Artificial Intelligence, or AI, is no longer a thing of the future. For the first time, computing power has caught up with the technology requirements of creating truly intelligent solutions that don't just push out data, but actually provide insights, complete with nuance and context. Normally, we’d call that “great advice”.

Increasingly, this is prompting many conversations at a senior level in hospitality about its role and scope for deployment in our businesses. What is striking to us is that, in many ways, this type of intelligent AI is, first and foremost, a multi-use tool. And this is precisely what makes it such an exciting and game-changing agent of change for hospitality businesses.

At the outset, it’s important to stipulate that AI is not here to replace humans. It clearly cannot deliver a memorable front-of-house guest experience, the vibe of a buzzing team or the kind of rich, personable service that successful hospitality businesses are built upon. Nor can it – without wanting to be overly dramatic – “save hospitality”.

But what is becoming increasingly clear is that hospitality operators that harness AI can – and will – run better, higher revenue, more profitable and more sustainable businesses – and be able to realise myriad advantages over competitors that drag their heels. In other words, AI cannot save hospitality, but operators that harness AI’s power in their businesses, can “save” themselves.

Like many ground-breaking technologies, an initial fear and general anxiety over jobs – typically that robots are about to replace us or will prompt the demise of an industry – soon gives way to a better understanding. Typically, it’s about a realisation that new opportunities are coming that will help us do more, deliver more, create better futures and, ultimately, create jobs.

This required mindset change is starting to happen, but speaking with senior operator colleagues, what is clear is that one of the biggest challenges is landing AI-driven technologies with teams, at venue level, in a way that drives cultural acceptance. It’s important that colleagues working in restaurant and pub spaces recognise that AI is here to help them, especially in an era when cost challenges mean P&Ls are strained and, in some cases, venue viability can be challenged.

In a recent working session with some of our operator partners, there was a consensus that workforce management software was saving between two and six hours per venue per day – equivalent to a full-time member of staff, or more than 2,000 hours per year. An element of this time saving stems from providing operators with the most optimal scheduling model possible according to their objectives, calculating and balancing between millions of variables to find the perfect schedule so that labour can be mapped and deployed more accurately than ever. 

The saved labour can then be redeployed to the busiest times, driving revenue and protecting the guest experience. When AI-driven systems start talking to each other, covers, sales, guest scores, dish scores, wait times, food out-of-the-kitchen times, upsells and so on are all tracked and overlaid. This means a more holistic picture of what happens on a given shift or service, which in turn drives machine learning engines. That’s when true alchemy starts to happen.

Taking the people-AI narrative one step further, we can see it has the scope to drive a better well-being story – longer lead times on shift visibility (a hospitality bugbear as old as the hills), greater shift reliability and better deployment of labour, which reduces understaffing issues and creates happier shifts and guests (to name but a few examples). This can all contribute to delivering a happier workforce. It also has the potential to support better engagement and to drive retention. 

With people, we are, of course, pulling on just one AI thread. In reality, there are many for hospitality. For a sector that has been on a significant digital transformation and data journey in the past decade, the deployment of this new type of solution means things are about to get really interesting.

Thankfully, the conversation is clearly starting to evolve and mature at a senior level. But, as ever with hospitality, the challenge is cultural and, in this case, how we socialise the concept and how we embed positive and enlightened thinking on AI, plus what it actually means for hospitality performance. Helping great general managers see AI as a tool rather than competition is key here. For the C-Suite, this is about backing teams with the best technology.

So, can AI save hospitality? No, not exactly. However, to paraphrase a recent article from the Harvard Business Review, operators using AI will beat those operators who are not. 

Don’t open Google’s Ngram Viewer. Even by warning you about this, I fear you might be tempted to peek into this highly addictive Pandora’s Box and never again look up. Industry will grind to a halt and civilisation will crumble. If that happens, I hold up my hand. On the off chance there’ll be anyone left to see it.

 

If you don’t know, Ngram invites you to key in any word or name, and in a split second, some dastardly algorithm calculates how many times it has appeared in books year by year, producing a graph going back to 1800.

 

Take the word “bucket”. You might be surprised that since the 1980s, it has climbed to its highest point, surpassing a surge at the start of the 20th century. Why? It must be down to the bucket list. Which, in turn, suggests that what I thought was a random choice of word was actually linked to the previous word I’d put in: “experiential”. Funny how the mind works. Well, my one, anyway.

 

I looked up “experiential” because it’s become all the rage in these columns, and it appears in last week’s briefing from hospitality guru Peter Backman. Backman often has an interesting take on the state of the sector, and he’s been analysing Office for National Statistics figures that, perhaps counterintuitively, point to a 21% increase in hospitality and foodservice establishments in the UK since 2017, nearly 26,000 businesses.

