Hospitality industry leaders are looking at sharing economy phenomena like Airbnb and HomeAway, wondering what this new collective ethos may mean for more traditional hotel brands.
For many, it means more sharing – but in a different way than Airbnb or HomeAway do it.
Whether they use them or not, most hotel operators are familiar with the notion of “shared services” – core business functions that are consolidated and managed at the corporate level so individual properties can tap into them, without having to recreate them site by site. Accounting, payroll, risk management, legal, human resources, design and construction, business development, investment management and information technology – any or all of these may be shared among dozens, even hundreds of properties.
Some hotel brands share these back-of-the-house functions among their corporate-owned properties; others carry that model to franchisees. Shared services have caught on because hotel groups can implement them to cut operating expenses (and thus increase profits) by streamlining business processes, eliminating redundant administrative tasks and resources, easing the burden of auditing and compliance, and giving property managers access to a larger set of operating data and insights. Michael Cullen, senior vice president of Shared Services for Marriott Business Services, blogged late last year that Marriott’s implementation of shared finance and accounting services has resulted in a 25 percent reduction in costs. Experiences like Marriott’s are making an impact. A recent survey conducted by Marriott and Accenture Hospitality found that seven out of 10 hotel operators “are personally willing to consider outsourcing (finance and accounting) functions to an above-property shared services model.”
While giants like Marriott are realizing bottom-line benefits, it may be time for hoteliers to look beyond traditional shared services to those that support more sophisticated approaches to planning, budgeting and forecasting, notes MGM Resorts International’s Rick Arpin. In a presentation at the 2014 Shared Services & Outsourcing for Hospitality and Service event in Las Vegas, Arpin explores how data analytics may be the Next Big Thing in shared services for hospitality businesses.
Drawing from definitions crafted by various analyst firms, Arpin describes data analytics as a tool for determining:
· Historical trends: What happened in the past (descriptive) and why (diagnostic)
· Current activity: What’s happening now (monitoring)
· Future outcomes: What’s likely to happen in the future (predictive)
An advanced analytics environment, he notes, would enable even more insights. These might include prescriptive suggestions about what companies should do in certain situations, along with what-if scenarios that help foresee the possible result of taking different actions.
We call this Big Data Finance. Why does it sound like the Next Big Thing for shared services? Arpin’s argument can be summarized in three basic points.
1. The market is ready. Arpin spotlights a 2013 Deloitte Shared Services Survey in which 45 percent of respondents said they expect to offer analytics via a shared services model, while 40 percent foresaw using that information to deliver improved business insights. An HfS Research/KPMG survey found that 65 percent of respondents say their back offices should already be delivering market-based insights today.
2. The uses are many. In an analytics-rich planning environment, hoteliers gain new insights into where costs are leeching margins, how to better balance staffing plans with expected occupancy levels, and how to increase revenue per available room (RevPAR). Arpin also points out that a self-service environment can put these insights right into the hands of property managers, instead of locking them away in a corporate data silo.
3. The data is available. Arpin urges hospitality businesses to view data as an asset, like any other property, and to impose quality control and other measures to ensure that asset performs optimally. Importantly, Arpin encourages integrating new data sources, which opens the door for hoteliers to automatically infuse forecasts with crucial contextual information like labor statistics, demographic trends, and even weather data.
Some hotel brands already are putting data analytics on their shared services menu. La Quinta Holdings, Inc. (NYSE: LQ), which owns, operates and franchises more than 860 hotels in North America, plans to share self-service planning and analytics capabilities among general managers at more than 350 corporate-owned hotels. The goal: to replace quarterly revenue forecasts with a continuous forecasting environment accessible to decision-makers from any device. Using the shared analytics service, hotel managers can optimize revenue efficiency by modeling what-if scenarios that show how certain decisions will impact RevPAR. They can also determine optimal room pricing in every market by importing and analyzing unstructured data from external sources, such as ZIP code-specific RevPAR numbers from hotel market benchmark service STR. On the corporate level, that same information can be combined with local wage data to feed sophisticated what-if models that can help executives pinpoint the most profitable locations for new hotels.
Some hotel brands may see the sharing economy as a threat – one that could erode RevPAR by giving virtually anyone a way to sell room nights at a bargain. But shared data analytics services provide a way for traditional lodging companies to fight back. Indeed, the Next Big Thing in shared services may just be the very thing hotels are looking for.