Why do most restaurants and hotels fail within a few years? It’s rarely because of bad food or poor service, but rather failure to manage demand, pricing, and customer mix effectively.
In this episode of the Impulso podcast, Professor Emeritus at Cornell’s School of Hotel Administration and hospitality revenue management expert Sherri Kimes unpacks how the industry has transformed over the last 20 years, and what it really takes to survive.
Tune in as we dive into:
• Why “good enough” food often beats culinary brilliance;
• The critical gap between having data and actionable information;
• How digital-first players like Luckin Coffee are outmaneuvering legacy giants.
• The future role of AI in hospitality, and where it’s just hype.
From hotel revenue management and AI in hospitality, these insights will change the way you see, and run, a hospitality business.
Timestamps:
00:01:10 – From phone calls to QR codes, 25 years of hospitality evolution
00:06:51 – The art of saying “yes” in revenue management
00:17:43 – Why simplicity always beats good food
00:27:50 – Luckin Coffee’s digital advantage
00:39:18 – AI in Hospitality & Restaurants: hype or game-changer?
Featured materials:
Inside Luckin Coffee: Strategy, model, and international playbook report, Momentum Works
Chinese F&B in Southeast Asia report, Momentum Works
Luckin Coffee brings manufacturing back to the USA? | Impulso E123
Also available on Spotify
[AI-generated transcript]
[00:00:00] Sherri: You really don’t have to talk to anybody to be able to, to do a lot of the transactions now. But back to your original question. Have things changed in the last 20, 25 years? Oh, yeah.
And then the other part too is that for, the company, it makes it more accurate they get more information and everything like that, assuming they know what to do with it. I mean, that’s back to data versus information.
[00:00:24] Sabrina: Hello everyone and welcome to the Impulso Podcast by Momentum Works. Today we have a very special guest joining us. This is Sherri Kimes. Sherri is known as a leading expert in revenue management for the hospitality as well as service industry.
So she’s been in this field for over 25 years, teaching, researching, as well as consulting, and is currently A professor at the Cornell University School of Hotel Administration with. More than a hundred articles and book chapters published on this topic. So, hi Sherri. Thanks for joining us today.
[00:00:58] Sherri: Great to join you. I’m looking forward to our conversation.
[00:01:00] Sabrina: So maybe just start, I’ll start with a more general question. How do you think the hospitality industry has evolved over the last 20 to 30 years
[00:01:10] Sherri: well, oh my goodness. I mean, look at Singapore. There was no Marina Bay Sands There was no Grab, there was no real booking online. I mean, things have changed so, so much.
And I mean, when I would ask my students, how about making a restaurant reservation? Do you call them what? Call. And so things have really, really changed. And I think the other thing that really comes out is that before. Data was sort of there, but nobody really paid that much attention.
And now you’ve gotta have the data. I think the challenge right now too is that people have data but they don’t have information, if that makes sense. That because you’ve gotta be able to turn the data into actionable information, but it’s, it is changed so, so much that I don’t think even 25 years ago we could ever imagine where we are right now.
[00:02:03] Jianggan: Sabrina, do you ever call?
[00:02:04] Sabrina: No. Yeah, I was just going to say, I don’t think I’ve ever called. Okay. So here’s the thing, right? I, I have a, some of my friends, they will never call a restaurant for a reservation because they don’t want to talk to someone else. So if you can’t make a reservation through like an app or online, it bothers me a lot, by the way, as well.
Like they’ll make me call. So that’s the only time that I would call the restaurant to make a reservation
[00:02:26] Sherri: it’s true. ’cause I mean, I did this study, I don’t know, it was like 10 or 15 years ago about online ordering and it was one study was with consumers and the other study was with restaurant operators.
And the restaurant operators were saying, oh, this will never work. ’cause our customers wanna talk to us. And the customers were going no, not really. And there were maybe like 20, 25% of people who said yes, they did wanna talk to somebody. But everybody else was like, you, Sabrina. I said, nah, nah, just let me take care of it and be done with.
[00:02:56] Sabrina: It’s a lot faster to just, I, I mean, at most I click three buttons when I make a reservation online. If I call you, that takes me like two, three minutes.
[00:03:07] Jianggan: I think I think for consumers, sometimes their incentives are a bit hard to think of unless you talk to them, to uncover what really need. A few years ago I had a discussion with somebody from Hong Kong’s hospital authority, and they were saying that they developed a booking tool.
I mean, that’s, that’s a separate industry for hospitals and clinics, for consultation and for old people. So, so basically they made it really easy for old people to use and et cetera. But what they realized that people were not using it. Initially they thought, okay so people prefer the old way of, you know calling and whatever.
And until they went down to the sort of waiting room in the clinic and they realized that, okay many of the old folks in Hong Kong take this clinic as a socializing place. So basically, basically they’ll go there, they talk to their friends while waiting for the, for their numbers to be called.
And I think this incentive is very different from what the hospital authority initially thought.
[00:04:01] Sherri: But that’s an interesting point too. ’cause you could see with some restaurants now they don’t wanna shut down the phone reservations. But then if you’re gonna have phone reservations, you’ve gotta have someone to answer the phone, right?
And so there’s some restaurant groups and kind of video apps that are experimenting with AI for that. And so the rest, I mean, so it sounds like. Someone is answering the phone and going through all the personalization and everything like that, but in reality it is ai and I think that that’s something that kind of gets kind of what you said.
