Why A.I. Has a Home in Hotels, with Simone Puorto

Episode Transcript

Simone: Humanity and technology. They’re not in competition. They’re always in cooperation and thinking that you can an industry that is getting more and more complicated by the hour continue to operate without some level of tech. To me, at best, is entrepreneur blindness.

Robin: 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, and my guest today is Simone Puorto, founder and CEO of Travel Singularity. Today, we’re discussing why the hotel industry is the ideal environment for the mass adoption of AI.

Robin: For the last 50 years, GroupeGM has been a leader in the luxury cosmetic amenities industry. The group proposes a 360 solution from manufacturing to distribution. With over 40 international brands in its worldwide distribution network, GroupeGM offers different shapes and sizes of eco friendly products in hotels all over the world. Discover more on www.groupegm.com.

Robin: Welcome Simone.

Simone: Thanks for having me.

Robin: Well, I’m very excited to be chatting with you today because I have to say, you are my first travel industry metaverse ambassador.

Simone: Ok, that’s fine.

Robin: I think we’re going to have a great conversation here. And I’ve been doing quite a few interviews with people who are some way involved in AI and the hospitality field because I’m trying to help my listening audience understand all of this better. So let’s just start with something pretty basic here. It’s fair to say that advances in technology have already reshaped global politics, the economy, medicine, biology. Why, in your opinion, is clinging to the idea that the travel industry is any different, a mistake?

Simone: So first of all, when we think about hospitality, we always think about high touch industry, right? That’s probably the more high touch industry that comes to mind. This is partially true, of course, but hospitality has always been a high tech industry as well. And I always do this comparison. Let’s say you got a. A 20, 20, 30 room property, Right. In order to operate, you will need at least half a dozen software anyway. Right. And this has always been the case. Now, if you if you compare that with with with a restaurant, for example, it’s a very similar business to hotels and a small restaurant for 20 people could simply operate just with a POS to get credit card payment. So I think that we got a problem of perception when it comes to the hospitality industry. Right. And it’s interesting to me because I’ve been in this space for almost 25 years now. I actually started as a receptionist while I was paying my university. And back in the days, I think that the kind of approach we used to have there was, of course, less tech savvy, was in a way more close to the original idea of what hospitality should be. And whenever I teach, for example, to my students, I always ask the same questions. And these questions are about the experience they do have with the hotels, right? And before COVID and pretty much 2022 has been the same.

Simone: I used to travel like at least one third of the year. So and I’ve been doing this for quite a long time. So I think I have, I don’t know, probably 1000 check-ins under my belt. The problem is that I don’t remember a single good one. And the problem is that it’s not that we don’t have good people, it’s that we are using these people to do stuff that should be automated in a way, right? And I always say, look, this is like this binary scheme. It’s not working anymore because the more you invest in technology and even if it can sound like a paradox, the more human the industry becomes because it puts back the human workers where they can bring real added value, and that is taking care of guests. And it’s not taking care of software. You know, it’s not data crunching or just a copy-pasting information on an Excel file. So humanity and technology, they’re not in competition. They’re always in cooperation and thinking that you can, in an industry that is getting more and more complicated by the hour, continue to operate without some level of tech. To me, it at best is entrepreneur blindness.

Robin: I think you’re making a very valid point because when you’re checking in, it doesn’t matter how nice the person is behind the desk. If there’s a crush of 40 other travelers all trying to check in at the same time, it’s going to be a stressful, time-consuming experience regardless of how wonderful the person behind the desk is or how well they’ve been trained. And I do agree with you. There is a real argument to be made that hoteliers in general have been looking at how to avoid changing or fixing the problem instead of turning the table upside down and saying, ok, how could we do this differently? How can we make this a better experience?

Simone: Let me add something to that. If you look at like a job, open job positions on LinkedIn, for example, and in Europe for example, but in the US as well, we got this crazy labor shortage problem in the industry. And it’s always interesting to me that when you see this position, you see that hotels are looking for people with mainly hard skill. A receptionist today should know five different places, three channel managers, at least be fluent in Excel. But you don’t see any mention of human skills, you know, soft skills. And that to me, it’s like it’s crazy. It doesn’t make any sense. It looks like we were hiring devs instead of receptionists. And that’s a tech problem, not because we’re using too much tech, but we’re not using in tech. And on top of that, all the tech we use work in silos. So basically you need these humans to do these repetitive tasks and they can of course cannot focus on the guest.