 

Backman breaks the number down to show the trend is strongest in “event-driven locations” plus transport hubs, industrial heritage centres, areas of natural beauty and coastal towns. In other words, places where there is an attraction alongside the food and drink. “The ambience is becoming as important as the appetiser – and the setting as crucial as the service,” he concludes.

 

My own research over the past 18 months suggests this shift towards “experiential dining” extends to beer. In tourist destinations, including city centres, among pubs and bars that have a good beer offer, openings have exceeded closures several-fold. 

 

True, the venues I’ve been watching are high quality, and you’d hope that gives them a better chance of success – otherwise we might as well give it up. Yet it’s credible that those with cash to spare want to travel and immerse themselves in a local culture, and hospitality operators can take advantage by explicitly linking themselves to that culture, by making their food and drink part of the visitor experience.

 

So that’s “experiential”. But we can sharpen our understanding with a dash of etymology. To tell the truth, I thought it was an ugly new-fangled word and turned to Ngram to check when it originated. Turns out it was 1809. Stupidly, I hadn’t thought of experiential philosophy. This asserts that all knowledge comes from experience alone and, my etymological dictionary tells me, the word “experience” derives from “experiment”.

 

This casts a brighter light on what we mean by “experiential”. These people who are seeking out fresh experiences are, in a sense, experimenting – testing something out for the first time to see what happens. It’s bound up with the thrill of discovery. So, it’s more than experience. Experience, which results from experiment, takes you not to somewhere new, but to somewhere familiar, tried and tested, like the local pub you keep going back to because you know what you’re going to get and who you’re going to see. 

 

And “experience’ is also a verb. You don’t stop experiencing that place, and you notice when something goes wrong. I’ve had a run of bad experiences with pub food and beer lately, and I’ll just focus on one. There’s pub I go to, a local tenancy that’s nothing special, except it has a couple of well-kept ales and a menu of simple home-cooked pub food. The pies are popular, but I tend to go for the chilli. It’s not easy to find a good chilli, and when you do, it’s wise to stick to it.

 

Then, last time I visited, they’d changed the recipe. Instead of mince, there were chunks of beef among the beans. A creative switch-up, but it didn’t work. Perhaps for some scientific reason, the spices weren’t coming through. Some parts were hotter than others, but in general, it was bland. I usually clean the plate, but this was too boring to finish. At check-back, I mentioned the chilli wasn’t the same, and the bartender merely said: “It’s home-made.” I felt miserable the rest of the evening. Now I have to muster the will to go back and order the chilli again in case it was a one-off.

 

The episode illustrates how tough it is for local pubs, competing for a scarce leisure pound, to keep busy. They may not be “experiential” destinations in the strict sense, but the experience is as important, if not more so. Their strength lies not in novelty but consistency, and one bland chilli can lose a customer.

This week, the federal government of Australia announced plans to ban dynamic ticket pricing as part of new measures it says will “stop businesses ripping off Australians”. Last month, The Guardian reported the European Commission was looking into the use of dynamic pricing for concert tickets amid growing concerns among parliamentarians in Brussels.

 

So, what is dynamic pricing and why is it causing such worldwide furore? Dynamic pricing is the practice of adjusting the price of a product based on real-time market conditions and fluctuating demand. Modern dynamic pricing systems use algorithms and data analytics to consider peak trading times, major events and seasonality. American Airlines was the first to introduce dynamic pricing in the 1970s. Today, several industries outside of hospitality have adopted the practice, including leisure, entertainment, retail and transportation.

 

“Supersonic”, the aptly named 1994 debut single from Oasis, best describes how quickly consumer awareness and backlash to dynamic pricing arose when last month, tickets for the band’s reunion concerts went on sale through Ticketmaster. Many fans expecting to pay around £148.50 a ticket saw prices significantly rise to as much as £355.20. What fans found was demand for the concerts greatly outstripped supply of the tickets. If demand exceeds supply, one of two things happens: either supply goes up, or prices increase. 

 

Stonegate Group, owner of Slug & Lettuce and Yates’, hit the headlines last year, when it announced it would be raising prices by 20p for a pint of beer at 800 of its venues during peak times to help cover soaring costs. According to a recent poll for Barclays, 32% of consumers said they had experienced price increases during peak times at pubs and bars. However, just 8% said they were willing to pay more to eat and drink at popular times.

