For years, hotel operators have under-invested in technology, but persistent labor challenges are forcing a reckoning in the industry.

“The labor issue is a big driver for investments in technology,” said Mark Haley, a partner at Prism Hospitality Consulting, which specializes in hospitality technology and marketing. “You can’t hire enough people. … I would submit to you that to most hoteliers today, [labor] is a more profound and concerning issue than a pending economic slowdown.”

At the moment, hotel operators are reporting brisk bookings, even in the face of rising room rates. Thank leisure travelers. They seem so eager to get out and about that they aren’t flinching at the higher prices. Hotel revenue per available room, a key industry metric known as RevPAR, will likely top pre-pandemic levels this year, on a nominal basis, according to two industry forecasts.

The latest, released by STR and Tourism Economics at the NYU International Hospitality Industry Investment Conference this week, predicts that hotel occupancy will remain below 2019 totals but average daily rates will be higher by about $11 than the group’s prior forecast.

The outlook factors in the possibility of a recession, but doesn’t expect the economy’s slowdown to force the traveling public to alter their habits. And it anticipates that business travel will continue to ramp up heading into next year.

“It’s kind of a cold reality that even in a fairly deep recession, more often than not, 70-80% of the population isn’t seeing it. They’re still getting their regular paychecks and they’re still traveling,” Haley said.

Business travel has long been a key driver of hotel spending and its weakness continues to be felt. In April, the American Hotel & Lodging Association and Kalibri Labs projected that hotel business travel revenue will be 23% below pre-pandemic levels this year, which is a loss of about $20 billion from 2019. In 2020 and 2021 combined, the industry lost about $108 billion in business travel revenue, according the AHLA.

In May, PwC projected business traveler growth next year will help offset any softening from leisure demand. It anticipates average daily room rates would be up 16.9% in 2022 from the prior year, prompting a 28.1% climb in RevPAR from last year. Then, in 2023, higher occupancy and room rates will help RevPAR rise 6.6% year over year, which would be 114% of the 2019 level.

As guests venture back to hotels they likely will notice some big changes, hotel operators say. Among them is a greater reliance on technology, which is often being used to help ease the impact of staff shortages.

More guests should be able to skip the front desk, and check into their rooms using a kiosk or app on their phone. Oracle and travel industry trade publication Skift conducted a survey of 633 hotel executives this spring and nearly all — some 96% — were investing in self-service technology at their hotels. And 62% said they expect contactless experiences will be the most widely adopted tech over the next three years.

Marco Manzie, founder and president of Paramount Hospitality Management, which operates five resort and hotel properties in Orlando, Florida, said he sees the investment in technology as a must because it has the power to lower his costs over time.

“When we look at the leanness of the future economy, it has most hoteliers and owners of hotels taking a step back and revisiting ways to improve their bottom line margins because they’ve been eroded from the inflation that we’ve been hit with,” Manzie said.

Inflation hasn’t been this brisk since December 1981. Surging food and energy costs pushed the consumer price index up 8.6% in May, the Bureau of Labor Statistics said on Friday. Hoteliers are seeing these costs ripple through their businesses, from the food sold in hotel restaurants to the fuel that heats and cools buildings to the salaries paid to staff.

Manzie said he is in the process of rolling out contactless check-in and kiosks for food and beverage orders at some of the properties he manages. Since it is still a work-in-progress, he has yet to reap the benefits of lower labor costs.

“I can tell you that we budgeted the end of the year for some labor cost reductions, anticipating savings,” he said.

When the pandemic struck in early 2020, most large hotel chains had already been deploying contactless options for their guests. But Covid accelerated the adoption and now it’s the cost of entry, industry consultants said.

According to Alex Alt, senior vice president and general manager at Oracle Hospitality, some hotels were looking to make these changes within a one-to-three-year time frame. After Covid struck, the road map was accelerated to one to three months in many cases, he said.

“As hotels saw a decrease in hotel staff and an increase in customer safety and health expectations, there was a strong need for hotels of all sizes to automate the hospitality experience by empowering guests to manage their stay largely from their mobile devices,” Alt said, in an email interview.

One reason is guests expect it. In their survey, Oracle and Skift also polled 5,266 consumers, and the vast majority (73%) said they are more likely to stay at a hotel with self-service options.

The responses suggested guests want the ability to order room service from their phone or text to have more towels sent up to their rooms. They also want to seamlessly connect to their personal streaming or gaming accounts with the in-room television without having to remember their passwords.

Also, consumers want the ability to “unbundle” hotel offerings and only pay for the services they use during their stay, Alt said. They are even willing to pay more for personalized choices such as selecting an exact room or floor, he said, likening it to options consumers have in booking airline tickets.

In the Oracle survey, 40% of hoteliers said the unbundling model is the future of the industry.

“This is a step-change from the way hotels recognize revenue today, so they need a more modern [enterprise resource planning] ERP system to be able to adapt to these changes,” Alt said.

He declined to provide specific forecasts for future spending but said hotels are making significant investments throughout the business.

