Artificial Intelligence Changes the Entire Business Model | with Tata Crocombe
​GAIN Momentum episode #57: Artificial Intelligence Changes the Entire Business Model | with Tata Crocombe
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Adam Mogelonsky: Welcome to the GAIN Momentum podcast, focusing on timeless lessons from senior leaders in Hospitality, food service, travel, and technology. I'm joined by my co host today, Neil Foster. And our special guest is Tata Korkombe, an independent hotel owner. Tata, how are you?
Tata Crocombe: Fantastic.
Adam Mogelonsky: All right. So before we dive into our four key questions that we structure this podcast around, I'm wondering, Tata, if you could give us some background. Starting with your background as an independent hotel owner and also because you are currently recording coming at us from the Cook Islands in the South Pacific, if you could talk a little bit about, you know, the, the unique aspects of hospitality for the South Pacific, as well as give us the elevator pitch on why everyone in the world should visit the Cook Islands at [00:01:00] least
Tata Crocombe: It's one of the most beautiful places in the world. very unique and distinct, culture that's living, breathing Polynesian culture that's really creative. Um, you know, all art forms are, in accelerated creativity mode here. Uh, so it's the combination of a, you know, very beautiful.
Physical location, you know, that sort of archetypal South Seas paradise. It's, that's the real deal, combined with, uh, you know, a wonderful, uh, community that's, um, not only fun, but very creative in terms of whether the cuisine or fashion or, you know, Tattoo, which is, you know, originally a Polynesian art form, carving, or whatever, I mean, it's, a magical little place.
So I have three resorts here in the Crook Islands. Uh, Otitaki Private Island Resort, which is a 33 key, five star. Private Island, uh, the Rarotonga Beach Resort, which is probably the best [00:02:00] known of all the hotels in the Cook Islands as um, 110 key family orientated four star resort, and then uh, 49 key adults only resort, Sanctuary Rarotonga.
Adam Mogelonsky: With that being said as an introduction, uh, what I also would like to discuss is you are increasingly involved on the forefront of technology. And besides being an independent hotel owner, besides being a leader in the South Pacific hospitality, you also have, uh, you also are the founder of traveltech.
ai. Can you give us some background on what this company does and is?
Tata Crocombe: Uh, essentially, we're developing AI solutions for the hotel industry specifically. Uh, we've made many millions of dollars already out of using AI in our, our business. Uh, across the board, we've made money in, in, uh Billions of dollars in finance, savings, [00:03:00] in increased direct business, in menu engineering in our restaurants, you know, AI is going to change the way that we run our businesses and we'll be able to run them better, faster, cheaper, and in quite quick order.
So we've developed a number of things for ourselves and other hoteliers have seen it so they'd like to buy it. So we're in the process of, Making those market ready.
Adam Mogelonsky: Right. Thanks for the intro. And, uh, here we go with our first question, which is looking at the vendor side of things. So Tata, what single piece of advice would you give to vendor companies entering hospitality?
Tata Crocombe: AI is going to change the world. You know, there's some folks call it the fourth industrial revolution. Um, but fundamentally what it's going to do is change the way that we process information in hotels. That's then going to change the This is actually the product that we deliver, [00:04:00] and it's going to change the industry structure.
So let's just talk about that quickly. in terms of our guests at the moment, the OTAs are the front runners in providing the lowest friction, most convenient way to, uh, book a hotel. And that's allowed them to extract the money. You know, more than a hundred billion dollars a year out of the hotel. So it's a basic truism that the easier you make it for a guest to have all the information that they need to make a booking at their hands and the less friction you apply, you're going to get, uh, a higher conversion rate.
Now along comes, uh, ChatGPT particularly. Chatbots have been around for a while and they've helped a little bit, but ChatGPT, what it has allowed us to do with our chatbots is to, um,
Provide an encyclopedia of of information at very granular level, uh, through our chatbots and we've seen a very significant shift. Uh, from third [00:05:00] party distributors to direct business as a result of being able to deliver that personalized information 24/7 we can see it through the bot, you know, that people ask two or three questions.
they get those answered and they move straight on to booking. So that's been a, I think there's a, there's a message in that, that, if you want to grow your direct business, you've got to be better than booking. com and Expedia. And to do that, you've got to have. Uh, the same capability of, uh, of delivering rate and inventory.
Uh, but also detailed information. And often that detailed information can be very, very specific. You know, a mother with a kid with celiac, and if she can get those answers to her satisfaction, she's going to make a booking. And behind that is usually, the parents and the. Sisters in law and, you know, you're actually picking up five bookings, not one booking as a result of resolving that issue.
what we notice also is the bulk of the inquiries come out of office [00:06:00] hours. So, you know, more than three quarters of it is when our reservations office is closed. So, instead of, um, You know, getting a helpful message saying we'll call you tomorrow or whatever, it's getting answered there right on the spot, the conversion.
So, look, if the hotel industry is ever to seriously reduce the scale and scope of the extraction of value, By the OTAs in Google, it's going to have to get into outperforming them and particularly in meeting tailored answers to questions 24 7. The next step in the process is that it's then, we've then got to get into tailored personalized pricing and packaging.
