Can the human touch and the latest tech coexist in hospitality? Professor David Sherwyn from the Cornell Nolan School of Hotel Administration and Alexander Mirza, founder and CEO of Mogul Hotels, discuss AI’s role in solving the talent disruption problem for hotels.
In his book Talent Disruption, Alexander Mirza, founder and CEO of Mogul Hotels, identifies the root causes of the hospitality labor shortage and AI-driven solutions for the issue. Mirza joins Cornell Nolan School Professor David Sherwyn to explore the possibilities in this episode of the Cornell Keynotes podcast.
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Nicholas Phillips: Welcome to Cornell Keynotes. I'm Nicholas Phillips. On today's episode, Professor David Sherwyn from the School of Hotel Administration is discussing leveraging AI to operate the hotels of the future. The founder and CEO of Mogul Hotels and Residences, Alexander Mirza. Alexander is joining us as he prepares for the release of his book Talent Disruption: People Are The Brand.
Nicholas Phillips: Dave, Alex, thank you, thank you so much for joining us and welcome to the show.
Dave Sherwyn: Nick, thank you for the introduction. Thanks to eCornell for having us. Alex, thank you for coming all the way out to Ithaca. I know it's not easy to get here.
Alexander Mirza: Thanks for having me.
Dave Sherwyn: So, with the audience would not know. But, you and I met several years ago. We met at the center that I run, the Cornell Center for Innovative Hospitality, Labor, Employment Relations, the world's longest title. Kyler, we were at our annual HR and hospitality conference at the Del Coronado Inn in San Diego. Shameless plug, this year's conference is in Atlanta, April 29th through May 1st.
Dave Sherwyn: But anyway, when I met you at the Del, we came in, you were at the conference, you were participating, and right away, I realized you weren't really an HR guy. So here you were at the conference presenting, but not as a true HR person. So, Alex, who are you?
Alexander Mirza: I'm a strategist. Interpreter turned entrepreneur. And I paid my dues at the big hotel chains and brands. I ran functions like strategy, corporate dive, and then went on to be a boutique hotel CEO, all of which was accidental. I had no idea I'd be in this business or certainly working on HR issues. And now my former colleagues make fun of me and say, what happened to you? You became an HR guy.
Dave Sherwyn: So, yes, becoming an HR guy and being made fun of, I understand that it happens a lot. And so we spend a lot of time with the finance people, the development people, as the hotel industry has become much of a real estate play, it seems real estate folks are really running the show in many ways. And then we've got your traditional operators.
Dave Sherwyn: And when we started our conference, I'd say the first five years of conferences, this will be our 18th year, was always about how does HR get a seat at the table? Well, that's not really the issue anymore. HR has a seat at the table. But the next question is how do we convince people that at the end of the day, the driver in your business can be HR?
Dave Sherwyn: And it seems that's what you identified. You wrote a book about it, and it is the basis of your hotel company. So give us some understanding of how a strategist became focused on human capital.
Alexander Mirza: Yeah. So the probably the formative experience in my career was I got a chance to work for Professor Gary Loveman, who was chairman and CEO of Caesars, and he had, over the course of the decade, put a system in place in the company that where the primary objective was to allocate capital to talent and to service profit chain through employee development and training led financial literacy, as well as bonuses and profit sharing.
Alexander Mirza: And that sounds all great, theoretically, you know, as it did when he taught it at business school. But when you get inside the company and you see that it's outperforming its peers by ten, 15% or more in margins, and there are in the midst of inferior assets, worse products and perhaps less prestigious hospitality at the time, it blew me away. It was very impressive.
Alexander Mirza: So as I dug into that and we and I looked at it more and more, I saw that he really was focused on differentiating and winning on service. And it proved to me that you could do that if you invested in people and build a culture around it.
Dave Sherwyn: First of all, I love the fact that you referenced Gary Loveman coming from Harvard to take over as CEO, proving that a professor can actually do something as opposed to just pretend and talk about it. So that's a pretty cool thing to talk about Gary Loveman. You say that what he did in the gaming in the sort of casino resort world was so innovative and it blew you away.
Dave Sherwyn: And now you look at what others do or don't do. So your book is filled with solutions in many ways. The beginning, that I don’t want to, for us and the audience, where's the problem? What's the problem with what people are doing now with their priorities in general and towards human capital specifically?
