Technology and Operational Impacts on the Future of Hospitality

PODCAST TRANSCRIPT

Brian Betkowski

Welcome everyone to Jabian’s Strategy That Works podcast. My name is Brian Betkowski. I’m here with my friend and colleague, Ed Haines, and we are your hosts today and we are really excited to have a fun conversation about an industry that we’re all intimately familiar with through our work and personal lives, which is the travel and hospitality industry.

Ed Haines

That’s right. It’s a huge industry. It’s around $5.8 trillion predicted to be in 2027, which on my reckoning is around the size of the German GDP roughly, so the third-largest economy in the world. And just talks to how much innovation is possible there and how much focus is going to be on that particular industry, and just how much we rely on it in the rest of the business world.

Brian Betkowski

Yeah, I think domestically, depends how you count it, but something like 1.2 trillion, which I think takes you to maybe the 16th largest economy in the world, something like the size of Indonesia. And from an employment perspective, which is interesting, I think it’s almost 5% of the total employment in the US, something like 2 million direct, 7 million indirect workers, which although that’s down from pre-pandemic levels, I think it was almost twice that pre-pandemic. But it still makes you realize how important it is in all of our lives.

Ed Haines

And I think one of the things that we’re excited to dive a little bit deeper into here is the amount of innovation that’s going on in this particular industry. And just because of that size, again, as I mentioned, the spectrum of what can be tackled, be it in the accommodations hospitality piece in general, how do you use AI in your concierge services? How do you use technology in the check-in? So I think that’s going to be a fascinating conversation with our guest today.

Brian Betkowski

Yeah. Well, it’s a perfect segue. I’d like to welcome our guest today. Ryan Briley is here with us. We are really fortunate because he has a lot of deep expertise. Ryan is a senior account executive in Jabian’s Atlanta office, and you’ve been for a while helping clients take brands to the next level, whether that’s been through your go-to-market strategies or envisioning the future guest experience. So welcome.

Ryan Briley

Yeah, thank you. Excited to be here. Excited to be here. Thanks for having me.

Ed Haines

Excellent. So Ryan, what we thought we’d do is start at a hundred thousand foot level and drill down, but in particular, rather than focusing on the whole industry we talked about. How do we focus in on the accommodations part of that, which I think I believe is a quarter of the larger travel and hospitality industry, and that’s representing, by those calculations, around 300 billion in the US and 1.3 trillion globally. Give us a view as to how you see that hundred thousand foot level of this particular part of the industry.

Ryan Briley

Yeah, happy to. And before I get started, it’s just an industry that I love, and something that I love the most about it, a couple of things. One, travel is just fun. Having new experiences with families and friends, it’s just a neat way to bring people together. Two, people that are in this industry are just really passionate about it because it’s that whole hospitality nature. At the end of the day, when people get into this business, what they love about it is they’re making people feel welcome, they’re making people feel cared for, they’re making people feel special, and it’s unique and that’s what energizes them. So there’s a lot of passionate people in the industry.

And then last one, specifically around accommodation, it’s really complex and diverse and it’s fun to be a part of it. When you think about it, you’ve got guests, you’ve got hotel operators, you’ve got hotel owners. Those owners can be either owners of independents or franchise hotels. You’ve got travel agencies, you’ve got a whole lot of tech providers that provide basically everything from helping guests discover, plan and book, and enhance their stay. So that’s why I love it. There’s a lot of factors that go into the accommodation piece.

Ed Haines

Yeah, it sounds fun.

Ryan Briley

And so I’d love to share some insights with you guys on where I think it’s going over the next five years, but I think it’s important to take where has this industry been over the past five years? And so just a couple of things to chat through is obviously COVID was a big impact. It clearly put this industry to a screaming halt, and over the past five years, we’ve seen recovery happen, largely first with leisure. We saw that come back and the whole revenge travel thing. And then we’re seeing that stabilize. Business travel has for sure returned and is still on its way back. And the one that’s showing the most growth right now, it’s not quite back, is the groups and events piece. So that’s an important component.

As people came back out of COVID, just prioritizing being together and experiences. So people started to honestly prioritize travel a lot more than they had in the past. And it’s specifically important for the younger generations, the digital natives, they experience the world obviously in a different way previous generations had, and just experiences over things is something that’s really important to them. And so you’re seeing travel be more of a priority than it was before over the last couple of years.
Then another interesting thing when you think about the way it shut down, a lot of people left that workforce. It just went away and then it has come back, but that’s clearly been a struggle that this industry has had over the past couple of years is getting back talent and expertise that left because they weren’t sure what’s going to happen and they found other jobs. And then lastly, largely new technology. I know we will talk about just neat things going on with AI in this space. It’s now alive and present in this industry, and we’ll talk about some cool areas, things that’s going on there.

