The hospitality industry is a large subsection within the service industry and is comprised of four main areas: Food & beverage, travel & tourism, lodging, and recreation. As examples, the F&B category includes restaurants, bars, and food trucks; travel & tourism covers different forms of transportation and travel agencies; lodging varies from hotel resorts to hostels; recreation refers to leisure activities such as sports, wellness, and entertainment. While all sectors are interconnected and reliant on each other, many of these hospitality sectors are quickly evolving due to new technologies and changing customer mindsets.
Known for being one of the main industries that is easily impacted by external forces, many questions have recently come up regarding the state of hospitality today. What trends are shaping its future? What makes it still one of the world's fastest-growing industries? How can it remain competitive? How to deal with the post-Covid staff shortages?
Read on to find out the experts' guide on what is happening in this exciting, evolving, and resilient sector.
- A brief history of hospitality
- How fast is the hospitality industry growing?
- Hospitality industry overview: Key statistics
- Hospitality industry growth: What trends are driving it?
- What major challenges is the hospitality industry facing?
- Travel and hospitality industry: Top trends
- What the top CEOs are saying about the future of the hospitality and tourism industry
- What leaders can do to ensure hospitality businesses remain competitive
- The hospitality management careers of tomorrow
- Future of hospitality: What's on the horizon for hospitality & tourism professionals
A brief history of hospitality
How has the Hospitality Industry evolved since its origins?
Derived from the latin word “hospes”, meaning host (one who provides lodging or entertainment for a guest or visitor), hospitality has its roots in ancient history. The ancient Greeks used the word "xenia" to define the sacred rule of hospitality: the generosity and courtesy shown to those who are far from home or associates of the person bestowing guest-friendship. Away from home, surrounded by strangers and yet feeling welcome.
Although the original concept of hospitality has remained largely unchanged since its origins (meeting travelers’ basic needs such as providing food and accommodation), the idea of building hotels for the sole purpose of hosting guests emerged alongside technological advances and better means of transportation towards the end of the 18th century. Since then, the sector been in constant expansion due to the very concept of hospitality being applicable to any sector that deals with customer service and satisfaction.
How fast is the hospitality industry growing?
Along with the overall economy, the global hospitality industry has enjoyed a spurt of massive growth over the last decade since the end of the financial crisis. According to the World Bank, the global economy has grown at a pace of more than three percent per year up until the global pandemic hit in 2019/20. Due to pent up demand during the beginning of the COVID-19 pandemic there was an acceleration of the global economy in 2021 of 5.5 percent growth, however it is set to decelerate to 4.1 percent in 2022 and 3.2 percent in 2023, arriving back at pre-pandemic levels.
This unprecedented expansion over the last decade has benefited the hospitality and tourism industry by stimulating the world population’s travel activity, adding countless room nights in both leisure and business travel.
Hospitality industry overview: Key statistics
1. International arrivals have increased from 900 million to more than 1.3 billion over a span of just ten years.
Not only has this boosted the number of rooms on offer, but has also led to a major contribution of global employment opportunities. Covid-19 had a severe impact and international tourist arrivals according to figures from UNTWO, which after years of steady annual growth saw a staggering -73% drop in arrivals in 2020 and -71% in 2021 due to travel restrictions in response to Covid-19.
All in all 2020 is recognized as the worst year in tourism history with 1 billion fewer international arrivals and US $ 1.1 trillion in international tourism receipts. Around -74% drop according to the latest data from World Tourism Organization (UNWTO) a level of 30 years ago.
However, so far the travel industry has seen an extremely positive bounce back. New data from UNTWO found that, overall, international arrivals reached 80% of pre-pandemic levels; in the first quarter of 2023.
Tourism figures are heading in the right direction as an estimated 235 million tourists traveled internationally in the first three months, more than double the same period of 2022.
2. The World Travel and Tourism Council (WTTC) names the hospitality industry’s importance as a main driver in global value creation.
Recent figures published by the WTTC found that in 2022 the Travel & Tourism sector made a contribution of 7.trillion USD to the global economy, 7.6% of the global GDP and 23% below pre-pandemic levels.
