The AI 'algorithmic audit' could be coming to hotel room checkout

CNBC

3 days ago

Artificial intelligence can lead to surprises in all sorts of places where a bill once would have been considered settled.
The use of AI by Hertz (and European car rental company Sixt) to scan for damage on cars, which is then charged to the customer, is a new application of the technology that is creeping into consumer life unnoticed. But it won't be the last unexpected adjustment to the travel experience courtesy of AI.
Experts say consumers should expect to see businesses across the service industry deploying similar technology in the future, if they aren't already.
"As businesses seek to automate loss prevention and operational efficiency, we're witnessing the emergence of what I call 'algorithmic auditing' – the systematic deployment of AI to identify, classify, and monetize previously overlooked inefficiencies or losses," said Shannon McKeen, professor of the practice and executive director for the Center for Analytics Impact at Wake Forest University School of Business. The Hertz program, recently reported on by the New York Times, is the beginning of what McKeen describes as a broader transformation, and new fault line, in the service economy.
"The implementation of these systems reveals a fundamental tension between operational efficiency and customer satisfaction and equity," McKeen said. The question isn't simply whether AI can detect a scratch on a rental car bumper. "It's whether businesses should charge customers for every microscopic imperfection that algorithms can identify but human judgment might reasonably overlook as normal wear and tear," he said.
McKeen says the dialogue between service agent and customer over costs will increasingly include a new term: "the machine says."
Hotels are working their way through these changes, according to Jordan Hollander, cofounder of Hoteltechreport.com, a research platform that helps hotels find new digital and AI products to improve efficiency.
"I've been seeing more hotels experiment with AI across operations, but not quite in the same way Hertz is using it for automated damage detection and billing. That said, we're not far off," Hollander said.
Some hotels, for instance, are already using AI-powered sensors to monitor air quality and trigger fines for smoking or vaping in rooms. But Hollander warns that sometimes the sensors trigger false positives.
"Like someone using a hairdryer or aerosol spray — and guests get hit with $500 charges without ever lighting up. It's not hard to imagine how that could go south quickly," Hollander said.
But unlike the car rental example, most hotels haven't automated the billing step yet.
"They're using AI more to flag potential issues — like a room that smells off, linens that don't meet standards, or maintenance problems — and then looping in a human for the final call," Hollander said. For now, the AI is acting more like a very observant assistant than a judge and jury.
"But it's clear that hotels are heading in the same direction," he said. "Between computer vision that can detect damage or wear in a room, and AI that analyzes guest behavior or room conditions in real time, the tech is already there."
In a hospitality industry where trust is everything, there are reasons for hotels to move with caution. To date, many hotel operators are using AI to improve things like housekeeping efficiency, energy usage, and guest messaging — but they're being cautious about when and how it impacts the guest directly in a way that can be perceived to hurt the experience.
"There's a risk of backlash if hotels start billing guests based solely on what an algorithm says. The moment a guest gets a charge and can't get a straight answer about why or how it was verified, you're in dangerous territory," Hollander said. "If guests feel like they're being watched or nickel-and-dimed by a machine, it undermines the relationship completely," he added.
Recent experience in the hotel industry provides at least one cautionary tale, according to Hollander, referring to a custom-modified Alexa for hotels. "Years ago, the hot thing was voice devices, and that never really took off for this reason," he said.
A Hertz spokeswoman told CNBC that AI brings uniformity and consistency to the checkout process.
"For years, vehicle damage inspections have caused confusion and frustration. The process was manual, subjective, and inconsistent, and that isn't good enough for our customers or our business," she said.
She added that with digital vehicle inspections, Hertz is introducing "much-needed precision, objectivity, and transparency to the process – giving our customers greater confidence that they won't be charged for damage that didn't occur during their rental, and a more efficient resolution process when damage does occur."
Of the 500,000 rentals scanned so far, more than 97% showed no billable damage, according to Hertz, and damage incidents are declining at scanner-equipped locations.
The Hertz spokeswoman acknowledged that the new system is still a work in progress.
"We know change of this scale takes time, and we're listening, learning, and improving every day. As we said from the start, our goal through this initiative is to enhance the safety, quality, and reliability of our fleet and to create a more consistent rental experience for our customers."
AI excels at pattern recognition, but where it may fall short is with the nuanced decision-making that has historically characterized good customer service, according to McKeen.
"What makes these systems particularly problematic is the erosion of contextual judgment," McKeen said. Traditionally, business relationships relied on human discretion to navigate gray areas like "when does a scuffed tire represent normal use versus chargeable damage? When does a hearty portion in a restaurant satisfy a hungry customer versus being wasteful?"
Other companies will be watching Hertz closely to see how the AI experiment works out, he said, and then jump right in on the profit opportunity if it is determined that use of the technology won't drive customers away.
The use of AI for cost recouping isn't widespread yet because companies have not figured out the balance between customer trust and implementing AI, and the benefit, so far, doesn't outweigh the potential loss in loyalty, said Chuck Reynolds, managing director at L.E.K Consulting and a member of the firm's digital practice.
The key for companies to implement these cost recouping tools is transparency. "While the opportunity for AI is huge, organizations need to be thoughtful about embedding it as a copilot, not police or enforcer," Reynolds said. Sustomers will accept AI as part of the experience, he added, if companies are fair, visible, and design the AI experience with empathy.
"AI has to have customer-centricity built into its core," Reynolds said, and companies have to keep a role for humans in the process to oversee and override the AI if necessary. "Organizations that do so without thinking through the entire process will have challenges with internal adoption and customer adoption," Reynolds said.
Customers should expect to see more of the technology Hertz is deploying in different settings, according to David Rivera, professor of hospitality and tourism at Flagler College. In addition to hotels, the future could include restaurants using AI to itemize plates to ensure accurate billing. But Rivera says all of this is being done with the goal of operational efficiency rather than to punish the customer. Use of AI in hospitality is evolving from passive data collection to active use of real-time decision-making tools, Rivera said, and that includes things like monitoring your rental car or how much you are raiding the mini-bar in your hotel room.
"The common thread is increased operational efficiency, enhanced guest satisfaction, and automation of traditionally manual tasks, with a layer of accountability and transparency for both guest and provider," Rivera said.
Not everyone is on board with that view, however.
"This trend is absolute overkill with AI solution capabilities," said Daniel Keller, CEO of cloud infrastructure company Influx Technologies, which provides data collection and data analysis tools. "This particular use of AI doesn't increase efficiency; it scrutinizes customers of small-margin service businesses looking to suck extra money out of guest experiences."