What you were just saying is that because there are some people who want that, you know, they wanna talk, they wanna talk to somebody. The, so the social side of it.
[00:04:42] Jianggan: Mm.
[00:04:44] Sabrina: I don’t know if you see that with the new generation as much. So there’s this, there’s this sort of trend going around.
It’s not a trend, it’s more of a statement that Gen Z in or the younger generations don’t know, don’t seem to know how to interact as much in social settings. And I think because so much of. What we do is automated, right? So for example, if I make a reservation, it’s online. Even when I order at a restaurant, I can just scan a QR code.
I don’t actually have to talk to anyone. So then it’s kind of brought up the conversation because of the automation in these sort of industries where, you know, there’s usually a bit of socialization, have the younger generation kind of forgot how to socialize. Or behave in a social setting.
[00:05:25] Sherri: That’s a whole nother topic, isn’t it?
I mean, because it’s kinda like, you know, if you don’t know how to interact with others well, we will. I mean, that’s a sociological conversation, I would say. But it’s, but it’s true because, you know, because I was reading an article the other day and it was talking about. I think it was in Japan or other places where, gen Z people are developing AI companions and that’s, you know, it’s, and, and a certain point you go, oh yeah, that’s not really, that’s probably not a really good thing.
But yeah. But it’s, it is, it is interesting how that’s changed because you really don’t have to talk to anybody to be able to, to do a lot of the transactions now. But back to your original question. Have things changed in the last 20, 25 years? Oh, yeah. I mean, I mean, and, and a lot of it has to do with the fact that you know, we’ve used a lot of technology to be able to make it, make it easier for the consumer.
And then the other part too is that for, you know, the company, it makes it more accurate and they get, you know, they get more information and everything like that, assuming they know what to do with it. I mean, that’s back to data versus information.
[00:06:31] Sabrina: I think we can dive a little bit more into that later.
The data versus information part, I think that’s something interesting, but maybe before we dive into that. So you specialize in revenue management for this hospitality as well as restaurant industries, right. Maybe you could share a little bit more about what that entails, especially for our viewers who might not be so familiar with this industry.
[00:06:51] Sherri: Well, revenue management, when it comes right down to it, let’s say that you’ve got a hotel and they are super, super busy. So in Singapore, let’s talk about F1. And so the hotels that are right by where the race is going to be, they’ve got more demand than they have space. So then the question becomes, well, which reservation request should they accept?
Should they do it first come, first served, but they could. Which would be incredibly stupid, right? Because what if the the first let’s say 300 people who call wanna pay the, they wanna pay the cheapest price. And so revenue management becomes a matter of who do you say yes to and who do you say no to?
And in the restaurant industry, and I think this is a problem it’s a major problem for revenue management and restaurants, for restaurants that take reservations, is we typically take reservations first come, first served. And so then you get the, let’s say you got one table left and the person who books it comes and drinks tea all night, right?
And then the next person who wanted to book was gonna be spending a whole lot of money. So that’s, so that, but it’s kind of, who do you say yes to and who do you say no to? But it’s also things like you know, pricing. How do you build demand during slow periods? It’s all about how do you manage your capacity uh, profitably.
[00:08:10] Jianggan: Is that similar to what people call yield management in sort of airline and hotel industry all the time. So basically they have different pricing for different different times and they allocate different inventory to different channel.
[00:08:23] Sherri: Yeah. So I mean, it’s exactly the same. And what’s happened is kind of interesting.
When I first started looking at revenue management, it was called yield management, and then it just kind of,
[00:08:32] Jianggan: okay.
[00:08:32] Sherri: The term kind of evolved. But you know, it started in the airline industry which makes sense, right? Because there aren’t as many competitors and everything, and the hotel industry is pretty widely adapted.
But at the same time, there was a study done by Skift about three years ago and showed that maybe less than 20% of hotels were using a computerized revenue management system. And most of those were excel. Right. And in the restaurant industry it’s still evolving, but you can see things like like the way, for example, with Chope you, with the way they, make availability.
I mean, what, what, what’s the availability gonna be? Or you can look at restaurants that are using. Different pricing by time of day or day of week and with menu engineering and menu design. So there’s a lot of tools there, but it’s always about, you know, what can we do to help a restaurant or hotel, or, I mean, actually a few years ago I worked with the Panama Canal on this of what can we do to help, help an organization more profitably use their capacity, but at the same time with that.
Long-term profitability. ’cause you don’t want to be, you don’t wanna be seen as taking advantage of your customers, right. And because if they believe that you’re taking advantage of them, they won’t come back.
[00:09:50] Jianggan: So are there like very established methodologies of how to do that effectively?
The order already highly depends on the organization. So they have to develop something customized.
[00:10:01] Sherri: Well, it’s, it is fairly standard, but I mean, then you assume you’ve gotta have some kind of a forecast. And that’s gonna tell you, am I gonna be slower? Am I gonna be busy?
Then you’ve gotta have some. If it, if it’s an organization that takes reservations or appointments, then you’ve gotta have some kind of an allocation decision. The other thing that goes into this is how do you come up with the pricing, right? And how do you communicate the price? And so when you get into, let’s say, for a, like a fast food restaurant or just a walk-in sort of restaurant that doesn’t take reservations.
I mean they don’t have, they can’t decide who they’re gonna say yes to and who they’re gonna say no to. Right. But they can do a lot with their pricing and menu design and that sort of thing.
