CEOs debate potential of AI

How to best work with artificial intelligence (AI) was among the interesting and confusing topics discussed on Tuesday during a CEO panel at the NYU International Hotel Investment Conference in New York City.

Always a pot stirrer on conference stages, Tyler Morse, CEO of owner-operator MCR Hotels in New York, was quick to suggest that “AI in the hospitality is bullshit. No one is actually using it in hotels. We are a people-based business and most of our team members are interacting with customers… AI is just a shiny new penny. For Apple it is terrific, but we don’t have budgets to execute against AI. We tried to get optical reader machine learning to read our invoices and it failed 50% of the time. AI won’t have an impact on the hotel business for 10 years. Maybe it will at Booking.com where they have the budget or maybe a little at Marriott Bonvoy or Hilton Honors, but most don’t have the budget.”

AI is just a shiny new penny. For Apple it is terrific, but we don’t have budgets to execute against AI. We tried to get optical reader machine learning to read our invoices and it failed 50% of the time.

Tyler Morse

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Peachtree Group CEO Greg Friedman responded by saying that AI will eventually impact how we service guests and lead to better outcomes. For now, and perhaps more importantly today, Friedman (and Aimbridge Hospitality CEO Craig Smith) said AI tools can be used to create more staffing efficiency models.

Joseph Bojanowski, CEO, PM Hotel Group, said he doesn’t expect his hotels to ever go back to pre-COVID staffing levels and to better manage they want to employ technology (robotics, AI, etc.) for highly repetitive tasks or transactions. Then, they will move the fewer live team members into positions where they are working on live experiences and services that drive value and ultimately charge more for.

Pyramid Global Hospitality CEO Warren Fields echoed Bojanowski’s comments, to a degree, saying personal service should always trump tech-based approaches to guest interaction. “AI won’t take over our business,” he said. “But technology can make some processes like billing more efficient and anywhere there is data input by humans” he said.

But, for guest services, Fields wasn’t ready to say it can assist and improve the experience.

Aimbridge’s Smith said AI can help improve revenue management programming and help better meet guest expectations by better understanding guest histories, scheduling and F&B trends. He cautioned, however, that younger team members need to understand technology and AI is not the solution for everything. “Get our there and work with guests,” he implored.

Session’s best commentary

Throughout the session, the leaders on stage made some timely and topical points. Here is a quick roundup:

Craig Smith: He is seeing third-party management grow in concert with increased franchising. He also said big brand companies that tended to manage in international markets are now franchising more and more, creating new opportunities for third-party managers. Smith cited Europe, Latin America and soon Asia as fertile for third-party growth.

There are always headwinds in every cycle. Once you figure out ways to move headwinds out of the way, you win.

Warren Fields

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Tyler Morse: Not unlike the CEOs of the biggest brands who took the stage on Monday, he said short-term concerns about macroeconomics are overblown. “The general travel curve is going up and to the right,” he said, adding that all product price points can take advantage of the bigger trend. He also boldly stated that the work-from-home trend is mostly dead, which increases the incidence of travel, as well. “They call it work for a reason and people should go to it,” he said. “People claim they are working from home, but they are really walking their cats. But they don’t tell you they are walking their cats.”

Morse also talked about the cost of debt. “Interest rates are not coming down. They are staying at 5%. Money should not be free – there’s a cost for money,” he said, adding that anyone 37 years old or younger, who has only lived with near-zero interest rates, needs to shift their thinking about debt costs.

Bojanowski: Group business is surging past 2019 levels but will decelerate a bit next year. He said in the top markets where they do business, group booking pace is currently down 3% for next year. At the same time, he expects accelerated growth in business transient.

Friedman: Interest rates have more or less shutdown the deal market and hurt valuations. He also said he expects to see a more active transaction market later this year and into 2025.

Fields: He is very bullish on continued growth and demand. He said rates ‘are what they are’ and if you see good cash flowing businesses with further opportunity to improve results investors should buy them now. “There are always headwinds in every cycle,” he said. “Once you figure out ways to move headwinds out of the way, you win.”

Fields admitted he has some struggling assets in the Pyramid system and pointed to markets like San Francisco and Portland, where he said the community is not always following the rule of law. “Boston is as liberal as any place on the planet, but they abide by the laws, whereas San Francisco you can do whatever you want. San Francisco and Portland are getting better, but challenges are affecting business and tourism.”