Hospitality Industry Trends (2019)
The hospitality industry has been undergoing tremendous changes and disruptions over the last two decades. What key trends have been steadily reshaping the industry and where is hospitality heading in the near future?
These are the key trends that are reshaping the hospitality industry:
Virtual Communities: Social networks and in particular TripAdvisor have had a profound impact on guests. This has led to more transparency and, overall, to an improved quality of the services provided by hospitality companies.
Sharing Economy: Airbnb represents a major disruption in the hotel industry, making the competitive landscape tougher than ever. This is further reinforced by the fact that lodging properties listed on Airbnb do not necessarily have to comply with the same rules and regulations than traditional hotels.
Online Travel Agents: They have had at least 3 major impacts on the hospitality industry. First, they have altered distribution channels and consequently taken value away from hoteliers. Second, the notoriety of brands owned by Booking Holdings and Expedia are such that these companies have almost replaced hotel brands. Third, they have built solid relations with travelers. Now, hoteliers have to pay to get access to these customers, thereby leading to a thinner profit margin for the former.
Digitalized Guest Experiences: Applications, in particular, are increasingly important in the way hoteliers manage the services they provide to their guests and can now control many aspects of the guest cycle and experience.
Booming Global Tourism: Low cost carriers enable more people to travel the world at a reasonable price. Moreover, several emerging markets have seen their GDP increase at a rapid pace, thereby enabling their citizens to travel the world. Guests from the Far East now constitute a large body of potential travelers. Their demands, of course, have a big impact on the offer.
Experience Economy: Guests request extreme personalization, unique experiences, and so on. This could very well lead to the death of the travel agent and the rise of the independent traveler.
Asset Management Practices: The asset-light approach has become prevalent in the industry. The separation between the management of operations and real estate assets now allows hospitality companies to focus on their core business, thus improving efficiencies. It however induces additional complexity and potential agency problems, explaining the emergence of new types of jobs, such as asset managers.
Professionalization: As stated above, new job profiles have emerged following the increasing complexity of the hospitality industry. In parallel, the need for quantitative competencies for forecasting, budgeting, planning, etc., has also increased.
Generations Y & Z: These new generations have different requirements and needs compared to older generations. A respondent said “Older generations think about hotels and car rentals. Younger generations think about Airbnb and Uber.”
Sustainability: People are becoming increasingly sensitive to environmental and social issues. A respondent said that this “has to be considered in branding, but beware of green-washers: consumers are now well-aware that window-dressing exists, and they will not buy it.”
Hospitality Industry Overview
What does the future of hospitality hold? Overall, hotel owners and operators need to properly embrace the above aforementioned trends and understand what’s at stakes. Here are the key dimensions:
Standardization can no longer be the norm: It is becoming critical to personalize and tailor the services to the needs and preferences of the travelers.
To create value, focus on niche markets: More customization and specialization may enable increased value creation for hospitality companies. But be careful as this requires to genuinely think about the value proposition of your offer and not “simply branding and rebranding”.
Exploit technology as an accelerator for business: Technology will be at the core of the hotel experience both in room, before and after the trip. This will lead to the development of new concepts and more innovation in the industry and contribute to the emergence of an ever more individualized offer.
Social responsibility is a moral and an economic obligation: The impact of global warming can today be considered a major risk for both corporations which may lose in revenues and profits and society as a whole. It is thus critical for governments but even more so for corporations to become more sustainable: “not just green, but real sustainable business models”.
Develop more responsive and resilient business models: “Tourism, despite ever growing flows of travelers, will become riskier and more prone to crises” as the number of travelers steadily continues to grow. This will be accompanied by increased regulation as a response to a disproportional increase in tourist flows in some places, such as Venice or Barcelona.
Manage talents actively: The days of long-lasting team member retention as well as passive, hierarchical management styles are definitely gone. “Attracting, developing and keeping the right talent into and within the hospitality industry continues to remain a core challenge.”
Hospitality Industry Tomorrow
While, as seen above, it all revolves around the need for the industry to evolve in order to better adapt to the current environment. Certain extreme views suggest that hotel rooms, as we know them today, “will become a thing of the past”. These views refer to the impact of the sharing economy and the tendency of today’s guests to avoid traditional hotels. They believe that adjustments in the offer, like the ones listed above, are not sufficient and that the industry has to truly reinvent itself.
This standpoint is reinforced by the increasing importance of technology in the hospitality industry and the power that technology firms are acquiring. Major technology firms will replace most hotel brands, because they can offer technology solutions and create markets to attract guests. The traditional hospitality industry will evolve into niche markets, either serving specific types of guests, or extremely a luxury sector, so they can afford to pay their teams reasonable salaries. Those who can’t identify their niche will become the money machines for technology companies. Some brands big enough may survive, but their business will get tougher.