AI adoption in hospitality: A proactive approach to mitigating risks 

Artificial intelligence (AI) is becoming increasingly embedded in hospitality operations, from chatbots and virtual concierges to mobile check-ins and automated pricing tools. The technology is driving efficiency, elevating guest experiences and helping ease labour pressures. But growing data volumes and systems integration also introduces new vulnerabilities for hotels, restaurants and other hospitality businesses. 

What risks should be considered when adopting AI and what steps can leaders take to proactively reduce their exposure? With nearly 15 years of insurance and risk management experience with specialized expertise in hospitality, Acera Insurance’s Steve Noreen shares how organizations can implement AI safely while protecting themselves along the way. 

Where is AI driving the biggest shifts in hospitality and what are the AI-driven risks?

AI’s presence in hospitality has moved beyond pilots and experiments. Businesses are leveraging these tools to navigate pressure points and unlock new efficiencies, supported by deliberate investment in weaving the technology into decision-making and service delivery. This rapid uptake is setting the stage for a variety of practical applications that are emerging as central drivers of modern hospitality operations. 

Hotels are deploying AI to answer customer FAQs, support bookings, enable multilingual service and provide 24/7 responsiveness. Meanwhile, restaurants increasingly rely on automated drive-thru agents and chatbots for reservations and ordering. However, these systems often capture and retain voice or text interactions, triggering obligations around privacy disclosure, transparency and Canada’s Anti‑Spam Legislation (CASL) which requires consent, identification and easy unsubscribe options for any commercial electronic messages. And in jurisdictions like Quebec and B.C., the use of any biometric identifiers (e.g. fingerprints, facial and voice recognition, etc.) face even more stringent expectations, requiring express consent and formal evaluations before they can be used legally. 

“Guests often don’t realize they’re interacting with AI, making transparency essential to building and preserving trust in your brand.” – Steve Noreen 

Hotels traditionally rely on staff to manually adjust rates based on occupancy, competitor activity and seasonal patterns. Today, AI can analyze demand, trends and local events in seconds and automatically recommend rate changes or trigger targeted promotional offers through email and text messages to fill rooms. While this speed and precision can significantly enhance revenue performance, particularly during slow periods, these tools require careful oversight. Claims of “AI-optimized savings” and automated discounts must be accurate to avoid triggering deceptive marketing scrutiny and pricing algorithms must withstand audit so businesses can justify how rates were generated.

Mobile keys, digital check-in and ID verification kiosks offer guests a smooth, contactless arrival experience – but also increase the stakes if a system is compromised. A breach could allow unauthorized room access, interrupt front-desk operations or expose stored identity information. These risks carry added weight in jurisdictions with strict privacy rules: Quebec’s Law 25 requires formal biometric notices and tight retention controls, while B.C.’s Personal Information Protection Act (PIPA) limits the use of biometric information even when images are publicly available. As these technologies become more common, hospitality businesses must ensure their deployment meets both security and compliance requirements. 

Behind the scenes, AI is supporting many of the functions that keep hospitality businesses running smoothly that guests may never see. These tools are helping teams operate more efficiently, anticipate needs and maintain consistency in service within high-pressure, fast-paced settings. Today, AI is commonly used for: 

• Predictive maintenance for elevators, HVAC systems and refrigeration, helping prevent costly breakdowns. 
• Housekeeping scheduling that allocates staff resources based on occupancy patterns and turnaround requirements. 
• Menu engineering and food cost forecasting, enabling more informed decisions about pricing, profitability and preparation levels. 
• Food safety monitoring through kitchen cameras that detect glove use, cross contamination or temperature issues. 
• Fraud detection and anomaly tracking that flag unusual transactions or operational inconsistencies in real time. 

“Robotics and AI-powered automation boosts productivity, but they also create additional points of equipment failure that businesses must manage proactively to avoid prolonged disruption.” – Steve Noreen

5 ways to minimize AI risks in hospitality  

Safely adopting AI in hospitality means approaching it with strategy, structure and a commitment to privacy and compliance. Leaders must ensure that AI tools are implemented responsibly and supported by the right governance frameworks. Building responsible, privacy‑conscious and legally aligned AI practices helps protect both guests and business operations. Below are Steve’s top recommendations, supported by industry best practices and Canadian regulatory context. 

A PIA identifies what data you collect, how it’s used, stored and shared, and whether it aligns with Canadian and international privacy standards. A thorough PIA evaluates alignment with Personal Information Protection and Electronic Documents Act (PIPEDA) federally and the applicable provincial legislation such as B.C.’s PIPA and Quebec’s Law 25. 

A PIA is especially critical when deploying AI tools that handle personal or biometric information, including: 

• Chatbots that collect guest preferences or conversation logs 
• Biometric or digital identity check-ins 
• Loyalty programs that use behavioural profiling 
• AI-driven marketing systems that generate personalized messages 

The EU’s General Data Protection Regulation (GDPR) is considered one of the world’s most comprehensive privacy frameworks – many jurisdictions model their laws after it. As a result, adopting GDPR‑level controls often positions hospitality businesses to meet and exceed requirements under local legislation. 

