June 19, 2023

AI Proposes Room Rates

Royal Holdings (HD) launched a full-fledged system in April in which artificial intelligence (AI) proposes room rates at all 43 directly managed hotel facilities. Based on past reservations and competitor data, it derives sales prices that lead to higher unit prices and occupancy rates. It also aims to reduce labor shortages by reducing work time to 1/3 or less of that required by humans.

All plans are eligible for all brands, such as "Richmond Hotel," with some exceptions, such as fixed selling price. AI recommends selling prices based on the last two years' room rates, reservation data, and competitors' situations. AI also proposes to maximize real income by multiplying the occupancy rate by the unit price.

A human operator will decide the final price based on the AI's proposal. Still, the time required to determine, estimated to have taken 20 to 30 hours per month, is expected to be significantly reduced.

Masataka Abe, president of Royal Holdings, said "We will improve compensation and reduce labor shortages while at the same time increasing operational efficiency through digitization and other measures".

The mechanism for moving prices in response to supply and demand conditions is called dynamic pricing and is a good match for AI, which learns from vast amounts of past data and other sources.