Alexander Mirza: Right, as we've seen in the last several months, it’s certainly not just an issue for the hotel industry or hospitality, right? It cuts across all services. And we're seeing that with the labor strife and many of the issues facing industries from health care to the auto industry and others. But the title of the book is Talent Disruption, and we define talent disruption as a 20 to 30% increase in your unit labor costs over a very short period of time, say 18 to 24 months, in one dimension.
Alexander Mirza: And the other one is loss of quality of talent. You look at the hotel industry, it's down about 20% in terms of its quality of talent, elite talent, GM-ready talent.
Dave Sherwyn: So wait a second. So when you say that, you're saying I have 100 employees. You're not saying I have 80. You're saying I still might have 100. But if that, if on a scale of 1 to 5, they were averaging a four. They're now down 20% off of that.
Alexander Mirza: Correct. And even perhaps more damaging is that those who could have been the GM, or leaders of the future, have defected and left for other industries or left the workforce altogether. And so I think that's the condition of certain industries. The hotel industry is one of them. Health care is another one.
Dave Sherwyn: So let me jump in again. Through the pandemic and as a hotel school professor, as I saw the exodus from the industry and thinking, wait, I love this industry and I've been sending my students there since 1997. Part of what the runaway was, was how recession sensitive and how disruptable the industry was. With health care, just how hard it was, are there things that are missing? What is it? What caused the exodus? I think that we as a society got addicted to cheap goods and services and cheap providers of goods and services. So it was our demand that the providers be so underpaid. Or was it the nature of the jobs themselves or the industry?
Alexander Mirza: I think it's the industry. I think the first thing you have to look at, you know, and I'm an MBA, is you got to look at the industry structure, what happened? What changed? Okay? So over the course of the last 15 years, right? We've gone from hotels owned, I think 12% by private equity to 70% in the US.
Alexander Mirza: We've gone from brands managing at least a third or half of their operations to under 5%, and the emergence of third party management companies, many of whom did not have scale or systems or structure in place. So, simply, in terms of who people are working for, it's different. In terms of what those companies have, in terms of their investment in people and systems and processes, it's not at the level that it was before when chains and brands ran those operations. In terms of the assets, you're talking about a situation in which hotels trade every five and a half years. So it's now, it's a trading business, more of a trading business, right? Less of an institutional, longer hold business. So all of these things, I think, from an industry structure perspective, make it challenging for someone to be on point for human capital.
Alexander Mirza: There's owners, there's operators, brands and lenders and so many people. And secondly, it makes it very difficult for people to see a career.
Dave Sherwyn:So when you're saying, I want to do this score card, obviously the GM is going to be scored, down to, you know, the room attendant, the dishwasher.
Alexander Mirza: Just like we do for the customer. We do it down to the department level, right? Okay. So you can look at a customer score card. You don't just see banquet catering, you see room service, you see restaurants. You can see each restaurant venue, at least down to that level, supervisor and above department level. I think that's where we should start.
Alexander Mirza: So what I think is missing before you get to the solution, right? Is that there really isn't a meritocracy or system here where the best people get paid for the value they create and the best talent rises and gets promoted based on their potential and their leadership abilities. And that sounds like, why? What are you talking about? We do that.
Alexander Mirza: But, but we.
Dave Sherwyn: Well, I’ll go the other way. We attempt to do that.
Alexander Mirza: Yeah.
Dave Sherwyn: I mean, I think that, I mean, I started this by sort of goofing on you, saying like, you are in a conference and you're not really an HR person, and I'm a labor employment lawyer, so I'm an HR poser also. If so, I'm right with you.
Dave Sherwyn: And I have listened to HR people for decades as we attempt to measure, as we attempt to identify. So it's not like folks didn't try. Question is, I think they didn't succeed.
Alexander Mirza: Well, we’re, think about it this way. When you're figuring out what to pay your GM, you're doing it. You're saying that this is what this person's worth. And when you pay their bonus, you're saying this is the value they're adding. But when an assets refinance, they don't get a portion of that. They don't own shares in the hotel, and neither does anyone in the hotel management team, right. And at least that I've seen, although very recently, some interesting things are being done by some great private equity firms around that. But I think they're just scratching the surface, right? So like alignment of interests and driving that sense of ownership and then potentially, it could be an alternative form of governance to unions that, you know, when employees have a seat at the table beside the owners and the brand, that, with an equal voice and an ownership in the asset, the game changes.
Dave Sherwyn: You said that you want to score and identify talent and say, have some sort of something that I can wrap my arms around so that I can discern what talent is and who possesses it. How do you do that?
