Transcript: Episode 156: Bar Tab Larceny

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[00:00:00] Susan Barry: This is Top Floor episode 156. You can find the show notes at topfloorpodcast.com/episode/156. 

[00:00:14] Narrator: Welcome to Top Floor with Susan Barry. This weekly podcast right up to the top floor features tangible tips and excellent stories from the experts and characters who elevate hospitality. And now your host and elevator operator, Susan Barry.

[00:00:32] Susan Barry: Welcome to the show. Tim Henschel grew up the son of a group travel entrepreneur who married a hotel executive. So it's not really a surprise that he wound up attending Cornell's hotel school. What is a surprise is that rather than becoming a hotel director of sales or a travel advisory executive, Tim founded a tech company. That company, which most of you will know as HotelPlanner sought to digitize the analog process of booking group business and hotels. HotelPlanner has changed a lot since it launched, and since I first used it in the early 2000’s. Today, we are going to talk about automating relationships over managing rate strategy and innovating in a tech-resistant industry. But before we jump in, we need to answer the call button.

Call button rings 

[00:01:36] Susan Barry: The emergency call button is our hotline for hospitality professionals who have burning questions. If you would like to submit a question, you can call or text me at 850 404 9630. Today's question was submitted by Randall. Tim, this is a question I've gotten from various friends and family over the years of my career. And so I'm interested to hear what you're going to have to say. Why can't I book a meeting in a hotel online the same way I can make dinner reservations? Now, obviously using HotelPlanner is a good start for that, but what are the obstacles in terms of making that happen? 

[00:02:20] Tim Hentschel: Well, there's no obstacle in the tech side. Uh, it's just a hotel preference at this point in the industry. The hotels typically want to hold back their space. Uh, and even once they've contracted, they still want to have flexibility to move space around, um, to accommodate different group sizes. So it, it. Typically get the best space goes to the group. That's the biggest group at the hotel at the time. Um, and, you know, if it's all B2B relationships, basically, you know, if it's IBM and it's their annual conference and you might have booked at that, uh, meeting space with the board room and it had the beautiful view. But IBM booked over your same dates and they're the bigger group at house. And now they're going to move you to something that's just as great, and they'll tell you how amazing it is, but that's what it comes down to. They, the hotel, um, group sales manager and director of sales wants the ability to control who gets what space at what time. And so the Internet would get in that way.

And there's obviously been talks in the industry for quite a while about, um, putting that inventory online to be completely bookable with a credit card. And, uh, you know, the. Big hotel chains have have pushed in that direction. They founded funded a company called Group 360. Um, that's supposed to to give more automation that space, but there's still massive pushback is at least from the big box hotels that make the majority of their revenues in catering catering and meetings. 

[00:03:59] Susan Barry: I think there's another piece of it to what you said is exactly right. But on the on the flip side of that, if you are booking an event a year out, you only have the very roughest of estimates for how many people will be there, what kind of setup you want, what your speakers are going to prefer in the room. And so having you pick the space that you think you need today versus waiting to assign meeting space until those specifications are actually clear and make sense is another good reason why they won't do it.

Your mom founded American Tours International and your dad owned and managed hotels. What did they think you would do after you graduated from Cornell? 

[00:04:46] Tim Hentschel: I think they thought that I would work for the family businesses but I was just too obsessed with the internet for that. 

[00:04:55] Susan Barry: So what happened instead was that you patented and founded HotelPlanner. Our hotel sales audience will definitely know what that is, but for the rest of the folks, will you kind of explain and describe what it does?

[00:05:09] Tim Hentschel: Yeah, sure. So we did a reverse auction. That's what we patented back in 2003 was a reverse auction for group hotel rooms through the internet. Customer would basically just say, I need this number of rooms for this many days, and I need to have meeting space or banquet space. This is the type of group I have. This is any special requests over that time. You know, they just detail out an ERP, electronic request for proposal, and that's when the hotels start to bid on the business. And it's the bidding part that actually is where we're the most unique. We have a whole revenue management system behind on the extranet that allows the hotels to automate their bids. Uh, and that really helped us handle the volume as the automation, um, part of it.

