The Fourth Revolution Is Coming: How Tech Is Reshaping Hospitality



In today’s episode, we will be speaking with Karthik Namasivayam, director of the School of Hospitality at Michigan State University, about what the fourth industrial revolution is, what a fully tech integrated hospitality looks like, and whether it is the future of budget and luxury hotels.


Highlights from Today’s Episode

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Episode Transcript

Karthik Namasivayam: At that time, technology was not really common, but they had interviewed senior citizens about their preference for technology or non technology. And the statement senior citizens made was, I would prefer not to wait any long second line if they were technology. So ultimately, I think it speaks to the fact that nobody wants to wait in line, go through the hassle of getting that service. If there were a simpler, easier way to receive a room key going up.


Robin Trimingham: Welcome to the Innovative Hotelier podcast by Hotels magazine with weekly thought provoking discussions with the world’s leading hotel and hospitality innovators. Welcome to the Innovative Hotelier Podcast brought to you by Hotels magazine. I’m your host, Robin Trimingham. As regular listeners will be aware on this podcast, we don’t just rehash today’s news. Whenever possible we take the conversation to the next level by discussing where the hotel and hospitality industry is heading with some of the world’s leading business and academic experts. My guest today, Karthik Namasivayam, is no exception, serving as the director of the School of Hospitality Business at the Eli Broad College of Management at Michigan State University. He specializes in researching leadership and human resource issues in the hospitality field. And today we’re going to chat about what he calls the coming of the fourth Industrial Revolution and its transformative impact on the hospitality industry. Join me now for my conversation with Karthik. For the last 50 years, Groupe Gm has been a leader in the luxury cosmetic amenities industry. The group proposes a 360 solution for manufacturing to distribution, with over 40 international brands in its worldwide distribution network. Groupe GM offers different shapes and sizes of eco friendly products in hotels all over the world. Discover more on That’s Group with an “E”, GM dot com. Welcome, Karthik.


Karthik Namasivayam: Thank you for having me here, Robin.


Robin Trimingham: Well, I love talking to futurists, so I think we’re going to have an absolutely fascinating conversation. To start us off here, though. I read in an article that you published last year where you used the term “The Fourth Industrial Revolution”. I’m a little bit of a history buff, so that got me interested right away. Can you briefly explain to our listeners what you mean by this term and why you’re using it now?


Karthik Namasivayam: So Mr. Klaus Schwab, who is the chair of the World Economic Forum, published a book in 2016 with the title The Fourth Industrial Revolution. He traced the different revolutions that are taking place earlier, for example, moving from foraging to agrarian, moving from the Industrial Revolution because of the steam engine. And then the third phase of that action was really miniaturization and transistors and chips and all of those kinds of things. So at each stage there was a revolution in how industry worked and kind of dislocated a lot of the industries. But what Klaus Schwab is talking about now is that there is a lot more systemic change happening because of all the different technologies that are converging in some sense. If you look at nanotechnology, if you look at Iot, AI, all of these are coming together. So it’s becoming a system wide change, which really implies that one part of our economy or our industry changes. Other parts have to change equally well.


Robin Trimingham: Yeah, I couldn’t agree with you more. If you take science, medicine and technology and you talk about how those things are converging and how rapidly they’re changing and advancing, well then you can see right away what we’re in for. But we’re trying to talk about the hotel industry specifically here. Are you suggesting that where brands once differentiated themselves primarily based on furnishings or amenities, that we’re in the midst of a transformation where they’re changing based on level of service or human interaction?


Karthik Namasivayam: Yeah, I think at a very high level of generalization, we can discern luxury hotels with a very high level of human interaction and the rest with moderate to maybe marginal human interaction. So we have this whole kind of spectrum of hotels with different service levels, and that also applies in part to the interior design of the hotel themselves. The luxury end are very well designed. They have designer inputs and they kind of shape their product in a much more coherent way than maybe hotels at the lower end are probably not doing as well, and they are much more cookie cutter replicas of each other. So there’s not that differentiation that happens. Increasingly, though, because of advances in technology and its encroaching application, the hotels that traditionally relied on human services brands will need to again intentionally redesign their entire hospitality product. So this means that businesses have to place a bet on one direction or the other. Are they going to be technology oriented? Are they going to be interpersonal oriented? So where the brands were differentiated by their design, interior design today, that is the choice of colors, quality of furnishing, music, the bouquets, aromas, whatever. Today, they will be differentiated by design, technology and the level of human touch. So all these three things have to be intentionally designed in order to differentiate products.