[00:10:48] Jianggan: Mm-hmm. We look at the fast food restaurants like McDonald’s, et cetera. Of course, there are very large corporate right?
So they have the people to design algorithms, people who look at the data. But when we look at the restaurant as an industry as a whole, I mean, it’s a, it’s a very, very large industry with lots of different players, with different scales, with different sort of backgrounds and stuff. And I think I remember a point of what Peter Thiel said in his book, Zero to One, he said along the lines of like, restaurant is like possibly the worst industry ever because it’s very hard for you to create any differentiation.
Yet, I mean, it’s something indispensable, right? I mean, so many of us spend so much of time so many occasions eating outside, and now with food delivery as well. So what could people do? I mean, without, you know, having expertise and stuff.
[00:11:36] Sherri: Whoa, without having expertise and stuff. It’s like have a talk with yourself.
Am I out of my mind? Because I mean, there’s, ’cause there’s so many people who go, oh, I mean, I’ve heard this with people who say, I should start a bnb. It’s like, oh my goodness. No, no, no. You really don’t wanna do that. But I mean, for a restaurant, I mean, it’s true all over the world.
There’s a very high failure rate. And so I guess then you get into, well, how can I replicate what I do? You wanna have something that’s different than others. You wanna make sure that you can actually do it right, ’cause I mean, I think there’s a lot of people who go, oh, I’m a really good cook and my friends love my food, so I should start a restaurant.
The problem with that is running a restaurant, it’s running a business. And so it’s like with any business, do I have sufficient demand. What are my costs going to be? Who am I gonna have work for me? It’s not just because of your food, because we’ve all been. And we all know of restaurants that are pretty successful, and then we have their food and go, Hmm, eh, so-so, right.
But they’re successful. Why are they successful? Well, their food is probably good enough, but, they’re able to work it as a business. So it’s really, I mean, it’s, it is a difficult industry and I think one of the problems with it, it’s not a problem, it’s a challenge, is that the barriers to entry are so low.
And so, you know, with a lot of other industries, like in the hotel industry, for example, if you say, oh, I think I’d like to run a hotel, well that costs a, an awful lot of money.
And so that tends to, you know, other than the people who say, I’m gonna turn my, turn my house into an Airbnb. But when they start to really look at it a little bit more, there’s a lot of, they gotta bring it up to code.
There’s a lot of costs involved with restaurants are pretty easy. But I mean, probably too easy to get involved with.
[00:13:26] Sabrina: That’s true in Singapore these days, you can sort of start a restaurant from your home, so there’s been a rise of home dining and home cafes, so you just go to someone’s house and buy like a cup of coffee or some snacks.
[00:13:39] Jianggan: Actually, it’s true. I mean, with all these channels where you can reach out to consumers like online. And with all these channels where, and platforms, you can deliver the food to people. So the cost of starting up is even lower, right? Because you don’t have to like open, expensive shop and pay the, like, three month rent yeah.
I mean, people can try it out pretty easily, but that, that. I think that also creates lots of anxiety amongst the people I know, right? Because there are so many different possibilities. There are so many different things to run, different channels, to get customers, different channels to manage customer experience.
So from your point of view, do see that running a restaurant has become much bigger headache compared to 30 years.
[00:14:17] Sherri: I think it’s similar headache, but I mean, but with like the home dining thing, I mean, for the regular restaurants, they don’t like that at all.
Right? Because they wait a minute, you know, we had to get space, we’re having to pay rent and you’re doing it out of your flat. I mean, come on.
[00:14:33] Jianggan: Yeah.
[00:14:33] Sherri: And so there’s been, I mean, in Singapore, I know, I mean, there’s been a lot of pushback. About is that really fair? And then you get into, well, what about their sanitation?
And different things like that. But there is pushback. But from a you know, I’m sure like you, I’ve been to some fantastic home dining options in Singapore and the relatively speaking, the price is fine. Right. But it is, I can see why the regular restaurants see it as a threat, but you know, it’s, it is an option.
But then there’s so many of them. Now, are they all gonna be able to make it? Probably not.
[00:15:08] Sabrina: I think someone once said, I don’t remember who. Maybe it was Jianggan that for F&B business to be able to succeed, they need to be able to last the first six months.
Not Jianggan someone told me this before.
[00:15:19] Jianggan: No, I mean maybe I said something around similar lines, right? Because ’cause here in Singapore, I mean, Sinapore’s was a place where lots of, lots of entrepreneurs will come in and try different concepts. And build different concepts. And quite often people are saying that, oh yeah, this place is so popular, right?
I mean, you need to queue for like 45 minutes to get the table. And I think I might have casually said, wait for six months
[00:15:40] Sabrina: to see if they survive.
[00:15:42] Jianggan: Yeah, but it’s challenging, right? Because you always have a lot of different options, different concepts, different, I mean, same for different cuisine types that entice the same amount of like, you know, dining customer.
[00:15:54] Sherri: Singapore, like in a lot of places, is that we’ve got a lot of foodies, they’re going, oh, new restaurant. Let me try it out.
[00:16:01] Jianggan: Yeah.
[00:16:01] Sherri: And then you try it out and after six months at least, there’s other new ones to try out. And so you just kinda keep going, kind of cycling through them.
And I think the failure rate in the first year is pretty high. And it’s not just Singapore. I mean, that’s true. All over the world.
[00:16:17] Jianggan: A friend of mine who runs like fairly successful chains. And he has a theory that in order to have the staying power, you have to offer something super basic.