Alexander Mirza: Yeah, I think we have the data to do that, right? And that's a beautiful thing about AI, when we get to it is that it just makes it scalable. But this is a business with a lot of smart people who are using data and analytics from multiple sources and feeds to figure out how a property's performing or how a piece of real estate is performing, or when to invest in it, or when to improve it and where and all that.
Alexander Mirza: I think it's just taking a lot of that data and then drilling it down and applying it to these departments and individual teams and employees, looking at customer satisfaction, changes in it, indexing it. They're looking at the quality of the product and brand experience, we’re looking at adjusting it for the degree of difficulty. How hard is it in that particular place and time to beat other people and outperform them when you have a lot of competition or, you know, tremendous demand in the market, adjusting for those factors, It's an algorithm and it's testing these algorithms with multiple data feeds, applying them to teams and talent, ranking the talent, putting those talents in the talent tiers, which, guess what, all the gig apps do it. If you go on Upwork or TaskRabbit or even Uber, you're going to see talent ranked in tiers based on reviews and paid differently.
Dave Sherwyn: And you're having dives into this data and looking, I used to when Yelp and TripAdvisor came out and I was so on top of the game when people said, what do you think? I said, why would I trust anybody who spends their time giving reviews? Shows how much I knew. But are you comfortable that those reviews provide you with meaningful data as long as you have enough of it?
Alexander Mirza: Yes. And let's just use our reviews we’re already using on the customer side and map them to people and departments and then index first, which and we know the concepts from SDR and other things. And it's the same thing that's happening in other industries. So I think that's the core thing. All of that creates some kind of a talent marketplace, some kind of a meritocracy, right?
Alexander Mirza: Where, today, it takes an average of 14 years to be a GM in a luxury hotel.
Dave Sherwyn: I know, I laughed because my friend, Ed Evans, was the CHRO at Four Seasons and he had a similar statistic. And then he compared it to what it took to take a rocket into space at NASA. And it was like six years. He's like, so in six years you can fly into space, but it takes 14 years to be like this, the director of housekeeping. And so, yes, you know, we have to get people to a place quicker, but okay, so you say I've identified talent. And in some ways, it seems that the identification of the talent is linked to the property. So this person in this department, at this successful property, based on the reviews and so on.
Dave Sherwyn: So now I'm searching to hire people. How do I go about learning that the GM I want or the assistant director of housekeeping to be my director of housekeeping? How do I turn that into a higher in my, for my company?
Alexander Mirza: Yeah. The first thing you have to do is look within the company. Okay. And so this marketplace has to first exist inside. And you have to really max that out. And that's where, I think, the retention comes in and profit sharing and alignment. But GM-ready talent exists often to levels below the GM. And using data and indicators to be notified of who those talents are and when they may be ready or who's a rising star based on the data, not based on one or two people's opinion inside the company, right? Moving them up faster, moving them around into those roles.
Dave Sherwyn: So you're talking now more about, again, having a company with some scale. Yeah, you know, this doesn't work when you're three hotels.
Alexander Mirza: It can work if you have three hotels if you are in a network. And this is where I think we need to go, right?
Dave Sherwyn: So let me take it back. So one, if I'm a Hilton, Marriott, of course, and a very large operator, then I can hang with my own company. But if I'm with three hotels, I'm a small franchisee or something like that, you're saying that I need to make friends with my competitors?
Alexander Mirza: Yeah. If you're in that boat. Okay, you got two options. Number one, you got to make friends with your competitors. And we need to help such operators establish networks and where people are pooled and shared. And it's possible for one operator with three hotels who needs a GM and for another one with three hotels who may have an extra GM. It's like a trade. Okay? And we've set up a marketplace where that occurs and there's even some kind of backfill or reward for that referral. Okay? So I think we.
Dave Sherwyn: It's my job to interrupt you, I think, more, if it's not, I keep doing it, right? And just to hammer the point home because I am a lawyer, is that there are numerous franchisors that, as part of their franchise agreement, have no poaching agreements which states and federal government have come down against, that they didn't want this Burger King franchisee to take an assistant general manager from that one. And you're going radical here and saying, instead of trying to keep your people when you don't have an opportunity for them to let them excel somewhere else for you, one of your competitors, and then take one of your competitors’ assistant GM, or whatever the position is and move up and everyone's better off and tell me if I got that right.