Robin Trimingham: So I guess then we’re talking about the building blocks of these things in different combinations. So I read that you’ve identified four potential brand categories that for now anyway, you’re calling augmented luxury. Traditional luxury tech and economy. Now, most of the people listening around the world in the hotel industry will not be familiar with these terms at all. So briefly, can you explain the differences between the four of them?


Karthik Namasivayam: Sure. There are three main elements that must be aligned and balanced. The first is the design of the spaces themselves or service based service capes, as we call them, in which a service product or if you prefer the experience, is delivered technology and human interaction. So these are the three main elements that have to be balanced in a line. Academics love to work in two by two matrices, easier to conceptualize and so on. As an academic, I’m no exception, so I cannot conceptualize how we can take the complete spectrum of. Pipes and put them into some kind of simplified model, if you will. So the model that I’m presenting is a simplified model, and it comes from two axes. So on the vertical axis, I plotted the extent of human interaction at the front end. So I’m really looking only at the customer facing side of the hospitality product and really looking at the level of interaction that they have. It can be high or low levels of interaction, not looking at intermediate, just higher. And on the horizontal axis, I plotted the extent to which hotel technology is visible to a customer so they can be visible technologies and invisible technologies. So what do I mean by visible technologies? When a guest checks in, you can see the check in kiosk potentially, or you can see the POS systems and things like that.


Karthik Namasivayam: So those are all visible technologies that the guest is potentially interacting with or knowing about those technologies and how they support the operation and checking in and all of those kinds of things. Invisible technologies are there. The hand or all those technologies that work in support of the hotel operation back of the house operations, accounting, finance, POS systems, all of those systems that the customer cannot see but are very common in multiple different parts of the organization. So what I’m interested in these two in the two by two matrix is really the visible technology. To the extent that a customer can see the technology and interact with it is the visible technology. So when you cross these over in a two by two matrix, you have four quadrants. And so when you look at high technology visibility and a high interpersonal interaction, which is on the right top corner quadrant, you will have a augmented luxury because the technology is visible as well as there is a high level of service. And so I call it augmented. So augmentation here really refers to service being supported by technology. And on the left top corner is high service, but lower levels of technology visible to the consumer. And that would kind of parallel the current four star hotels, five star hotels and luxury properties because you see hardly see a lot of technology in the front end where the guest is interacting with it.


Karthik Namasivayam: And so that’s where I place those the tech companies are, those that have a very high level of technology and are leaning very much into the technology space and have lower levels of interpersonal service. So the most common example that comes to my mind is that of the airline check in counter compared to about ten years ago. When you look at the levels of service that have changed, we have fewer people supporting the check in. You do have a floater at the kiosks, but you essentially check yourself in, you get your boarding passes and proceed to the aircraft and you have one person or two people kind of floating around supporting those folks who are finding it difficult to get through. So that would be a tech oriented kind of an organization. So if you were to look at a hotel which has that, it’s not to say that all the people will vanish, but that they will have different numbers and they will be a lot more technology. The economy is those properties that are neither investing in technology nor are they investing in interpersonal service. So you have that kind of a space where I think it will be very difficult to compete in future. The names of assigned to each are just random. They can be named anything else.


Robin Trimingham: Okay, now that I’ve heard you describe all this, I have questions. I’m going to take a swing at this here. So it’s what’s interesting to me is when you talk about high tech and high touch at the same time and that being different from high tech but not very visible. And that’s what you say we have at the moment. I’m in a fortunate position. I get to talk to all kinds of people working on all kinds of different AI projects and development. And I remember talking to one of my guests about the fact that they’re developing technology around heat sensors, and I’m oversimplifying, but the concept is that the human will walk into the room and the system will automatically know, Oh, it’s Robin or it’s car tech and oh, he prefers the room cool. Or she prefers the room a little warmer or whatever, and you don’t see a thing, but magically it kind of happens. And I’m wondering how you would classify that because that might be augmented luxury or that might be more of a standard feature. How do you see this kind of shuffling out?