Robin: I’m going to take your point one further because a lot of the big brands, they will use personality profiling software in the hiring process and they’ll be looking for a particular personality set for these positions. So what you end up with is a highly caring, highly sensitive person greeting people at the front desk who’s getting more stressed out by the moment when they’re the crowd is too big or the system isn’t updating fast enough and they burn out. So it’s really sort of a catch-22 situation, if you will, in a lot of respects.

Simone: That’s true.

Robin: So in the case of the pandemic, the medical field, for example, they, because of the extreme circumstance, were highly motivated to transition beyond the state of viewing it as being AI versus human to a state in which the industry now is clearly working in harmony with AI to serve humanity and solve problems. Why is the hotel industry not following suit?

Simone: That’s a good one. But again, I think the main problem is a perception problem because human feelings, when it comes to artificial intelligence or tech in general change considerably according to the applications of the technology. Right. And you’re right. In a medical field for us is that was Ex machina AI, for example can increase accuracy in disease detection or we can use tech AR, for example, or VR to during surgical procedure. It makes everything safer. But when it comes to hospitality, even the slight allusion to AI is perceived as heresy. And again, I think that the problem is caused by prejudice that we do have as human beings before hoteliers in regards to AI. And let me tell you something that to me was always fascinating. The most famous test to evaluate the intelligence of a machine is the Turing Test and the Turing test is highly anthropocentric. You can determine whether or not a machine is a machine only by comparing it back to a human. The human is always the ultimate terms, the ultimate term of comparison. So in a way, we’re obsessed with human, even when we shouldn’t be really. And on top of that, high tech is always perceived as the opposite of high touch. We think that when we go to the tech way, the service is going to be inferior. Well, that’s not really the case. You know, just Google Translate. It speaks better than the average underpaid waiter that we hire. So that’s again, I think it’s still a question of perception and a question of bias we do have when it comes to AI.

Robin: Yeah, there’s definitely a perception problem and also a misunderstanding of how these things can be valued by the customer. Why, though, should hoteliers actually be more concerned with the impact of a stressed out or unfriendly or poorly trained staff member on the guest experience than with the introduction of this next level technology?

Simone: Look, partially it’s because they don’t understand, and I can relate to that. I know that when you work in a hotel, most of your working hours will be spent on operational tasks and at some point the quality of your mattresses or pillows would be more important than the quality of your software. And so I do understand that. But you need to see the other side of things. And there is this very interesting poll published by Gallup, and it said that the negative attitude of employees is causing an annual loss of around $300 billion in the United States only, and that’s just loss of productivity. People that are not happy with their job, they’re not doing the job right and so forth. And there was another study I was reading a few weeks ago that said something I could be slightly off, but it said that like 57% of negative experiences in hotels are due to the staff. And again, it’s not because humans are bad. It’s just they’re they’re overworked and they’re doing things that should not be done by humans. They should be done by machines, by algorithm, by robotics. But again, it’s a double-standard issue. Most people, especially in the hospitality space, they cannot get out of this binary scheme: AI versus human intelligence. And that is really the problem.

Robin: Yeah, I think from an interesting perspective, you’re quite right, because what does a human being crave? A human being craves at the core of their being, being valued, being interested, being creative learning. And a lot of these basic hotel tasks really aren’t about any of that. So it’s kind of odd that we should expect that humans would be delighted to do these tasks endlessly and never get upset, never wear out. But the machine will do it quite happily because it doesn’t feel in the same way that a human does. Yet anyway.

Simone: If you go to a desk and somebody is making a copy of your passport or your credit card, that’s not hospitality. That’s just the logistics of things. And I always make the same example in hospitality. We’re always a few years late with regards of what the airline companies are doing, right? This was the case for revenue management. This was the case for marketing, for enticement and so forth. So I always ask the same question, Look, you don’t go 4 hours before to the airport because you want the human touch of the guy that gives you the ticket because that’s logistics. You don’t care about that. There’s no added human value in that. Exactly. Like there’s no added human value in a person, a human being, biological staff, charging your credit card. So we need to divide the concept of hospitality from the concept of the logistics of travel. And I understand that this is quite hard at times.