You offer something like fries, burgers, et cetera, et cetera. And you don’t focus too much on the product. You focus on a whole suite of things, right? Because people make decisions based on. Product, I mean, sometimes so-so is good enough price, what is convenient, what’s available at where I am, and whether it’s noisy, et cetera.
So it’s all sort of different considerations consumers have when they make the choice. And I was asking him, have you ever thought about differentiation? He said, no. I mean, whenever I think about something differentiating and after three months, I have to think about something else, which is differentiating at that time.
So I have to constantly chase the change.
[00:17:04] Sherri: You look at how like McDonald’s started, I mean, they were so simple, right? I mean, burgers and fries and a shake. And then you could also kinda look into that you know, the real simple offering. Look at a lot of the hawker stands.
I mean, okay, they specialize in such and such and when you start to diversify, then you gotta, you know, how do I maintain the quality? And I mean, then I have to a more complicated production systems and it gets messy really fast, but it’s tempting, right?
Because then you attract probably some more market segments and so maybe you’re gonna be able to make more, but at a certain point what your friend was saying, I can completely see his strategy with that.
[00:17:43] Jianggan: Yep, keep it bland, keep it simple. And
[00:17:45] Sabrina: that’s how you keep customers coming back.
[00:17:48] Jianggan: That that’s how, also how he can go up the supply chain to get stable supply and constant negotiate prices down. ’cause every time you have to chase new things and your negotiation power is different.
[00:17:58] Sabrina: And I think when you go up the supply chain, that’s where you also have a lot more control over your price and your cost as an F&B player.
Right. And obviously. I think cause is still a pretty big factor for a lot of people when they’re choosing. Especially if they’re, they want to eat something simple.
Like if I want to eat Chai fan. Chai fan. is like economic rice. It’s like rice and two veggies and one meat. There isn’t any particular store that I would choose to go to because the food is so good. I would just go to whichever is the cheapest or whichever is nearer to me. So actually that gives you a cost advantage if your product offerings are very basic and simple.
[00:18:32] Jianggan: Right? I was on a similar note, I was discussing with someone about a branding power of 7/11 and people said that 7/11 is a very, very strong brand because people get attracted to that and and that friend runs convenience stores, and he said, no. I mean, it doesn’t matter because if I can build another convenience store next to 7/11.
Just to make the, like the stripes of color, as my light box and people walk in because you think people like believe in 7/11, they actually believe in the concept of, okay, there’s something near my home. I can walk in easily and it has the things I want.
[00:19:04] Sherri: Yeah. But make sure it doesn’t look too much like a 7/11 or the 7/11 lawyers will be contacting them very quickly.
[00:19:12] Sabrina: There’ll be a different set of problems. So we’ve been talking about how like a restaurant generally is a very hard way to make money, right? And of course we’ve seen that a lot of F&B owners are struggling. In your opinion, do you think that a hotel is a much better business to run than, let’s say an F&B chain?
[00:19:28] Sherri: No, because I mean, you think about, first of all, when you think about the cost associated with it, you’ve gotta build one. And so that’s very capital intensive. And you know, for like a full service hotel, they not only have rooms, but they have, you know, they have F&B and they have spa and different sorts of things like that.
And so that gets a lot more complicated. The other interesting thing in the hotel industry is that. For like the larger chains they don’t own their hotels. You know, it’s a investment companies that own them. And so , basically they’re managing, they’re managing hotels. And so it’s, I think the margin is higher.
Like the margin on guest rooms is about 70% as opposed to, you know, F&B is 30%. But the upfront costs are high. Now, you could also see, though, if you get to a, like smaller hotels, like think about your 20 room hotels in Indonesia. That doesn’t cost that much.
Especially if it’s just kind of a basic hotel with rooms and stuff like that. And I know, I mean, there’s a lot of people out there who will, I’m just using Indonesia as an example of it, but it’s kind of a real estate play. Okay, I’ve got this land, and you know, I could put this on and then maybe later on I could, could sell it.
But it’s not easier at all. The only thing that. Is easier, I think, is that in the restaurant industry, the customer is pretty much always there. I mean, you have the customer interaction and in hotels, I mean, once the person gets into their room. You don’t see them too much.
So, that makes that the customer service part for restaurants, even with delivery and pickup is harder than it is for the hotel industry. ’cause any hotels now, I mean, really, I mean, back to what you were saying earlier, Sabrina, you don’t have to go to the front desk anymore.
You could just use your phone and get into the room so you don’t even have to talk to anybody.
[00:21:22] Sabrina: I recently went to a resort where everything you wanted the front desk to do, you just texted them on WhatsApp.
[00:21:29] Sherri: Yeah. Yeah
[00:21:29] Sabrina: so everything was like, just there. I didn’t have to leave my room for anything.
[00:21:32] Jianggan: Was that real human responding to you?
[00:21:34] Sabrina: I think so. ’cause I, I saw the staff like replying to some of the WhatsApp messages, so,
[00:21:38] Sherri: oh, okay. Maybe they were real,
[00:21:40] Sabrina: still a real human,
[00:21:42] Jianggan: I think i’ve, I’ve been into China a lot this year, like seven, eight times since January. So I also had lots of chats with people about hotel industry because this year, I mean you see that in China, the consumption is stagnant.
So the high-end hotels are suffering a lot, and that creates opportunity for lots of medium range hotels that come out with interesting offerings. Right? So of course, I mean now people talk about all these like robots which sends your deliveries or send your stuff up to your room.