Alexander Mirza: You got that right. And not just within our industry. If you look, for example, one of the clients we worked with in our software company was in the economy, right? And most of their employees come from construction, and retail and other industries. Right? So it's developing. This is just the way we solve the customer issue when we faced off against Expedia for the first time in OTAs, we had to launch reward programs. We had to develop databases of customers and, you know, market to them and CRM. The equivalent needs to happen with respect to human capital.
Dave Sherwyn: So, you've talked about AI as a way to reduce employee headcount. We have two examples of OP or an industry airlines that lost the hospitality in a way, and then we have Airbnb, which didn't even try. They just say, Here, stay here. And so, you're going to reduce the headcount and what are you going to do? Are we going to be the airlines, are we going to be Airbnb or are we still going to be the hotel industry?
Alexander Mirza: We had a million unfilled positions in hotels in the U.S. in 2019 before the pandemic. Okay? And I think we're north of that right now. So I think clearly there's something wrong. Right? People don't want to do these jobs. So why are we worried about automating some of them? Other industries don't have that reticence? So I think that it's critical that the first priority of AI be to give people tools and processes to automate much of their work and take away the administrative burden in a hotel, just as it is, as we talk about in the book, as it's occurring in hospitals and other industries.
Alexander Mirza: So, if you do that and you automate, say, talent acquisition or revenue management or accounting, clearly, you're not going to need as many people. Okay?
Dave Sherwyn: Okay. So that's back to the house. Stuff like revenue management gives me my price, gives me my rate, I'd like it to be lower. It really bothers me that I waited two days and now it's higher. So that doesn't make me happier that there's great revenue management, certainly makes the brand or the owner happy. Accounting, same thing.
Dave Sherwyn: I never see the accountant until I need a copy of my folio. But when I talk about the hospitality aspect, because I can now check in on my phone, my phone is my key. I haven't talked to a human. Of course my suitcase has rollers, so I'm not letting a bell person take it. And the concierge is now an app.
Dave Sherwyn: So do I get everything I need without talking to a person? And is that what we want?
Alexander Mirza: I think for certain types of hotels, yes. You would get everything you need. And I mean, let's give everybody some credit for one thing. They have taken a lot of hits lately. That super host concept was probably their biggest innovation. Okay? And what is it? It’s a talent tier of hosts ranked on reviews that's very hard to achieve and it results in a revenue premium.
Alexander Mirza: The customers attach value to it, and it even became a search variable at the beginning. So it was a huge success, right? So and that's not something the hotel industry has embraced or executed, right? So start with that premise. And there are certain roles that could be virtual or automated or even replaced with robots and robotics, right? And so what that means is that you could go from 400 people running a 200 room hotel that's, you know, full service all the way down to 50 or 60 people working in that.
Alexander Mirza: And those 50 or 60 or the elite phenomenal talents, right? And many of the other people who want to work in this business are working behind the scenes to create large language models and program them and update them to serve the customer. And the industry will be better off. The owners will be better off. People who are doing their jobs will enjoy doing them. They will be delivering service and innovation to the customer. And I think that's a future where people will be excited about being in this industry.
Dave Sherwyn: So we've got a 400 employee hotel and you just made it 50. It's got the same number of rooms. It's got the, it's got the same F&B outlets. It's got a pool with towels and lounge chairs. And I get dropped off out of my Uber. How is my experience using AI different and as good or better with 50 people than 400?
Dave Sherwyn: What can this provide me that extra and what am I missing that I won't miss?
Alexander Mirza: Right. If you think about what AI can do with all the data and knowledge that we would have about you on your trip when you show up, right? There's a lot of the process of your preferences and communicating the features of the hotel and taking it to your room and all that would be eliminated, the upgrade option and all that.
Alexander Mirza: So, you know, if we can predict that in advance.
Dave Sherwyn: So what does it mean? Like. you know.
Alexander Mirza: That means there's no front desk. That means there's no departments of front office and bellman and concierge and all that stuff. There's just cross-functional four or five people. Then there's robots. And the robots are, you know, checking you in and your data is transmitted. And if you want, they can even, the robots can even give you feedback and suggestions. And we could take that to another level with all kinds of innovation on health care, on F&B, on your sleep and well-being. And that data could be tied into other networks.
Dave Sherwyn: When you think about robots, it's like, I grew up in this in the 70s mostly, where, you know, we watched The Jetsons and all the robots were just like mini humans and then one of our students developed a robot that vacuums. It's not a human, it's like a desk. So when you're talking about robots checking me in, what am I?
