are informing more high-level discussions at the corporate level, too. Corporate leaders often want to see the information in easily digestible, visual format, but don’t necessarily need all the details.
“When you go above property, you’re not writing a long-winded email and copy-pasting reports,” Burkhard says.
As COO, Curran says he needs information in such a way that he can quickly scan through it and understand what’s happening across all the hotels in Reneson’s portfolio.
“I have eight hotels, soon to be 10, I can’t spend 30 minutes a day looking through each one of these reports, or else I just won’t have time to do anything else,” he says. “I want to see my General Manager having a conversation with the Night Auditor and asking why something’s off, and then I don’t have to ask the General Manager. I want to know that my team members have seen it and are doing something about it.”
Detailing A Decade Of Digital Adoption At Crescent Hotels & Resorts
It’s a common thread throughout the hotel industry: Operators are looking to remove much of the back-office work from staff at the property level and take on more of that responsibility at the regional or headquarters level. But centralizing back-office operations can’t be done without streamlined communications and connectivity between each of the properties and corporate. More than ever, operators are relying on technology as the framework for sharing information, oftentimes in the form of data, reports and dashboards.
Rob Smith has been serving as CFO of Fairfax, Virginia-based Crescent Hotels & Resorts for nearly eight years, and in that time, he has embraced the adoption of new tools across Crescent’s entire technology stack. Since 2015, Crescent has moved nearly everything that was previously done manually into a digital environment, including audit compliance, finance, procurement, payroll and business intelligence.
Q: How often do you refer to previous night audit reports?
Smith: We just did it over the last few weeks. We have a union property and we needed to pull payroll records. We’re going through a New York State sales tax audit at one property. You still have to pull stuff out now and again, but with the payroll systems and the HRIS systems, much of that can be digitized. Nowadays, it’s much easier to get the information quickly.
This morning I got in the office at 6:30 and by 7:30 I had already fired off a bunch of files. I can’t imagine having to print and fax those papers.
On a daily basis, we still need to look at things like occupancy reports, comp reports and service tracking items, but with today’s systems, it’s all readily available in digital format.
Q: What are some functions that you can move from property to corporate?
Smith: Right now your General Managers are serving as a Jack of All Trades – they’ve got a lot of things they’re doing. So how do we help them out? How do we get things off of their plate? Much of our accounting functions that years ago were done on property – such as sales tax reporting, cash management, cutting checks – is now centralized. We are now talking about centralizing accounts receivable for certain properties. We even have one property that has taken advantage of an ATM-like system for cash handling purposes to eliminate daily cash deposits and allow corporate to reconcile banking activity.
There’s still a cost associated with centralizing operations – you have to hire someone at corporate – but now the individuals at the property level should be freed up to perform more valuable and impactful functions.
Automation to Offset Skyrocketing Costs
Technology has become a key solution to combating rising costs. A Skift and Oracle Hospitality survey shows that 64.7% of executives surveyed consider incorporating new technologies for staff efficiency as a part of their labor strategy to attract and retain staff.
Automation by the way of artificial intelligence (AI) has been a talking point in the hotel industry for the past few years. In 2023, that conversation accelerated – especially as costs skyrocketed thanks to inflation, the COVID-19 pandemic, rising wages due to labor shortage issues, and more.
All of these challenges work together to threaten hotel profitability. While it’s true key performance indicators for U.S. hotels are on the rise – +13.8% in ADR and +10.4% in RevPAR in January 2023 vs. 2019, according to STR – it’s not because hotels have managed to save money by lean operations.
“Our gains in profit have come from ADR growth and not really from efficiency,” James Carroll, President & CEO at Crestline Hotels & Resorts, said during the 2023 ALIS conference. “Are we using the efficiencies we learned over the past few years? We stopped cleaning rooms except upon checkout, we made dramatic changes in F&B, and the guests accommodated those. A lot of those things were put back.”
The biggest expense for any hotel is labor, which makes up about 50% of a property’s operating costs. And with 71% of hoteliers increasing wages to attract workers and fill job vacancies, according to the AHLA, that expense line item will only continue to rise.
Many hotels will cross-train their current employees to handle tasks among multiple departments. The risk there, however, is that it can lead to overworked employees, which means a drop in guest satisfaction and more team turnover. And that’s bad for the bottom line. Consider this: U.S. businesses lose $1.6 trillion in revenue due to customers switching brands because of subpar service, according to Forbes. And a dissatisfied guest will anti-refer your brand and share their negative guest experience with about 15 people, according to American Express.
Below are several ways hoteliers can combat rising costs through automation without sacrificing the guest experience. These can serve to take some manual tasks off your team’s plates, enhancing the employee experience and reducing turnover.
- Implement self-service kiosks: Self-service kiosks can be placed in various areas of the hotel, such as the front desk, restaurants, or gift shops. This allows guests to quickly check in or order food and drinks, reducing the need for additional staff while improving efficiency and guest experience.