That’s pretty standard. I think all hotels have that. But you look at things traditional five star hotels would not have things like self-service laundry room, but lots of four star hotels would have that. There’s one hotel chain in China, which became very successful, called Atour.
And their value proposition is that we give you comfortable pillows. So we strip away all this unnecessary, like amenities and stuff, and we make sure that your, your pillow is the most comfortable you can find anywhere else. So that’s, that’s in a way similar to I think what you saw in Japan many years ago, right?
I mean, you saw people that strip away all these like unnecessary value propositions and just to focus on one thing and use that one thing to acquire customers.
[00:22:50] Sherri: Well, it’s kind of back to I mean Tune Hotels out of Malaysia. So, you know, it was Tony Fernandes and and their whole thing was what do people value A comfortable mattress?
A good shower and safe. And so that’s kind of what they, you know, what they had. If you wanted to have towels, you pay, I mean, everything was kind of an add-on. And I remember I went to this presentation, I, it’s probably like 15 years ago from, might’ve been the COO from Tune and someone said people really pay.
Pay for their towels? Oh yeah. He said it’s like most people actually, no, most people don’t pay for their towels. Most of them were bringing, like 80% were packing them in their suitcases went, really? And then you want air con, you pay. But it was a good bed.
A good shower and safe. So.
[00:23:39] Jianggan: And does that pose like challenges to established hotel chains.
[00:23:44] Sherri: Well, yes and no. I mean, it kind of goes back to how when we say yield management got started in the airline industry. In the U.S. The airline was, it’s no longer around. It was called People Express.
It was very, very low cost. And then American Airlines kind of said, huh, okay, you wanna have cheap prices. We could have cheaper prices too, but just on part of our inventory and and so a lot of the really price sensitive people switched over to American Airlines.
And the story I read on that, which I thought was very funny the, CEO of People Express at the time, I think Donald Burr was his name. And his mother was coming home for American Thanksgiving, and he said, oh, mom, are you flying on my airline? No, I’m flying American, but mom, I have my own airline.
Yeah, but they’re cheaper. It’s like, ooh. But that’s where, I mean, so I think the larger chains they have a lot more options for responding to that, sort of thing. Because, they’ve got other inventory that they could sell at a higher price. But when you start to target in on the the really price sensitive people, yes, there are those people, but there are other people willing to pay more.
I mean that’s, that’s kind of the beginning of revenue management really, right?
[00:25:00] Jianggan: Yeah. So, basically when you have a very large consumer base, there were different segments of consumers who value different things. And the question is that, I mean, how do you have the right data to understand?
I mean, which consumer segments you should target and understand who are these consumers and, put the value proposition right to them at the right point of time.
[00:25:20] Sherri: And that’s back to the use of data. I mean, because, a lot of times if you just sort of go, well, this seems like a good idea, maybe you’re right, and maybe you’re wrong.
And I think now, you know, we’re starting to see a lot more analytics with it, but it’s still, it’s still kind of a work in progress, I would say.
[00:25:36] Jianggan: Mm-hmm. And I, I do feel that different people use data to different levels of effectiveness. So first half a year I’ve been traveling so much. So, it is a weird kind of feeling that, okay, when I got to platinum status of one hotel group, I said, okay, there’s no point in like, stay in this hotel anymore.
Let me try to get another one. So I ended up like getting three platinums and I can see clear difference in how these three hotel groups manage the customer relations and how do they sort of give you the offerings and try to upsell to you. And, and that makes me wonder because. For large hotel chains and, and of course, I mean your sort of value property for each property would be different, but the way you, you look at consumers, the way you can actually effectively manage your consumers and upsell to your consumers, I think there should be some fairly established methodology, right?
But the execution is very different.
[00:26:28] Sherri: It’s really different. And you could see that also not only in your hotels, but you could see that with, you know, restaurants as well. And so there’s some reservation systems where somebody writes down the customer information and stuff like that, but whether that gets transferred through, so the next time you go there they go, oh.
Would you like to try such and such? You really enjoyed it the last time or you liked that table? And so, thinking about it more strategically, really. And that’s why I said before, that we’re in that awkward age.
I mean, we could kind of say, is put it as like early teenage where You’re kind of trying to figure out what to do. So let’s say it’s like a 13-year-old and so sometimes it’s good and sometimes it’s not so good.
[00:27:10] Jianggan: So it’s complex.
[00:27:12] Sabrina: I think a company that we look at quite often and that we actually just launched a report about Luckin Coffee who just entered the U.S.
i think they’re a company that does this pretty well. Right? So they obviously, because they used to be a mobile only sort of coffee chain, they collect a lot of data from all their customers and they’ve actually managed to use this data in a lot of ways to improve their operational efficiency, even though.
Like, I wouldn’t say accelerate, but improve their product R&D. And also I think, I feel they’re a good example of a company that has managed to collect a good amount of data and also managed to distill from that data, valuable insights that can actually benefit the company itself.
[00:27:50] Jianggan: And you don’t need to talk to anybody at all.
There’s, there’s no barista, there’s like products in line,
[00:27:56] Sherri: but it’s also too, I mean, I think the fact that. They kind of designed it from the get go. Right? And so that’s, that’s the way they are. And, and I mean, I was reading an article about Luckin Coffee. It was in, I don’t know, it might have been in the Wall Street Journal or some, a paper in the U.S. and they were kind of talking about, oh.