So for example, the peak experience when coming to one of our resorts in the Cook Islands is, uh, for a young family to be able to swim with the turtles and the tropical fish and the tropical corals and that. it's a peak experience, right? And [00:07:00] people have photographers come and take photos of the happy family and those become treasured memories.
probably for life so we want to turn the marketing at the moment through book. comicspedia, which is commoditized and it's just really around rate and availability. We want to turn that upside down and say, let's start off with the experience, right? let's talk about whether this is A big buzz for you not for everybody, but for a lot of people it is.
and then basically be able to put together a whole guest itinerary for their entire stay, airline bookings, transfer bookings, restaurant bookings, tours, both onsite and offsite. So that's, again, Um, going to provide a service level that I don't believe the OTAs will be able to match. some of the industry believe, you know, with a thousand engineers, both at Expedia and at how to do it.
But you're talking about a level of [00:08:00] information and knowledge that really, Only the hotel would have and be able to keep up to date. So we're updating our chatbots daily. You know, we're getting hit by four, five, six questions that the bot, which is trained on thousands and thousands of different, Possibilities.
What we're finding is that as people get used to the bot, they're asking more and more questions, more than they would have asked a human. And so, um, we're having to train it further and further and further each, each and every day. And it identifies the questions it couldn't, couldn't answer. So, I think it's a great opportunity for the hotels to win back A lot of business from third party distributors.
Adam Mogelonsky: You know, that's a very interesting observation at the end there about how people are asking them more and more questions. And what I always rationalize that with is people are, by and large, polite [00:09:00] and friendly. And when they see a person behind them in line, they don't want to hold up the line by asking a lot of questions.
And you'll see that in an ice cream shop, right? If you're the only one in the ice cream shop, you're going to want to try every single flavor. But the second another person walks in the store, you're like, Uh, oh, okay, okay, I'll just get vanilla, right? Uh, but, so when you, you remove the person and people don't feel like they're bothering anyone, they really feel like they have the opportunity to explore.
And really, this is, this is sort of next step. In what the website used to be, where you could click around a website. There was all this new content. You could really discover a property. And some hotels are still at the stage where they're trying to really keep their websites up to date. So, my question there in understanding that there's this window shopping effect is how do you then connect the dots between all these additional questions that guests are asking your chatbot to answer?[00:10:00]
Towards property improvements or insights that you can use to build revenues in various ways.
Tata Crocombe: Well, it's very specific, the feedback that's coming through. You know, you've got the questions. know, straight out of the guest's mouth. what we do is once a month, we'll pull all those questions in and we'll put them through ChatGPT and try and summarize, uh, and do sentiment analysis to see which ones are, you know, people are feeling most strongly about, and then that goes straight onto our priority list of things to fix.
Oftentimes the things that are quite. Little inverted comments but have a big impact on the, on the guest experience. So it's actually, uh, given us a much better understanding of the, the guest voice, um, and what's actually important to them. often not what we thought it was. You know, I'll give you, uh, uh, one example.
know, we live in the South Pacific, so we have a lot of, you know, we're surrounded by [00:11:00] oceans. We have a lot of, uh, fresh fish. We just think fresh fish is always fresh. You know, that's kind of, that's how we eat fish. That's not how the world is fished, you know, usually it's caught, it's set in a a trawler for a month and then it goes into a storage for a month.
And so one of the things that surprised us early on was how much people were responding with strong emotions. Welcome to the freshness of the fish, not only at our resorts, but around the island, which led us to rethink our whole menu. We had a more international kind of a menu, so we took all the duck and all the other stuff off it and really started to focus on, the deep sea fish, the tuna, yellowfin tuna, mahi mahi, those sorts of things, and provide more options.
And that's actually met consumer demand. Not something we would have thought of. The consumer, the guest wasn't telling us that, but through the analytics, we were able to pick up on that trend. And it was a very strong trend.
Adam Mogelonsky: Wow. [00:12:00] Able to pick up on, uh, on an override human bias using these various summa summarization and, uh, NLP or sentiment analysis tools. That is very cool. so while we're on the topic of chat GPT and how it's. It is currently changing hotel operations. We're talking about the channel shift right now and that is such a critical component because it's giving hotels more net margins to then play with and to have wiggle room to improve service.
I'm wondering, uh, you know, before we look at some of the next key questions is what other areas are you seeing GPT based systems or AI agents come into play here for improving operations around the hotel?
Tata Crocombe: So one of the pain points for us and every other hotelier in the world is food and beverage. you could probably count on one hand, the number of hotels in the world that actually make money out of food and beverage. As I say, [00:13:00] You know, those hoteliers who think they're making money out of food and beverage often don't understand accounting.
but it's one of those things that we have to We have to provide, we make our money back through rate and occupancy. I mean, there's no doubt a good food and beverage operation, in my experience, can have a leveraged effect on rate and occupancy. So that's where we make the money. We, we don't focus so much on, uh, the food and beverage department itself.
