How IoT upgrades are the smart way to drive profitability

By Speleos Dravillas

Despite a strong rebound in travel and room-night demand, gross operating profit (GOP) margins for select- and full-service hotels still haven’t returned to pre-pandemic levels. And while 40% of Americans say they plan to travel more this year—which should be great news for hoteliers—the industry continues to grapple with the rising costs of operations, supplies and labor, which cut sharply into profitability.

Most people think of hospitality technology primarily for guest convenience and experience, but deploying Internet of Things (IoT) solutions has the potential to significantly reduce operational and labor costs, while increasing staff productivity and efficiency to help full- and select-service operators widen their profit margins.

In fact, IDC predicts that by 2027, 55% of hospitality and travel organizations will invest in AI and/or IoT-powered devices to reduce waste by 20% and lower costs by 15%. The anticipated gains are so substantial that by 2029, nearly half of hospitality organizations are expected to earmark as much as 25% of their IT budgets for automation of services and processes, aiming to increase efficiency by 85%.

With inflation and labor costs showing no signs of lowering anytime soon, that makes investing in IoT and the network to support it a no-brainer for operators. Here are seven areas in which IoT and network capacity investments can save money and drive new revenue to increase GOP margins.

Energy optimization

Energy consumption is a huge portion of OpEx and with many investors prioritizing Environmental, Sustainability and Governance (ESG) initiatives, increasing energy efficiency can help drive savings and new investments. Not to mention, 42% of travelers say they’ve paid more for a more sustainable travel option, and 69% are actively seeking sustainable travel options, which means energy efficient features can help boost revenue and loyalty as well.

Hoteliers should look to install energy management systems that optimize utilization to reduce unnecessary heating, cooling and lighting. For example, smart thermostats and occupancy sensors can adjust the temperature based on occupancy of the space in common areas and guestrooms, while smart blinds can also help to reduce HVAC load by utilizing sunlight for heat when appropriate or insulating against excessive heat and cold.

Connected lighting can also be deployed for automated control and daylight harvesting, to reduce lighting burn time and energy consumption.

Maintenance

If an ounce of prevention is worth a pound of cure, when it comes to hospitality equipment maintenance, those metrics can be measured in thousands of dollars.

IoT connected PTAC/HVAC systems are just one example: by detecting when filters need to be changed, refrigerant is low, coils are dirty or a compressor needs service, IoT monitoring solutions can alert staff before a major repair or complete replacement is needed.

Other solutions like sensors on elevators can monitor for maintenance alerts and provide peace of mind for guest safety, while water leak detection systems can prevent unnecessary and costly water waste, not to mention reduce the risk of property damage, guest injury and liability.

Front desk efficiency

While the labor market isn’t quite as tight these days, hotels still employ 12% fewer staff compared to pre-pandemic levels, and the time it takes to fill vacant positions is still hovering near six weeks. That means many properties are operating with fewer-than-ideal staff.

IoT and connected tech solutions can alleviate this shortage, offering a much more economical solution and also free up staff from the burden of routine, mundane tasks. For example, deploying a mobile app or a lobby kiosk that supports both check-in/checkout and serves as a room key saves time for front-desk staff and is more convenient for guests.

Finally, deploying voice-operated in-room devices that allow guests to make housekeeping requests, order room service or food delivery, or check the hours for the fitness center and other amenities can greatly reduce calls to the front desk. At one 82-room property, in-room voice assistants handled more than 50 requests per day, including guest inquiries about amenities, service requests, recommendations and navigation help, saving an estimated 630 staff hours per year. At another location in New Orleans, guests made nearly 14,000 hotel service requests in a single quarter via voice assistants for an estimated staff time savings of more than 5 hours a day, totaling roughly 56 eight-hour shifts or 11 full work weeks.

Cloud telephony

Speaking of voice, deploying a robust network to support IoT also opens the door to the use of cloud telephony, which can replace much more expensive premise-based phone systems.

By leveraging the building’s data network, cloud telephony solutions not only reduce the need for expensive PBX upgrades, but the best cloud telephony systems are also easily integrated into the PMS to handle line provisioning as well as digital storage and deletion of all call records, voicemails, etc. upon checkout.

Instead of charging per room for cloud-based PBX service, integrated data and cloud PBX providers charge a flat fee per X number of devices accessing the network. This keeps the cost low to satisfy hoteliers’ demands for affordable, yet full-featured, services for their guests, while still abiding by local laws.

Safety

Guest and employee safety is always paramount, and with limited staff, it’s inevitable that there are times when staff may be on their own across the property. Of course, connected CC camera systems are a must for security monitoring, but too often, those are only useful after an incident occurs.

IoT panic buttons allow for staff to instantly call for help in any situation—an accident, fall or run-in with guests or an intruder. These not only send an alert to other staff for immediate response but also provide location data so help can get to the right place faster. This can save hoteliers substantial money by mitigating the risk and/or severity of incidents, costly medical bills and staff turnover as a result of feeling unsafe. As a bonus, some of these devices can even measure WiFi signal strength in real time as staff moves around the property to alert property managers or their IT staff to any issues with bandwidth or signal strength.

Mobile loyalty applications

Cost savings aren’t the only way IoT solutions can help boost GOP margins—they can also drive new revenue.

With a robust IoT network, hoteliers can deploy mobile guest loyalty applications that recognize guests with automated, secure authentication, which allows property managers to deliver offers, discounts and other marketing/customer engagement content personalized for each guest. This not only bolsters company loyalty but can also drive upsell and future bookings at a much lower investment than front-desk staff time.

Co-working/dual use

With the rise in remote and hybrid working, many companies are looking for ways to bring teams together face-to-face in a convenient, economical way.

Hotels can provide the ideal solution by offering conference rooms, lobbies, business centers and even unoccupied suites for co-working space, and those who do can increase revenue by up to 20%. Of course, this hybrid use of space demands a strong IoT network to support collaboration, simple and seamless device connection, and online meeting technology.

IoT: A worthwhile investment

According to IDC, nearly two-thirds of hospitality companies will increase their investment by 2026 in IT networking, including IoT and WiFi, to meet growing demand for connected experiences. Beyond providing a better guest experience, this investment will substantially improve operational efficiency, reduce costs and drive new revenue opportunities for hotel operators as well, helping to widen their GOP margin.

Considering both the top-line and bottom-line benefits, IoT solutions can deliver a significant ROI that makes the investment not only a must-have for guest satisfaction, but a smart way to drive profitability.

Speleos Dravillas is chief revenue officer at Nomadix, an ASSA ABLOY company, and is responsible for the company’s go-to-market strategy and revenue growth through the execution of technology integration partnerships, strong channel and customer relationships, and industry alliances. He also is responsible for global sales and channel growth strategies and their plan executions.

This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.