J. David Flagg
Published: February 26, 2025
The hospitality industry is at a pivotal moment in time, with artificial intelligence (AI) rapidly transforming how hotels, motels, B&B’s, and AirBnB’s perform general operations, engage with guests, and stay competitive. AI-powered chat bots, predictive analytics, and automation tools are no longer futuristic concepts…they are essential for business owners looking to remain competitive in an increasingly digital world.
But with so many AI solutions available, where should business owners start? The number one step hotels must take before implementing AI is identifying their most critical operational challenge that AI can solve effectively.
Why Identifying the Right Problem is Crucial
Jumping into AI without a clear problem to solve is like investing in going all-in on bitcoin without first having an understanding of what bitcoin is. Many businesses rush into AI adoption with the latest tech trends such chat bots, voice agents, facial recognition, or dynamic pricing, without considering whether those tools address their most pressing pain points.
According to a study by McKinsey & Company (2018), AI delivers the highest return when it’s used to optimize existing processes rather than replace them entirely. The report found that AI-driven personalization in hospitality can increase revenue by up to 15% while improving customer satisfaction (Bughin, Seong, Manyika, Chui, & Joshi, 2018). However, if hotels apply AI without a clear focus, they risk wasting resources on solutions that don’t provide tangible benefits. At Cape May AI, we use our 30+ years of systems engineering, business management, and innovative problem solution experience to do just that. We work with you to help you clear your focus, determine your primary pain point and design and develop a solution that you believe will solve your problem.
How to Identify the Right AI Use Case
According to David Flagg, owner of Cape May AI, to pinpoint where AI can make the biggest impact, business owners should take the following steps:
1. Conduct a Pain Point Analysis
Start by evaluating daily operational challenges and identifying bottlenecks that slow down efficiency, increase costs, or frustrate your guests. If you think about it for a moment, there will likely be several that jump to the front of your brain. However, to give your brain a kick start if it needs it, here are some common pain points many hospitality businesses encounter:
• Slow guest check-in and check-out times creating frustrating guests and stressing out employees
• High customer service demands leading to long response times, and again frustrated employees and guests
• Inefficient room cleaning schedules
• Fluctuating occupancy rates and revenue unpredictability
Hotels should gather input from front-line employees, managers, and guests to ensure they focus on the right problems. Sometimes asking the “boots on the ground” their thoughts on the situation provides invaluable insight.
2. Prioritize AI Solutions That Enhance Guest Experience
AI should not be seen as a replacement for human hospitality but rather as a way to enhance your employees ability to satisfy your guests, that is the goal…correct? A report by Deloitte (2021) highlights that AI solutions providing hyper personalization and seamless automation lead to higher guest satisfaction. For instance, AI-powered virtual concierges can handle routine inquiries (WiFi passwords, restaurant reservations, late checkout requests), freeing up your staff for high-value, high-touch guest interactions.
3. Start with a High-Impact, Low-Disruption AI Tool
Rather than overhauling entire systems, businesses should start small with AI tools that integrate easily and provide quick wins. According to Oracle’s Hospitality Benchmark Report (2023), automated chat bots and dynamic pricing systems are the two easiest AI applications to implement, offering a fast return on investment. However, at Cape May AI, we almost always suggest getting acquainted with AI through the use of a chat bot on their website. It is the quickest, most cost-effective way to prove the solution to your problem works. According to David Flagg (2025), a basic AI chat bot can be designed and developed within two weeks that will answer most questions that a guest might have before they make a reservation or during their stay. However, implementing it onto your website, may take a little longer as we have to work directly with your website hosting platform to implement it.
After seeing some positive impact from the chat bot, the functionality of the chat bot could be expanded to allow for direct bookings with with online booking systems such as Hotel Runner, Little Hotelier or Online Travel Agencies, like Booking.com, or Expedia. And as the business begins to implement and see these tools, solving actual business problems, AI can then take your guests experience to a whole new level, one solved problem at a time.
Case Study: AI Success in Hospitality
A prime example of AI implementation done right is The Cosmopolitan of Las Vegas, which introduced “Rose,” an AI-powered chatbot that handles guest requests via SMS (text message). By addressing a clear need (fast and convenient guest support), Rose increased guest engagement by 33% while reducing front desk workload (Skift, 2019).
Similarly, CitizenM Hotels implemented AI-driven dynamic pricing and automated guest check-in kiosks, reducing wait times and boosting revenue by 10% within the first year (PhocusWire, 2022).
Final Thoughts: AI Adoption Starts with Strategy
Again, before diving into AI headfirst without a clear direction, business owners must define the right problem to solve. There actually may be several problems that need addressing, but prioritizing them and finding the most cos-effective is challenging. AI is not a one-size-fits-all solution, although it does seem to be advertised that way by many, it works best when strategically applied to address specific challenges and this is what Cape May AI does. By conducting a thorough pain point analysis, prioritizing guest experience, and starting with AI tools that offer quick wins, businesses can set themselves up for long-term success in the AI revolution.
References:
• Bughin, J., Seong, J., Manyika, J., Chui, M., & Joshi, R. (2018). McKinsey & Company: Notes from the AI Frontier
• Deloitte (2021). The Future of AI in Hospitality: Enhancing Personalization and Efficiency
Flagg, J.D. (2025). The One Thing: The 1st step hotels, motels, and B&B’s must take to implement AI successfully.
• Oracle Hospitality (2023). AI Trends and Impact in Hotels
• Skift (2019). The Rise of AI Chatbots in Hotels: A Case Study on The Cosmopolitan’s “Rose”
• PhocusWire (2022). How AI is Reshaping Hotel Revenue Management
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