Never tell your executive chef that, but that's the, that's the truth of it. So, what we did is that we've used ChatGPT, uh, to develop an algorithm that helps us optimize our food and beverage operation, right? So, first step was, we basically said, um, What are the dishes that, in Australia and New Zealand um, 90 of our customers at this particular hotel, like when they were at a sun destination, a four star sun destination, beach resort in Bali, Thailand, Hawaii, Fiji, Queensland, right?[00:14:00]
And so that gave us a whole lot of information. And what I should say here is that what we've found is using ChatGPT as a. Augmented tool to assist the humans make better decisions, right? We don't sort of all bow down before the great ChatGPT and say, Oh my God, it said this, we will always iterate, you know, come back with, you know, this is what we think, but but what we've found is that it's, it's fantastic at pulling together ideas and funnily enough, you know, like in this menu engineering exercise, we had director of sales and marketing, executive chef, food and beverage manager.
Financial controller and myself, right? None of us short of ego. So sometimes getting five people's thoughts and egos managed is difficult. What we've found with chatGPT is that everyone can have their say, we stick it into chatGPT We say, order that in terms of the options, the advantages and disadvantages of each option, and you'll recommend an option.
Now we don't all. You know, fall on our feet and say, Oh my God, chatGPT has recommended [00:15:00] one two three But generally it starts us on a pathway towards getting a, an optimized solution. So we, firstly, we said, right, what are the things that Aussies and Kiwis like when they're on a Long story short, we said in each category of pizza and so on and so on, we want to have 50 of the menu, the traditionals, you know, like in the pizza, we've got a margarita, Hawaiian, uh, pepperoni, you know, there's no point reinventing the whole wheel but people don't come to a Polynesian paradise, not to experience something different.
So then we said, right, give us some ideas on Polynesian infused pizza, right? And so we've got a bunch of, we have about 50 of the menu and we went through the whole menu doing that. We have a staff shortage. So we said, you know, most of our, uh, people on the line, uh, you know, have one year's experience and a one year diploma.
So we said, what do they need to be able to do, to have nothing on the menu that they can't produce in 20 minutes. between six and eight, when they've got 100 orders up, right? So that [00:16:00] eliminated about, well, it identified about 25 of their menu that couldn't meet that target. So we worked through each individual item, with chatGPT to say which ones could be adjusted and which ones couldn't, we dropped the ones that couldn't be adjusted.
Similarly with profitability, we wanted to, Chase a 40 uh, gross margin. So we said go through the whole, menu, identify those ones that fall below. Now some of them are 39, so we were able to, you know, make some small adjustments. Some of them we just couldn't make work, and so we dropped those out of the, out of the menu.
And then we sort of said, have a look at the menu from a balanced point of view. Have we got enough to cover, because we have a broad base of clients who are here for seven to TEN days. So we need to, provide a broad range. And they came back and said, look, you don't have enough on the kids menu.
You don't have enough vegan, vegetarian, and gluten free. So we went back and said, look, we don't want to have a whole vegan menu. What we want is. Things that have start off as vegan, but we can add [00:17:00] prawns or chicken or whatever to, and make it a more sort of, um, standard dish. So, was able to do that. And then we get to the, once we've got that finalized, we said, let's generate the recipe card.
And the recipe card has got the, not only the, the name of the dish comes up with something, you know, exciting and sexy, uh, but a little one liner that goes beneath it, but then it also does all the marketing, Instagram marketing, the Facebook marketing, uh, any other kind of marketing. It just generates the, um, that marketing.
Then it comes down and we say, right, what are the things, what are the beverages that would match with this particular dish? What are the, uh, health, you know, with people are heart conscious or about gluten or whatever. Uh, what information do we give about that? And then we, went down to how do we cook it?
How do we produce it? So it's the recipe card for the chefs and then what are the items that we need to buy? Uh, for each one of these dishes. So that then becomes [00:18:00] the, uh, recipe. The Market List for the Purchasing officers And then that also then is the foundation for the Financial Analysis, which we would generate a level of financial analysis we've never been able to see before.
So it's obviously, you know, food cost, Labor cost gross margin, but we actually went down right to overheads and uh, and so on because as I said, right at, uh, a minute ago, most hoteliers forget about the overheads when they look at food and beverage. So we built that into the algorithm. So within a day.
We're able to completely revise a hundred different, uh, menu items, as well as do a strategic analysis of the whole menu, tailored to our clientele, which would have, you know, we'd never got done, you know, people just got too busy. So that's been a big breakthrough. We picked up about 15%. In overall revenue, once we introduced the menus, like immediately, [00:19:00] profitably went up a third.
that's just the start of where we're going. Now what we've done is we've interfaced it with the with the purchasing module. So if the price of chicken goes up 20 all the chicken dishes get repriced, right? And in some case it'll alert us to say, this has to be, you know, some of it we can absorb, some of it we have to reprice on the menu.
and again, the next step is obviously dynamic pricing. You know, dynamic pricing came from airlines into hotel rooms, it'll next go into food and beverage. we're given the, um, Opportunity to, already have half of the solution done. So going forward, I think that's a microcosm of how AI is gonna be used in hotels, is that every single transaction is gonna be analyzed.
24 7 in real time and it will use its intelligence to identify and say look the Mexican burger [00:20:00] is is we sold three last yesterday we thought we're going to sell 17 let's change it to a Thai burger not only that that's this is the impact it's going to have on the profit and loss for the restaurant, not only that, that's the level of, uh, impact it's going to have on over a year on the hotel P& L.
