Can Artificial Intelligence replace Human Intelligence in Hospitality revenue management?
A lot has been said in the recent past about revenue managers and artificial intelligence and whether revenue managers in hospitality need to panic about being replaced by AI-driven tools, and so on. Can a revenue management tool ever actually replace the human intelligence that a hospitality revenue manager brings to the table?
I feel we need to dig a little deeper and explore a few related concepts, which could help us get a better grasp of ideas like AI replacing humans in revenue management in the near future. It is, no doubt, a sensational debate, but we hope to discuss the finer details of why this debate is premature and how.
The role that tools play in today’s revenue management
There is no denying that technology has helped us grow by leaps and bounds. Revenue management tools today perform several tasks such as competition analysis, forecasting, price optimization, inventory control, consumer behavior and so on. Several hotels the world over have found immense value in hotel revenue management tools, for rightly so.
While it is possible for a hotel to rely on a tool to take care of certain aspects of their revenue management strategy, it is equally essential for them to be aware that these cannot completely substitute human intelligence.
Revenue Management Tools are like smoke detectors…
… that raise alarm when they detect smoke. Installing sprinklers to act on the fire, requires human intelligence. And, both are equally important!
The point here is that even if you invest in the best-in-class tool, you still need a person to monitor it. Which is why it is called a ‘tool’. It is not meant to perform the exact same functions as that of the person who mans the tool. As long as we remember that they act as enablers, the fear of being replaced will be in check. This apart, here are two other major reasons why tools aren’t equipped to replace human intelligence just yet:
- Tools are efficient with tasks that can be templatized. Personalization, which is an integral part of hospitality, cannot be handled by tools.
- Tools recommend, and they do a good job of it. It is still up to human intelligence whether or not action needs to be taken on the recommendation.
Recommendation vs. Decision Making
The ultimate decision of reacting (or not) to the recommendation, is still a result of human intelligence. While these tools claim to be built to distribute, they mostly (only) recommend. And therein lies a world of difference.
Most revenue management tools will not tell you this explicitly and will still market themselves as a tool that will distribute on your behalf. But this is where your human intelligence comes into play – when you understand that an AI-powered tool simply cannot distribute as effectively as a HI-powered revenue manager!
As a hotelier, knowing when to rely on AI and when to count on the value that Human Intelligence brings to you is paramount.
Why Hotel Revenue Managers are Indispensable
Revenue management tools, like every other AI powered tool, learn from instances. They are rule-driven and act on to whatever you feed them. They cannot predict unnatural instances which will affect your occupancy rates, no matter which part of the world you are in. Factors such as political instability, natural disasters, terrorist attacks, epidemics also play a major role when it comes to forecasts or pricing strategy. But tools do not have it in them to factor these in, while doing what they do. And this can have a grave impact on your business.
Agreed these are exceptional instances, but if you are investing in a tool, why not make it invincible? No flaws, fully equipped to handle any and every situation it is bound to encounter? This is the ideal case – but for this to happen, we will have to manually feed every possible instance. This is why there’s a need to have a Revenue management team, or even just a revenue manager to supervise the tool.
The purpose of this blog is not to discourage the use of tools in your hotel revenue management strategy. In fact, it is the exact opposite. What we are trying to establish here is the fact that a reliable and sustainable hotel revenue management system includes a solid tool that can take care of the tactical aspects of your business AND a revenue manager who doesn’t only monitor the tool but also fill in the gaps with critical judgment which only human intelligence can guarantee.