And so clients would see an automated bid back and then they could, uh, either accept or reject the bid. Once the, uh, client gets down to the last one or two or three hotels that they're considering, they're encouraged to reach out directly to the hotel's, um, sales department. And then they actually contract electronically or you know the old fashioned way with with paper and pen, and then they pay the hotel directly. Or we now set up a online credit card payment system for each customer if they want their customers to pay via merchant 

[00:06:39] Susan Barry: And the hotel pays you a commission?

[00:06:41] Tim Hentschel: Hotel pays us a commission or in the case of merchant model, uh, there could be a margin.  

[00:06:48] Susan Barry: Got it. Understood. Although the business started as a group booking tool, your company is pretty focused now on automating high touch processes across the industry. What are some of the other areas of focus for you?

[00:07:03] Tim Hentschel: So over COVID, because our call center in the Philippines was shut down as many were because of COVID, we had a, uh, a necessity went and put the first of its kind gig call center together with just our friends and family. So we trained friends and family, including, you know, all of our employees that were working from home at the time to start taking customer service calls and taking reservations calls and the first of its kind gig cloud based call center was born and it turned out that our customers liked the experience better. So once we recovered out of COVID, we just started hiring more and more people that we would train and then background check and get up onto the system. And we made a gig because we found that people were better if they got to pick their own hours. You know, they, uh, they could do it for four hours, five hours, especially if it's a really busy day and they've made a lot of money and they felt like they've made enough money in a couple hours. Why keep going?

Uh, and the system's a bit gamified because if you are making money really quickly, cause you're really closing sales, um, then you get to spin a wheel and that wheel is like a roulette wheel or a wheel of fortune kind of thing. And then you get extra bonuses, uh, you know, either free hotel room nights or free cash free this and that, uh, people just really caught onto it. So we have to 7, 000 gig agents and, uh, do we have AI that backs up the system that allows, uh, the system to push the best calls to the best agents. Uh, and that could be anything based on locality, you know, whether that agent to the hotels that that person is looking to book go to or that person's locale is close to where that customer is. Language similarities, all of that is accounted for in the AI. So it, you know, it's really, really grown. It's been great.

And then in the next few months, we will be launching the first and it's a completely automated AI agent and the AI agents will be able to work you know, 24/7/365 and they'll speak every language. Uh, it'll really be a game changer and they'll compete against the gig agents. But this should be a very positive thing for our gigs because, uh, assuming the AI isn't you know, better than the human. And I think in majority of the cases, it won't be as good. Um, it'll the AI behind that that actually triage his calls will triage the calls to the highest performing agents. So the agents will actually be getting more revenue from this.

[00:09:47] Susan Barry: So why would you pursue AI if you don't think it's going to be better than the live humans? 

[00:09:54] Tim Hentschel: Oh, I, I didn't, I didn't mean that. I just need the first iterations wont. 

[00:09:57] Susan Barry: Ah gotcha. 

[00:09:58] Tim Hentschel: You train the AI on the last, you know, five years of, of hundreds of thousands of recorded calls. So all of our calls are void. So it's picking the best of the best where yeah, um, but you know the human versus robot, um, or the or the human robot hybrid of the days that we live in now. It's funny because now it seems in social media circles on the tech side, but even a little bit on the investment tech side to people are beginning to say that AI is a bit hyped. I think that sounds like back in 2000 when the Internet bubble had burst. I think AI has unlimited, um, uh, potential and, and we haven't even seen anything yet. I mean, for people to already call it hype and it's only been around really in the, uh, mainstream sense for a year. It's just like the internet. Remember, I mean, in those early years, everybody said, “Oh, it's a fad.” And then, and then look at what it changes with AI will be that the best AI, just like the internet though, it will make it a positive impact in your life where you, uh, you won't really notice it like what we're trying to do with a 100 percent AI reservation agent. 