Brian Betkowski

You mentioned the younger generation versus the baby boomer generation, and I was reading a little bit about how the different hotel types, whether it’s boutique hotels, budget hotels, the big luxury brands, how that resonates differently with the different age groups. Do you have any insights into that?

Ryan Briley

Yeah, yeah. It’s clearly been a strategy that you’ve seen a lot of the brands play, because you rewind back 10, 15 years ago, the amount of, I would say, brands under the big portfolios, the big guys, they didn’t have a lot of boutique brands. They had their across the tiers in terms of lower mid-scale, upscale, and luxury and lifestyle. They had maybe one in each of those tiers. Now if you look at the portfolio, they’ve got four or five brands with each of those, but all targeting a different offering for basically people that are targeting a different experience. So it’s been neat to see that play out over the last couple of years.

Brian Betkowski

I’m also curious about, prior to the pandemic, when Airbnb and Vrbo had first come out, I was like, oh man, is that going to disrupt the whole entire industry and what’s that going to do to things? And then I feel like lots of laws got passed around that and it’s been a lot of swirl. Where does that land in?

Ryan Briley

Obviously that’s made it a challenge for that to be a consistent experience. What’s appealing about a big brand is an element of consistency. And so when you go to a big market, something like a tier one city, they could be having different levels of restrictions and how types of properties are available and coming up. Also on the consistency, the quality and the cleanliness and things of that nature, obviously is important to people. And that’s a wild card. So I think you’ve continued to see people almost gravitated that when it was new, but maybe coming back to more traditional ways of staying, just because of challenges with the quality piece.

Brian Betkowski

Well, you mentioned something about the technology, AI, everybody wants to hear about AI. Tell us a little bit about what you’re seeing.

Ryan Briley

It’s definitely one of the big things that I’m seeing. Just the use of AI and automation technology to advance two things. One around guest experience and personalization and making that a better experience for guests, and then obviously the other around helping hotel owners and operators really optimize their asset. And so on the guest experience piece, you’re thinking about a spectrum. Guests are either looking to discover, book plan, travel, and that’s where I think you’re going to continue to see AI play a part. So I know a big one, you guys are big into this, particularly, but using AI technology to help you plan your trip. So have you guys used ChatGPT Gemini to help plan a trip? Have you used it?

Brian Betkowski

For sure.

Ryan Briley

How was that experience?

Brian Betkowski

I was kind of blown away by it, especially because of the integration that it has now. Most of those tools have integrations with live data as well, not just its historical data. So you can get live information about what’s going on, you can get flight information, you can get all sorts of stuff that it would be really, really time-consuming to do yourself.

Ed Haines

And it’s a place to tie together those thoughts, because when I plan travel, the problem I run into is you go to one website, you get some information, you go to another website, and like in the old days, you’ve got a pad and a pen, and you’re writing it down. But when you’re using chatGPT, for example, it’s all in that same thread. And so it knows what you’ve been doing more than what you do, because half the time you forget. Go Back.

Brian Betkowski

It is interesting, the biases that it may or may not have or how advertising is going to impact that over time. I often think what is really causing it to tell me that that hotel is the best? Is it really the best? And what does that even really mean? And whose opinion is that?

Ryan Briley

Yeah, for sure. So in using that experience, is there anything that you felt like it was missing? Obviously it’s new, new ways, but anything that you couldn’t do as part of doing that?

Ed Haines

Well, book the travel.

Ryan Briley

There you go. Book the travel. The other thing when it’s serving you up information is it doesn’t have all the pictures and all the context and the other things that you get if you go direct to one of the brands website, and that’s what’s going to be a powerful shift. So when you see those technologies be able to book, that’s going to drive some material change in the industry. Because when you think about today, they’re called OTAs, online travel advisors. So think Expedia, think Booking.com, they largely have been a channel before to go and search and discover, travel. Now, once chatGPT can do these things, their business model is going to totally have to change.

Ed Haines

Well, before those guys, there were the travel agents.

Ryan Briley

Yeah, exactly.

Ed Haines

Of course, on the High Street, in my case. I remember those. You walked past them and you went in and booked a trip, and then it got replaced eventually by the electronic or the digital version. So do you see those guys basically reinventing themselves, or do you see the travel agent coming back in the form of an agent, or do you see the brands taking it on, like the hotels?

Ryan Briley

Yeah, yeah. Obviously the biggest impact of the OTAs is they’re going to have to reinvent themselves. They won’t go away, but they’re going to become less of a channel and more of an engine. So an example is, you can look at Expedia is something that I think they’re actually releasing over the next couple of weeks. Social is becoming more of a channel. It’s how, again, digital agers, it’s how they discover and think about the world and where they see, where they want to go, where their friends are going.

