Ted Audio Collective Hi everyone.
You're listening to After Hours.
I'm Yang Mi. I'm Felix.
I'm Mi here. And we have with us tonight our dear friend and colleague, Ryan Buelle.
Hi Ryan. Hi everyone.
Great to have you Ryan.
I'm excited to be here.
Ryan, just FYI for our listeners, is in our technology operations and management area, which means that his actual setup is something that we are all feeling great in before.
Because we're all checking out his equipment like, that's a nice stand you got there.
Young Mi and Mi here fool you.
I had to learn from them how to do this well, so we'll see how this goes today.
I think this will be really fun.
We wanted to talk about travel.
And who better to talk to than someone who knows everything there is to know about service industries, which of course is our good friend Ryan.
So thanks for coming on Ryan.
We have so many questions to ask you as we are in the middle of a very busy travel season.
And not just questions.
Frankly, Ryan, we also have lots of complaints and you will just become the object of a lot of our problems.
And you can feel them however you will.
Alright friends, bring them on.
By the way, I'm on hold with Americans, so I may have to drop off on occasion.
No, no, no, no. They're not going to get back to you for at least another 8 hours.
Good luck Mi here. But he's been on since Tuesday, so who knows?
Okay, so we are in the midst of a very, very busy travel season.
And for many people, this is the first time they've traveled by air in a couple of years.
And so what we wanted to do is use your expertise, Brian, to kind of lay out some of the travel headaches people are experiencing.
So let's start out with the airlines because that's where people are experiencing a lot of headaches.
Yeah, I mean, I think this is a really fascinating story.
And the truth of the matter is this is not just a story that's been brewing for 18 months.
If you actually look at what's been going on in the airline industry over the last 20 years, there were all these things that were taking place that led up to the pandemic that really set them up for the perfect storm when the pandemic hit.
If you go back to, for example, 2001 and you flash forward to 2020 right before the pandemic, we saw lots and lots of consolidation in the industry.
So American acquires TWA and USA and Delta acquires Northwest, United gets Continental, Southwest gets Air Tran.
So we had fewer carriers.
And over that 20 year period, the number of employees in the industry goes down by 18 percent.
Now, at the same time, the number of passengers goes up by 50 percent.
We have fuller planes than we've ever had before, 70 percent full in 2001, 85 percent full in 2000, right before the pandemic.
And then the pandemic hits.
And by April of 2020, passenger volume had crashed.
Seventy five percent of flights were grounded.
They cut staff by 25 percent.
And now things are starting to come back.
And this bullwhip is now just ravaging the industry, which makes us think a really interesting time to have this conversation.
So, Ryan, what are you hearing from travelers?
What are some of the things on their list of headaches?
So one of the biggest things on the list of headaches that travelers are experiencing right now are short notice cancellations.
And in fact, we've seen this throughout the industry.
Some carriers are bigger offenders than others right now.
But that tends to be at the top of the list because that really stymies a vacation.
And this is the result of unforeseen technical difficulties, shortage of personnel, what causes these very short notice cancellations?
I'd say the big three things that are driving it are weather, extreme weather, labor, which is a massive issue which links to the challenges the airline is facing more broadly.
And then these very old antiquated systems that are having a very hard time keeping up with the pace of change in this industry.
Well, so I think weather and labor we can understand, but do that last one a little bit more, Ryan, which is what's going on in the background that's causing these large ripple effects?
I might have thought that it might have also just been they are running so lean and so tight that when mistakes happen, then the ripple effects are just larger than ever before.
Is that about the systems or is that just about there's just no redundancy?
There's no slack in the system.
There is no slack in the system.
And so you've got a system where they're hemorrhaging money, they're operating at a massive, massive loss, and they have these old technology systems that through consolidation have been kind of bolted together, these kind of Frankenstein systems that don't talk to each other very well, that worked
pretty well in steady state, but it was the kind of thing that if you sneeze around it, it would fall apart.
So, for example, Southwest has an old crew scheduling system that stopped working for a weekend and it just completely ground things to a halt.