[00:11:19] Susan Barry: So people talk about the costs associated with replacing those low barrier to entry jobs like call center agents, for example, with AI but I, I have to wonder, and I don't know how to figure this out for myself, so I'm betting you can tell me. The cost of the compute and like the energy to power these large language models and everything that's the underpinnings of AI, how does that compare just in terms of costs? Like, are you trading one expensive thing in labor for another expensive thing in compute? How do you like a company like yours? How do you make that comparison, that decision to go hard and AI if there aren't appreciable cost savings? 

[00:12:08] Tim Hentschel: So in the company's direction to take, you know, high touch space and add high automation when back in 2021, when we were about to go public on the NASDAQ, uh, on his back in our, um, investor deck, it actually talked about our goal was to make an offline reservation as cost effective as an online reservation. And when we pushed the gig, we got a little closer to, to that. We dropped the cost per reservation in half from a traditional call center. And that was a combination of the AI and the efficiencies on top of the higher conversion. So that's how we dropped the cost in half since the cost per per reservation.

When we launched this AI 100 percent AI reservations agents in the next our estimates is that we're going to be able to drop that cost from the gig agent by about 75%. So it'll be one fourth the cost. But to put it in perspective, even at one fourth, the cost, because of the cost for ai, it's still gonna be about three times, four times more expensive than an online reservation. So we're gonna have to have the AI increase the, you know, cost per sale, you know, total ticket value, um, you know, margin, all of that will have to basically get to the same cost as an online reservation. But we are very close to that in the next, you know, three to six months, uh, from what we put out in our, our, uh, deck just three years ago, um, you know, by 2025.

[00:13:51] Susan Barry: How's that mix? Like, do people still, I mean, I know people still call a call center because you wouldn't have one if they didn't, but like, is that consumer behavior evolving such that that percentage of the mix of reservations is decreasing enough that it doesn't really matter? You know what I mean? I don't know if I asked that very well.

[00:14:10] Tim Hentschel: No, I know what you're trying to say. You're trying to say, well, people are still going to pick up the phone. But we're we're not looking at that that way. We're looking at anything voice activated. So whether you're talking, um, through a phone, you know, through your, uh, VR headset through your your smart TV, through your Alexa or Siri, or through your car, you know, um, there's going to be always going to be voice activated AI. And that's where we want to be on the head and forefront of a voice activated AI.

[00:14:45] Susan Barry: Gotcha. Okay. So you generally obviously favor AI, but we have talked before about how automated revenue management systems can falsely inflate rates like particularly when it's a high demand period like the Paris Olympics, for example. Can you explain what you mean? And maybe what you see is a solution for that? 

[00:15:09] Tim Hentschel: Well, yeah, I think it just needs a human touch a lot more. Um, the blocks for the big events don't get, um, pushed out or uh released, you know fast enough to the general public. Too much space is blocked in advance, I mean all these factors come into it and it pushes the revenue management systems up up. Because they thinks that the revenue management system thinks it has demand it really doesn't have. And so that's just where it needs a human oversight to say look, you know it's not booking as fast as it is. And this event is probably not as big as it was forecasted. And so we need to release space faster and we need to bring down rates. We definitely recorded that in this Paris Olympics and we've seen it at other events too. Um, notably the last few Superbowls, there was much higher forecast for rates than what the rates turned out to be one week out. You know, you always can snatch a deal usually one week out before the big event when they mismanage the manager. 

[00:16:18] Susan Barry: Which is a terrible way to try to train consumer behavior. Just wait till the last minute and you'll get a better deal. That's utter nonsense. I think one of the big issues with revenue management systems is they don't take all of the supply into account. They don't consider short term rentals, vacation rentals, all of those pieces of the puzzle that suddenly become available the closer that you get, you know, there's plenty of people who have put their house on Airbnb one time and that was when the Super Bowl was in their city.