Robin: Which is exactly why we have conversations like this.

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Robin: So let’s talk about the tough one. At least for the hoteliers, a lot of hoteliers simply struggle to see why when they are a luxury brand whose entire price point and value proposition is sustained on delivering that sense of luxury, why they should be involving themselves in AI at all because their understanding, their definition of luxury is it’s all done by a person for a person.

Simone: Ah, the luxury question. That’s always a good one. I have a theory. I think that in the next few years we will see three different types of hotels, Right? And they will not be classified based on stars or reputation like we do now, but on the number of human staff they hire. So I can see, for example, think about budget, hotels or hostels. These properties can benefit from replacing humans with algorithms or robots or self-checking apps or kiosks and so forth. Automation in general, because this will put the cost of personnel way down and they will be able to offer more competitive rate. So I have no problem seeing like a hotel where you basically have no two little humans and you’re exchanging the quote-unquote “human experience” with the fact that you’re actually paying less. Like in the business side of things, this will probably work.

Simone: On the other side, probably there will be like something like we’re seeing now, hybrid hotels. So properties where the human and the artificial element coexist. Right. So you can maintain the service that is as human as possible. But can you reduce the cost and you can improve processes wherever it is feasible. And this is pretty much where we are right now with the majority of properties.

Simone: Luxury on the other side. I think that the. In the future, we may be willing to pay extra money for human-only service.

Simone: So that’s actually an interesting thing because like today we pay more for like a handmade items compared to those created on an industrial scale. Maybe in the future we will be willing to pay more just because there is a human person taking our luggage. And again, look, there’s no added value in that. But probably that is going to work like that. But on top of that, what most people don’t understand is that when we talk about tech, the first thing that comes to mind, especially to techno phobic, is you remember this Japanese hotel, the I don’t know if you ever heard of that, like dinosaurs checking in. And I think the problem with that is that we watched so many eighties and nineties science fiction movies. So what do we think about AI? In our mind is like physical robots. So we think about, okay, we’re implementing artificial intelligence and you start thinking that you, you have robots just running around like Terminator. That’s not the case. A lot of AI is just it goes behind the curtain. You’re not embracing AI because you’re turning your property into a robot-centric property. You’re just embracing AI because you can make the process easier and the guests will not even see that. Like good technology really works like magic. You don’t see it.

Robin: I want to ask you a what-if question. What if the real way forward here is something in the middle. I’m going to call this a hybrid. What I’m wondering, based on all the conversations I’ve had with different people in the field, is that what we really have to help hoteliers understand is what they can do with the same amount of labor. If these people aren’t tied up doing the menial tasks, the checking in, whatever, what if a resort property with a beach took the money they were spending on labor for all these jobs that could easily be replaced and offered cabanas where every single cabana had their own attendant, a real physical person. That would be an extremely great example of luxury, something that even a five star might not be able to really afford at the moment. That could be quite feasible if things were all thought about differently.

Simone: Totally. Look to me, I always make it the credit card example. I still see to this day hotels manually charging credit cards. So whenever they got a reservation, this poor guys just take out a POS and they start charging credit card manually. Now, let’s do the math. We’re doing something like that manually will take you, I don’t know, 5 minutes per reservation, even more like if the credit card doesn’t work and you need to get another one and so forth. Let’s say you got 20 reservation a day. It’s small property. It’s 100 minutes that you’re spending just charging credit cards. Now, if you think that this is the fact that it’s a human charging your credit card, if you think that’s luxury, fine. That’s not luxury for me, because you’re completely right. It’s 2 hours. This person could actually create some kind of connection with the guest. And so it’s not even about reducing the stuff. It’s about replacing parts of what the human staff does with more valuable interaction with humans. And again, you do the math. It’s crazy. You can just go in from charging credit card manually to a payment gateway. And we’re talking about like basic tech. You can save up, I don’t know, like a small property can save up to 15 K a month. A year. That’s great. Yeah.