And then from there onto the valuation of the hotel. So we're going to be able to, manage our businesses in conjunction with, uh, these artificial intelligence agents, uh, in a way that we haven't been able to before.
Adam Mogelonsky: Wow. first of all, thank you. That's such an incredibly thorough answer. And, and how you go through a whole process and how you embed AI at every single step that would normally go in. And, you know, if I had any follow up, I'm wondering about the human side. of this technology stack you put together.
And if you faced any obstacles of people who were resistant to giving the reins over [00:21:00] to, to an AI, uh, in terms of doing a lot of this, this, uh, not necessarily automated work, but the initial work of, let's say, coming up with new menu additions or deciding which ones. should be turned over into new items or, coming up with the actual marketing phrasing.
Did you, did you experience any obstacles when you're first setting this up?
Tata Crocombe: None at all. People are very excited about once they see the. How it works, they're very excited with the pace at which it can, um, you know, we've got a strong team and people are very, um, creative and thoughtful and, you know, and passionate. And, what the ChatGPT allows us to do is really incorporate a lot more of that passion, creativity than we were, before.
Because what it can do is it can take all those different considerations. You've got a financial consideration, a marketing consideration, you've got a The chef's consideration, the purchasing officer's [00:22:00] consideration, and take all of those different perspectives and come up with solutions, uh, that meet all of them, um, in very innovative and creative ways and so fast, you know, it's, it goes back to your point before, we're always worried about, you know, You know, and should be, worried about inconveniencing a fellow human.
We don't care about inconveniencing a computer. I mean, so what we would typically do is we'll say, you know, we're looking for a rice dish that would straddle a vegan vegetarian, um, and, but also we could add a Polynesian flavor to it and, uh, it would be interesting on the menu and whatever other criteria we've got, right?
And we say, give us 50 options. And then we rattle through those and we say, look, we like item 23 and 29, but not quite. We brought, we really want to do is make them spicy. And so we want to add chili, but not too much chili. Cause I was in Kiwis like a little bit of chili, but not too much chili. And [00:23:00] we can do all that.
And then we came up with one of our best sellers, which is, um, Hawaiian pineapple fried rice, right? Which, and you can add prawns, it starts off as vegan, you can add prawns, you can add egg, you can add chicken, you can make it for kids, you can make it as a quick, you know, so it's been a hit.
Wouldn't have got there without it. Um, wouldn't have got that. So, no, people are very excited about it. Now, there is a, you know, like anything, there's people who are more excited than others. There's some people who, uh, Drink the Kool Aid and, and use it regularly for a lot of things and they're having startling results, startling results.
and there's other folks who, you know, who are slower out of the gate. That's all good.
Adam Mogelonsky: uh, we've looked at food and beverage. Where else are you using Uh, chat GPT or GPT based agents, or human resources, you've mentioned insurance in the past. Uh, any other departments you want to touch [00:24:00] on?
Tata Crocombe: Well, let's just talk about things we've made, you know, million dollars plus out of. which is all of them so far. of the interesting things is that we were renegotiating with our bank, our terms and conditions for the next period, and they had a bunch of terms and conditions that didn't really work for us.
We had a bunch of terms and conditions they asked for, but didn't really work for them, you know, on their side, they had, you know, Uh, a couple of guys between them had 50 years of, you know, finance experience between us. We've had 50 years as well, so 100 years of experience. None of us could find a solution to this problem.
So, at the end of the meeting, I said, Look, Guys, are you interested in trying ChatGPT? And everyone thinks I'm crazy anyway. So they said, why not? So all we did is we said, right, this is what the bank requires. This is what we require. Give us 50 solutions that would meet the bank's requirements and ours.
Right.
I'll never forget it. The bank guys, we were on a shared screen, the bank guys said, you know, number six, we could actually go with, [00:25:00] you know, we could look at that, but it'd have to have one, two, three, four, five more requirements. And our response was, yeah, that could work, but we'd have to have nine, seven, eight more requirements.
You know, as well. And so we just said to Chat GPT, incorporate these considerations on that one thing and generate another 50 ideas. Anyway, we iterated, iterated, iterated. We eventually got to something. They said, look, we're happy to take that to our CEO. Now, this is a bank that's has a history of 160 years.
And as they said to me, we've never agreed to this particular request in 160 years. And I said, well, you never had Chet GPT either. So anyway, the fellow said, um, But you've given me a hard task because now I've got to write the paper to go up. And I said, well, tell me about it. She said, well, it's got to be two pages long.
It's got to comprehensively explain the issue, but can't go over too long. It's got to be, you know, clear, logical, concise. And I said, right, hang fire. So I said to ChatGPT, that's what we need to do. Two pages. And [00:26:00] said, right, uh, produce that paper. And again, three iterations or so. And they had a paper that they were prepared to send to the CEO.
week later, he rang me up and he says, you know, it's been approved. We're stunt, we're stunned. And that saved us a couple million dollars. ChatGPT should hire me to market for them because we just make so much money out of their thing. And it's wonderful, you know, this is the best deal I've ever come across in my life.
Um, you know, the lovely people at, um, Microsoft spent 13 billion US, you know, real dollars, on, um, getting the first iteration of ChatGPT. They've probably spent the same again getting to what we've got now, ChatGPT 4. And they want 20 bucks a month for it, you know, and even if you don't pay the 20 bucks and just use the free version, you can do 99 percent of what you want.