[00:16:49] Tim Hentschel: Because it makes economic sense too. You can't account for the fact that you don't know how many people will actually start one time rentals once the rates get to $2,000 a night. And then all of a sudden it's like, yeah, I can take my entire family on a five star summer vacation if I rent my house out for a week.

[00:17:05] Susan Barry: Exactly. And avoid all the traffic and nonsense that's going to happen with this big event. Totally agree. We like to make sure that our listeners come away from every single episode of Top Floor with some practical, tangible tips to try either in their businesses or in their personal lives. I'm curious what advice you have for hotel salespeople who think that the relationship part of group sales is at risk. From hearing what we've talked about today from the existence of HotelPlanner and Seavent and Group 360 and all that stuff. What would you tell hotel salespeople? 

[00:17:48] Tim Hentschel: I think it's very similar to, you know, what's going on with our gig agents to the AI revolution. You know, um, I wouldn't worry about it. At all. I actually think that it will make them more valuable because it will give them more front of the house time. Um, it's going to automate a lot to take over the little things. Um, even if you think about the main focus of that sales manager is that is that personal relationship, making sure that they can actually get the person, the group coordinator to get to the hotel in a face to face, take them out to dinner, get that personal relationship as high as possible. Or at least get as much phone time with that person as possible. But then as they get into the more back and forth on the minutia of the contract, or, you know, even haggling over, over deal terms or prices, a lot of that can be taken over by AI. And then you can just focus on the personal relationship. So it should make every sales manager more effective.

And that's exactly where the gig agents compared to AI agents going to be on our cloud based call, you know, system. The gig agents will be able to give a you know, a little bit more personality and a little bit more service and I should push them to do that to be much better. But once they are, they're going to get the highest, highest value calls. So it's the same thing. The sales managers that will be, um, the best sales manager will get the highest value groups. Therefore their bonuses will be the best that they can be and they'll have more time actually doing personal sales and less time doing paperwork, minutiae, you know, back and forth, uh, haggling and follow up.

[00:19:41] Susan Barry: Let's hope that that's what happens. 

[00:19:43] Tim Hentschel: It is what will happen. I have to tell you, I've just been doing this for way too long. I'm 45 years old, been in the industry since I was 14. And everybody thought the internet was going to kill jobs and look at it. It's completely opposite. And every, and now we hit every year, we hit a world record in hotel occupancy, hotel revenue, uh, travel revenue. Um, we hit new records. And I think a lot of those records are based on the automation that's been pushed in the industry in the last 20 years. It's freed up a lot of, of the best sales travel salespeople's time to sell more travel. And so therefore we have more revenue.

[00:20:23] Susan Barry: I think that's true. I think there's also just a lot of white space and opportunity for compression, not just at the low barrier to entry positions, but at the high barrier to entry positions like sales managers. And not for nothing, but having been a director of sales and marketing for 10 years and then, you know, done this business for another 15, the word relationship is overblown when it comes to hotel sales. Because people will make decisions that are bad for the hotel to preserve the relationship, but clients never do that. Clients don't ever make decisions that are bad for their companies to preserve the relationship with the hotel sales manager. So, is it even worth, you know, retaining or having be this big thing. Who knows? 

[00:21:19] Tim Hentschel: I mean, my take on it is the hospitality industry and at the core of hospitality is service. So you want to give a little bit more than what you get. Um, I mean, I've been in the industries again so long that when I go to establishments, hotels, restaurants, you know, private clubs, I really try to give as much to them as I get back because I'm sensitive to it because I'm actually from the industry side.

[00:21:45] Susan Barry: Right, and well that's the difference between a relationship and a transaction, right? 

