As hotel owners navigate persistent inflation, rising operating costs and growing guest expectations, maintaining profitability requires a careful balance of expense management, operational efficiency and revenue optimization. For Apple Hospitality REIT, that means taking a disciplined approach to controlling costs, maximizing the profitability of each booking and leveraging technology to help hotel teams work smarter.
Ahead of The Hospitality Show 2026, advisory board member K.C. Gallagher, senior vice president and chief operating officer at Apple Hospitality REIT, discussed the industry's biggest profitability challenges, the role of artificial intelligence in streamlining operations and decision-making, and why stronger integration between hotel systems could create significant value for owners and operators. She also shared how the company is using data and emerging technologies to improve performance while enabling associates to spend more time focused on guest service.
What's the biggest threat to hotel profitability right now, and what's the biggest opportunity?
In today’s inflationary environment, we remain intently focused on the threat of expense creep. We work to prudently manage expenses across our portfolio to maximize the flow-through of top-line improvements and deliver strong bottom-line performance. We also work closely with our third-party management companies to find and retain exceptional talent who deliver real hospitality, maintain the asset and drive bottom-line growth.
We continue to see opportunity as strategic revenue management evolves and focuses more on putting the most profitable business in our hotels, taking into account distribution and acquisition costs as well as the impact of factors like length of stay and the number of people per room on variable costs.
We also see real upside in the automation, consolidation and integration of the myriad of disparate systems hotels subscribe to today. Done well, that could:
- Streamline operations so managers spend less time logging into different systems for different purposes;
- Bring data points together across various areas of operations to allow for better strategic decisions;
- Automate manual tasks to save manager time and improve consistency and quality of follow-through;
- More effectively layer in AI once all systems are speaking to each other to save analysis time, so managers can focus on taking action as a result of the analysis, and to improve the consistency and quality of analysis across hotels; and
- Reduce subscription costs through consolidation of vendors.
What's the one thing your company is doing today to optimize operations, improve efficiency or drive better returns?
We have tremendous access to performance data that we utilize to benchmark and identify areas of opportunity. We are leaning harder into AI for administrative tasks and basic analysis so we can more efficiently direct our focus to the follow-through, ensuring action is taken to address confirmed opportunities. Data sources comprise all aspects of operations, including labor management and productivity, all expense areas beyond labor, preventative maintenance, guest satisfaction, chargeback success rates, guest messaging response times, and a myriad of commercial data including booking position, market share, forward-looking positioning vs competitive set, forecasts vs booking position, segmentation, channel mix and more.
We are also working closely with the brands since they oversee much of the onsite technology infrastructure and the standards we need to execute on. Those conversations are going well, and we believe there are solid advancements coming.
What guest expectation has changed the most, and how are hotels adapting without sacrificing margins?
As guests tend to pay more, given ADR increases over the past few years, they naturally expect more. Executing on brand promise is a key focus so guests get what they expect from a service, cleanliness and product standpoint. We remain intently focused on guest satisfaction, especially as it relates to service and cleanliness, areas where we can drive improvement without incurring additional costs. That means finding the right associates, giving them the right training, oversight and support, and reducing turnover once a solid team is in place, all of which happens through successful management company culture.
We make sure we’re partnered with the right management companies with strong cultures that are able to draw, train and retain the best hotel associates. We also work with our management companies to find the latest and greatest systems and processes that further streamline operations so managers and associates have more time to devote to true hospitality, the positive guest interactions that drive loyalty and increase demand for our hotels.
Where do you see AI delivering the most tangible value in hotel operations over the next few years?
There is an incredible opportunity for brands to take the reins and create a framework for AI use at the property level that drives operating efficiency and consistency in the guest experience. Within the next few years, we should be in a position for AI to handle basic analysis of data points across all aspects of the operation so humans can focus on follow-through and realizing identified opportunities. Currently, so much time goes into pulling data from disparate sources to identify opportunities and make strategic decisions that very little time is left to follow through and effect change. If we can be more efficient while elevating the level and consistency of analysis, we’ll have more time to focus on making change and improving strategic direction.
Brands will need to help establish the infrastructure of AI use on property by ensuring consistent data sources and systems that have sufficient integration with PMS, revenue management and other critical systems, so the application is holistic and guest experience is consistent.
Why is The Hospitality Show valuable to you personally, and how does it benefit your company?
The Hospitality Show is a great opportunity to network and get a pulse check on what advancements and innovations are out there that might help advance the business. As an industry, we have to keep innovating, brainstorming, and sharing best practices, feedback and experiences to maximize advancement. Events like this are critical to our industry. We work with 15 of the strongest management companies in the business and make it a point to share similarly across our platform for the benefit of all, so each one has easy access to feedback and the best practices of our other management companies.