Dave Sherwyn: Is it a kiosk? Is it a…
Alexander Mirza: I'm talking about that being the next frontier of hospitality. Okay?
Dave Sherwyn: Okay.
Alexander Mirza: Where hospitality experts are working alongside data scientists and software developers and coding these languages and these greetings and customizing it to the person. And so the level of personalization is greater and the level of service is still at that level of warmth. And you still have humans in the building.
Alexander Mirza: Okay? But what we know, we know a lot more about you, and if you're willing to share that information, subject to, you know, your privacy and what you're willing to do, we can customize that experience to a far greater extent.
Dave Sherwyn: Like, what do you, what information, and what will you do?
Alexander Mirza: Okay, so let's take food and beverage, for example. Let's say you're a vegan and you're allergic to certain things and we don't know it, okay? We will be able to get that information from you if you volunteer, they’ll be able to see what kind of food you're ordering on DoorDash or whatever app or some grocery store. And we might even be able to see what other challenges or issues you have with your health or otherwise, right? And so, we'll take that all into account when we decide what room to put you in, when we decide maybe if you're at a resort, what you're welcome drink is. What other amenities might go in the room and so forth. And I think from there that that gives us a lot of opportunity to innovate and curate the experience to suit you.
Alexander Mirza: We might, we might not know your exact, your DNA profile, but one day we'll know that too. I think we're really you know, we're the magic is in the future with AI and hospitality is the intersection of traditional hospitality, well-being, health care and fitness for people.
Dave Sherwyn: What tasks that humans do now, we talked before that our friend Harry Katz, who's the former dean of the ILR School, has on numerous occasions called me a Luddite as sort of this anti tech person. And I'm not. Well, maybe I am, but what and where it always comes down to and this is when I argue these things, is that many of the technological advances are replacing humans.
Dave Sherwyn: I mean, you just, we started with we're going to go from 400 to 50. So what are the areas, what are the tasks that I can replace that won't bother me at all? Like, it's nice to see your room attendant and it's nice to say hello and to be a nice person, but I can stay at a hotel for a week and never see my room attendant if I'm working and I leave before person gets in and I'm when I get back, my room's clean, right?
Dave Sherwyn: So, I could, if my room would be cleaned without a human, I don't think it would change my guest experience. So when you look at, and I don't know if you do this, do you look at, are these jobs, these interactions don't really add. So let's see if we can replace, and what are they? Which ones don't add and can be replaced?
Alexander Mirza: I think they can all be replaced, which is a radical view perhaps right now. But, you know, I think that all depends on the brand segment. And so, in most of the industry, I think they can all be replaced. I think you still need a GM and a core team, you know, standing behind the automation and robotics. You said something else, though.
Alexander Mirza: You said it's going to replace all these humans. And I think that's wrong. I think it's just, it's more about training people in AI and retooling them. And this is something we're going to have to do, not just because of the labor shortage, because of immigration bottlenecks and a whole range of other challenges. So imagine, if you took the best concierges in the company and you said, we're not, we don't have concierge, we don't have a concierge function anymore.
Alexander Mirza: Okay? But what we want you to do is work alongside these data scientists and these software developers and write the language, write your greeting, write your process, map the scenarios, and develop a large language model that can be executed. And guess what? It's a contest. We might actually call the humanoid or robot, Mary or John, one of you.
Alexander Mirza: And, if it works and we replicate it, you'll get royalties on that and it will be just like what Hollywood just finished debating in terms of the rights to paying writers, that there's, this is content creation and the people standing behind it in the wherever the concierge is command and control room is are going to be keeping that alive and robust and continuing to make it better.
Alexander Mirza: And sometimes going out to the properties and ordering it and supporting it. That's the future. It doesn't mean they lose their jobs.
Dave Sherwyn: Well, but if we're talking about using AI and automation to clean rooms, now, the housekeeping pool in the industry oversimplification has been newly arrived immigrants who don't speak English and have been able to say, depending on the city, an arguably middle class or close to middle-class job by being in by themselves cleaning a room where they don't need education or language skills.
Dave Sherwyn: And it's a shift work and you can be done in certainly 8 hours and maybe six. It sounds like those jobs are not. There is no place for that demographic now, maybe with our immigration, but bottleneck. And you know, there aren’t people right now, no one can find people in that to do those tasks anyway. So maybe you're looking and saying if that continues to dry up, there's no humans to replace, to fill in as people retire and move on.
