Hospitality has spent years explaining its investment case against a backdrop of rising costs, squeezed margins and operational complexity. Artificial intelligence could give the sector a fresh argument—and one that goes well beyond running a more efficient restaurant.
Across parts of the economy, investors are considering how much of a company’s competitive advantage will survive AI. If technology makes its product cheaper to reproduce, its expertise more widely available or its service easier for customers to perform themselves, what happens to its pricing power and future profits?
Hospitality presents an intriguing proposition. AI can help improve the economics of delivering the experience, while the experience itself remains rooted in something physical, social and human.
That combination deserves attention.
The operational benefits are substantial. Better demand forecasting can help hospitality businesses order more accurately, prepare appropriate quantities and build rotas around expected trade. Analysing purchasing, sales and waste together can expose margin leakage that might otherwise remain hidden until the monthly accounts arrive.
This is already happening. Iberostar uses AI through Winnow to identify and measure discarded food, giving kitchen teams information to adjust production and reduce waste. OpenTable offers AI tools and integrations that help answer enquiries, handle telephone reservations and support restaurant discovery. These are practical applications addressing everyday commercial problems.
The opportunity extends across the business: more relevant marketing, better understanding of returning guests, quicker reporting, support with training and translation, and less time spent processing routine administration. Hotels can also use AI to support revenue management, staffing and more personalised offers.
AI can recommend somewhere for an anniversary dinner. It cannot have the evening for you
For a manager, the most valuable outcome may simply be having more time on the floor. Technology earns its place when it helps the team deliver a better welcome, notice an unhappy guest or turn a first visit into a regular booking.
But the more interesting question is what this could mean for the value of the business.
A buyer is purchasing future earnings. The amount they are prepared to pay depends partly on how confident they feel that those earnings will endure.
In some sectors, AI could improve productivity while simultaneously giving competitors and customers the means to undermine the business. Costs may fall, but so might the price anyone is willing to pay for its output.
A good hospitality business has a different starting point. People visit restaurants for food, certainly, but also for company, atmosphere, celebration and the pleasure of being looked after. The location, the room, the team and the people around the table all contribute to the product.
AI can recommend somewhere for an anniversary dinner. It cannot have the evening for you.
Even as more kitchen and service tasks become automated, the desire to gather in a real place remains. An established restaurant with a distinctive identity, loyal customers and a compelling experience possesses qualities that cannot simply be reproduced by generating a cheaper digital alternative.
My view is that investors may begin to attach greater significance to that distinction.
There are two potential sources of value. The first is stronger profitability through better operations. For illustration, on £10m of annual revenue, a one percentage point improvement in EBITDA margin adds £100,000 of annual earnings. If sustainable and measured after the ongoing costs of the technology, that can support a higher business valuation even without a higher earnings multiple.
The second is greater confidence in the durability of those earnings. Businesses that combine operational improvement with an experience customers continue to seek out could become relatively more attractive as investors reassess disruption elsewhere.
This is where the corporate finance conversation becomes interesting. Alongside asking how quickly a business can grow, investors may increasingly ask how difficult its earnings are to replace.
Hospitality has a credible answer.
Of course, this does not make every hospitality business a good investment. Technology is widely available, competitors can copy efficiencies, and customers may capture some of the savings. Rent, debt, capital expenditure and consumer spending still matter. The strongest case belongs to businesses that use AI effectively while continuing to give people a compelling reason to visit.
There may also be a cultural dividend. As more of working life becomes automated and screen based, shared physical experiences could become more prized.
Hospitality has always understood the value of bringing people together. As AI changes the world around us, that human connection could become one of our greatest commercial strengths.
Sometimes the world delivers a surprise. For hospitality, perhaps AI will prove to be the biggest gift we never saw coming.
Ted Schama is founder of advisory business One Voice Hospitality.