American went down for two days because their old Sabre system, which is the reservation and pricing system, ground to a halt.
And if any of these little pieces breaks, you can't operate or effectively operate an airline and everything comes apart.
Okay, I get that. But if you were to ask any company that is operating on antiquated systems, why they haven't updated their systems, the number one excuse is it's hard to fix something and still run the business.
So, on the one hand, an entire shutdown of your business is a bad thing.
On the other hand, it's an absolute opportunity to upgrade your systems.
And in fact, many companies and other industries use the lockdown as an opportunity to begin to address some of the technical debt that had accumulated over many years, some of the infrastructure debt that had accumulated over many years, so that you saw some companies, I mean, it's a subset, but some
companies emerging out of the pandemic stronger than they entered the pandemic.
Why is it that airlines didn't do any of this?
Because this was all foreseeable.
Eventually, travel would come back, in which case you would assume they would know that they would be experiencing these kinds of problems.
So, one thing is, although for us, for 18 months, travel kind of ground to a halt, they did have to keep some of those planes in the air.
So, they never went down and matched the level of fall in demand in terms of their fall in supply.
The other thing is, there's a lot of rigidity in this system.
So, if you lay off 25 % of your staff, and then you try to bring them back, that actually took a very, very long time.
Some of these are new staff, and so there were lots of fires to put out.
And how much of this do you think is their failure also to communicate with customers about this?
Is it just a really hard problem, or are they also terrible in the way they think about delivering the message?
Yeah, I think they are terrible at how they think about delivering the message.
If you think about the situation that they find themselves in, when they realize they have to cancel a flight, that's really bad news.
Nobody wants to have to deliver that bad news.
Historically, there was enough extra slack in the system so that they could solve some of those problems, so that for passengers it wasn't a cancellation, it might have been a delay.
And so, I think the challenge is, they don't want to share the bad news until they absolutely have to.
And when they're operating without slack, it makes it even worse.
And for the traveler, we just wind up stranded.
But for the organization, they're trying to manage this at a broader level and not doing it very well.
Thinking about the difficulties of bringing staff back, how important is it that we are in a generally very difficult job market?
That wage is rising, intense competition for people.
Do we know whether people are exiting the air travel industry altogether?
And so, perhaps we've lost them forever to other industries.
Yeah, I mean, this is something that's happening in air travel and in hospitality worldwide.
And I think a lot of people said, you know, I don't want to go back to those conditions, whereas we have schedule inflexibility or insufficient pay or a lack of sufficient benefits or dealing with difficult customers.
And so, people that left the industry, some of them left the industry permanently and said, look, I won't return.
Others are saying, look, I can get paid better to do work elsewhere.
Well, I'll be appreciated more.
I won't have to put myself through this adverse experience.
Right. And that's something they're absolutely struggling with now.
And Ryan, if you can take us out of the present moment for a second and talk a little bit about the future and in particular, on the demand side and the business travel market and the business leisure mix.
So, what do we know about the return of business travel and what do we know about their operating models if business travel is only 70 percent, you know, 80 percent of what it once was?
This is a big unknown.
And I think that it's affecting different airlines differently based on how they've positioned themselves.
So, Delta really tried to center itself around business travelers.
If you look at JetBlue, for example, it's a little bit different.
And I think there's a big question because I think the pandemic caused us to question a lot of conventional wisdom about do we really need to fly across the country for that two hour meeting?
And on the other hand, Ryan, you have this flexibility about location.
And so you hear more and more about people flying on Mondays and Tuesdays and going places that are not business -related, but going to locations they want to go to.
So, is that a countervailing force or is that not nearly enough to kind of measure up against the laws on business?
I think the answer is we don't know.
And this is an industry that has had a lot of rigidity to young me's earlier point, not being perfectly great at being able to kind of turn on a dime.
And I think we're seeing ample evidence of that right now.
In addition to the cancellations, there are other headaches that people have complained about.
There's a lot of confusion about travel requirements and what documents you need to travel.