Dave Sherwyn: But we are saying that those jobs would go away.
Alexander Mirza: Potentially, potentially.
Dave Sherwyn: And can be replaced by robots. Kind of motored by AI.
Alexander Mirza: Yes. Same as what's happened, what's happening in other industries with automation. And you see Amazon automating warehouses and there'll be some impact there.
Dave Sherwyn: But. Right. And it's more of a knowledge-based talent pool and more of a knowledge-based economy than a manual is how you're seeing it. So you're looking and saying a lot of the manual jobs that the industry is having trouble filling can be replaced by AI and, sort of, cover the job shortage that way.
Alexander Mirza: Right. And those 50 or 60 people still left in that full-service hotel have to be part owners. They have to be engaged with them. Profits are they have to be financially literate and they're going to still be managing the content that's driving that area, which is alive and dynamic and it's fluid. And then there's going to be other people.
Alexander Mirza: And in regional or command and control centers that are also reviewing. So I think it's just a different factory, is the way I look at it.
Dave Sherwyn: So one of your themes across the board on this is, it's AI, tell me if I got it right, it's using AI to make the property more efficient, using AI to enhance the guest experience. And in terms of making the property more efficient, what you're doing is replacing many jobs that were kind of nameless and faceless, didn't really affect the guest experience.
Dave Sherwyn: And you're taking your core group of employees and really making them super responsible.
Alexander Mirza: Correct.
Dave Sherwyn: And you're saying you want to pay them in a way so that they have skin in the game?
Alexander Mirza: That's right.
Dave Sherwyn: Okay. So now is the problem, we're in a really complex industry.
Alexander Mirza: Yes.
Dave Sherwyn: It's not like I own a store and now you're telling me that I should make my GM give that person, you know, give her some ownership in that and she'll work hard because I've got owners, brands who operate, brands who don't operate brands who are franchise owners and operators, brands who are only franchise owners. And then I have franchisees who operate and those that don't operate.
Dave Sherwyn: And all of them are trying to take some peace somewhere.
Alexander Mirza: Right.
Dave Sherwyn: And now you're saying there's another piece that you got to carve out and give to your employees. So I guess the question is twofold. Is the structure of the industry problematic for what you want to do? Or…it’s one question. Or can it really work? Like, do we have to, do we have to blow up the structure or can it work in this complicated kind of funky structure?
Alexander Mirza: I think that brands that operate and own or companies that do are in an ideal position to innovate when there's new technologies or when there's disruption. You see that occurring in the restaurant business. Sweetgreen and Chipotle are two such companies and they're investing in automation and they just talked about it this week. They're automating their kitchens, right? It's going to be a lot harder for McDonald's to, not impossible.
Alexander Mirza: I don't think we need to blow up our industry. The owners need to step up and they need to give skin in the game to the employees and to make a culture to get them to be financially literate, irrespective of who the brand and the manager is. And it's in their interest to do that. And they're driving the bus in this industry.
Alexander Mirza: So, that's where it all starts. And most of these owners are very financially sophisticated and quite capable of doing that because they develop such models as, you know, for themselves and their various capital stack, you know, of investors and lenders. So they need to bring in the employees into that.
Dave Sherwyn: Do you foresee a time in the future when you can check in and get a room key without having to talk to someone at the front desk? And I would say, that's not the future, that’s the present, right?
Alexander Mirza: That’s the present.
Dave Sherwyn: So there's a lot of that going on. In order to support an employee vested structure across all staff, are some of the profits to supply this consideration coming from an alternative as to employee savings?
Alexander Mirza: Yes, absolutely.
Dave Sherwyn: So explain that.
Alexander Mirza: Yeah. So I mean, I think if you implement the AI model and we make this transition of the factory, right? We're talking about the 20% increase in profit margins and that's going to free up a lot of cash, even with increased labor costs, inflation, food costs, all the things that are happening right now. And I understand that many people are in a position where they're still paying down their loans and lenders and it's a tight situation.
Alexander Mirza: So I'm not saying that it's a windfall in itself, but it's going to free up capital and cash flow.
Dave Sherwyn: We talked about franchising and and the lawyer in me looks and says, when we talk about franchisees and franchisors, that even though, you know, I'm an employment lawyer and I should be talking all the time about don't violate the joint employer doctrine and don't be liable for the slip and falls or, you know, even worse, the assaults that happen on your property.