 

So, what is making consumers so upset? In any transaction, consumers assess their sacrifices – that being money, time and effort versus the value they receive. Notably, they only feel fairly treated if what they gain is balanced, clear and transparent in relation to what they sacrificed. Dynamic pricing makes them feel at a disadvantage and unfairly treated because it is not transparent and therefore triggers negative emotions, which subconsciously makes them change their behaviours. 

 

Here at Revenue Management Solutions, we conducted a behavioural experiment with 260 consumers from the UK and US. We tasked them with placing an order from an online restaurant. However, before making their order, we randomly divided them into two groups – one with dynamic pricing and the other without. We asked the dynamic pricing group questions relating to their last flight ticket purchase, the goal being to remind them of a situation in which they experienced dynamic pricing in the past. The second group was asked questions about their last holiday. 

 

While the participants placed their orders, we used eye-tracking technology to monitor where they focused their attention on the menu. We found that the dynamic pricing group focused more intensely around the pricing areas of the menu, while the non-dynamic pricing group’s attention was focused on photos and menu item descriptions.

 

As a result, we also found that the dynamic pricing group had a 3% lower average spend, choosing to order less expensive items, mainly by opting for smaller portion sizes. This shows their subconscious awareness of dynamic pricing triggered them to spend more time evaluating price points, resulting in more rational purchasing decisions.

 

We know from psychological research that people generally dislike losing more than they enjoy winning. The time we are happy after a win is shorter than the time we are upset after a loss. Consumers subconsciously associate the uncertainty around dynamic pricing to a fear of making a loss or being at a disadvantage. Ultimately, they feel unfairly treated.

 

Studies using neuroimaging have shown that feeling unfairly treated activates the same region in the brain as when we experience physical pain, anger or disgust. Situations that risk causing us pain make us more alert, and in this case, we change to a more conscious and rational decision-making process.

 

The big question is how can operators improve profits without triggering negative consumer emotions? The key is to make consumers feel they’ve gained rather than made a loss, so instead, work with price decreases, such as promoting happy hours, rather than pointing out that prices have increased. We have consistently seen the biggest profitability boost with customers come from the right location-based price differentiation.

Taking occasions and price sensitivity into account prevents consumer backlash. Additionally, pricing tactics are most successful when combined with other tactics such as menu-engineering or promotions. 

During a recent meeting at the original Grind coffee shop in London’s Old Street, I was discussing with data specialists CACI how the branded coffee players will have to better manage their historical physical spaces in this digital, work-from-home era when, after exactly one hour, a server with an iPad asked if we would like another drink.

 

I demurred from asking her if this was a new policy but the implications were obvious – make a purchase or take a hike and free up the table – which seemed a rather sensible strategy to me as it is only a modestly-sized venue. Laptop-wielding work-from-home types nursing a coffee for hours on end and working groups hogging tables can potentially kill any business reliant on high volumes of sales.

 

Taking a more aggressive stance with this sensitive issue are a couple of independents that have laptop users squarely in their sights. The Collective in Caversham has banned using such devices between 11.30am and 1.30pm on weekdays and completely at the weekends, having identified such customers as low-spenders. 

 

Meanwhile, at Milk and Bean in Newbury, laptop usage has been restricted to only one hour on weekdays and a total ban is enforced at weekends. As well as spending little, the owner also feels the laptop-using brigade are giving off bad vibes. Something of a double whammy. 

 

While these are rather isolated incidents at independents, there are undoubtedly discussions over similar issues taking place at the large coffee shop brands. They are all navigating very different customer journeys from those that predominated pre-pandemic, with their property portfolios and systems that are often ill-suited and were put in place before the explosion in digital ordering. 

 

Consider Starbucks, which had been a market-leading digital innovator with its app for ordering ahead. This app is now regarded as the company’s biggest Achilles heel, according to former chief executive Howard Schultz, and is a high priority problem to be solved by incoming boss Brian Niccol. He’s already stated that a key issue is the back-ups in the morning as app orders are collected and the in-store teams struggle to cope. He’s also promised to return Starbucks to its heritage of being community hubs where people linger (no doubt with their laptops fired up).

 

Managing this balance is very hard. This lingering is okay in many Starbucks because the stores are so large, and with the high levels of digital ordering, there is no problem with the laptop warriors commandeering a table for the day. But is it a profitable model? There is no doubt that there is the potential for the downsizing of many outlets and instead focusing more on getting those digital orders out at a faster pace.

 

The downsizing scenario will no doubt also be on the agenda at Pret A Manger, as it faces the impact of the overhaul of its subscription proposition. The fall-out of the decision will surely be a decline in footfall. Although I have continued with my subscription – on alternate months, as I don’t like in-grained habitual routines – my visits are certainly less frequent. 