I also think that the in -flight experience has changed somewhat and everybody seems to be more on edge.
What advice do you have for any listener out there who is getting ready to travel?
And how do you think this is eventually going to sort itself out?
I think the short -term answer to the question is, first off, please, please, please plan ahead.
And you have to check things that you wouldn't ordinarily think to check.
So, for example, am I still going to be able to get into the country with the documents that I have?
Or is my flight still scheduled?
Because one thing that we've seen is sometimes those things get canceled and word doesn't even get to the passengers.
And then on the flight itself, I think being prepared and mentally engaged for that experience is a second thing that we have to do.
It's still safe to fly, is what the data suggests, but it's different than the experience was 18 months ago.
And I think being open to that and ready for that and prepared for that is a really important thing for passengers right now.
And then longer term, how is it going to change?
Do we see a completely renewed industry in some way?
I think there's a lot of reinvention going on right now, Felix.
Oh, that's optimistic.
And what are the examples of that, Ryan?
Like, where do you see something that's exciting for you?
Well, so, for example, going back to young me's point about the ambiguity, for example, around what do I need to travel?
There's actually some innovation in this space.
There are startups that are now trying to centralize that information.
There's a Canadian startup called Sherpa that I was on their website this morning.
And it's actually a glorious user experience to try and help you understand when flying into this country, what are the things that you need.
And in fact, some airlines are partnering with it.
American Airlines, who I'm flying with, happens to be partnering with it.
And so I think shared services is one place where we could see real innovation.
Another related piece to this notion of shared services is when booking gets botched at the end, customers call in and they wind up waiting for two hours, three hours, four hours.
One thing that these airlines could do is they could pool resources in terms of customer support.
But I think the biggest area for innovation, honestly, is in rethinking the labor model.
At its root, service is the business of people helping people, and yet it doesn't feel that way.
So how can we reclaim those dynamics and help people genuinely feel the positive benefit that they're creating in the lives of their passengers and their customers?
And in order to make that happen, we actually have to bring the passengers and customers along too.
So I think there's lots and lots of room for innovation.
But getting from where we are to where we need to be, I think, is going to be a long process.
You know, I'm glad you ended this segment on a somewhat more optimistic note, because one of the things you see when you travel is, however much you feel tempted to complain, you look at the service professionals and they seem so demoralized.
Honestly, they just seem demoralized, exhausted.
And so you can't help but feel some sympathy for what they're probably experiencing on their end.
I do want to talk about the hotel industry and a few other things.
So let's take a break and be right back.
So that's all about getting someplace, but when you get there, Ryan, there's now an interesting set of issues on the hospitality side in hotels, which have also struggled enormously over the last 18 months.
And we see some of the same things coming back, which is labor shortages, maybe customer experiences that aren't great.
So tell us about the story there and what you think of as how they can manage their way out of this.
Yeah, I mean, we've seen the same demand fluctuations.
And what's kind of interesting is in hotels, we've seen that occupancy rates in some locations are back to where they were pre -pandemic, but it's the same mix issue.
It's primarily now leisure travelers.
People have been pent up in their homes and they've been desperate to get out.
And so now their expectations have been building for the last 18 months of what they'll encounter once they get out.
And they're not finding things that matched the levels of service offerings that they experienced prior to the pandemic.
There are good shortages, there are labor shortages.
And so, for example, housekeeping is now opt in in some places or in some cases we'll clean it up before you get there.
We'll clean it up after you leave, but we won't come again.
Or they eliminate things like free back breakfasts or they don't have the bar open or they don't have the restaurant open.
And this is, I think, hotels attempts at trying to figure out how do we operate in this new world?
And there's a lot of experimentation going on.
But again, I think that the transition from where we are to where we will ultimately land is challenging.
So it seems that the story from a hotel perspective is somewhat more straightforward.
In other words, they're just experiencing a labor crunch.
Yeah, I mean, I think this is largely a labor story.
I think that's right.
And hotels have always had a challenge, I'd say, with labor just because turnover rates are high.