Karthik Namasivayam: So I might call it augmented luxury simply because I think there might be a biometric reader or a cell phone reader or one of those devices which. A customer has to have in order for that system in that room to recognize the person entering that room. And therefore, there is that kind of little bit of visible technology in that luxury space in creating that experience. And so I would perhaps put it in the box of augmented luxury. So I’m talking about the experience being augmented by technology and stuff.


Robin Trimingham: Yeah, and we’re just speculating, of course, because it’s we’re living in an interesting time where everything is being developed as we speak. I have another question for you. You were talking about the fact that you were really just looking at the two ends of the spectrum, the high touch and the low touch or the high visibility or the low visibility. But, you know, an awful lot happens in that kind of gray, fuzzy middle ground. What do you think of the potential for either the think tank or some kind of startup engine accelerator program actually running AI programs on all of this and figuring out where are the sweet spots, if you will?


Karthik Namasivayam: You’re absolutely right, Robin. I think that’s the next step, really. I think the hotel industry, by and large, have been laggards in adopting technology. And I think a part of that is because of the business models that are prevalent within hospitality, where you have a franchise organization, you have different ownership structures. And so the capital to be invested in particular advances are distributed. And so it’s not focused. And also the cost of upgrades become part of the calculation. And that’s probably the reason why we see a lot of ad hoc adoption of technologies as they are developed rather than a intentional design hospitality operation that starts from ground up to be digital. So for example, I think McKinsey and Deloitte and all these leading consulting firms have constantly spoken about how an organization has to be digitally designed in order to take advantage of all the technologies. I think hospitality is kind of anchored in two issues. One is obviously the business model that I spoke about. The other is potentially the ethos of hospitality, what it hospitality stands for and what it has always stood for. I think those two factors might play a role in how soon hospitality adopts technologies and takes it on. So to your point about VCs investing, I think this would be a great time to invest in an end to end system and to develop a hospitality product that’s entirely driven by tech from ground up.


Robin Trimingham: That’s an excellent point, and I think you’re the first person I’ve actually heard to make that point, because it also really brings to light the fact that you could go down two or three different paths. You could absolutely go down. Let’s design something from the ground up that is all tech. But I also think if you started from scratch with a clean piece of paper, which would be really hard for hoteliers to stomach, that you could also come up with, I’m going to call it some kind of brand new hybrid scenario in which you have the best of both worlds coexisting to make a better experience for. Oh, yes, the human. Did you know that offering top cosmetic brands is a delight for your guests? For the last 50 years, Groupe Gm has been a leader in the luxury amenity industry. The group proposes a 360 solution for manufacturing to distribution on cosmetic amenities and dry accessories. With over 40 international brands such as Guerlain Nooks Italia Cologne. The group offers different shapes and sizes of eco friendly products in hotels all over the world. This is possible thanks to its worldwide distribution network. Thanks to their care about the Earth programme, you can offer your guests top cosmetic products with a reduced environmental impact. Discover more on w w w dot group GmbH dot com that’s group with an E, GM dot com. I’m interested as far back as I think it was, 2017, if I’ve got this right, you published a paper where you were talking about the advent of text fatality and you were researching the emotional implications associated with removing front desk staff from the check in process. Talk to me a little more about your research in this area, because, I mean, 2017, that would sort of put you really at the forefront of a lot of what we’re just seeing coming online now.