Dave Sherwyn: So, where you as a brand stay away, don't give any advice. But I don't think you're saying.
Alexander Mirza: No, I'm saying that our system of brand management is broken right now and that each stakeholder in our industry has a role to play in building the human capital base back in our industry and attracting talent back. We talked about the owners already, okay? What can the brands do? Well, they're collecting on average, I think it's somewhere around $800 billion of brand fees centrally.
Alexander Mirza: And they've got great discretion in how they use those fees. Right? But they have narrowly defined them in for marketing purposes and some little bit of product development support. I stayed away from human capital. I think that needs to evolve and a portion of that budget needs to go into human capital solutions. What does that mean? It doesn't mean getting involved in the day to day recruiting or staffing or operational oversight of properties, your franchise. It could mean building talent marketplaces or some kind of overarching solution, or even using your corporate website with a brand that's far more well known than the operators or the owners to create a larger talent marketplace and job bank and partner with other firms to build that database of employees, then offer it to your franchisees. So it's those kinds of solutions that I think that the corporate offices of the brands need to look at and partner with their franchisees, just like they do with other initiatives and study.
Alexander Mirza: But earmark, say, 10% of these marketing fees, which I also think are largely inefficient, okay? And when you look at the whole industry and you look at in the U.S. alone, $46 billion of taxes collected on room revenue, primarily by local markets who use it again for destination marketing, it's an absurd amount of money being wasted on marketing in this industry and very little being put into human capital.
Dave Sherwyn: And so, you're looking at this franchise model and saying that our fears of joint employer, fears of being liable for slip and falls, have driven us to not focus on our capital, human capital, and are undermining the quality of our, of our product, of our property. And to stay within the confines of the law, there's things that you can do, right?
Dave Sherwyn: You know, I mean, it would be nice to have a new joint employer doctrine that would actually allow the really smart people that you've identified to give really good advice so that people don't get hurt. That would be kind of nice. But our law doesn't allow that. We're almost out of time. So I'm going to give you kind of a last word with two questions, okay? And the questions are, do you believe that, and I think I know the answer, that these AI powered chat bots and virtual assistants and so on, which are replacing human to human interaction, resulting in a net loss to, in terms of our experiences? Where are we really going to use AI? Is it going to be in accounting or is it going to be in talent acquisition or is it going to be in guest services?
Dave Sherwyn: So I guess the question is, are we using it in guest services and is it going to negatively affect or can we actually have a better experience?
Alexander Mirza: Let's look at some other industries. I know that's difficult for hotel people sometimes.
Dave Sherwyn: Okay, so offense taken.
Alexander Mirza: So health care isn't a big, isn't a big hole, okay. There's about 500,000, a shortage of about 500,000 people who are doctors, nurses, technicians. I think the nurse numbers north of 300,000. Okay? And so what's the next frontier there? It's been $300 billion of R&D into remote diagnostics, into virtual care, telemedicine and other technologies, right? All of which is going to improve the service level.
Alexander Mirza: And so it's the same logic here that travel planning should be easier. Picking your hotel should be easier, getting your rooms should be easier, planning your event should be exponentially better than it ever was before, whether it's a birthday party or a corporate event where you can figure out what each person wants to eat and they should be able to get it on on a big scale.
Dave Sherwyn: So I think what you're saying, because I got to keep the trains running and the train's about to stop. But I think what you're saying is that we are back to our friend…with don't become the airlines that we're so afraid of becoming the airlines. And we've put this.
Alexander Mirza: We're on our way to becoming the airlines already.
Dave Sherwyn: But we put this alleged premium on human touch that we say we can actually do better with a different kind of touch.
Alexander Mirza: Correct.
Dave Sherwyn: And then still keep the best of the human touch.
Alexander Mirza: You got it.
Dave Sherwyn: And we're out of time. So, Alex, you came from Los Angeles to Ithaca, which is not easy. So I really appreciate you coming out here and spending the time with us.
Nicholas Phillips: If you enjoyed this episode, be sure to subscribe so you don't miss any new episodes as they're released wherever you listen to podcasts. Learn more about how technologies affecting the hospitality labor market or the workforce in hospitality, check out Dave Sherwyn’s HR and Hospitality certificate program. You can also learn about any of Cornell's online courses and on campus programs by checking out the episode notes for more information.
Nicholas Phillips: Thank you so much for listening.