And 2019 turnover rates in hotels on average, they were about 80 percent.
Now it's 96 percent.
But the real problematic part, and this rhymes with what we discussed earlier with airlines, is lots of people don't want to return to the industry.
Ryan, I'm still just really struck, well, A, by this labor story, which is, you know, as we've seen minimum wages and Amazon pay $15, $18 an hour, then the natural consequences of these other large employment sectors, like call center employees for the airlines or like housekeeping staff for the hotels,
gets very complicated, I think.
But the thing I'm really struck by is I'm still struggling with this business leisure mix question.
These are large fixed cost businesses, and so business travelers were really important.
Is there a way to maybe segment the leisure market?
The way they segmented the world was business and leisure, and I don't think that's working anymore.
And so how do you rethink the demand side to manage through this?
Yeah, that's a really interesting observation, right?
Do we want to think about segmenting differently?
I think that part of the challenge of that is we don't yet know what the world is turning into.
Right. And so maybe we start to microsegment.
So, for example, Boston used to be in hotels, used to be a top five destination in the United States, it's now bottom five of the major cities because it was such a business destination.
Whereas Miami is booming like it always has and maybe even more because people have been just saying, once I get out of this house, I can't wait to have some fun in the sun.
Well, but also, Ryan, there's another piece, too, right?
Which is, I think there's a lot of things that look like leisure but that are kind of business, right?
So like, I want to spend a week working remotely from Miami.
Right. You know, what is that?
And people have a different willingness to pay them when they're taking their family to Miami.
So that also feels like a different piece of the segmentation.
I think that's absolutely right.
Whereas we used to just say it was leisure travel and now it's business travel.
We have to subset what business travel means.
I was thinking about people that really just want a quiet room where I can connect in and I can do my virtual work, but I also want to be able to go and explore the city, maybe by myself or with my family in the evenings.
I don't think we yet know exactly what all of those segments might be, which is, I think, maybe frustrating and maybe terrifying to your point for some of these providers, but it's also kind of exhilarating because it means that I think this is an opportunity to differentiate further.
I hated this word when I heard it, but it seems to be kind of true, which is, you know, like the whole bleacher idea.
No, no, no, no, no.
But that's kind of what we're talking about.
It is, but that's not the word.
Okay, you don't like it?
No, no. Wait, Felix, you wanted to jump in.
So going back to the balance between the big hotel groups, how do you see the competitive balance shift?
Is what's going on now in the end, will it lead to greater concentration?
The big groups will come to dominate everything.
Is there a place for independent hotels given the difficulties of managing these fixed cost businesses with such uncertainty on the demand side?
I think there will continue to be a place for independent hotels, but I think that how their role evolves really depends on this segmentation question.
One of the interesting things about Airbnb versus these different kinds of competitors in hotels is, for example, recently, hotels have been a lot more flexible.
If you have to change your plans or cancel, they understand the externalities of airlines and of the uncertainty that we're all facing more broadly.
They've been a lot more flexible because they've been really working hard to try and maintain relationships with their guests.
And on the other hand, Airbnb, right, this two -sided marketplace, has a lot less flexibility because they actually have to honor both sides.
They have to honor both the hosts and the guests.
And so quite interestingly, this is a period of time where Airbnb is a little on its heels in terms of the customer experience that it's offering and providing, which I think is a moment of opportunity in an intriguing way for these existing hospitality providers.
Yeah. You know, one of the things that I hope is that these hotels are really learning from this experience and they are recognizing that there's so many different ways they can rethink their value proposition.
If you book a room at a hotel, it's such a rigid bundle of services.
And if there's any price difference, 90 % of that price difference is based on the size of the room you book.
You're booking for either a smaller or larger room.
And so one consequence of that is that there are some visitors to a hotel who end up feeling really underserved because they ended up not really getting what they felt like was fair value for their money.
And then there are other folks who felt completely over -served.
They got housekeeping every day.
They didn't want housekeeping every day.
There's a concierge they walk by every day.