The trouble is that some hotel technology systems are antiquated, especially at independent hotels. In an article published in Hospitalitynet, New York University professor Max Starkov said the hospitality industry can often spend less than 2.5% of net room revenue on IT, including staff and benefits.

Darin Yug, PwC U.S. hospitality and gaming consulting leader, also has seen a greater focus on updating back-office systems.

“There hadn’t been a lot of attention paid to the back office,” he said, adding that companies were having to play a bit of catch-up. But even this investment is also being inspired in part by labor needs, he said.

“The quest for talent is not only for people cleaning your rooms and hotels, but also running finance operations and it’s getting more and more difficult,” Yug said. “By putting better technology, better tools in their hands, it’s really about upgrading … the experience for their employees.”

Scott Strickland, the chief information officer at Wyndham Hotels & Resorts, said the small business owners that franchise Wyndham hotel brands like Wingate, Ramada and Days Inn, have the benefit of using one of two standardized property management systems it offers.

“We made the foundational investment [to standardize], which puts us way ahead of our competitors,” Strickland said. It also means that some of services more commonly associated with high-end hotels are available to its more economy-priced hotels brands.

“For us to be be able to do it at the economy hotel and to roll that out at scale is something we’re very proud of,” Strickland said. He added that it means a bus full of kids coming back from a soccer tournament can arrive at a Super 8 hotel and use self-service check-in to speed their way to their rooms, which helps build loyalty.

Wyndham’s franchisees can also opt into its reservation system, which routes customers to a centralized call center to book a room. Wyndham said the 4,000 hotels that use the system see a 15% or higher premium on rates than non-participating hotels. Also, hotel operators are able to focus on the guests at their hotel or other duties like cleaning rooms, without a distraction, Strickland said.

Still, Wyndham is looking for new ways to use tech to ease the labor crunch. It is piloting a cashless tipping system where guests are able to tip the housekeeping staff by scanning a QR code in the room with a phone. So far, Wyndham has seen an increase in tipping, Strickland said.

Bene, the provider of the cashless tipping platform, has said its clients see an average increase in staff compensation of $4.50 an hour, and a 30% increase in monthly staff retention.

Strickland said the system makes it easier for guests, who often don’t carry cash, to be able to tip.

Many hotels are also considering chatbots, machine learning, artificial intelligence, facial recognition and other ways to run properties more efficiently and safely with less staff. These technologies are particularly helpful in handling more mundane requests, which then allows staff to focus on more meaningful one-on-one interactions, said Oracle’s Alt.

“These types of strategic technologies will be critical as the hospitality industry is still facing a labor shortage as we head into the busy summer travel season,” he said.

Sharan Pasricha, the founder and co-CEO of lifestyle hospitality company Ennismore, said he has used technology as a key point of differentiation in his business.

“The hotel industry runs on a very archaic technology stack,” said Pasricha, who explained that many hotels are only now switching over their property management systems to the cloud.

Pasricha’s approach has been to have in-house software developers and product engineers who can create bespoke applications. One of his focus areas was improving the booking system, where he drew inspiration from features in the e-commerce industry, which he sees as more innovative than the hotel industry.

“I couldn’t quite understand why we would accept a very traditional, boring, badly designed … cookie-cutter [third-party] booking engine, when we care so much about our physical experiences and everything in our hotels is so thoughtful and authentic and creative,” he said.

His efforts led to more bookings coming directly to the website of Hoxton, one of Ennismore’s boutique hotel brands. About 50% are direct, Pasricha said.

It also made it possible for the company to create Flexy Time, a feature that allows its guests to check in or out of a room 24 hours a day, rather than having to wait for a standardized time. Pasricha said the offering, which comes with no extra charge, means guests don’t have to “bum around the lobby for five hours” after arriving in town on a red-eye flight.

Flexy Time presents more of a logistical and operational challenge, but it has helped Hoxton stand out among other hotel brands. To make sure rooms are ready, it asks guests when they will arrive and depart when they book.

“Having the ability to control the technology allows you to have these iterations and innovations, which has for us, garnered a lot of loyalty with our guests,” he said.

Ennismore is in the process of expanding Flexy Time to its 14-brand portfolio, which includes the Scottish hotel Gleneagles, So/ and Mama Shelter, among others. The company is a joint venture with Accor, the French hospitality brand that owns the Fairmont and Sofitel hotel brands, among others.

Wyndham also looks for ways to stand out with its investments. Two weeks ago, it launched a road trip planning feature on its app that recommends routes and allows users to customize a trip itinerary. Also, ahead are investments it will make in electric vehicle charging stations, including a reservation system to book plug-in time, Strickland said.

Mobile apps are great for companies that want to build loyalty with their customers. The data companies can harvest allows them to better tailor future services and offers.

Although it’s too soon to say what impact inflation will have on the industry, the pandemic forced “a new level of appreciation” for modern systems, according to Alt.

“While the pace of innovation may slow, hotels know there is no turning back on these new consumer demands and they must be able to adapt with the help of the right technology,” he said.