Robin: Yeah, I agree. Okay. The typical pushback from some hoteliers would be that spending more on AI has limited value at the moment because they’ve just been through the awful experience of their existing RMS software basically being useless for much of the pandemic because it wasn’t able to predict properly. How do you respond to something like that?

Simone: They’re using the wrong RMS.

Robin: Fair enough.

Simone: Look, revenue managers, most revenue managers take out this crazy idea that it’s all about historical data. No, you can still do a lot of things when it comes to 2020, 2021 in terms of their black swans. They’re like, statistically relevant. Fine. But there are things happening outside of your property that are pretty interesting, like the cost of gas, the weather, the events and whether you can or cannot travel. And all these external factors are harder to process than just looking at historical data. So I understand why a lot of revenue managers are lost. Because they always been used to do exactly the same things. We look at last year and we predict what next year could be. But that’s not revenue management. That is just you see what you’ve done last year and you want to do the same thing next year. And maybe what you did last year was wrong anyway. And the RMS’s– good RMS’s. Well, average RMS’s, it’s not even good. They don’t take into consideration all the historical data. They take into consideration everything else around. So this is just a reduction of ad absurdum, as I say, all the time. It’s just doesn’t make any sense to me. On top of that, consider that the human brain can take. Think about I was reading about 3000 decision a day 3000 looks like a lot but when you compare it to an average RMS, the number goes up to 35,000. So it means that to get to the same level of accuracy, you need 12 revenue managers. It doesn’t make any sense to me. To cut a long story short, if this is the perception you’re totally using the wrong RMS. Or even worse, you’re doing things on an Excel file.

Robin: Yeah. Okay. I can see your point. We’ve got a couple of minutes left here. In any radical systems change scenario, there’s always early adopters, fence-sitters, and resisters. When do you anticipate, based on all of your research, that we’re going to reach the tipping point with AI adoption? And what do you foresee? What do you believe the hospitality landscape will look like once we do?

Simone: Look, I think we’ve got another problem to solve first, and that is the fact that now the majority of properties are not free to choose whatever they want in terms of technology. And this is because they are quote-unquote “kidnapped” by their system. I still see most properties in Europe working with old legacy systems with no APIs. It’s pretty much impossible to connect technology. Now, in a perfect world, what I see is an industry where you can try out technology. If it doesn’t work for you, you just replace it with something else. And this is very easy and it’s free of charge. Now, the problem is that when you work with software that have been built in the eighties or in the nineties, connecting anything is a struggle and it’s costly. So let’s say tomorrow you’re working. I’m not going to namedrop anything, of course, but let’s say you got you’ve got like a legacy VMS coded in the eighties and now you want to integrate an RMS and this will cost you 20k for integration, integration at six months of waiting. And then when you do that, you see that this is not the real best that RMS in the market and you want something else and you start all over again.

Simone: Now, if you go with a cloud-native, API-first kind of approach, basically you can change your tech stack like you change the apps on your iPhone. And so it’s not even a question of tipping point or artificial intelligence, like the technology is pretty much already there. It’s a question of we need to get rid of all these old systems that we do have. And you go back to my first point, we’re a tech industry. We’re not only a human industry, we always needed tech. And that’s the innovator’s dilemma. We’re paying a debt because we are using all these technologies that have been built years ago. It’s interestingly enough, like the apartment rental industry that is younger in a way they don’t have all these problems because they already started with software that were built post the Internet, post API, post cloud and so forth. So it’s not a question of reaching a level of tipping point of AI, it’s a question of getting rid of all these platforms that are limiting innovation.

Robin: I love your try before you buy idea aging myself here, but back in the dark ages, that’s exactly how they used to sell really big photocopiers and the sales rep would come with the catalogue and say to you, okay, I think this would be good for you. Now let me have it delivered. You try it for a month. If it’s no good, we take it away on the truck, we bring a different one. And that worked. Well. Maybe something like that will be coming our way. Simone, I have to thank you so much. Very interesting conversation. You’ve been listening to the Innovative Hotelier podcast brought to you by Hotels magazine. Join us again soon for more up-to-the-minute insights and information specifically for the hotel and hospitality industry. You’ve been listening to the Innovative Hoteliers podcast by Hotels Magazine. Join us again soon for more conversations with hospitality industry thought leaders.