Karthik Namasivayam: Yeah, sure. Most of my research from my dissertation on has been to understand the customer interaction better. The point at which a service person and a customer meet is the most critical point of any service organization. But I think we have examples from the CEO of Scandinavian John Carlson, who termed those as the moments of truth for an organization. So I think that’s particularly important for an organized service organization to manage. And I wanted to understand that from the point of view of customer, what really satisfies the person. And previous researchers had identified a number of factors, both discrete elements in the service product, as well as things like tangibility, reliability, empathy, and a whole bunch of other factors that they are identified as being critical to the customer evaluation of quality or satisfaction with the product. My query was really Why does reliability impact a customer’s satisfaction level? Why does tangibility or intangible effects go to see, affect and so on and so forth? So I kind of identified something that I thought was important. It’s about perceptions of control or the building of the service product. So as consumers, I think when we walk into a store or when we walk into a restaurant or a hotel, we want a certain service and we have a preconceived notion of what that service is going to look like. I would like to have a room of this kind.


Karthik Namasivayam: I’d like it to be clean. I’d like it to be lit like this. I’d like it to be quiet, I’d like it to oversee the fee or whatever. So all of those things we put together and build what we might call a service product. So if you disassemble all of the components that one puts into that service product, you can find that there will be functional elements. I want a nice bed, but I also want a nice ambience. I want a person who is giving me the key to be pleasant. I don’t want an unpleasant exchange there. So we kind of build both of those pieces into our expectations of a service product. And therefore, when we start to disassemble or deconstruct the service product, we can find that there are a number of functional elements that are very important to that service. And then overlaid on it are all what I call the bells and whistles of our service. So you can track back the service product to to early caravans arise or ends of the olden days and we will find that the main product being sold there is a bed, not even a comfortable bed. So we have really the product itself has not changed a lot. What we sell as an industry, we sell a room, but then all of the overlay has changed quite a bit. So the emotional pieces are all overlaid beyond what it started off as, so we can separate out the emotional pieces.


Karthik Namasivayam: I want to feel good. I want to feel happy. I want to feel satisfied. All of these are slightly emotional content of that service experience, as we call it the experience now. So my argument is that when you look at what happened during the pandemic, the separation between the emotional and the functional was clear. We could see that people went into stores, went into restaurants, went into hotels with no expectations of that interpersonal experience or service, if you will, but were entirely satisfied with the functional aspects of that service product. And so the question is, if that is possible during a pandemic, why is it not possible with technology or with other issues that we can? And actually, one of the articles published I don’t remember the date now, but it was in the Lodging magazine, I think, where they had interviewed senior citizens. And at that time, technology was not really common, but they had interviewed senior citizens about their preference for technology or non technology. And the statement senior citizens made was, I would prefer not to wait in a long second line if they were technology. So ultimately, I think it speaks to the fact that nobody wants to wait in line, go through the hassle of getting that service. If there were a simpler, easier way to receive a room key.


Robin Trimingham: This is fascinating to me because what you’re really talking about here is people buying into things that meet their key expectations. So I guess my question then becomes, how do you propose that we go about being clearer about all of these key expectations? Because yours and mine, they might not be the same?


Karthik Namasivayam: Yeah, I think part of the way hospitality organizations are reacting to this is how they deploy technology. So they are more cautious in deploying technology at the luxury end of the market, whereas of the more economy and budget scales, we see technology being rolled out in the front quite quickly in the customer interface sections as well. So I think the industry, as it has always done, has segmented the market is segmenting the market and kind of creating appropriate experiences, if you will, depending on what it is. So one of the ways I have been thinking about how the industry might develop in the future is to look at know, again, I’m speaking at a very macro level. I’m not talking about the nuances within each one of those two, but the industry is probably going to break out into two broad groups of organizations. The one group of organizations will be they’re highly tech oriented, tech mediated, tech driven kind of hospitality organization, and the consumers will go to those organizations are entirely comfortable with apps, keys on their phones, speaking to the front desk through a text message or apps and so on and so forth.


