Industry Innovations Set to Deliver Strong Growth Prospects for Hospitality Stocks in 2025

In a hospitality sector that’s still struggling to fully embrace digital transformation, 2025 may finally be the year when innovative technologies begin to make tangible improvements to customer experience (CX) models. If implemented correctly, the push to embrace AI and emerging technologies could drive a new golden age for hospitality stocks on Wall Street.

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\ Getting innovation right in a hospitality landscape that still prefers that all-important human touch can be a significant challenge.

\ According to a recent Mews survey, 76% of hoteliers agree that personalization boosts reputation and repeat business, while 70% believe that technology can help deliver better personalized experiences and customization options for guests.

\ 2024 has been a mixed bag for hospitality stocks. While homestay rental stocks like Airbnb (NASDAQ:ABNB) entered the fourth quarter some 6% down on the calendar year, Booking.com (NASDAQ:BKNG) surged 21% higher.

\ Meanwhile, in the restaurant industry, McDonald’s (NYSE:MCD) had began Q4 with subtle growth following losses throughout the summer months, while Yum! Brands (NYSE:YUM) has endured significant volatility throughout the year.

\ Although the performance of the hospitality sector may not fill Wall Street investors with confidence for the year ahead, the steady flow of innovations to improve CX across the industry could point to a strong 2025 for some of its most ambitious players.

Embracing the AI Boom

Crucially, 2025 appears set to be the year when leading hospitality players finally reach the implementation stage for the artificial intelligence boom.

\ According to recent statistics, global AI in the hospitality market is projected to skyrocket, with a staggering Compound Annual Growth Rate (CAGR) of 60% expected until 2033.

\ Booking.com has already expanded its suite of AI-powered features in recent weeks to leverage more tailored and efficient solutions for customers, including Smart Filter, Property Q&A, and Review Summaries.

\ The innovations make use of large language models (LLMs) to more accurately interpret contextual prompts from users who are looking for their ideal stay. With a view to ultimately replacing manual filtering processes, the Search Made Simple Tool can work like an intelligent search engine to match customers with their ideal hotel, based on their description.

\ Homestay firm Airbnb’s plans for generative AI are highly ambitious, with the company acquiring a stealth artificial intelligence firm launched by Siri’s co-founder called GamePlanner.AI in a deal worth $200 million.

\ While the details of Airbnb’s intentions for GamePlanner are few and far between, CEO Brian Chesky has been vocal in his plans to grow the ‘application layer’ of AI to build one of the world’s ‘most innovative AI interfaces ever created.’

Emphasis on CX

The year ahead will see a customer experience gold rush emerge throughout the hospitality landscape, with brands from different sectors seeking to implement generative AI solutions to improve their relationship with customers.

\ McDonald’s has recently made strides in implementing generative AI for CX by collaborating with Google Cloud to deploy the tech firm’s AI and edge computing capabilities within a number of McDonald’s operational frameworks.

\ As a result, customers can soon expect personalized ordering services, automated customer service solutions, and far more comprehensive training programs for staff.

\ We’re likely to see more hospitality firms embrace generative AI chatbots throughout 2025, intending to reduce common customer pain points while providing intelligent troubleshooting tools.

\ One such innovation that’s already making its presence felt is ‘Connie’, Hilton’s (NYSE:HLT) IBM-powered AI robot that’s been designed to improve the efficiency of the hotel brand’s concierge services.

\ Connie works by helping guests discover information on local attractions, hotel services, and amenities through its built-in natural language processing (NLP) system. The arrival of Connie rapidly speeds up information delivery for the hotel giant while improving the quality of guest services.

\ Hilton’s Wall Street growth in 2024 has already empowered the hospitality leader to authorize the repurchase of an additional $3.5 billion worth of common stock in recent weeks, and the incorporation of Connie into the chain’s core services promises to aid the stock’s strong performance into the new year.

Supply Chain Innovation

Digital transformation in hospitality is also set to significantly improve the quality of supply chain management in 2025 across a variety of industries.

\ With the help of intelligent systems, hospitality firms like hotels and restaurants can actively monitor their inventory levels based on customer purchases and orders. This significant time-saving process is helping to actively manage the supply of stock while preventing stockouts from occurring.

\ Generative AI innovations are also helping to improve processes throughout the supply chain for businesses, with Coupa launching an artificial intelligence platform dedicated to accounts payable automation and optimized sourcing capabilities. The innovation helps to reduce risks attached to human error while saving countless hours of manual entry for staff when sourcing materials and restaurant items.

Should Investors Look to Hospitality in 2025?

Evidence of innovation throughout the hospitality sector indicates that we’re finally witnessing the beginning of the implementation phases of generative AI and its innovative capabilities.

\ This is likely to pave the way for stocks outside of the tech sector to finally experience an artificial intelligence boom period as the tangible changes to operation models and CX strategies begin to improve the bottom line of early adopters.

\ With this in mind, investors can benefit from monitoring the state of digital transformation throughout key hospitality stocks for fresh opportunities and more outperformance in the year ahead.