Travel and Hospitality Companies Budgeting for IT: 4 Trends to Keep in Mind in 2023

While the pandemic's impact had been extremely hard on the entire travel industry, which resulted in many companies slashing their IT budgets, some players leveraged the crisis to recalibrate their investments in technology and improve or automate technological operations. For these companies, the pandemic was a chance to accelerate IT measures rather than an obstacle to advancement. In the post-pandemic era, global spending on IT is growing: the latest forecasts by Gartner project that it will total $4.5 trillion in 2022, an increase of 3% over 2021.

As travel and hospitality companies continue to recover, let’s look at trends in technology cost allocation that will be useful to consider as the time for 2023 budget planning approaches.

Budget Line: Staff Management and Automation Systems

The travel and hospitality industry experienced unprecedented “brain drain” during the pandemic: millions of skilled and capable professionals left their jobs for other industries, and others took early retirement. According to the Statista’s estimates, the global travel and tourism market lost roughly 62 million jobs in 2020. While this scenario improved in 2021, the sector still reported around 44 million fewer jobs worldwide compared to 2019.

There is still a long road to recovery ahead. As travelers resume pre-pandemic travel practices, hotels and airlines are struggling to hire employees for customer-facing and service roles. Labor shortages are a major driver for travel companies to improve staff management systems and automate routine processes.

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Manual Process Automation for Hotels

As of October 2021, there were 300,000 fewer workers in the hotel industry than two years prior. This called for a need to eliminate some routine tasks in order to concentrate on maintaining the guest experience. Automation at hotels is not only about using robots for check in, there are other automation opportunities, including call-center automation and machine learning-driven logic for self-service assistance. Many situations that usually involve an in-person interaction with the hotel personnel can be automated.

Revenue management automation will be another huge area of investment for hotels in 2023. Historical data on seasonal room occupancy that was accumulated pre-Covid is no longer fully relevant, so hoteliers need to train their revenue management algorithms based on newer data. This requires more sophisticated, ML-based algorithms, that can identify and accommodate for repetitive patterns in smaller amounts of data. A smart revenue management system takes into account future pace of recovery, price sensitivity, external data points, unconstrained demand, and even prices by room type and/or market segment to help a hotel generate more revenue in the long term.

Crew Management Systems for Airlines

Two major items of expenditure for the airlines remain unchanged through years: labor and fuel costs. As airlines face challenges filling their needs for pilots and mechanics, they should plan to invest in smarter crew management systems. According to a study by Dartmouth College, airlines can avoid up to 80% of crew-related delays and save billions of dollars annually through advanced crew shift planning and flight scheduling.

Smart crew management systems are designed to meet thousands of complex rules at a time, including workload variables due to seasonal traffic fluctuations, legislative and contractual conditions, crew member preferences and certification expiry dates. Machine learning algorithms take all these variables into account and perform what-if scenario analyses. Airlines can use these models to improve crew management system accuracy and airline profitability.

Budget Line: Elastic IT Team

Along with the shortage of customer-facing and service employees, travel and hospitality companies face a shortage of in-house IT professionals with travel industry experience. This gap can be addressed by forming strategic partnerships with experienced software development and consulting vendors. These partnerships can help provide flexibility for 2023 IT budgeting strategies and execution.

With an external tech partner, it is easier for travel companies to scale up or reduce their IT teams as technology priorities change.

Budget Line: Information and Cybersecurity

The modern travel and hospitality industry is heavily reliant on digital interactions: tourists enter their personal data when they book a flight,  hotel room, or car online. For this reason, travel businesses are a target for cyber crime. In fact, the number of cyber attacks on travel companies and consumers has grown every year.

Throughout the pandemic, many small travel businesses adopted digital capabilities. Unfortunately, not all of them had the knowledge or experience in information and cybersecurity that they needed to protect against threats. This made them easy targets for threat actors.

This led to a chain reaction of data breaches and infosec incidents: hackers used small companies as a backdoor to attack their larger and more reputable partners in the travel industry. The most notorious example of this kind of chain cyberattack is Marriott International, a global hotel chain, which has had its internal systems repeatedly (and successfully)  attacked through the Starwood Hotels & Resorts Worldwide network, which Marriott acquired in 2016. During the most recent attack, the group of hackers exfiltrated around 20GB of data, including customers’ credit card details.

To ensure strong cybersecurity, it is crucial for travel companies to have both a security incident-driven response system and a prevention-based one. This can boost the security and resilience of their infrastructure and streamline compliance. Companies that have not yet implemented strict cybersecurity standards and policies should consider allocating a budget for these in the upcoming year. Larger companies with dedicated InfoSec departments and stringent requirements around the security of their digital assets must continue to stress-test their systems regularly by running periodic black, grey, and white box penetration testing.

Budget Line: Cloud

Cloud has been a major budget line for many travel companies over the past few years. In 2023, the resiliency and scalability that this technology offers will take on an even greater meaning. The upcoming year will likely come with significant economic strain, so travel companies should once again prepare for the worst while hoping for the best. Price increases and delivery uncertainty, exacerbated by Russia’s invasion of Ukraine, have already accelerated the transition in purchasing preferences from ownership to service. This has led cloud spending to grow by 18.4% in 2021, a trend that’s expected to increase to 22.1% in 2022. Companies that have not yet seen the benefits cloud has to offer should allocate budget for cloud entrance, POCs, and further cloud adoption in 2023.

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The cloud paradox lies in the fact that, for large companies, it is often more economically viable in the short term to maintain on-prem data centers. At the same time, for companies that can't predict their monthly/yearly transactions count, cloud delivers the elasticity and scale they need. Furthermore, cloud helps these companies promote innovation since the tech team focuses on non-infrastructure related items, rather than infrastructure tasks.

Those travel and hospitality companies that moved to cloud during the pandemic are already enjoying increased agility, cost savings, and a faster adoption of innovation. They not only modernized their infrastructure, but also cut spending for on-prem data centers that they would otherwise have maintained during the 'darkest days' of the pandemic, when their transaction count was extremely low. We recently shared a cloud migration success story of one of DataArt’s clients, Onepark, a France-based online car park booking vendor. You can find it here.

How DataArt Can Help

DataArt has helped trusted partners like Skyscanner, Apple Leisure Group, Inspirato, and Trainline. We enable clients to be more flexible and reactive to changes in marketplace dynamics. DataArt's experts provide relevant expertise for executing your IT strategy — be it cloud transformations, cybersecurity measures, AI and ML, or data analytics.

A good technology partner will always challenge clients with questions like "Is this really the most efficient way to do this?" or "Is there room for delivering an even better experience for your clients?" This is exactly what we do at DataArt. We follow strong processes to learn and understand a clients’ business and desired outcomes, and help them to increase operational efficiency or make their systems more flexible and easily adaptable in the future.

Similar to what the cloud does for computing power, DataArt enables businesses to use engineering expertise and services on demand.Contact us today to find out more!