Expedia is actually rolling out something where they… I think it’s called trip matching, is what it is, and you essentially upload, through your social channel, you upload a story or a picture that describes where you want to go. You tag Expedia and then it says, “Here’s suggestions of things you should do. Here’s itinerary. Here’s where you should stay, and here’s the ability to book.” So again, that OTA has become more of that engine behind it, but what was the channel with social media? So I think you’re going to continue to see OTAs have to reinvent their business model as a result of AI becoming more prevalent, not only from an advantage for them, but then changing their role that they serve in the discover and book phase of travel.

Brian Betkowski

I would say the other dimension it made me think of is just the personalization dimension, and then this becomes this trust thing, which is how much do you trust all these channels to know how much about you, and then do you trust all these individual channels or do you end up going back to a single point of trust? And I don’t know if that’s something that you’re hearing people talk a lot about.

Ryan Briley

Yeah, yeah, definitely so. And that’s clearly what the big brands are promoting, obviously. So the actual brand companies, they’re trying to… Obviously the name of their game is upping that direct channel booking because that’s more profitable for them, and so they’re wanting to definitely pushing that message of trust. It’s interesting you say about personalization. That’s definitely another part of how the booking experience is going to change with more AI technology. So today, when you go on to one of your marriott.com and you go to book a room, what’s one of the first things you do, once you know it’s a Marriott and you have the property you want to go to, what do you do?

Brian Betkowski

You log in.

Ryan Briley

Yeah. And then you go and search for different room types and you get an idea of what you’re looking for. And it’s usually a bit underwhelming. There’s three static images of a hotel room and you’re like, “I kind of get it,” but what’s going to change in the future is some of those direct channels customizing that booking experience to basically make it more personalized to you, but then to help them drive that conversion rate. And I’ll give you an example that I know a lot of companies are actually piloting right now.

So today there’s three static images. In tomorrow’s world when this is more integrated, some of the AI and automation engines will use what it knows about you as maybe a Marriott Rewards customer. It will say, “Brian, you’re a family of four, and I know that, so when I serve up images to you, I’m going to show pictures of your two kids sleeping in the bunk room. I’m going to show the size of the closet that has all the room for your luggage,” and so you can actually see yourself in that, and again, makes a more customized experience for you. And then the ability to drive a higher conversion rate.

Ed Haines

That’s a fascinating point, and I think actually it’s a point to be made with all industries. Those who have the data are going to have the advantage. And as you were sitting there talking about that, I was thinking, well, Delta, for example, and call out one airline, they have probably 30 years of data on me since we’ve been using them. And the idea of how do you capture that data and use it to your benefit? In that big data space, are hotels doing… You say they’re doing similar things, but what other things are they doing other than the bookings? What about when you show up on the day? Are there technologies there that are going to be used to improve your experience?

Ryan Briley

Yeah, yeah, definitely. On the day of, that’s where you get into, I know I said guest discover versus when you arrive on site. And so when you think about how they’re using some of these things, that whole check-in experience, and you want that to be very personal and warm and they use what they know about you, and you think about maybe the gold standard 20, 30 years ago, it was Ritz-Carlton, right? They built this robust system and process beyond that and it was amazing, but they were Ritz-Carlton. They had the means to go do that. Your average courtyard down the street doesn’t have the means to do that, but with some of the uses of technology and it knowing about you, it now does. So you’re going to see things like their property management system, which is where they check in a guest. It now has the ability to use what it knows about you and basically serve up, in a guided workflow to that agent, what to say at exactly the right time to be able to just create that warm feeling and personalized experience as part of check-in.

Brian Betkowski

And there’s the kind of people who want no experience and just want to be walked through the door with the e-keys, which has already existing. Then you get into the, when does this become creepy? When does it go from cool to creepy? When you’re in your room and Alexa’s listening to you, and this is where it goes back to the trust thing. Do you trust the brand to have all those things, and it’s a delicate slope?

Ryan Briley

Yeah, absolutely. Another lens to think about it is from the owner perspective. Again, how some of this technology is helping them and what you’re going to see in the future is the whole revenue management function. So you can think about it from a hotel, “How do I set prices based upon demand?” You will continue to see that get really smart, and have demand-sixing technology today. For a lot of hotels, it’s still very manual. It’s gut feel for the individual operator or for that small-tier hotel. And you’ll see that, basically the intelligence get better, and it gives the hotel operator again to focus more on the thing that matters, which is the hospitality experience. They don’t have to do some of this back office stuff. And so you’ll see them to be able to focus that to basically make their asset perform better without the intervention of a human at all.

Brian Betkowski

You mentioned some of the metrics in our research. It’s interesting that pre-pandemic versus now, occupancy is down, but RevPAR and average daily rate are up over 10%. So the price that people are paying, and a little bit of that’s inflation, for sure, but the price that people are willing to pay goes up as seemingly the overall demand goes down a little bit. I’m not sure what your clients are saying about that.

