Demand for Hospitality Services
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1 A Brief Overview on the Supply and Demand for Hospitality Services Prepared by Gregory Gilpin, Ph.D. Assistant Professor of Economics, DAEE, MSU Executive Summary The supply of new hospitality graduates will exceed the demand by employers over the next 10 years by a wide margin. In addition, annual median income is expected to be $46,000-$47,000 for those with Bachelor s degrees in hospitality management which is well below the median of $90,967 for all management occupations. It is also well below the median of $57,616 for all occupations that require a Bachelor s degree. In the school year, there were 12,074 hospitality BA degrees conferred nationally. Over the last five years, current hospitality programs have increased the number of BA degrees conferred by 1,692, or 339 additional graduates per year. The demand for U.S. hospitality services is forecasted to increase by only % annually (compared to a national average of 0.7% annually for all management services and 1.2% for all occupations requiring a BA degree) over the next 10 years. Montana will likely have a higher growth rate of 6-7% annually for hospitality services managers (over the next 10 years) albeit starting from a small base. Graduates in hospitality management are likely to be placed in lodging and food service manager occupations (see Table A.1). The national job outlook for both is bleak: only 700 lodging managers will be required nationally over the next 10 years (translating into 26 new jobs for Montana using current market shares) and 5,000 new food service managers (translating into 168 new jobs in Montana). Given the above forecasts in supply and demand for BA hospitality graduates, the data suggest substantial excess supply of 2,384 graduates over the next ten years. Due to the lack of demand for these graduates in their primary field, these graduates will likely seek employment in related fields that pay substantially less (See Table A.3 for a list of related fields). National postsecondary education data indicate 465 higher education institutions offer certificates, Associate s (AS) and Bachelor s (BA) degrees, and post- Baccalaureate degrees. Hundreds of these programs are well-established, high-quality, and reputable, with 60 being accredited by ACPHA. Lastly, this field of education has substantial penetration by for-profit institutions and will likely saturate any future demand.
2 Demand for Hospitality Services The demand for hospitality services is driven primarily by needs for lodging and food service managers. The Bureau of Labor Statistics indicates little growth in the number of these jobs over the next 10 years within the United States and strong competition will exist for the few jobs that are created (see Table 1). In addition, lodging and food service managers incomes are in the lowest four categories of managerial occupations (see the Appendix). Table 1: National Employment Outlook Indicator Lodging Food Service All Management All Occupations Managers Managers Occupations (Bachelor's required) Annual Income (Median) $46,810 $47,960 $90,967 $57,616 Number of Jobs, , ,400 7,656, ,126,000 Job Outlook, (Annual) 0.1% 0.2% 0.7% 1.2% Annual Employ. Change, ,593 1,693,512 These data are at odds with the estimates of employer demand for hotel, restaurant, and tourism managers displayed in the figure and box on pg. 96 of the Hospitality Proposal that suggests a 14.3% annual growth rate for the Northwest region (pg. 96). But, as stated in the footnote to the table on that page, [d]ata collected for H and after is not directly comparable to data collected before H due to improvements in Burning Glass Labor/Insight s web spidering technology. After excluding data beyond H2 2013, the average annual growth rate has been 7.1% in the Northwest region which is higher than national projections for the next 10 years. Given that Montana tourism receipts are increasing by more than those of the rest of the nation, it is anticipated that employment growth will be larger as well. Nonetheless, Montana represents only 0.5% of total U.S. tourism receipts even though receipts are growing at a rate of 11.6% annually from this small base (see Table 2). This implies that Montana s demand increase for lodging managers over the next 10 years will be 26, or 3 new lodging managers per year. Similarly, food service managers will increase by 168, or 17 new food service managers per year. For an analysis of other occupations, see the appendix. Table 2: Total tourism Receipts, over time Annual Growth Montana $2.6 $2.9 $3.4 $3.7 $ % Nation $706.7 $781.5 $822.5 $855.9 $ % Note: In billions of 2014 dollars. Sources: BEA's Tourism Satellite Accounts. MT tourism fast fact sheet The BLS s job forecast for lodging managers indicates [t]hose seeking jobs at hotels with the highest level of guest services are expected to face strong competition, as these positions are highly sought after by people trained in hospitality management or administration. Applicants with a bachelor s degree in hospitality or hotel management are expected to have the best job opportunities, particularly at upscale and luxury hotels. Given that Montana has approximately 2