This Chinese company coming in and how Starbucks going to react. ’cause Starbucks has always been about the, the sense of place and everything, but if that’s not what people really want and the cost is a lot less , it’ll be very interesting to see how, how all of that plays out.
It will also be interesting to see if they’re coming into the U.S. but to see what other countries that they’re starting to go into, like, if they start to go into some of the South American countries and, and how those countries will react because again, those people are really picky about their coffee.
[00:28:47] Jianggan: So we look a lot about how all this coffee has been evolving in China, right? Because Luckin plus a few challengers have been really giving Starbucks a hard time. And and I’ve, I’ve had lots of discussions with people in the industry and many people are saying that it’s not because of , Starbucks.
Not doing what it’s supposed to, but, but it’s because, I mean having the digital capabilities to really understand the customers is something which is a side function, I mean, look, if you look at a Starbucks app that gets updated in App store like once every two month or I think in Singapore was like once every six months for Luckin, like once every two weeks.
So basically they constantly involving this, the digital capabilities and for Starbucks because they have. All this like different service offerings, different considerations in store that they have to care about. So the attention on digital is less and historically. You also have the issue of every time there’s new management come in and have a different thought.
So you can’t execute things very consistently. And the thing about Luckin is that of course the original founders were kicked out because of a accounting scandal. But the people who came in to take over, they took the foundation and said, okay, I’m being very digital focused, sort of having all the touchpoint on the app is the right thing to do.
So they stuck with it. And they didn’t deviate from I’m not sure how much of that is because of the the competition in China, which made them think that every time when they make, try to make a decision, should have another offering on stuff. And this always comes down to the, the most logical decision to stick to what they’re, they’re doing now
[00:30:18] Sherri: and it’s working really well for them.
[00:30:21] Jianggan: 25,000 stores, right?
[00:30:23] Sabrina: 24,000 plus plus maybe 25,000 stores soon. And profitable, right.
[00:30:29] Jianggan: They’re profitable.
[00:30:29] Sabrina: Yeah. And profitable. More, more important than the number of stores. Of course.
[00:30:33] Jianggan: Actually, I have one more question for you. We’ve been looking a lot at food delivery platforms, right? I mean, in China you can easily it can easily.
Account for like 30 to 40% in some cases 50% of the volume of sales of a food service restaurant. So that gives the platforms a lot of power and that makes the restaurants. Very nervous. And of course the platforms will give them a lot of tools for them to, you know, sell effectively on the platform, et cetera.
But the online traffic, I mean, it’s not like a location where you pay a good rent and you get that space, right? I mean, online you have constantly beautiful traffic against all your competitors and you have been in a lot of different markets. And is that the dynamics you see in say, U.S. as well, or?
[00:31:19] Sherri: I think so. I mean, ’cause in, in the U.S. The major players are, are DoorDash and Uber Eats, right? And like in Singapore, and I mean around, I mean, Southeast Asia, China, the restaurants really do not like them. Right? Because they are, you know, the commissions that they have to pay and all the competition and everything on the app.
And so, but it, it kind of goes back to. This is like 25 years ago in the hotel industry. When Expedia and the likes were getting started, the hotels their reaction was, oh, these people are, they’re horrible. We hate them. They’re gonna go away. ’cause people wanna talk directly to us. And then, I mean, even.
Probably I, I did a study about, I don’t know, like 10, 15 years ago, and I had some people were talking about the future of hotel revenue management. And so there were a lot of, there was an open-ended question where people were writing and I had some statisticians. They, you know, they were like, they analyzed, you know, comments and stuff like that and they didn’t know anything about the hotel industry.
And we had our first conference call and they said. Who are these OTAs, which is the online travel agents like Expedia, they said people hate them. I went, yeah, yeah. And so, but what happened in the hotel industry? It became I think it’s a love hate relationship, right? I mean, it’s sort of like, okay, all right.
We don’t like them, but we need them to be alive in the restaurant industry. I think it’s starting to get that way. But think about it. I mean, for like, if a restaurant says, well, I’m. I’m not going to use. Any of those platforms, I’m just gonna deliver my own food. Really? How are you gonna pull that off?
Right? I mean, that’s off, that’s awfully expensive. And or if you say, well, I’m not gonna do delivery. I want people to come here. Well, what if people don’t wanna come there? And so, I mean, I think it’s, I think the restaurant industry, I think they understand it a lot better now. Than they did 10 or 15, years ago.
But, , it’s evolving. And I think you made the comment too, I think the data is better now. ’cause back, you know, even five years ago, they had some iPads and they weren’t connected with the POS system and somebody was supposed to key in the orders.
I mean, it was horrible. And which is exactly the same thing that happened in the hotel industry 25 years ago. And, but now it’s, you know, there’s a lot more integration and things like that that have gone on. So, I mean, I think it’s, it’s still evolving. But I think it is going in the right direction.
It’s not done. It will improve.
[00:33:49] Jianggan: Last week we went to a friend’s new restaurant for dinner and he opened restaurant in a very obscure place. I said, why? There’s no traffic. He said, this is the place for me to test the new concepts. And then he showed me a post he just wrote out and he’s planning to sort of throw out of his restaurants.
I said, what does this post do? And he said this is a self-service place, so we just pick whatever you want to eat and put that. Put that tray on a post, you automatically calculate the price for it. And he said, for that concept restaurant, he saves like one and a half, half people, because you need, someone previously need someone to there to actually physically count.