I mean, I just don't want to do 99, I want to do 100. So it's the best deal that's ever been available in my lifetime. Never, you know, can't think of anything that comes anywhere [00:27:00] close.
Adam Mogelonsky: guess the word there is democratization. And you talk about orders of magnitude, this is 20 a month. You look at the traditional tech stack and how much you're paying on each piece of software on a per monthly basis for those pieces as well. So it's
Tata Crocombe: you know, hoteliers are rightly, um, suspicious of the hotel tech industry because, you know, we've all had so much vaporware and we've all had disappointing experiences, but when the, the ingoing cost is 20 bucks a month, you know, you can make a lot of mistakes. So, which leads us to another thing.
I mean, you know, where we're going is that we're going to be having, um, Our tech investments are going to be far smaller than they are now, far more flexible and far more powerful. we're, you know, at the moment an average hotel, 200 rooms has got 20 silos. You know, our friends in the [00:28:00] hotel tech industry will tell us that they, they integrate and, you know, they, and they don't terribly well.
Uh, it's getting better and better. But essentially I think the track we're on to is now is basically there'll be two parts to a hotel, tech stack, there'll be a database, and there'll be an AI, and and the AI will become so pivotal that it'll be more valuable, I'd say within three to five years, more valuable than the, um, The physical buildings that make up a hotel.
Yeah, you can think that's extraordinary, but when you think about it this way, the AI will know how to optimize each and every hotel in a way that humans wouldn't be able to on their own. So, for example, the World Hotel Industry runs at, let's say, 60% occupancy. You know, by definition there's 40% of unutilized capacity.
Um, if you look at the [00:29:00] ho the airline industry, that's how the airline industry used to operate. 20, 30 years ago, you get on a plane that's not at 90%. Some, you know, most of the planes I've been on, the last 20 flights I've been on have been at a hundred. So the airline industry has figured out how to do it.
So the hotel industry needs to figure that out, that's going to bring extraordinary value. Cost of acquisition, you know, we're all paying over a hundred billion to Google booking. Expedia. Um, that's obviously, uh, with AI has got the potential to be vastly reduced, you know, from, 33 percent down to, I'd say in the next three to five years, maybe 10.
And then after that, probably down to three, it'll become a AI intensive. But much cheaper and much more direct driven, um, cost of acquisition. Labor's going to have as well, and we're going to simultaneously be able to deliver better guest [00:30:00] experience and better staff experience. there's no other technology that's ever.
Being presented to the hotel industry that can have the kind of dramatic impact that it has. And we've talked about banks and insurance and equity. I mean, that those industries all, work around risk. And most of that risk is a lack of information. As we get far more precise information, we're going to be able to, we'll be able to, you know, see those risk premiums in insurance, in, in banking and equity investment, they're going to come way, way down.
You know, at least half of where they are now in probably three to five years. And this will all happen simultaneously. It's not like we're going to get the improvements in cost of acquisition. And then later we'll get the food improvements and operations. They're all going to come together. So, um, don't sell your hotel shares,
Adam Mogelonsky: it's one thing to look at, you know, a specific piece of an AI and automation, like a ChatGPT venue. Boil that down to increased net [00:31:00] margins. More margins off GOP, more NOI, more net operating income. And then before you know it, you have not only greater valuation for that hotel, but you have a more efficient engine to then generate more occupancy, greater rate, and also to actually improve the surety of those forecasts going forward to then give the bank a better picture.
of the operation, which then goes all the way down to the lowering of rates to sort of bring it full circle. Is that the picture that you see for the next three to five years?
Tata Crocombe: I think that's part of the picture, but I think the thing that's exciting for me is that what it's going to allow us to do is fulfill our role society and for humanity in creating joy on a scale and pace that we've never been able to before. So, you know, at the end of the day, hospitality's job is we're in the [00:32:00] happy business.
We keep saying we're, we're about making people happy and making them joyous and, AI is going to allow us to do that on a scale that we've never seen before. Simultaneously, AI through the rest of the economy is going to leap. You know, the average American's, um, GDP has fallen in the last 60 years or so.
Um, it's about to go up at an even more rapid rate. what do humans do? When they get money, they travel, they take holidays. So, we're going to have a double whammy of, um, increased demand and the ability to deliver a far better service, a far better product, a far more joyous experience for our guests and our staff and our vendors and our communities, through the, uh, effective use of this technology.
It's terribly exciting.
Adam Mogelonsky: So, I mean, there's so many other points to touch on with regards to AI and we're sort of [00:33:00] expanding out into societal level implications. you know, some of the social, the paradigm shifts, if you will, I'm wondering if we could expand it out to one other aspect that hinges on your career path, which is that you were the chairman of the Cook Islands Tourism Association.
So, do you have any ideas for how destination marketing organizations or central visitor bureaus can use these AI tools that you're talking about to drive more awareness and travel lift to a given destination like, like the Cook Islands or another island destination? Mm
Tata Crocombe: So, the first thing we're Uh, it allows us to do is to understand, uh, guest feedback. I mean, the, the level of guest feedback that we get now is just tsunami like, right? You just can't keep up with it. and AI can turn it into actionable insights. That's the [00:34:00] first thing, you know. Again, it's the same thing, you know.