Karthik Namasivayam: And then you have the luxury market and I mean luxury only because of the fact that these are groups of people who will still want to have that interpersonal contact and an interpersonal service element and a separate discussion about why they want that interpersonal experience. It can be a sociological explanation. It can be from class, be Marxist theory, a whole bunch of different things can explain that. But nevertheless, there are a group of people who are willing to pay extra money in order to get that extra service. And because human labor is going to get more and more expensive as technology starts to creep in, that is going to push that entire market into the luxury sector, if you will. It automatically priced those products into the luxury market. And so overall, they’re going to have a group of lodging properties or hospitality properties that are going to be heavily touch oriented in the front end and less touch oriented in the front end on the other side. So these two groups will start to split out, I think, going forward.


Robin Trimingham: So I’ve talked to lots of AI enthusiasts and they are developing apps and applications and all of this stuff and they all say the same thing to me. They all say, Oh, well, it’s going to free humans up to do either the more important tasks or sometimes they say it’s, oh, the tasks that the machines can’t do or shouldn’t do. Look in the crystal ball for me here. Like where is all of this heading? I mean, McDonald’s, I understand, has rolled out a new version of McDonald’s restaurant in which it’s entirely tech. No people whatsoever, except I guess, somebody to repair the equipment once in a while. What’s going to happen in the hospitality industry? Where are the people who work going to work?


Karthik Namasivayam: I think this is just such an important question in my mind, not only because of my spent about 40 years in this industry and looking at the evolution over the last few years has been kind of mind boggling for me, how it’s kind of transformed and how it is. And so if I were to extrapolate from all of these trends going forward, but also from the work of labor economists and other people who have been studying how labor has has formed and what kinds of skill sets are required, etc.. There are a number of reports out there which speak about nearly 42% of all workers needing to reskill and to learn some new skill sets in the next 3 to 4 years. That was in 2019. And then there are some reports from McKinsey and others who say that about 10% of jobs are going to be in the front line contact jobs are going to be replaced. So there’s just this whole bunch of trying to figure out what’s going to happen. But one of the things that I did look at was we did a little project funded by the Statler Foundation recently to understand what’s happening to hospitality, jobs and things like that. More often than not, the respondents agreed that technology is going to play a big role in the work environment, the increasing numbers. They also said that. Jobs will increase by 0 to 5% in the next five years.


Karthik Namasivayam: And these were all top executives speaking about how the transformation is going to take place. But the thing that I suspect is that jobs are going to shift. They’re going to be new jobs. And as many labor economists have spoken about, every time new technology comes in, a new set of jobs will start to develop as well. So I suspect that’s the same thing in hospitality. As new technologies are introduced, old jobs will go away and new jobs will take their place. So net the numbers of jobs might remain the same, but that they might be totally different kinds of jobs. And so as an educator, for me, what I’m interested in understanding is what are those new jobs that are potentially going to come up as a result of technology being introduced? And just as an example, in conversations with top execs, I know this has been a move for some time, but has become really predominant now is that many hotel organizations are now introducing the role of a commercial manager. The role of a commercial manager includes the roles of a revenue manager or marketing manager and a sales manager. And this was possible because much of the day to day tactical aspects of revenue management of sales management and marketing management have been automated. So this is a very quick example of a new job evolving because of the fact that technology has taken over some aspects.


Robin Trimingham: That’s a fascinating example to me. You may not be aware I actually have worked in the hotel industry and yes, I was in the big bad sales department, so I can relate to this one because one of the big holdups, when you have a great piece of business on the table, particularly if you’re doing large scale group convention kind of business, is that first of all, you have to find the space. Then you have to find out whether or not you can have the space at the price the client is willing to pay. Or conversely, what price is the hotel willing to let the space go for? And there could be all these big delays and time gaps while you tried to sort all of this out. But if you have one person who has big picture training and the tools is right in front of them on their own desk, I mean, how much easier is that?


Karthik Namasivayam: That’s right. So I think those are the kinds of changes that are evolving around the industry at this point. There’s obviously a lot of change that’s happening in the back of the house and the accounting and the finance in all of those things or robotic process. Automation is a big thing, so you can automate a lot of that chat. Ai has helped a whole bunch of telephone answering and querying and use, so it has definitely reduced the numbers of people required to manage the same hotel. I’m just curious for my own self and for the school that I’m leading, really curious about how that’s going to transform what our students have to learn and how they are prepared for the future of the industry. And that’s where I’m so engaged with how technology is going to affect our industry, how it’s going to evolve our industry, and what do we need to do to get ready for it. So.


