In the three years since the peak of the pandemic, the hospitality industry has demonstrated remarkable resilience. Hotels have managed to survive and thrive in a storm of uncertainty despite facing unprecedented challenges. The landscape of hotel services today has evolved to meet the shifting needs of travel guests. Hotels must heed the evolving demands and preferences of their guests to thrive in this dynamic environment. Those unable to adapt may consider exploring opportunities such as selling their hotel property or converting it into affordable housing. Success awaits those hotels that proactively embrace change, aligning their strategies with evolving industry trends. The key to enduring success lies in remaining deeply attuned to the needs of the guests served. Hoteliers can create a promising future in the ever-evolving world of hospitality by gaining industry insight.
Predictions for Growth, Demand, and Guest Preferences
Throughout 2023, the economy has hovered precariously close to a crisis, yet U.S. hotels have managed to defy the odds and flourish. RevPAR levels have not only rebounded to pre-pandemic heights but have exceeded them, sparking optimism within the industry. This remarkable success owes much to the increased average daily rate (ADR). As the broader economic landscape continues to grapple with challenges, industry experts caution that the road ahead may be rocky. The prevailing belief is that the ongoing economic struggles will inevitably impact hotel demand for the remainder of the year, and the impact may well extend into 2024. The unwavering resilience and adaptability of U.S. hotels are key factors that pave the way for continued success amid uncertainty.
Current demand and guest preferences seem to be centered around business travel.
“This idea of blended travel seems to have some staying power because we began to see it actually a little bit before the pandemic, and then it just dramatically accelerated as we came out of the pandemic,” said Chip Rogers, CEO of American Hotel and Lodging Association.
Blended travel is not a new idea, but it is increasingly the new norm for American workers who find themselves challenged to create work-life balance. This presents opportunities for the future of the hotel industry.
What Hoteliers Should Be On the Lookout For
The biggest thing on a hotelier’s radar should be technology. Human interaction is a vital part of the hotel industry, but staffing shortages and customer expectations demand that hotels invest in technology. This includes having enough bandwidth to meet the needs of all customers, but it also means investing in technology that makes guest services more efficient. Guests expect their hospitality services to be efficient and use modernized tools to deliver comfort.
Advanced technology options may include smart room keys, mobile check-in, mobile payments, and self-service kiosks. Smart room features such as voice control speakers or smart robots for cleaning or delivering amenities. Virtual reality tours and guest apps are becoming popular. As labor shortages continue, technology can fill the gap between adequate staffing and guest needs. The future of the hotel industry may rely on technology as well as other industry trends.
Hotel Industry Trends
Paying attention to industry trends is also one way to positively impact the future of the hotel industry. Trends include eco-friendliness, health and safety, and digital nomadism. Catering to these trends improves guest experiences and the hotel’s branding image.
“There are a few trends that I think have come together for our collective benefit,” says Anthony Capuano, CEO of Marriott International, Inc.
“We saw leisure demand growing meaningfully faster than business-transient or group prior to the pandemic. We saw that trend accelerate into the recovery, and by necessity, folks have learned they can conduct business from almost anywhere.”
As a result of the demand for blended travel, hotel companies like Marriott are focusing on providing adequate bandwidth, flexible offerings, and items that make guests be able to seamlessly pivot between business and leisure. This includes accommodations for family members who may join a business guest on the weekend.
Blended travel may be poised to transition to more dedicated corporate transient travel as summer ends, as trade shows and conferences are responding to pent-up demand stoked by the pandemic. The hybrid workplace has created opportunity for continued “bleisure,” and business travelers may be arriving with their families to take advantage of vacation opportunities.
In order to prepare for this demand, hotels should focus on the customer experience and use key performance indicators to monitor their guests’ needs. This may involve investing in areas for dedicated work activities or lounge areas for working guests to unwind. Entertainment activities for weekends and for families during the week may result in positive reviews and increased revenue.
Remote work is a challenge for hotel guests when they are balancing family life at the same time, and hotels that cater to this situation will see positive business metrics.
Hotel Outlook for the Rest of 2023
While data from CoStar shows July 2023 as the best occupancy rating (72.9%) for the hotel industry since August 2019, the seasons are changing. The end of July is typically the peak of travel in the U.S. followed by a seasonal decrease as summer ends. The industry is still expected to maintain year-over-year growth.
Weekday occupancy growth indicates that business travelers will drive industry growth for the rest of the year. Additionally, these occupancies have been higher-scale, with the most upscale hotels up 3 percentage points YOY. Although the future of the hotel industry appears to be positive, ADR growth isn’t keeping pace with inflation. The industry may struggle because of the economy despite its growth.
Early 2023 predictions for the future of the hotel industry were more optimistic because RevPAR exceeded GDP growth, but if the economy continues to decline, the strong correlation between these two metrics may resume. While hotels must focus on industry trends and the customer experience, they must also focus on efficiency to increase profit margins and protect against economic downturns.
Accessing Hotel Industry Insight
Industry specialists from NewGen Advisory provide clients with access to industry leaders and investors to help them outperform the competition in every metric. Contact us today to maximize the return on your hotel.