I mean, what have you picked up and figure out the price and stuff. And he said a lot of these things are, I mean, technology available. The question is that, how do you calibrate that to. Put something that’s good enough for, the restaurant owners just to trust it.
[00:34:39] Sherri: It’s also kinda like the old, you know,
the sushi restaurants where they had the
[00:34:43] Jianggan: the belt.
[00:34:44] Sherri: Yeah. And so, I mean, they could kinda weigh it out and everything would be, it’d be pretty automated.
[00:34:48] Jianggan: Yeah. Yeah.
[00:34:51] Sabrina: That’s interesting. Self-service I’ve seen quite a few self-service restaurants. I haven’t been to any, but I’ve seen them online. So there’s a lot of like these shops in Korea where it’s like a self-service ramen store.
So similar concept. There’s no one manning the store and then you just take and pay. But I guess that technically would only work in countries that people would actually pay because I, I don’t have to pay, there’s no one manning the store.
[00:35:14] Sherri: They can use technology to make sure you do,
[00:35:17] Sabrina: you would need technology to support that as well.
[00:35:19] Jianggan: I had discussions at one large. Retail companies in China, and they run like small retail stores across the country, and many of them are unmanned after midnight. And they said, I mean, that developed a sort of, according to them, a complex mechanism or, or algorithm to calculate, I mean, what levels threshold they put in each place, right?
I mean, in some places you need to verify identity to go in and you need to verify identity to go out in some places, you don’t need to verify identity to come in, but you need to verify identity to go out. And in some places they have to put like a human customer service to monitor what’s going on.
And in some places they don’t have to. So, back to the, to, to the revenue management piece, right? I mean, for you to optimize all these things and we have all the data and it allows you to, make decisions, right? Okay. In which area? Because we can talk about lots of perspectives, but at the end of the day, I mean all this automation, how much advantage does, does it give you and how much incremental revenue we get, how much incremental cost saving you will get, and and to, to do that effectively, how much cost do you have to spend on.
[00:36:23] Sherri: Yeah. And, and I think it’s interesting too, ’cause like in the U.S. I’ve not been to one of these stores, but Amazon has some small retail stores and it’s just like shopping on Amazon anyway. And so, it’s all tied to your account and so you automatically get charged.
Right? And so it’s really not, it’s really not an issue. But I think you could see too, I mean. If labor costs go up a whole lot, there’s a lot of incentive for any kind of business to go to the automation and the cost of automation is going down. And Sabrina, as you were saying that, I mean, you and your friends really don’t wanna talk to anybody anyway, so automation is fine.
[00:36:59] Sabrina: We, we talk to each other, but we, we don’t wanna talk to restaurant staff
[00:37:02] Sherri: glad you talk to each other. That’s good. Yeah.
[00:37:04] Sabrina: We just talk to each other. Yeah.
[00:37:06] Jianggan: Would you, I mean, if you go to place where instead of a real waiter, waitress you have a Tesla Optimus robot, would you talk to that robot or you try to prefer to like type something on your phone?
[00:37:19] Sabrina: I prefer ordering on my phone. Why would I talk to a robot then? I’d rather talk to a real human. I’d rather talk to a human than a robot. But I would rather order from a tablet than talk to a human because this is sometimes like, you know what If they hear you wrongly. If I key into the tablet wrongly, I only have myself to blame.
[00:37:36] Jianggan: Oh, that’s a accoutability issue. Yeah. Yeah.
[00:37:39] Sabrina: So, so Sheri, you’ve been in the industry for about 25 years, right? What are some of the most interesting innovations or changes that you’ve seen in the hospitality or restaurant industry over these like 20 to 30 years?
[00:37:53] Sherri: I mean, I think the use of data, right?
Because before it was just sort of there and the data wasn’t very integrated and now, I mean, it’s not perfect, but there’s a lot more going on with that. I also think that you could see what’s going on in the Grab buying Chope DoorDash, buying SevenRooms. I was just talking earlier about American Express has got Resy in the U.S. and they’ve got Toast. So that’s really, that’s really different seeing how that plays out. And then you could also see in the hotel industry how.
It used to be the hotel chains own their own hotels, but now they just manage the hotels. And so completely just changed the dynamic. And then of course, you know, we talked about right at the very beginning is that when you go to book a hotel or an airline or make a restaurant reservation or place and order at a restaurant, you don’t call anymore.
You go online or you go onto your app. So I mean things have changed a lot. The basics of the business are still the same. I mean, providing a quality service, but the customer interface has changed.
[00:38:58] Sabrina: So we’ve talked a lot about like data as well as automation, but how about ai?
So obviously AI is kind of like the buzz keyword this days. You know, everyone is talking about ai, AI in different industries. How do you see the hospitality as well as restaurant industries sort of adopting AI into their operations or revenue management?
[00:39:18] Sherri: Well, I think it’s a, there’s a lot of talk right now and I’ve seen this quote somewhere else, but I forget what context, but it’s a little, it’s a little bit off color.
Everyone talks about it, but nobody does it. And so it’s there’s a lot of talk and I think though it has. It has the capability, but I mean a lot of restaurants are using it for things like menu design or coming up with promotions and different sorts of things like that.
But it kind of reminds me and Jianggan you might have, I mean five to 10 years ago, everybody was talking about big data. Yeah. And it’s like, yeah, Uhhuh Uhhuh. And so AI is kind of simple, I’m getting the same sort of thing. It, well, it’s happening, but then you also can see like Delta Airlines came out and said.