They never once interacted with the concierge.
And so you could imagine an extreme different version of this where you booked a hotel and it was almost a la carte.
You get the room and then you just check, I'm going to need dry cleaning.
I need super good Wi -Fi.
I need room service.
Here are the services that I'm going to make use of, and therefore my price is this.
And then if I don't want any of that, and I'm never going to step foot in the gym, then I get a different price.
Now, maybe that's too operationally complex, but at the very least you could begin to imagine different, for lack of a better word, different classes of service, like the airline model.
Exactly. Which is you pay for the bag, you pay for the advance check -in, you pay for the food on the plane.
Yes, but in an airline, everybody at the front of the plane is essentially subsidizing the entire flight, whereas in a hotel everybody shares in the cost of all the services associated with the hotel.
And for someone who's more budget -conscious, I don't know.
It's not a great trade -off because you're getting over -served and you're overpaying.
Yeah. I mean, I think that if that was managed artfully and that was managed in a way that wasn't cumbersome to guests, I think that's a really interesting idea.
And you could even imagine it as a transitional idea as an organization is trying to figure out, how do we better serve these different micro segments of customers?
Yeah. Any predictions about 2022 before we close this segment out?
Any predictions about how you think this is all going to shake out in the coming year, right?
I do. I have some hopes and predictions.
This is how I hope it will evolve.
And these are sort of three things at a high level.
One is that I think that we will see better transparency about what's going on, both before you travel and while you're traveling.
And that when challenges inevitably arise, I think that the organizations that rise to the top are going to be the ones who have a gracious response.
The second thing that I think that we will see because of the pressures of labor that we've talked about in both airlines and hotels is I think that we're going to see a lot of work done to make the job more sustainable for employees, making sure people have capability, that they're motivated, that they
have discretion to solve problems in real time.
And that from a scheduling and compensation perspective, that the job is sustainable not just for the organization, but for employees too.
And then the final piece is, I think these organizations have to understand and acknowledge we're in a period of reinvention and that this is an opportunity for us to unleash.
Yeah. Okay. We're going to come back with recommendations.
Sound good? Yeah, let's do it.
Excellent. Okay. Okay, Pics, Felix, you are an intrepid world traveler.
So, Pics. I recently learned an interesting travel hack from a receptionist at a hotel.
I had left my bags at the counter and then when I came back to collect them, the person working at the reception, she put a fragile tag on my bag.
And I said, well, actually, there's nothing fragile in it.
And she says, no, no, no, this is not about fragile content.
And so she explained to me that you can never really be totally sure whether your bags are treated better if there's a fragile tag.
But the one thing you seem to know always is that it gets loaded on top of all the other bags in the airplane, which then, of course, means once you get out at the other end, it gets out first.
And long behold, I arrive in Boston, I'm waiting, and my bag is the second bag that came out.
So, I didn't think through all the consequences if everybody did that.
But at least for the time being, this seems to be an interesting thing to think about.
Yes, okay. So, listen, I'm going to go next because I brought in some travel hacks as well.
So, one is to download an app that not only lets you check the status of your flight and whether it's going to leave on time, but actually allows you to see where that flight is coming in from so you can check the previous flight.
And it will give you such a head start on knowing whether or not there's a delay or not.
That's a great one.
Do you do that, Meir?
Oh, I do that totally.
And some of the airlines provide a flight view does it as well.
There's lots of good ones, yeah, absolutely.
Yeah, that's such a good one.
A second tip is, you know, I struggled for many years to figure out how to keep my clothes from getting completely wrinkled when I travel.
And sometimes I would carry one of those hanger bags, and those are super unwieldy, and I don't like to check my bags.
So, I discovered this hack, which is, if you fold your clothes and then you just put them in a plastic bag individually, and it takes up no additional space because it flattens, then your clothes come out without any wrinkling.
Someone taught me this, and it's an amazing, amazing hack.
Have you done that?
I have not. I've done a version of it with even like just taking the plastic from a dry cleaning bag.