Robin Trimingham: So one of the comments that you made earlier in our conversation is that those hotels, those brands that choose not to embrace all this technology who don’t go down this path are going to find it harder to compete. Do you feel that’s going to be equally true, whether we’re talking about a national brand or whether we’re talking about a boutique or independent operator?


Karthik Namasivayam: I think it is to to a large extent, and I’ll give you an example from earlier days, the roadside motel started to adopt HBO, but they did not all adopt it at the same time. But all of the motels were forced to adopt HBO because the neighbor had HBO. So that’s the front end piece of it, the marketing piece of it, the consumer facing part of it. But if you were to think of the cost economics of technology supporting operations, you can easily compare two properties, one with technology support or the other without technology support. And the disadvantage that a hotel that does not have technology will face in terms of costs and management and all of those kinds of issues. So if technology becomes common, if it becomes cost effective, if it becomes less expensive as the adoption grows, technology tends to become less expensive. Then you’ll see that there will be a shakeout in the market of those properties that don’t adopt technology at the same rate as hotels that do.


Robin Trimingham: I think somewhere in your equation then there must be you must be factoring in the time the rate of adoption because there were I’m all about finding the gray areas in discussion. So I think it’s interesting because if we’re not adopting all that quickly or at the same rate from one country to the next, then an operator might continue to go on for quite some time under the illusion that all is well and then suddenly discover that he’s been left out while his back was turned.


Karthik Namasivayam: You’re right, Robyn. I think that’s fascinating, actually, because the rate of adoption and the compulsion to adopt are things that are market driven as well. So at what pace do consumers in India, for example, adopt technology compared to consumers in the United States? As an example, there are more robots in China and in the Far East than there are in the US, for example, in terms of those robots in the front end and things like that. So the Asian population appears to adopt or respond to robots serving them far more easily than than perhaps Western consumers. So those differences will obviously affect the rate at which certain technologies are adopted. But I think in terms of the cost element, it may be that we’ll find models that kind of emphasize software as a service model where a hotel can subscribe on a lease basis or just rent space from the cloud and operate their properties. So that will be a lesser cost than actually installing technology in their unit. And those models might become much more common as the as the industry and technology also becomes much more sophisticated.


Robin Trimingham: That’s actually an excellent point. So if our listeners are taking us seriously, we’ve said a lot of scary things in this conversation. Let’s talk about something a little more positive, to be sure. Hr policies, hiring practices, employee benefits, they’re all in a state of flux throughout the industry right now. How do you foresee employee roles as being transformed by all of this? Can you give me any other examples of where you actually see opportunities for employees who are properly educated, properly trained? However, we’re going to say that.


Karthik Namasivayam: Yeah, I think there’s a big opportunity here for hotel organizations themselves to look at the employee base and to say, okay, we’re going to grow this way and we’re going to include technology in these spaces, etc., and help prepare their own employee workforce and the employee base to respond to these new kinds of work roles that are available now. These employees are valuable because they understand the company culture. They’ve been there with them for some years. And so to just provide them the skill sets required to work with technology would be really advantageous both to the operator as well as to the employee themselves. So there’s ample opportunity to reskill, retrain and redeploy our employees into spaces that will support the future strategy of the hospitality organization, no doubt about it.


Robin Trimingham: So we have a minute or two left here. What’s your key message or your key piece of advice for everybody who hears this podcast?


Karthik Namasivayam: I think the important takeaway here is to really continue to think about how technology is going to shape our industry and to start preparing for it already. That’s one key takeaway. The second takeaway is can we redesign business models right now intentionally to incorporate technology and to make it the best possible model going forward that will help us as educators. It will help us understand exactly what business models are going to be prevalent and common and help prepare our students for these kinds of roles. And that’s very important for us, I think.


Robin Trimingham: You’ve been listening to the Innovative Hotelier podcast by Hotels Magazine. Join us again soon for more conversations with hospitality. Industry thought leaders.


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