Well, we’re gonna use AI for personalized pricing and customers. There’s a lot of pushback on that. It’s like, what? I don’t have any control over what my price is gonna be. So it, it is going to happen. But it’s going to be, I mean, but right now I think there’s a lot more talk about it. And then the other part with this too, is that customers.
We use it all the time, right? Like if you’re going on a trip or something to kind of figure out where you’re gonna go. But I mean, when a company’s using ai, people are a little nervous about it. I mean, what does that mean? What does that mean for me? Are there robots deciding what my life’s going to be?
I mean, it, it just kind of gets a little creepy.
[00:40:43] Jianggan: Maybe we’ll get used to that or the next generation will get used to that.
[00:40:46] Sabrina: Maybe. I mean, the next generation is kind of using AI for everything already, so maybe it. It’s, they’ll be more immune to it.
[00:40:52] Sherri: From a student, I mean from a student perspective, when I see, Singapore is taking a smart approach with it, because if you assume that students aren’t going to use AI and that you’re gonna make it so that it’s evil, if they do, it’s like, oh, come on.
I mean, of course , they’re going to do that. I mean and so then it becomes the challenge of how do you structure that in such a way that you can make sure that people are still, are still learning.
[00:41:16] Sabrina: Have you ever used AI to plan a trip? I mean Jianggan doesn’t plan trips, but I have.
You tried?
[00:41:21] Sherri: I did. First time I did it, I was in in London about a year and a half ago, and I was there, I had like a day or two before the conference and I was by myself, and so I just put into ChatGPT Oh, well Here I am. Here’s what I wanna do. I like to walk, I don’t wanna go too far from the hotel.
And it was, it was fascinating. I showed it to the concierge on my way out. I said, so what do you think? He went, oh, wow, this is really good. He’s probably also thinking, oh no, but it was, it was,
[00:41:50] Sabrina: it was replacing his job.
[00:41:51] Sherri: It was it, but it was, it was fantastic. But yeah, you should, so you should definitely try it.
[00:41:56] Jianggan: I don’t plan for trips, AI or not,
[00:41:59] Sabrina: That’s what I was saying
[00:42:00] Jianggan: yeah. So I have not had leisure trip for a while, and when I travel in business, there are only two things I need to do, right? I mean, book a flight, and book a hotel. And actually for both, I, I use the, the websites or apps of airlines and and hotel groups.
And but that’s one thing I use during my, some of my trips so last year I was in Shiyan for business, right? And then I had one day, then I went to see the terracotta warriors. Instead of renting this really expensive, you know, audio guide, I just typed in ChatGPT say, Hey, I’m at the Terracotta museum.
Could be my guide. They said, sure. And now I just zapping photos, so, okay, help me explain this. And it’s pretty good.
[00:42:35] Sabrina: Oh, I’m gonna try it next time.
[00:42:37] Sherri: In multiple languages. I mean, it’s, it’s really very helpful. And like for me on that trip I had a like a day and a half to get over jet lag.
And so that was kind of, and I wanted to go outside to be able to to do that. It was perfect.
[00:42:51] Sabrina: I’m gonna try that. The next time I go to a museum or something, just use ChatGPT as my guide.
[00:42:56] Jianggan: So, as a restaurant owner and, and as a hotel operator, what should be the reason that I should remain optimistic for the next 10 years?
[00:43:09] Sherri: Oh, I mean, why should I be optimistic? Because, there are always customers out there. There are needs that need to be, to be met.
I mean, if you kind of succumb to being pessimist, I mean, why be in the business in the first place, but are there gonna be changes? Yes. There’re gonna be changes. Is there gonna be more technology? Yes, there’s gonna be more technology. And so just getting yourself, you, I mean, kind of prepared for that.
And I mean, I could use the term ready for the ride because things aren’t, things
[00:43:36] Jianggan: ready for the ride
[00:43:36] Sherri: are going to be changing for, so if you, if you go in and you say, well, things are gonna stay exactly the same. You’re in for a lot of disappointments.
[00:43:44] Sabrina: Be ready to adapt.
[00:43:45] Sherri: Yes.
[00:43:46] Sabrina: I mean, things change so fast nowadays as well.
[00:43:49] Sherri: But I think, you know, you could see companies that are, that are pretty good with that, where they’re like, okay, this is happening. And so how do we pivot to be able to do it that way?
And there’s some that are so stuck in their ways that it’s really hard for them to be able to make that change.
[00:44:04] Jianggan: So the mindset is actually more important.
[00:44:08] Sherri: Well, mindset. I mean, you gotta have the capability to be able to do it too. Right? ‘Cause I can be optimistic and clueless but if I’m optimistic and I have the right tools, I’m in, I’m in pretty good shape.
[00:44:19] Jianggan: But the tools are becoming more and more available in a way.
[00:44:23] Sherri: Yeah. And that back to, you know, back to where AI is going to take us. Yeah.
[00:44:28] Jianggan: So we should be optimistic.
[00:44:30] Sabrina: So thank you guys for tuning into another episode of the Impulso podcast. I hope that you guys enjoyed today’s episode with Sherri. If you guys did, do like this video, as well as subscribe to our YouTube channel to stay up to date on the latest happenings and trends in tech, new retail, and the broader digital economy.
Thank you, and bye-bye.
The post Why Great Food Isn’t Enough for Restaurants to Succeed, Featuring Prof. Sherri Kimes | Impulso E129 first appeared on The Low Down - Momentum Works.
