Former Remington Hospitality CEO Sloan Dean is launching a new third-party hotel management company, which he bills as the "first AI-native hotel operating company."
Dean's AI Hospitality Group will begin running its first hotels starting later this year, using proprietary technology and heavily leaning on artificial intelligence to significantly cut down both corporate and on-property staffing. The goal, he said, ultimately is to boost profitability.
Dean said his company could staff just half to a quarter as many human corporate employees as a traditional hotel operating company.
"We actually can improve performance and have, at scale, one corporate associate for every three hotels," he said.
That math doesn't fully reflect the advantage AIHG anticipates. Dean noted that a chief commercial officer at an AI-first company could be "three, four, five times more effective."
"You have to have A-plus players, but you just have less of them," he said.
Dean expects his company to operate with gross operating profits at a 500-basis-point premium compared to other hotel operators, thanks to automation and labor reduction. At the same time, AIHG will pay the fewer employees they do have a higher rate in order to attract talent, as well as prioritize keeping people in the most important, guest-facing roles.
AIHG's structure will also let people move back to focusing on hospitality rather than dealing with archaic legacy systems rampant across the hotel industry, or juggling responsibilities outside of their skill sets, he said.
"We're putting the human back in host," Dean said. "As you got into the business as a GM or a front-office manager, you wanted these positions because you wanted to be in the hospitality business, not because you're doing accounts payable in your office. So [AIHG is bringing in] automation of accounting, certain human resource functions, procurement, some of the commercial functions, bringing AI in a fully integrated way to reimagine things."
Prior to launching AIHG, Dean spent more than seven years leading Remington Hospitality, which grew significantly over his tenure. When he took over Remington in 2018, it operated primarily as the in-house management firm for Ashford Inc.'s two advised real estate investment trusts, Ashford Hospitality Trust and Braemar Hotels & Resorts.
In 2022, Remington significantly boosted its portfolio of managed hotels with the acquisition of Chesapeake Hospitality, growing to more than 120 hotels across 28 states. Remington also expanded its hotel portfolio into the Caribbean and Latin America during Dean's tenure.
Piloting tech
AIHG has spent the past few months piloting its technology at a set of three California hotels that are operated by different companies — The Ameswell Hotel in Mountain View, California; the Marina Del Rey Hotel in Marina Del Rey, California; and the Hotel Hermosa in Hermosa Beach, California.
"We own all the [intellectual property], and we've developed a lot of proprietary AI competencies that we then use as the operator," Dean said.
Simone Harms is the general manager of the Ameswell Hotel, which is managed by Storey Hotel Management Group and owned by Broadreach Capital Partners. She said she's noticed definite improvements from the AI recruiting agent she piloted, along with a sales agent and revenue management automation.
"It's tremendous, the time savings and efficiency it's created for us," she said. She noted that the HR recruitment technology she piloted helped particularly in conquering language barriers with candidates, as well as streamlining the scheduling of interviews.
"The time-saving has been night and day for our HR coordinator," she said. "They used to be playing phone tag with these candidates."
Perhaps the biggest benefit Harms has seen from a deeper integration of AI on her property is the ability for data to span across different systems that didn't used to be able to communicate with each other easily.
"I now have my own AI agent that pulls all my data," she said. "I can ask it for anything from my [profit and loss statement] to sales, et cetera. It's very specific to me and my property, and oh my God, it saves me hours of work."
Harms said she still has some long-term questions about AI deployment at hotels, particularly around the math of labor savings versus AI token costs, although Dean said AI token costs are built in to AIHG's profitability projections.
Owner alignment
Dean believes the new model will prove quickly profitable among hotel owners, who are increasingly focused on profitability over top-line revenue in an environment of ever-increasing costs. To that end, AIHG's management contracts will be structured to pay out based on profits, not revenue.
The company has no plans to sell or license its technology to other operators.
"The vast majority of the way we make money is a [gross operating profit] share," he said. "So if the owner's not making more money, we're making far less, and so it's a direct alignment with incentives of the owner. We baseline on the [trailing 12-month] GOP, and then we take a percentage of the GOP expansion beyond. We charge a very, very low base fee, very very low reimbursables, and basically a profit-share model."
Dean said there's no dancing around the fact that a core part of AIHG's mission will be operating hotels with fewer people, but that helps deal with two of the major issues faced by the industry: increasing costs and labor shortages.
He said the lower headcount is also something that competitors will struggle to replicate.
"The beauty of us being vertically integrated is if you were an incumbent operator trying to do this — destroying jobs destroys culture," he said. "So we're coming from the ground up, natively, organically, and just saying 'Hey, we operate hotels with less people, but the people we do have are more hosts. We're making it known. It's not like an incumbent saying they're going to lay off 10% of the workforce, which is really difficult to do."
Existing competitors also are unlikely to be able to replicate AIHG's tech capabilities, Dean said. Plus, given that most large-scale hotel operators are owned by private equity, they're incentivized to prioritize short-term growth over tech investments so their ownership group can have a successful exit.
"Even if they went and spent tens of millions of dollars, it's almost like you have to be a technology company as much as an operating company, and you can't just morph an operating company," he said.
Growth aspirations
Dean has lofty growth targets for AI Hospitality Group. The new company expects to launch with around 10-20 hotels in the first six months with "a couple of institutional owners," he said. The first wave of management deals are with private equity investors and the next will likely be real estate investment trusts.
AIHG has the first wave of management contracts signed but is still waiting on owner approvals before announcing them publicly, Dean added.
He said REIT executives have been keenly interested in the new model but need a proven track record of performance before jumping ship.
He also believes the company will scale up to more than 100 hotels within three years, with even more lofty growth aspirations after that.
AIHG was launched with its first round of public funding led by $7.5 million from venture capital firm Rackhouse Venture Capital.
Kevin Novak, Rackhouse founder and former head of data science for Uber, said what makes AIHG appealing as a venture capital investment in a way that really any other third-party hotel management company wouldn't be is the potential to truly reimagine how day-to-day operations happen at a hotel.
"People are the core of delivering any sort of great hospitality experience, but the back office is using systems that peaked during the Bush administration," he said.
The nature of how the hospitality business works keeps traditional management companies from doing things in a truly innovative way or experimenting in real time on how to improve things, Novak said.
"It's not like you can A/B test a customer support system under the hood and route 10% of your guests at your hotel to a different building run by a different management company," Novak said. "That's not how real life works. So you've got kind of a natural risk aversion that comes into this."
Novak sees this investment as a good opportunity both to refine hotel operations and because he believes Dean is the right type of person to execute on that plan.
"Sloan knows everybody," he said. "He's built a really successful firm in the past. He has high odds of building the right thing [and] has the trust of the right ownership groups in the industry. And I think that's going to be as important, if not more important, than the sort of technology you're making."
Novak acknowledged there will at least be a short-term push back within the industry against the idea of being too reliant on AI, but he said AIHG's model will be sound both because it is executable based on currently available technology — not the promise of significant AI improvements in the future — and because hotel owners will eventually almost have to come around to it if the results are strong enough.
"If this works, it's going to be insanely profitable and obviously successful, so we wouldn't be surprised if people come around to our viewpoint over time," he said.