Technification Is Accelerating Commoditization

Technification, defined as the application of technology-based systems to a specific industry, was first used in the 1930s according to the Oxford English Dictionary, but it feels more relevant than ever in today’s business world.

This is especially true in the lodging industry. Agentic artificial intelligence, large-language models, chatbots, and humanoid robots are grabbing headlines and commanding more of leadership’s attention.

No doubt, it’s super important to stay abreast of all the changes transforming the lodging industry. When deployed correctly, technology can and will positively impact guest experiences and simultaneously increase profits.

However, many solutions being touted in the name of increased operational efficiency may lead to commoditization, whereby price becomes the only remaining differentiator.

Arguments for the technification of processes are typically based on two premises. First, it is difficult to find qualified labor these days because employees are neither loyal nor hard working anymore, especially the Gen Z workforce, and therefore it is better to replace humans whenever possible. Secondly, today’s guests prefer self-service models over human-centric service, especially younger — i.e., Millennial and Gen Z — guests who, as we are constantly reminded, “grew up with smartphones.”

Tech companies, in particular, push the idea that you can classify an entire cohort of humans simply by their birth year. This concept was made famous by Neil Howe and William Strauss in their 1991 book “Generations.”

In writing this month’s column, I am tempted to refute these premises, as I have done previously, by sharing stories about the amazing, hard-working, eager-to-learn Gen Z employees I encounter every week as I conduct on-site hospitality staff training workshops. I could once more share data from legit research firms like McKinsey & Co. showing that customers of all ages prefer live conversations, even the Gen Z cohort.

But instead, I will simply ask readers to pause and consider the result when hotels remove even the remaining human connections from the guest service cycle.

When the day comes that saying “representative” no longer gets you to a live agent, when all guests are forced to use smartphone check-in, when room service can only be ordered on an app, when a human concierge is fully replaced by a personified app, when all RFPs for hotel groups and events are responded to by AI-powered sales CRMs, what is left for one hotel to differentiate itself?

Place? How many hotels truly have an exclusive advantage of location, versus those that have a direct competitor next door or across the street?

Product? Although the “physical product” (rooms, lobby, meeting space, F&B) is certainly differentiated by hotel classification, those within the same market segment are typically homogenous. In most cases, if you blindfold an experienced traveler and walk them into different hotels, they would see very little difference between brands.

Price? With hotel pricing being increasingly powered by automated revenue management systems working off the same data points, chances are the price is going to be commensurate.

Points? With all major brands offering loyalty programs, and with OTA’s offering their One Key and Genius direct rewards, points no longer ensure loyalty. And with the proliferation of sub-brands within each mega brand, chances are that guests who are brand-loyal can find another like-branded hotel nearby, franchised by different owners, and therefore your direct competitor.

Take away the people parts, and what is left? A building with rooms that look the same, that are priced the same, and that offer the same technified self-service model.

The end result? Commoditization of an entire industry. When you ask AI (Gemini) to define the word, here’s what comes back:

“Commoditization is the process by which goods or services become standardized, indistinguishable from competitors’ offerings, and interchangeable over time. In a commoditized market, products lose their unique brand identity or special features, forcing suppliers to compete primarily on price rather than differentiation. (Source: Wikipedia.)

So what is the best way to differentiate your hotel from another in the same location and within the same classification? People! Your people are your hotel’s superpower.

Genuine smiles, warm welcomes, random conversations in passing, true personal recognition, that is what is going to bring guests back. In hotel sales, it is the relationships that build trust between the planner and the salesperson. The bartender who remembers a drink preference. The front desk clerk who remembers to ask about how a repeat guest’s dog or child is doing or who comments on their hometown.

Those who deploy chatbots talk about successful “containment” of guest requests and questions, but the real question is whether they were simply deflected versus being satisfactorily resolved.

The buzzword used when tech companies tout their solutions is to reduce “friction points.” Friction? A better phrase would be to call these “connection opportunities,” and rather than eliminating them, hotels should be obsessed with re-humanizing them. What is the cost of a conversation versus the benefit of having one?

Here are some ways to stand out through humanification, thus integrating the best of new technologies with the people parts:

• It is wonderful to have AI voice agents and chatbots answering the most basic questions and completing repetitive tasks, but make it easy to connect to a well-trained human for special needs or requests.
• Embrace every workable tech solution out there to free up time for your front desk staff so they can succeed in their most important role of all as greeters and first-impression makers.
• Similarly, automate away repetitive tasks in the food and beverage areas so servers, bartenders, and hosts can engage guests in genuine conversations.
• Train all staff to proactively greet guests they pass in hallways, corridors, and lobbies. To strike up guest-focused conversations in elevators, parking lots, and at the front door as guests await ride shares.
• Especially at resorts and full-service hotels, call guests who book online to obtain pre-arrival details, discover clues about how to personalize their visits, and thus encourage emotional connections with your brand.
• Likewise, when guests book through OTA’s that prohibit direct guest contact, have staff message guests through the app, introducing themselves by name, seeking out arrival details, thereby fostering brand loyalty that helps channel convert future stays.
• In the sales office, where auto-response features of CRMs provide an initial, prompt reply, have salespeople reach out personally to create relationships.

Originally published in Costar News

Doug Kennedy is President of the Kennedy Training Network, Inc. a leading provider of hotel sales, guest service, reservations, and front desk training programs and telephone mystery shopping services for the lodging and hospitality industry. Doug continues to be a fixture on the industry’s conference circuit for hotel companies, brands and associations, as he has been for decades. Since 1996, Doug’s monthly training articles have been published worldwide, making him one of the most widely read hospitality industry authorities. Check out his monthly webcasts at www.KTNwebcast.com or visit www.kennedytrainingnetwork.com.