Ryan Briley

There’s a multi-factored answer to that. One, I think there’s, although occupancy may be factored in. I think demand is still high. People prioritizing travel and putting that… You also see, when you look at which segments are actually excelling right now, it’s interesting, despite with some economic softening, that whole luxury and lifestyle component is actually on a growth trajectory right now.

Brian Betkowski

These are boomers.

Ryan Briley

So there’s that, and again, people, when they do spend, they’re spending at a higher amount because it’s a treat. So maybe I won’t go as often, but when I do, I’m going to go all out. The other is obviously rising costs. Hotels have had to raise the prices. So that’s definitely a key part of that, too.

Brian Betkowski

Interesting. Well, any final thoughts, any final questions or final thoughts, Ryan?

Ed Haines

No, it’s one of those industries where I look forward to seeing what technological innovations help improve that experience, but also from a business standpoint, that make it more efficient and make it so that we can expand the way we’re thinking about things and expand the industry.

Brian Betkowski

Yeah. Any final thoughts?

Ryan Briley

Yeah, just obviously, like I said, COVID rocked the world for this industry, but then you saw a return come back, but what is normal is now different, and I think the industry has embraced it, but now it’s time to scale. So you’re going to see that scaled in terms of advancements in technology, analytics, cloud, and we didn’t get a chance to talk about sustainability. That’s going to be a thing. All will be things that you see at the forefront.

Brian Betkowski

Tell us more. We have all the time we want. Do you have thoughts on sustainability?

Ryan Briley

Yeah, yeah. I think sustainability, that will be another trend that I think you see continue to be in the forefront in the future. And for two reasons. One, travelers, specifically younger generations, are becoming more eco-friendly. So that’s obviously in the hearts and minds more. The other thing is utilities and energy and all that. Outside of labor, that’s the number two expense for hotels. So if they can do things to drive that cost down, they’re going to do it. So when you guys think sustainability at a hotel, what do you think of?

Ed Haines

Oh, I think of the… We used to get fresh towels and now you do it by request. And the other one, traveling around Europe particularly you see this, where the lights go off and the air condition goes off when you take the key out of the slot in the door. And you see a little bit more of that in the US now, don’t you, but those efficiency saving things.

Ryan Briley

What about you, Brian?

Brian Betkowski

I would say definitely just the room not getting cleaned. I went skiing recently and came back, and the room wasn’t cleaned, and so I asked. They’re like, “Oh, we only do it every other day.” I’m like, oh, okay. That’s an interesting maybe cost-cutting thing. At the same time, it’s less laundry, it’s less everything. You do everything yourself.

Ryan Briley

So I thought you were going to say it’s the pump on the wall. They took away my minis and they put the pump the wall.

Brian Betkowski

That’s true, that’s true. But it’s not that. I think what you’re going to see change is just, again, using technology to help hotel owners optimize their water and energy consumption. So in terms of monitoring tools that can help them understand what their usage is, and actually set it against competitive benchmarks that are actually relative to a hotel, and then serve them up recommendations on things they can do to drive that down. They can be alerted, smart sensors around to, if there’s been a water issue somewhere, like go cut it off before it creates more of a havoc. And then, like you said, just continued advancement in smart HVAC and lighting solutions.
You’ll see some hotels start to invest in more renewable energy sources. That’s a little bit probably ways off, but the big trend here is all of these things come at a cost, and a lot of the bigger full service hotels have had this for years. What you’re going to see happen is now a lot of this technology and tools is more accessible to those limited service hotels, because the cost to acquire some of those, it’s just going to go down. So you’ll see, again, your average courtyard or whatever, that they will have some of that technology to drive down that number two cost.

Ed Haines

When it’s a win-win, though, that’s when it’s the best case, right?

Ryan Briley

Yeah.

Ed Haines

So the towel example is a win-win to a great degree from the sustainability, and having towels two days in a row is probably not the worst thing. And also, I look at that and I think, well, just the size of the industry, like we talked about at the beginning, all you need to do is take a small percentage out of that and it will make a real difference.

Ryan Briley

That’s why the hotel owners, at the end of the day, one of their favorite people are things that help them; energy, but then procurement isn’t their favorite group because they can materially just take cost right out of the bottom line of the business. So yeah, absolutely.

Brian Betkowski

That’s where scale helps, too.

Ryan Briley

Yep, absolutely.

Brian Betkowski

Well I really enjoyed this.

Ryan Briley

Excellent.

Brian Betkowski

Thanks Ed. Thanks Ryan for joining us.

Ryan Briley

Fun stuff.

Brian Betkowski

This was great.

Ryan Briley

Yeah, thank you guys.