Hotel Data Science: A New Profession for the New Era of Advanced Hospitality
By Michele Walters Co-Founder, Origin World Labs | September 08, 2013
We are living in the data-driven era where most innovation in business, medicine, education, and government will come from the application of mathematical models and algorithms to large volumes of data points. Sadly, progress will probably come very slowly as every industry is suffering from a long term problem with no short term solution - a massive analytics talent drought. More specifically, there just aren't enough people with a mix of math, programming, critical thinking and business skills to help companies unearth the profit hidden in their data. According to a study by McKenzie Research, by the year 2018 the United States alone will face a "shortage of 140,000 to 190,000 people with deep analytical skills as well as 1.5 million managers and analysts with the know-how to use the analysis of big data to make effective decisions."
This shortage will hit the hospitality industry especially hard as it tends to be at the bottom of the totem pole for attracting analytical and technical talent. Unfortunately, hospitality is still perceived as an industry where soft skills are overwhelmingly more important than hard skills. Other service industries, such as retail, have become a lot more data and mathematically savvy in the last decade through supply chain and in-store innovations, but not hospitality. In fact, driving innovation through technology and data analysis is seen by many in the industry as a luxurious exercise that is a "nice to have." For most hotel execs, it's better to have the right couch in the lobby than the right data server in the telephone closet, even though many data servers are now cheaper than most couches. Even in hotel companies where substantial investments have been made in Business Intelligence and CRM systems, little attention has been paid to the quality of people who are responsible for extracting insights from those systems. Many hospitality companies have been sold or are paying for expensive intelligence software and hardware on the promise that they are a panacea that begin to solve problems as soon as you install them. Sort of a "set it and forget it" promise.
Here's the bigger problem, in the next ten years most university graduates with a statistical, data mining, machine learning education will go into academic research, manufacturing, high finance, technology, and life sciences. This will leave little or no advanced analytics talent to serve the needs of service industries, where the proper application of analytics can yield immense value. The big brand hotel companies have already recognized this trend and for the last five to seven years they have embarked on an effort to lure analytics talent to their Revenue Management function. Companies such as Marriott and Disney have realized that hospitality is a data-intensive business and that there is a wealth of creative strategies and tactics that can be found when the data is analyzed by professionals. Yet, even for these big brands the single biggest obstacle to making data-driven progress is their inability to find enough qualified talent to fill their analytics positions. Even at the property level, attracting RM talent with the right combination of technical skills is like pushing a boulder up a mountain. At least I can say confidently that when it comes to analytics talent, big brands do "get it" and they are doing something about it.
In the independent world the story is very different. Most non-branded properties do not even have the most simple BI capabilities, putting them already at least 10 years behind the analytics curve. Even when independents invest in intelligence software, it is an enormous task for them to find the talent to extract value from these tools. Hence the glut of Data Warehouses and CRM systems collecting dust in independent properties all over the world. Further, even if they could find the right person they probably would not be able to afford them as annual salaries for statisticians and data miners now start at $80,000 and average around $145,000. The most glaring manifestation of this talent drought in the independent world is the fact that most properties have relegated their Revenue Management, arguably the most data and mathematically intensive function in a hotel, to employees that are promoted from the front desk and reservations.
Rounding out this perfect storm is the fact that there are only a handful of university hospitality program courses dedicated to data analysis. These, however, are mainly focused on the basic statistical analysis of small data sets. There are no courses dedicated to the real-world problem of mining and analyzing PMS-sized databases. Therefore, the industry can not look to hospitality programs to supply any of the much needed talent for years and maybe decades to come.
I believe that the single best way to tackle this talent shortage in the industry is to take a page from the financial services playbook of the early 80's. In the 70's, some forward-looking investors in Wall Street began using mathematical modeling to analyze stocks and bonds. This led to a massive demand for graduates with a mathematical background. The profession was soon formally titled Quantitative Analyst or "Quant". Later universities began creating programs to fill the specific needs of the finance industry by introducing degrees in financial engineering, mathematical finance, and computational finance. Now, even though there is still a shortage in Wall Street of this type of talent, at least there is a pipeline of trained graduates being supplied by colleges and universities from all around the country.