“If you’re implementing AI, a privacy impact assessment should be your first step. It lays the groundwork for transparency, compliance and consumer trust.” — Steve Noreen  

AI-generated emails, SMS offers and automated outreach are subject to Canada’s Anti‑Spam Legislation (CASL). This means that even if content is drafted or delivered by AI, the organization sending out these messages are responsible for ensuring legal compliance. Under CASL, businesses must have: 

• Express or implied consent before sending any commercial electronic message 
• Proper identification of the sender and how to contact them 
• A simple, easy-to-use unsubscribe mechanism (commonly one click)
• Records showing when recipients opted in and opted out 

Additionally, AI must never automatically harvest emails or send promotions without documented permissions. Businesses are responsible for complying with consent, transparency and unsubscribe obligations, and improper use of AI can lead to significant penalties. 

I systems depend heavily on cloud platforms, integrations with point‑of‑sale systems and constant connectivity. That means even a brief disruption to a booking engine, payment processor or mobile‑key system can immediately impact guest experience and revenue.  

To build cyber resilience and reduce the operational impact of outages, operators should: 

• Segment networks from Internet of Things (IoT) devices to limit lateral movement if a system is compromised. 
• Maintain strong authentication (MFA) and keep PCI DSS 4.0 controls active on all payment‑related systems. 
• Test backups and incident‑response processes to ensure systems can be restored quickly. 
• Verify contingent business interruption coverage to protect against outages originating from key third‑party providers such as booking platforms or payment processors. 

Additionally, it is important to be aware that business interruption stemming from cyber incidents is not covered under traditional property policies, because data is excluded from standard property wording. Instead, this exposure is addressed under a dedicated cyber liability policy, which provides coverage for system shutdowns, recovery costs and related lost income.  

AI is increasingly influencing HR and workforce management in hospitality, from resume screening tools that filter out candidates to automated interview platforms that assess tone, word choice and facial cues. AI-enabled monitoring is also becoming more common in kitchen and bar areas, where cameras can track food safety practices, cash handling and staff movement to prevent employee theft or fraud. These types of tools can introduce several risks to the business: 

• Algorithmic discrimination leading to unfair hiring or scheduling based on biased data. 
• Privacy breaches (particularly when employee activity is recorded, analyzed and stored without explicit notice or protections). 
• Unsubstantiated performance decisions such as disciplinary actions based on AI scoring or pattern detection. 

Because these issues directly affect recruitment, workplace fairness and employee rights, they fall primarily under employment practices liability (EPL). EPL insurance helps protect businesses against claims tied to discrimination, wrongful termination and other employment‑related allegations. 

AI is accelerating decision‑making and data‑driven workflows, but it’s also expanding the scope of potential liabilities. Risks tied to cyberattacks, system outages, regulatory compliance and AI‑generated errors are becoming more complex and interdependent. Many of these exposures fall into grey areas between traditional coverage lines, making it more important than ever to assess your insurance programs through the lens of emerging AI-related risks to ensure you are aligned with the realities of AI‑driven operations.  

• Cyber liability covers the costs of responding to and recovering from data breaches and cyberattacks. Unless other specifically excluded, AI-related data loss is generally covered under this type of insurance. 

• Errors and omissions (E&O) liability (also known as professional liability) protects your business if a third party suffers a financial loss due to advice or professional services you provide. If your business doesn’t provide these services, issues arising from AI use such as incorrect pricing or booking errors are more commonly addressed under cyber liability or contractual liability provisions.

• Directors & officers (D&O) liability protects leadership in the event they are personally sued for allegations of wrongdoing in the course of their duties as directors and officers of the organization. This coverage could respond if board members or executives are accused of failing to exercise proper oversight over AI‑driven systems or policies. 

• Equipment breakdown insurance responds when machinery or technology fails due to sudden and accidental mechanical or electrical breakdown. Pure software or algorithmic failures may not be covered unless specifically endorsed. This type of coverage is increasingly relevant as kitchens, HVAC systems and guest technologies adopt embedded AI.  

Helping you navigate AI risks in your hospitality business 

The rapid rise of AI in hospitality underscores the need for thoughtful, structured risk management. Privacy regulations are tightening, cyber threats are becoming more sophisticated and automated decisions can carry real operational and legal consequences. By grounding adoption in strong privacy practices, CASL‑compliant outreach, resilient cybersecurity and thoughtful HR oversight, as well as ensuring insurance programs reflect emerging AI exposures, your business can stay ahead of emerging risks while delivering the seamless experiences guests expect. 

And while AI may be the headline here, rest assured there’s a real human behind this article who’s ready to help you navigate it all. Connect with me directly to review your AI-related exposures and build a coverage strategy that matches your technology roadmap. 

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Steve Noreen is a Senior Client Executive at Acera Insurance. Steve brings more than 13 years of insurance experience and specialized expertise in the hospitality and tourism industry. He works closely with destination marketing and hospitality industry associations nationwide, serving as a trusted advisor and resource to member organizations navigating complex insurance and risk management requirements. You can reach out to Steve at 250.519.2303 or steve.noreen@acera.ca.

Also by Steve Noreen:

Managing insurance and risks for your hospitality business in 2025 

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