Who is going to be happiest at Cook Islands? Not everybody. So let's try zero in on those people that are going to be happy and joyous and delighted with their experience with what we have to offer. So from a destination marketing point of view, being able to, you know, More clearly defined in real time and at a granular level, your, um, unique selling proposition is the first thing.
The second thing is you're going to be able to deliver that and tailor that to individual guests. So someone is, uh, on your website and saying, you know, I'm looking at, The Cook Islands or Tahiti or Fiji. And our big thing is marine ecosystems and conservation. but you know, the kids are only three and five.
we're gonna be able to tailor that and say, Hey, you can actually go swimming with the turtles in a, with a special operator who focuses on kids of that age and providing them a safe experience. So we're going to be able to do that. And, and the [00:35:00] destination marketing organizations are going to increasingly Get into the business of, single guest itineraries.
They're going to say, you know, now that we understand what you're about, here's a whole itinerary and click on here and you can book all the things that we've recommended. And if you don't like the sound of them, or you want to add something else, you sort of say, well, little Johnny's also, he's five, but he's celiac.
Uh, you've got to add that in and it'll be fine. Basically come up with recommendations. So at that sort of being able to perform their function, the DMC function, the destination marketing organization function, they're going to be able to do that at scale and granularity simultaneously, right? So that's fulfilling their mission, you know, which is to find the right people that would be delighted with an organization and get them the information and assist them with the marketing process.
So that's. That's the start of it. Uh, there's so many other things that, uh, it'll revolutionize destination marketing, as much as it's going to revolutionize [00:36:00] hotels.
Adam Mogelonsky: So, if we can expand this out here, because we've sort of followed along our questions. We've mentioned some drawbacks, we've mentioned what we're looking forward to, but I want to expand it out because we're moving increasingly from the single chatbot functionality into operations like food and beverage, into now looking at the greater picture of net operating income and then into the actual how this affects finances. But really what we're talking about when you mentioned that about how people will have more time to spend on travel and we're talking about this, the happiness equation aspect. Let's look at, um, some of this, this whole idea of a paradigm shift. you know, obviously everyone knows the term, but very few people have read, uh, Thomas Kuhn's book, uh, The Structure of Scientific Revolutions and that where the phrase was coined.
And, uh, in fact, uh, Tata, you were the one who put me on to that book itself. I had heard of it before, [00:37:00] but forgot about it. And I hadn't actually read it till you, you cajoled me, uh, this past summer.
Neil Foster: Same here, Adam.
Great book. of course, you know, like, uh, Tata, you're an inspiration, right, and I'm wondering within that, um, and this is a question to you, to you, Neil, as well, who's, who's read this, is, uh, do you think the current state of artificial intelligence will elicit a major paradigm shift in hotel management and finance, and what's your take on that?
Adam Mogelonsky: You know, how do we identify the leading indicators that it is going to be, as you say, towards this picture of very lean management, where an AI is more powerful than the physical structure, and as well on the finance side, banks have more surety in the operations, therefore they're able to lend at more generous rates than are presently offered.
what are we looking here for and how do we make that happen? How do we make this paradigm shift happen?
Tata Crocombe: I think there's such a momentum behind the technology that it's going to [00:38:00] happen anyway. There's a lot of folks who are saying, let's slow this down. That's not a realistic, um, option. Um, the technology is, Talk about democratization of a technology. This is the most democratic technology that's ever come about.
Because, yes, the, uh, the metas and the, uh, And the Googles and so on, have been able to invest hundreds of billions of dollars into the technology. But that doesn't necessarily mean that they're going to be the, uh, ultimate winners in this. I mean, one of the things that we do know if we look back over technological change is that very rarely, Over the long term, does the incumbent who benefit from a particular technology dominate the next wave?
So the question really is, is this a new wave or is this just part of the extension of the whole information technology boom that [00:39:00] started off with PCs and gone through cloud and now into, gone through internet and into cloud? My own take is that It is a fundamental break. It is built on the back of PC's internet cloud, but it's the, what's different is that the ability to apply the sum total of all human knowledge to every single individual.
Piece of information, right? So let's, if we think about a hotel, basically, Mrs. Jones is coming in, she's staying at a beachfront, uh, beachfront suite. Um, she's been before three times and she's got some loyalty points. That's about as much as we can know about Mrs. Jones, right? We're going to know. So much more about Mrs.
Jones before she even comes. We're going to have delivered Mrs. Jones more information about our hotel to make sure that she's happy with her purchase and not happy, delighted and over the moon and can't wait to come. And that we've already structured with, you know, assisted her to identify which of the turtle tours she'd do, whether [00:40:00] her husband would play golf, where he'll play.
He will play golf. Who he'll play golf with, how much that'll cost, what time he'll go. We'll have gone through the menu and say the Little Johnny with the Celiac. Here's a menu that is for Celiac kids or alternatively, here's the rooms that have full kitchens that you can prepare the meals. And here's the supermarkets that you can, shop at nearby.
The application of intelligence to every single transaction has never been achieved ever before in the history of mankind, right? We've moved information around, but we haven't applied intelligence to it. The intelligence is applied later when some human looks at a spreadsheet and says, Guess what?