[00:21:49] Tim Hentschel: Yeah. And I think, I think, I think the customer, especially on the high end is hungry for that more and more. I mean, when you saw the amount of service levels that were. Pulled back during covid and then post covid they didn't come back at anywhere near the level. Look at how many people have gravitated towards private member clubs where they're paying that all time high of membership. They're paying, you know tens of thousands thousands of dollars a year, sometimes hundreds of thousands of dollars a year just to be guaranteed real hospitality like real high service levels. The the boom in private jets is another aspect of that. The customer customers are hungry for that. But those customers yeah, they want to take a little bit more than than they're going to give because they feel like they're paying for that, that experience. 

[00:22:41] Susan Barry: We have reached the fortune telling portion of our show. So you're going to predict the future and then we'll see if you were right. What is a prediction you have about the future of high touch service and hotels? So what I mean by this is what sort of analog or old fashioned parts of hotels should not ever be automated? 

[00:23:04] Tim Hentschel: Oh definitely restaurant service. There should be as much personal relationships, sommeliers, and you know chef interaction even, meal descriptions. That's that's when you get to paying 200 to 300 dollars per person, you know, uh for a meal, that's what people really really want when we're talking about the five stars. So that's where I don't think technology is going to make a huge impact in the front of the house but in the back of the house again, it should be able to make everything more efficient so that the human time can be spent with other humans and so it could be you know, the most valuable time spent. 

[00:23:52] Susan Barry: Okay. What about if you could wave a magic wand and undo an innovation or a change that you've seen in the hospitality industry? What would that be? 

[00:24:04] Tim Hentschel: QR codes in restaurants. I totally agree. 

[00:24:08] Susan Barry: I totally agree. One million, trillion percent. I think the only reason to have a QR code is… Is there - maybe there's not even a single good reason to have it.

[00:24:20] Tim Hentschel: Oh, even better when they want you to download their app. I'm saying order from their menu. Everybody wants you to download their app these days. And it's probably about the creepiest thing ever. Cause you know, at the end of the day, it's about data sales. It was just like, okay, I'd rather tip you more, not. I mean, nobody needs another app on their phone. It was a COVID invention and it just needs to go away. And somehow they pushed it on as like it was more sanitary.  

[00:24:50] Susan Barry: I totally agree with you. And the worst to me is when you go to a place that has a QR code menu and if you ask for a menu, like, oh, my battery's dead or, you know, whatever. And they say, no, like, what?

[00:25:04] Tim Hentschel: I hate to say it, but whenever I see a QR code at a restaurant, I usually guess the food's bad and it usually is. That's amazing too, right?

[00:25:13] Susan Barry: I don't think you're wrong.

[00:25:14] Tim Hentschel: Probably the chef doesn't have much control of the restaurant if there's QR codes there. So it's more of like, you know, uh, a corporate manager type and, uh, you know, they're just looking for efficiency. Well, then they're going to just be cheap and efficient with the food, too.  

[00:25:34] Susan Barry: Yeah. And if everything exists on a website, then they probably don't have the bandwidth to change the offerings very often. You know what I mean? So there's no like seasonal menu or whatever. All right, we're fully in agreement. QR codes need to be banned. Okay, folks, before we tell Tim goodbye, we are going to head down to the loading dock where all of the best stories get told.

Elevator voice announces, “Going down.” 

Tim, what is a story you would only tell on the loading dock? 

[00:26:09] Tim Hentschel: So one of the most interesting experiences that I had was actually, WTTC, do you know that organization? It's World Travel and Tourism Council. You have to be a member of it. Uh, and it's a global member of travel companies, and they have an annual event every year. This year it's gonna be in Perth, Australia. Uh, it was down in, um Buenos Aires and they go to remote areas. So we were in Riyadh in Saudi, um, just a year ago and the World Cup was going on at the time. And we had just been at the palace for dinner and Julio Iglesias Jr. performed to just a couple hundred people with his whole band. I mean, it was an amazing experience, right? And, um, I'm sitting at a table of 10, like an arm's length distance from Ed Norton, you know, the actor? 

[00:27:16] Susan Barry: Mm hmm. 