3 four 4-star (and above) hotels, there appears to be very little demand for BA hospitality majors in Montana ( Supply of Hospitality Services Managers/Laborers The data indicate that 465 higher education institutions house hospitality administration/management programs. Many of these are well-established, high-quality, reputable programs that offer certificates, Associate s and Bachelor s degrees, and post- Baccalaureate degrees. Currently, 347 higher education institutions offer AS and 239 institutions offer BA hospitality degrees (some offer both). Overall, 60 are accredited by ACPHA. Table 3: Number of institutions offering hospitality AS and BA degrees, to Public 374 Private, non-profit 30 Private, for-profit 61 Total 465 Source: IPEDS Most of hospitality students (77%) are enrolled in BA degrees, while the remaining seek AS degrees. In addition, the for-profit market has started to penetrate this field of study. During the school year, 12,074 hospitality BA degrees were conferred. The annual number of AS and BA degrees in this field has averaged 14,693 since The average annual growth rate over this time period has been 5.5%. Table 4: Degrees conferred in Hospitality Administration and Management (CIP ), by school year Avg. Associate's degrees 3,044 3,284 3,618 3,593 3,385 Bachelor's degrees 10,382 11,031 11,745 12,074 11,308 Total 13,426 14,315 15,363 15,667 14,693 Source: IPEDS 3
4 4.0 Appendix The IES Classification of Instructional Programs (CIP) to Standard Occupational Classification (SOC) crosswalk indicates that a hospitality major bests aligns with lodging and food service managers. There are other occupations that graduates may enter. For completeness, the entire CIP to SOC crosswalk for all hospitality and administration occupations (CIP 52.09XX) are listed in Table A.2. These occupations include Travel Guides, Meeting, Convention, and Event Planners, Gaming Managers, Gaming Supervisors, Slot Supervisors, and Managers, All Other. The job outlooks and/or median income for these occupations are well below that of lodging and food services managers. As such, we exclude them from the analysis. Table A.1: Instructional Program to Occupation Handbook of CIP 52.09XX CIP Code CIP Title SOC SOC Title Hospitality Admin./Man., Food Service Managers General Tourism and Travel Managers, All Other Services Man Travel Guides Hotel/Motel Admin./Man Food Service Managers Restaurant/Food Services Food Service Managers Man Resort Man Meeting and Event Planning Meeting, Convention, and Event Planners Casino Man Gaming Managers Gaming Supervisors Slot Supervisors Hotel, Motel, and Restaurant Man Hospitality Admin./ Man., Other. Source: Food Service Managers Business Teachers, Postsecondary Managers, All Other 4
5 Table A.2: Managerial Occupational Outlooks Managerial Occupations Median Job Employment Income Outlook change Medical and Health Services Managers $88, % 73,300 Social and Community Service Managers $59, % 27,700 Preschool and Childcare Center Directors $43, % 10,900 Construction Managers $82, % 78,200 Computer and Information Systems Managers $120, % 50,900 Postsecondary Education Administrators $86, % 23,500 Human Resources Managers $99, % 13,600 Public Relations and Fundraising Managers $95, % 8,000 Property, Real Estate, and Community Association Managers $52, % 35,000 Administrative Services Managers $81, % 34,200 Advertising, Promotions, and Marketing Managers $115, % 25,400 Top Executives $101, % 261,500 Training and Development Managers $95, % 3,200 Financial Managers $109, % 47,100 Sales Managers $105, % 29,800 Emergency Management Directors $59, % 800 Architectural and Engineering Managers $124, % 13,100 Elementary, Middle, and High School Principals $87, % 13,100 Natural Sciences Managers $115, % 2,900 Compensation and Benefits Managers $95, % 600 Food Service Managers $47, % 5,000 Lodging Managers $46, % 700 Industrial Production Managers $89, % (4,100) Farmers, Ranchers, and Other Agricultural Managers $69, % (179,900) Table A.3: Additional Annual National Employment Growth Rates and Income Related to Hospitality Occupation Job Growth Median Income Travel Guides -1.2% $34,600 Meeting, Convention, and Event Planners 3.3% $45,810 Gaming Managers 1.0% $20,210 Gaming Supervisors 1.0% $20,210 Slot Supervisors 1.0% $20,210 5
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