- Use chatbots and virtual assistants: Chatbots can be used to handle basic guest inquiries, such as room availability and pricing, while virtual assistants can provide personalized recommendations and services, such as making reservations or arranging transportation. This can help reduce the workload of front desk staff while still providing guests with quality service.
- Adopt smart energy management systems: Automated energy management systems can help reduce energy costs by automatically adjusting lighting, temperature, and other settings based on occupancy levels. This can help hoteliers reduce their environmental footprint while also saving money on utility bills.
- Utilize automated inventory management: Automated inventory management systems can help hoteliers track inventory levels and manage supply chains more efficiently, reducing waste and ensuring that supplies are always available when needed.
- Integrate mobile technology: Mobile apps can be used to provide guests with a seamless experience from start to finish. Guests can use their mobile devices to check in, access room keys, order room service, and even control room amenities such as lighting and temperature.
- Streamline housekeeping operations: Automation can be used to streamline housekeeping operations by providing housekeeping staff with real-time updates on room occupancy and cleaning schedules. This can help reduce labor costs and improve the overall guest experience by ensuring that rooms are always clean and ready for occupancy.
- Use data analytics: By analyzing data on guest preferences and behavior, hoteliers can gain valuable insights into how to optimize their operations and improve the guest experience. This can help them identify areas where automation can be most effective in reducing costs without sacrificing quality.
- Adopt automated financial management: Automated financial management systems can help hoteliers manage their finances more efficiently, reducing the risk of errors and improving cash flow.
- Adopt digital tools that cut down on paper reports: Hoteliers can use digital tools that replace printing documents and scanning them to email or fax. They can consolidate the single-daily reporting and reconciliation process for all the properties in a portfolio, replacing the construction of multiple manual excel sheets for each property. Not only can it save time, but it also leads to more sustainable operations.
- Employ a Workforce Management System: A Workforce Management System is a software application that helps hoteliers manage employee scheduling, payroll, and benefits. This tool can help streamline HR operations and improve employee satisfaction.
- Use an Electronic Data Interchange (EDI): An EDI is a tool that allows hoteliers to exchange electronic documents, such as purchase orders and invoices, with suppliers. This tool can help streamline purchasing and reduce errors.
- Apply AI to the hotel’s voice channel: Hoteliers can turn to third-party call centers to reduce labor costs and free up the front desk’s time. However, new technology is making it possible to utilize natural language processing to apply AI to a hotel call center.
Justifying Tech Costs
The above is not a comprehensive list of the efficiencies technology can offer hotel operations. However, the solutions can positively contribute to hoteliers’ bottom lines.
Task management, housekeeping, and staff collaboration software fees range from $100 to $400 per hotel per month. Most vendors that have multiple tech offerings tend to package these as a part of the operations management tech stack using tiered pricing. Most vendors offer the software with a SaaS (Software as a Service) model for a set subscription fee using a cloud or hybrid service model.
The cost for such software is justified. For instance, Skift Research estimates that task management, housekeeping, and staff collaboration software vendors in the hospitality industry generated total revenue of $229 million in 2019. Combining this with the unused market potential, this tech category has the potential to generate a total of $1.3 billion in annual revenues.
However, research shows how big of an opportunity there is for the hotel industry in terms of adoption. Skift Research estimates that 18% of hotels worldwide, or approximately 12.6 million rooms, are supported by these tools. That means there’s a huge opportunity for the other 82% of hotels to adopt digital tools to drive better operational efficiencies.
Only 18% of hotels worldwide have adopted task management, housekeeping, and staff collaboration software. That means there’s a huge opportunity to adopt digital tools to drive better operational efficiencies for 82% of hotels.
Optimizing Operations with Digital Tools and Automation
The hotel industry has found itself on solid post-pandemic footing. However, rising supply costs, inflation, wages, and more threaten hotel profitability in a multitude of ways. It’s never been more important for hoteliers to adopt digital tools that help automate processes to fill labor gaps and increase operational efficiencies.
Automation is becoming increasingly critical to the longevity of the hotel industry. As the industry shifts focus toward managing expenses and bottom-line growth, hoteliers must look to adopt automation strategies and operational efficiencies to remain competitive. By adopting automation tools and technology, hotels can optimize their operations, reduce redundancies, and improve the guest experience.
Automation can greatly improve back-office communication and collaboration at hotels. By relying on new digital capabilities to automate time-consuming tasks, hoteliers can streamline operations, reduce errors, and improve accuracy. Digital collaboration tools can align departments and team members on the same priorities and ensure accountability by making certain everyone on the team can easily view and access notes and records.
Digital tools also make it easier to communicate with Night Auditors, who are responsible for generating critical reports needed to run a smooth daily operation. Additionally, by indexing information, teams can easily go back and view past reports or specific incidents at any time.
Finally, automated reporting in a visual format helps corporate leaders quickly scan through information to understand what’s happening across all hotels in their portfolio. By embracing automation, hoteliers can improve back-office communication and collaboration, streamline operations, and ultimately provide a better guest experience.