Completely. It can be anything.
Somehow it's just the direct contact or the shielding, I don't know what it is, but it's kind of great.
Or like a tiny layer of air, I'm not really sure.
And then my final hack is, when you are in the car on the way to your hotel, just call ahead to your hotel to make sure your room is ready.
Let them know you're coming.
And if there is a massive delay, they'll tell you and then you can decide to stop at a restaurant first or do something else and it avoids any kind of headache there.
Those are good. Very nice.
Here. What do you got?
So I have two slightly she -she travel hacks.
The first is to think a little bit about this new product that American has and that United has that's called an AirPass or a Pass Plus.
So what they are doing is now democratizing what they've always offered corporations, which is you prepay at the end of the year for your travel for the next year.
You, for example, prepay five thousand dollars or ten thousand dollars.
As a consequence of that, you get a whole bunch of elite status, but you also get predictability about travel costs.
And so this is kind of a thing that really grew during COVID as a financing vehicle for American and for United.
But now you see so many people traveling in this kind of leisure slash business way and they actually are going, for example, from Dallas to Miami, let's say six times a year and you know you're going to be doing that regularly.
Well, then you prepay five thousand dollars and then you actually just eat into it as you go and you get a whole bunch of benefits as a consequence of that.
So I think that is really interesting.
And I'm kind of thinking a little bit about it.
It used to be you had to do it like thirty thousand dollars and you had to have that much business travel, but now they're bringing it down and they bring it down quite a bit to people putting in five thousand dollars, which is still a lot of money.
But if you know you're going to spend that on American or United, it's a really interesting idea.
And then the second one is I recently heard about from a student, which is status matches.
I did not know about the world of status matches.
My sister taught me about this.
Oh, yeah. So status matches are when you have status on one airline and then they, for example, discontinue a route that you've been using a lot and you want to go over to the other airline, you can ask them to match your status.
And it's kind of crazy.
And so my two tips are these pass programs and status matches.
Those are both very good.
I haven't heard of the pass program, but the status matching, I can confirm it's a real thing and it's very, very nice.
What about you, Ryan?
So now I'm motivated by your multiple travel ideas.
So I have one to share if you're just interested in maybe not traveling today, if you go to the flight aware website and you click on their misery map.
It's a fascinating overlay of weather going across the country and you can see major airports and what the delays look like, but it's graphical and visual and beautiful, but also terrifying depending on how you're going to be traveling.
It's called the misery map.
It's called the misery map.
That's great branding right there.
And then the other one actually, this was a rediscovery.
I ran into a neighbor in our neighborhood who had been at the neighborhood library box.
We have a little library box in our neighborhood across the street and she had a book with her and I recognized it.
And it was a book that I'd read many, many years ago.
It's called The Book of Awesome by Neil Passretia.
I love that book. It's a narration of all of the simple, brilliant, lovely things that we encounter in everyday life that we might otherwise overlook.
And when you notice them and you realize how incredible they are, it just makes your day a little bit better, which is good if you're not traveling and you're stuck at home.
But it's also great if you're traveling.
So I'll just give you a couple.
So here's one illegal naps.
When you catch a nap, but maybe you're in a situation where you shouldn't, like how wonderful or awesome that is.
Or when you get the milk to cereal ratio just right, or high -fiving babies.
He writes a little essay on each one.
It just makes your day a little bit brighter by noticing the incredible things all around you to make your world a little bit better.
It is actually a book about gratitude because each one is maybe a page long, maybe.
And it makes you realize how many little micro -didlites there are in a given day.
So I love that one.
Thanks so much for joining, Ryan.
Thank you for having me.
This was so much fun.
You know what? I think you're awesome.
Aw, thanks for being here.
I think you are. You're my book awesome.
You should be in the Book of Awesome.
So I hope everyone enjoyed that.
That was Ryan Buell, our dear friend and colleague from Harvard Business School.
And that's it for us tonight.
We hope you guys are all enjoying the holiday season.
This is After Hours from the TED Audio Collective.