You know, there's some new insight. Those insights are going to be coming in real time. Uh, at scale. And one of the things I think that is going to happen shortly is that hotels will voluntarily sign up to be, have their data shared with other hotels. So you're going to be learning off hundreds and hundreds, maybe thousands of other hotels, what's going on in [00:41:00] F& B.
what's best practice in terms of, dealing with sexual harassment, what's best practice in terms of, uh, you know, structuring loans, uh, from banks, um, and so on. So. The scale of, uh, information is going to be, um, is going to be unprecedented, but it's also going to change the way that, uh, we run hotels.
So, the other books which I've assigned you for reading, which I'll be disappointed if you haven't read already, is, uh, Professor Harari's, um, The latest book, uh, Nexus, right? And distilling down what I believe what his, what his message is for the hotel industry is that if you look back through history, the flow of information, how information is flowed, whether it's through the orals, traditions, then the printing press, and then so on until now.
Each one of those, um, The information gets structured in a different way, and that actually structures the economic and political [00:42:00] environment. for the first time, information is not going to be static. Information is going to have intelligence applied to it, and the sum total of all human knowledge is going to be applied to every single transaction, and looking for new ways to do things better.
So, That inevitably means hotels are going to be a different kind of an organization. We're going to be run differently. We're going to, you know, it's going to be more collaborative. It's going to be more, less of a grind and drudgery. You know, a lot of the drudgery is going to be handed off to, uh, first AI and then secondarily, once we get the robots sorted out, a lot of that will be gone and the humans will be focused on the, on the hospitality.
Um, the systems that we use will be much, much more simplified, you know, We're developing AI solutions for training. Basically what we're doing is dumping every SOP that we've got into a bot. And so therefore we don't have to train people as intensely as we train them now, because 24 seven, if they need the information, they just ask the [00:43:00] bot.
So that's going to mean that people can flow in and out of the industry, but it's also going to mean that we can absorb the intelligence of other hoteliers or other hotels, Basically, in real time, we're creating new knowledge about how to run our hotels better, faster, cheaper, and lead to a better outcome for all of our stakeholders, not only the guests, not only the staff, but also the owners and the community, even the environment.
Because, you know, a lot of this is around, is around fundamental brain structure, right? The human brain can only handle so many variables at once. And AI can handle Far more variables than we can, you know, can handle thousands simultaneously. it gives us the opportunity to compress a human learning cycle down into seconds, which is only a good thing.
Now, Professor O'Reilly's point is that every time there's been [00:44:00] a new change, a change in the way that technology handles information, whether it's the printing press or PCs or whatever, or radio or telegraph or etc. there is fundamental change in society, right? Now, he also says, and I think he's right, that change, negative change is not, For a foregone conclusion, for example, um, you know, FDR and the United States came up with a new deal from the depression.
Um, Hitler came up with, you know, the Holocaust out of the same sort of sets of stressed economic circumstances. And Stalin came up with his, uh, murderous regime. So, there's nothing inevitable about technological change, uh, leading to bad outcomes. But there's also nothing Inevitable leading to good outcomes, so human agency will still be the, um, fundamental and, and, and frankly human leadership.
So, coming back to hotels, the way that we've run hotels is about to be turned upside [00:45:00] down. In the best possible way, in my view, uh, we'll be able to deliver on our, our mission of, of developing joy at scale in a way that we've never been able to before. And, uh, we'll be able to learn how to do that better.
you know, there's going to be a golden age for not only humanities, but, but specifically for hotels. Now, uh, there's some concerns, you know, uh, you know, job loss is a big issue. But if we look at technology again, technological change generally leads to vast increase in jobs and all sorts of jobs that we don't know.
I mean, you know, 20 years ago, there was no job called video game developer, you know. Uh, there was no job called Hotel Digital Marketer, you know, so, but how we help folks transition across to these new opportunities, um, is going to be a challenge. Um, But not an insurmountable one at all. I think, uh, in the main, [00:46:00] uh, humanity is on track to Andrew Goldenage that will be facilitated by the power of being able to apply intelligence to more and more things that we're doing.
Adam Mogelonsky: So Neil, uh, over, over to you, um, what other leading indicators have you seen and have you started reading Nexus? Uh, to comment on what Tata said in terms of how hotels can, uh. Look at this golden age. They can see it happen in real time and get, get in on the, uh, on the action, so to speak.
Neil Foster: I have not read Nexus. It's on my reading list. But just to make a couple of comments, uh, the first is that hospitality seems to be a natural fit in terms of if repairing human connection is an important thing in the midst of all of this technological noise, uh, then it follows that tech, that hospitality as an industry is a really great sandbox to test some of this technology and to see how, you know, the tweaking of this [00:47:00] technology results in meaningful human connection.
Um, and so I guess also by extension, thinking about, uh, Tata's role, I want to, maybe this a little cliche, uh, you and I, Adam, as Canadians, uh, we can take pride in a Canadian philosopher named Marshall McLuhan. And he famously said, among a number of other quotes, we don't understand who discovered water, but we know it wasn't a fish.
One thing that has really struck me as being extremely interesting about Tata, you and I have known each other for about a year now, and I feel that you are absolutely that fish out of water. The fish that's been able to sort of understand two worlds, the world inside water and the world outside of water.
