The Future of Hospitality is Data-Led

Opinion article by Mark Bentley, Business Development Director at HDI.

Most of my career to date has been spent working in retail, in the world of FMCG (Fast Moving Consumer Goods) where there is an abundance of data.

When I started working in the hospitality sector back in 2016, one of the first things I noticed was the relative scarcity of good quality data. Whilst I initially found the limited availability of hospitality data liberating, providing plenty of opportunities for creativity in terms of filling in the gaps and making sense of complexity, I always felt that there was a need for better data to help hospitality businesses make better decisions.

In general terms, the world of retail can be seen as being very data-led, whilst gut-feel, intuition and entrepreneurialism arguably play a far greater role in the hospitality sector. Hospitality is undoubtedly more complex and fragmented than the retail sector, with the diversity of hospitality and its complex supply chains meaning that its simply not possible to have the same types of data that the retail sector has.

However, I believe that good quality data is just as important for the hospitality sector as it is for the retail sector, especially in a world where the costs of getting things wrong are increasingly high.

“Retail is detail” is a well-known adage, and one that’s supported by the fact that statistical information is very much part of its DNA. Pretty much everything in the retail world can be accurately measured, with data underpinning decisions from whether a store should be opened in a particular area and which retail concepts/formats are best suited to it, all the way through to how space is allocated across different product categories and indeed which products are put on the shelves and how they’re merchandised.

The range of different data sources is vast, providing operators and suppliers with a comprehensive understanding of who their customers are and how they behave, and ultimately enabling them to make better data-led decisions.

Many of the decisions that hospitality businesses need to make are the same or broadly similar to those made by the retail sector, and many of the challenges that they face also have parallels. Let’s take the example of a restaurant or bar operator, operating several different brands or concepts. As they expand, they’ll want to identify suitable sites for future openings and decide which brand or concept is best suited to that location.

When it comes to developing their offer, decisions will need to be made around menu development and pricing. And then when a site is up and running, they’ll want to assess how its performing, including being able to understand the reasons for any over or under-performance. Better data can help hospitality businesses do all these things, from choosing the right locations for their openings, optimising their customer offer and pricing strategies, understanding their performance against the local market context and so much more.

There’s no question that the worlds of retail and hospitality are very different. I recently read Peter Backman’s book, ‘Restaurants also serve food’, and he summarises the differences succinctly saying that the purpose of hospitality “is not, primarily, to provide food and drink, but to provide a service based on hospitality” and that “statistical information is not part of the DNA” of hospitality businesses. This is something that I wholeheartedly agree with based on my own experiences, but to what extent is this the best approach and to what extent are things likely to change in the years ahead?

Reflecting on the similarities and differences between the retail and hospitality worlds, I can’t help but think that there’s a need for a more balanced approach – the retail sector could benefit from a more creative, entrepreneurial approach at times; whilst the hospitality sector could undoubtedly benefit from better data to inform its decision-making. The availability of good quality data is growing all the time, helped by advances in technology, and embracing this is something that will be critical to the success of hospitality businesses in the years ahead.

It’s clear that the world is changing – by 2030, Millennials and Generation Z will represent 70% of the workforce and these are cohorts that have grown up with technology and who are well versed in data. It doesn’t need to be a choice of relying on gut-feel or being data-driven in the world of hospitality – both have a role to play and finding the right balance is key.

One thing is clear though; the future of hospitality will be increasingly data-led!