 

These big coffee brands are no doubt looking on enviously at the likes of Blank Street Coffee, which operate from outlets that are a fraction of the size of the average Pret and Starbucks. Many Blank Street units are under 350 square feet, with just two employees per shift, and are located in high footfall locations. They use speedy automated espresso machines, but even when queues do build up, the youngsters don’t seem to mind if the result is association with a cool US brand with an innovative menu – although it has noticeably avoided the menu sprawl that afflicts Starbucks and contributes to its laboured service times. 

 

Maybe if the big brands could start with a blank sheet of paper, they would devise a model not dissimilar to Blank Street. They are suffering from something that Blank Street will no doubt face in the future if it continues on its impressive trajectory – of having legacy characteristics that place it at the mercy of disruptive newcomers. 

 

As we left the Old Street Grind after our hour slot, I concurred with CACI that in the past, the chief competition for the big brands were the single unit, often financially underpowered independents with limited systems and poor technology knowhow. But today, the threat is much more dangerous in the form of a growing number of rapidly expanding, differentiated, well-funded, strongly branded players.

The hospitality industry thrives on people. Passionate, happy, friendly and immensely skilled people are the backbone of every successful pub, restaurant and bar. Yet, finding and keeping those talented individuals is becoming increasingly difficult. As co-founder of Candid Hospitality, we’ve spent the past five months immersed in the world of hospitality hiring, conducting more than 60 interviews with both companies and candidates. What we uncovered was a resounding cry for change.

Traditional hiring practices are failing. CVs, while seemingly objective, are riddled with unconscious bias. Did you know that women are 30% less likely to be invited to an interview, and those of childbearing age fall by another 12%? Shockingly, identical CVs with non-English sounding names are invited to 48% fewer interviews than those with English-sounding names. Ageism is also rife, with candidates over 50 being 25 times less likely to be invited to an interview. These statistics paint a bleak picture, highlighting the urgent need for a fairer, more inclusive approach.

Our research also revealed a deep-seated fear among candidates – 82% expressed concern about their current employer discovering their job search. This fear stifles ambition and prevents talented individuals from exploring new opportunities. Furthermore, both candidates and employers are frustrated by the time-consuming and inefficient nature of traditional hiring processes. Companies are swamped with unqualified applicants, while candidates wade through irrelevant job matches and grapple with a lack of transparency around salary and company culture.  

So, what's the solution? We believe it lies in blind hiring. All candidates interviewed stated a preference to remain anonymous until being invited to interview. Blind hiring ditches the CV and focuses on skills. By hiding a candidate's identity, operators can finally select the absolute best person for the job, regardless of gender, ethnicity, age or appearance. This approach has already proven successful in other fields. When orchestras introduced blind auditions, selecting on talent only, the percentage of seats filled by females more than tripled.

These findings paint a concerning picture of the current hiring landscape in hospitality, but it's not all doom and gloom. By understanding these challenges, we can take proactive steps to address them and create a more equitable and effective recruitment process. I always think it’s best to take a challenge and turn it into an opportunity, so how can people teams in hospitality potentially improve their recruitment practices? Based on feedback we received, here are some key takeaways:

1. Prioritise skills and culture: Move beyond CVs and focus on assessing candidates’ competencies and cultural fit. Implement tools and techniques that allow for a more holistic evaluation such as skills-based assessments, personality tests and values-driven interviews.

2. Embrace anonymity: Consider incorporating blind hiring practices to mitigate unconscious bias. Remove identifying information from applications initially, allowing you to focus on skills and experience first and foremost.

3. Promote transparency: Be upfront about salary ranges and company culture. Provide candidates with clear and comprehensive information about the role and the organisation, fostering trust and managing expectations.

4. Streamline processes: Simplify applications, automate tasks and enhance communication. Make the hiring process as efficient and candidate friendly as possible, reducing drop-off rates and improving the overall experience.

5. Champion diversity and inclusion: Actively seek out diverse talent pools and create an inclusive environment where everyone feels welcome and valued. Promote a culture of inclusion where differences are celebrated, and everyone has the opportunity to thrive.

By adopting these principles, hospitality businesses can transform their recruitment strategies, attracting and retaining top talent while building a more diverse and inclusive workforce. It's time to move beyond outdated practices and embrace a people-first approach that prioritises skills, culture and transparency. The future of hospitality depends on it.

And, if you’re reading this and wondering: “What small change can we make?” Why don’t you start by reviewing your current job descriptions and application forms. Are they truly inclusive and focused on skills? Even small changes can make a big difference in attracting and retaining top talent.