Since I've known you, you've been all around the planet, you've been learning, you've been discovering best practices, and it's not lost that an island An island ecosystem is a fairly closed ecosystem, and it's hard to find connection in the same way as in the rest of the world. So, if one could say that a fish in its [00:48:00] environment of water is the rest of the world immersed in the environment of technology, and if you could also say that technology within the hospitality industry has been something that has been somewhat of a Uh, some, somewhat of a misfit, that you've probably been able to see all of the elements of service within the island life, within the community life, all of the greatest things about human connection and experience as it's delivered by humans, and being able to see all of the tools on the outside.
we've also, one thing that I, I think you are, uh, probably repeat with every single vendor partner that you explore with is the idea of a forever partner. So you're looking at, optimally looking at the human attribute of loyalty, uh, which is one of the greatest things, finding that human connection, trying to find good faith and connection in business relations.
And I see that in your day to day dealings in, in the time that you and I have. [00:49:00] Uh, discuss technology and technology partnership. So your view on the tech stack has been a very unique one. And when you talk about how CHAP GPT as As sort of an externality, a repository of information that can help bring out the best in your people, your environment, the one that you're normally immersed in, in the Cook Islands, is a perfect hybrid of being able to bring out the best in the people with the best of the technology, but I want to sort of ask you, what are some of the things that you feel you Uh, having seen what the technology as it's viewed on the outside, where do you see the biggest disconnects between our industry and the way in which technology has been perceived?
Tata Crocombe: there's not a great understanding between hoteliers and, the hotel industry. Partly that's because Most of the people who write the checks are older, and don't know technology, [00:50:00] are suspicious of it, and often divorce from the, from the decision, you know? and on the flip side, I don't believe the hotel tech industry, one, has a good track record in delivering, um, great return on investment.
The business cases are, in my view, not as clear cut as they would think. Uh, it's too expensive, too difficult to Access and so on. So I think there's a disconnect between the ownership community and the tech community, and oftentimes they're not even talking to each other. I mean, I've been at a number of, conferences and what have you, and I'm surprised there might be 200 people there.
Pretty much the only owner. There's one owner, it's me. You know, and that's, um, when, when technology is so fundamental to the value of a hotel, I think a few other, a few of our owners need to Wake up and get with the program. [00:51:00] On the hotel tech side, I think there needs to be a better understanding of, of how decisions about investments are really made.
And, you know, typically a hotel owners can say I've got a million dollars I can put into a tech sack, I can put into a restaurant. I understand restaurants. I know that, you know, how that works. I know that if I put a million dollars in, I'll get 200, 000 a year out of it, or whatever. to figure out how to build AI into the existing products and how to build a whole new category of products that will work.
be a step function different from what we, what we have now, you know, almost take us, there's going to be a transition phase, but after that, this is going to be like cloud computing is not the same as on prem, you know what I mean?
Adam Mogelonsky: We're up at a full hour here, Tata, and you've given Every hotelier, I really hope that everyone listens all the way through to the full hour to talk about how everything will change. And you're totally [00:52:00] right. An AI based system, it's going to be a database and there's going to be rules and you're going to be able to converse with that database in terms of how the AI picks out patterns.
So I'm wondering to the two of you, if you have any closing thoughts before we, uh, before we wrap up, uh, today's, uh, today's session.
Tata Crocombe: program. It's um, it's, you know, it's come very far. Um, no one had left behind. And it's a lot of fun. You don't have to have Massive budget to get massive results. I mean, I was just saying to someone earlier today, the return on investment I'm getting out of Chet GPT is, you know, there's not a return on investment.
I'm spending 20 a month and getting, making millions. So I don't know how you calculate that. Um, but I've just seen that in my, you know, my career for four years, so yeah, I think it's the perfect tool for the hotel industry and it's only going to [00:53:00] lead to some, uh, some more joy. Absolutely. And, uh, and that's all stakeholders, the staff, to the, the, even the owners, even the bank managers, everyone's going to be, uh, getting a better deal out of this thing.
Adam Mogelonsky: Wow. Neil, any closing thoughts?
Neil Foster: Well, um, I just want to say that I wish that more hoteliers were as open minded as Tata is, uh, and I think if they were, we probably would have had a much smoother adoption of technology years ago.
Uh, I also sense that, uh, uh, that for hoteliers that are looking to get out of their shell and to see how to do things differently, uh, that what Tata is doing and, uh, uh, some of the, some of these, uh, other adopters of chat GPT and AI.
Uh, that really there are some inspirational stories out there, uh, that, that may be very helpful as sort of, uh, as a [00:54:00] tailwind to ride, I guess, and, and in, in terms of adopting some of these technologies in far less challenging environments. So kudos to you, Tata, for the movement that you're leading, and I'm really looking forward to seeing how, uh, how you bring more technologies and some of your out of the box thinking together from here.
Adam Mogelonsky: Awesome. Yeah. I mean, it's, there's a lot to keep track of, but you know, again, Tata, thank you for paving the way and thank you for today's conversation. you, Neil. Thank you, Tata.
Tata Crocombe: Thanks, Adam.
Thanks, Neil.
