Leaders increasingly are betting on technology, led by AI
and automation, as both a buffer against disruption and a catalyst for
long-term competitive advantage.
NATIONAL REPORT – Amid macroeconomic pressures, rising costs
and a decline in international travel, the hotel management sector is cutting
spending in some areas, but technology investment is viewed as a crucial
strategy to maximize profitability in the years to come. In fact, hotel
operators and investors see technology as a potential solution to current
economic challenges.
Hoteliers are investing in a range of artificial intelligence (AI)
applications, including revenue management, personalization and automation of
everything from guest services to tax compliance. According to a recent
Phocuswright survey of hotel management companies and hotel investors with U.S.
holdings, AI is key to helping hoteliers survive and thrive via unprecedented
operational efficiency.
Macroeconomic pressures reshape hotel strategies
While U.S. economic indicators have been mixed
in 2025, ongoing inflation, high interest rates and a sluggish economy are
taking their toll. Hotel management companies and investors indicate a range of
macroeconomic trends are impacting hotel cost structure. More than half (55%)
include labor costs and staffing shortages among the highest-impact trends, and
roughly four in 10 (41%), cite inflation and insurance premiums/risk management
costs, respectively.
The hotel sector is also being impacted by a decline in international
visitation. Inbound international visits to the U.S. are projected to decrease 6.3% in 2025.
More than half of survey respondents indicate business from international
travel has decreased in 2025, while only 12% report an increase.
These mounting pressures have forced hoteliers to adjust
their operational strategies in a variety of ways. Most commonly, hotels are
reducing staffing levels and delaying new hires, stretching existing resources.
Notably, however, economic uncertainty is also fueling technology investment.
Technology is viewed as a key way to improve operational efficiency, and these
tech investments are more likely to be prioritized over other strategies.
A multifaceted technology playbook
Hotel managers and investors often consider multiple factors
when evaluating the ROI of a new operational technology tool. Improved guest
satisfaction is the most commonly cited goal influencing tech investment, but
hoteliers also consider how seamlessly the tool will integrate with existing
systems, the ability to reallocate staff or reduce headcount and cost and/or
time savings.
In the current environment where hotels are already operating with limited
staff, technology that automates processes and maximizes efficiency becomes
even more important.
When asked to describe the operational change or technology
investment with the greatest potential to improve hotel profitability over the
next three years, respondents were most likely to cite AI/automation and data
and platform integration. Other key investment objectives include improving the
guest experience, revenue management and workflow optimization.
“At the core, AI enables us to shift from reactive to
predictive and prescriptive decision-making, driving efficiencies, enhancing
guest experience and unlocking entirely new revenue streams,” said one hotel
management leader in a survey response. “Ultimately, AI is not just a
technology investment for us, it’s a profitability engine, a cultural shift and
a long-term competitive advantage.”
While AI is the top strategy for driving profit overall, the technology is also
powering many of the other profit-driving efforts hotels are focusing on,
including revenue management, personalization, marketing and operational
efficiency. Hoteliers see the highest potential ROI in AI applications focused
on guest service automation (56%), revenue forecasting and dynamic pricing
(50%) and marketing and personalization (46%). However, hotel managers and
investors are investing in AI across many areas other of hotel operations.
Hotels’ multi-faceted approach to AI encompasses several
different objectives. Among them:
- Improving the customer experience (e.g., guest service
automation)
- Optimizing decision-making (e.g., prediction and analytics
tools to drive pricing and marketing decisions)
- Optimizing operational efficiency (e.g., automation)
Some of these technologies are flashier and more visible
than others but all play a role in boosting hotel profitability. AI robots, for
example, may garner the most headlines, but the technology tools that drive
behind-the-scenes insights and efficiencies are essential for hotels to remain
competitive in the years to come.
Optimizing efficiency across all areas of operations
AI is creating huge opportunities for automation across
hotel operations. Some AI efficiency tools enable capabilities that simply were
not possible previously, such as intelligent scheduling, optimized energy
management, inventory control, predictive maintenance and supply chain
optimization. Other AI tools and complementary approaches, such as robotic
process automation (RPA), make it possible to automate tasks that have
traditionally been done manually, freeing up crucial human resources at a time
when staffing levels are strained.
One hotel management executive said, “I believe that introducing end-to-end
automated workflows (RPA/workflow engine) in the hotel management side can
significantly reduce the burden on the operation team, allowing human resources
to focus more on high-value activities.”
Another respondent said, “We are investing in AI tools that streamline guest
communication and overall experience to mitigate the downside of the labor
shortage (and high overhead in general). We believe this will help increase our
NPS [net promoter score] and therefore RevPAR [revenue per available
room].”
Agentic AI for compliance workflows
One opportunity for automation that is sometimes overlooked
is tax compliance. Compliance is an operational necessity in hotel management
and much of the process can now be automated, saving time and resources.
Lodging tax compliance can be a burden on organizations, particularly at times
when organizational change is underway. Only four in 10 respondents (42%) are
confident in their organization’s ability to maintain lodging tax compliance
while scaling or restructuring operations.
Among the aspects of lodging compliance hotel managers find
to be most difficult and/or time-consuming are understanding local tax rates
and rules (42%), filing monthly and quarterly returns (30%) and understanding
marketplace and channel-specific rules (28%). Time spent navigating various
regulations to ensure compliance could be better used on projects that generate
revenue. In the current economic environment, automating low-ROI tasks like
compliance is essential.
Avalara, a leader in tax and compliance automation, is
applying agentic AI to streamline the compliance lifecycle for hotels. The
Avalara Agentic Tax and Compliance Platform automates end-to-end occupancy tax
workflows, from rate calculation and reporting to filing and remittance, while
integrating seamlessly with existing hotel and accounting systems.
By transforming compliance from a manual process into an intelligent, automated
function, Avalara helps hotel operators reduce errors, lower costs and free staff
to focus on growth and guest experience. In a period of economic pressure and
lean staffing, automation in compliance isn’t just a convenience; it’s a
competitive advantage.
Looking ahead
The hotel sector is at an inflection point. Economic
pressures are unlikely to ease soon, and operators will continue navigating
staffing shortages, cost inflation and shifting demand patterns. Yet the path
forward is clear: Leaders increasingly are betting on technology, led by AI and
automation, as both a buffer against disruption and a catalyst for long-term
competitive advantage.
Learn more: Explore how Avalara’s AI solutions are transforming
compliance automation for hotels.