[00:27:18] Tim Hentschel: So, so I didn't get to say hi to him or anything, but, but you know —

[00:27:24] Susan Barry: you were sitting at the same table, you didn't say hi? 

[00:27:25] Tim Hentschel: No, 'cause we were at different tables and I didn't even get up and, and tap him on the shoulder or anything. So we all went back to the hotel. We were staying at the, the Ritz Carlton, uh, there at Riyadh, and they didn't have World Cup on the tv. So I called up the, the desk and I said, where can I, can I see World Cup? Because it was Iran versus the US that night. So I wanted to see that match. And they said, “Oh, actually we're, we're showing it at the bowling alley in the basement.” Cause of course you have a bowling alley in the basement, right? This is like, you know, how funny this, this whole situation is. So I go down there and they turned a bowling alley into like a makeshift theater. Right? So they bought all these leather couches and put them together and, and they were giving everybody popcorn and, uh, you could order drinks and everything.

And it was just me and a couple of guys from our company that were down there. And, um, and a couple other people that were on a couch off to the side. And all of a sudden Ed Norton walks in, uh, to the room and I was like, well, obviously, you know, this is meant to be and wants to hang out. So I immediately said, “Ed, come on, sit over here.” He was taken back a little bit cause I found out that he does not go by Ed, he goes by Edward. And he went into a, he's like, “No, sorry. I'm here with a couple of our friends.” So then he goes and sits next to the other guys there. And so we start watching the match. And, um, those, those guys are, are pro Iran and we're rooting for the USA and, uh, Ed's kind of staying silent.

And, uh, just started talking about what a great event this was. And I said, yeah, and look, we're watching World Cup in the basement of the Ritz Carlton with Ed Norton. And the other guy just said, yes and President Calderon from Mexico. And I was like, oh, sorry, sorry I didn't recognize you. But the whole time I'm thinking, this is a bit odd. Like the president of Mexico is rooting for Iran. And I'm like, wow. And of course, Ed's like staying silent because he's friends, you know, he's not going to take sides or anything. But then, of course, as we started to get deeper and deeper into it, I started to ask President Calderon, you know, why he's letting so much fentanyl come across the border. Because as you do right when you're watching World Cup, it's getting contentious because it's 1 - 1 and. And then he got into a long answer about how it's, uh, it's not, it's, it's, it's not anything to do with, with, um, their policing. It's, it's, it's 100 percent a US issue. And I don't know how I could get in much deeper than that besides get into too much, uh, uh, contentious politics. But as I left that night, to go into the elevator. All I hear is Tim, Tim, Tim! And, um, I was like, oh, it's, it's, it's Edward. Of course. He, he wants to spend more time with me. All right. What's up? What can I do? And he goes, Uh, you forgot to pay your bill.  

[00:30:41] Susan Barry: Oh no. 

[00:30:42] Tim Hentschel: So, I stuck, uh, Ed Norton with, with my bar tab.

[00:30:46] Susan Barry: Fantastic.

[00:30:48] Tim Hentschel: In the basement of the Ritz Carlton in Riyadh. And that's my most embarrassing moment in my entire life.

[00:30:55] Susan Barry: Well, that story doesn't even sound real. So, it's absolutely perfect for the loading dock. Tim, thank you for being here. I know that Our listeners learned a lot about AI and automation, and I really appreciate riding with us to the top floor.

[00:31:12] Tim Hentschel: Thank you so much. Have a good one.

[00:31:15] Susan Barry: Thank you for listening. You can find the show notes at topfloorpodcast.com/episode/156. Jonathan Albano is our editor, producer, and all around genius. He even wrote and performed our theme song with vocals by Cameron Albano. You can subscribe to Top Floor on Apple Podcasts, Spotify, or wherever you like to listen. And your rating or review will go a long way in helping us give you more of what you like.  

[00:31:50] Narrator: Thanks for listening to the Top Floor Podcast at www.topfloorpodcast.com. Have a hospitality marketing question? Reach us at 850-404-9630 to be featured in a future episode.