3. The hospitality and travel industry accounts for one out of every ten employment opportunities.
Bringing the number of people earning their living in the sector to a remarkable 330 million in 2022.
In 2022, there were 22 million new jobs, representing a 7.9% increase on 2021, and only 11.4% below 2019.
The rise in revenue does not only benefit international companies and hotel owners, but also acts as a major factor in job creation for local populations and destinations. As of the latest data, around 173 million people were employed in the hotel and motel industry before the Covid-19 pandemic hit.
The WTTC forecast that there will be an additional 126 million jobs created between now and 2032.
4. The overall growth in the travel and tourism industry stands at +5.8% Vs. Overall GDP +2.7%.
According to the Hospitality Global Market Report 2023 the global hospitality marketgrew from $4,390.59 billion in 2022 to $4,699.57 billion in 2023 at a compound annual growth rate (CAGR) of 7.0%.
This large growth rate is in part the bounce back from global restrictions on travel. The market is expected to continue growing but at a slower rate due to the global economic situation with a Compound Annual Growth Rate (GAGR) of +5,8% forecasted between 2022 and 2032.
Image source: World Travel & Tourism Council, Travel & Tourism Economic Impact 2022
Hospitality industry growth: What trends are driving it?
1. The global economy growth has created positive momentum in the sector by contributing to the overall income per capita.
Since 2009, the global GDP has constantly increased at an average pace of almost two percent per annum, leading to a growing demand for both international and domestic travel spending. Whilst the Covid-19 pandemic led to a shock -2.81% decline in GDP in 2020 according to Statista, 2022 figures and subsequent projections for 2023 show year-on-year growth.
2. Airfares have consistently become more affordable over the last three decades, but will this last?
Thanks to lower fuel prices, carrier competition and the rise of low-cost airlines. While these are not happy news for the airline industry, which is using ancillary fees to increase profit margins, it benefits travelers who can get more from their purchasing power. However the emerging global energy crisis could put a halt to such a trend and airlines could pass on the price hikes to the consumer, which will in turn impact consumer travel behaviour.
3. Corporate travel is yet another contributor to the healthy outlook and is projected to keep growing.
In China and India, the growth of business travel is particularly steep due to the relentless pace of economic expansion in this part of the world.
4. The health and wellness segment has boomed in recent years.
There has never been so much appetite among the public for wellness and the escapism travel can offer from life’s stresses - the pandemic taught us to slow down and not to take our health for granted.
The global consumer health and wellness market is a $1.5 trillion market growing at 5 to 10 percent a year, and, according to a recent McKinsey survey, people around the world are increasingly interested in taking care of themselves and are planning to spend more money on wellness products and services.
5. Hotel operators are seeking to expand their portfolios through targeted acquisitions of smaller regional chains.
Mergers and Acquisitions activity in hospitality has somewhat cooled over the last few years, with operators seeking to expand business in a more controlled way.
What major challenges is the hospitality industry facing?
1. The threat of climate change
The threat of climate change will adversely impact many major tourist destinations. Threats resulting from climate change, safety and security issues, as well as unprecedented migration streams are tomorrow’s game changers. The main challenges for the hospitality industry are the lack of predictability and the magnitude of such events – and how fast the industry can react and adapt. Hybrid operations might be one of the hospitality 4ndustry’s possible responses to increased risks.
2. Industry consolidation
Corporate consolidation has led to increasing concentration of size and power among the top players. Hotel operators will seek to expand their portfolios through targeted acquisitions of smaller regional chains. While the ultimate goal is to create value through cross-organizational synergies, this development also comes with downsides, as the management of structures with a diverse selection of geographies and a plethora of brands generates more complexity and threatens to increase overall rigidity.
Marriott and Hilton remain the world’s most valuable hospitality brands, valued in 2023 at $53.5B and $37.99B respectively.
3. New competition from tech and digital players
Are major technology firms such as Google or Facebook threatening to replace hotel brands by offering technological solutions and creating novel markets to attract new types of customers? Thanks to their control over all types of data related to customer behavior both off- and online, tech behemoths could oust traditional incumbents into niche markets. Companies that fail to identify their niche are at risk of becoming mere revenue generators for technology companies. Some big enough brands may survive, but their business will get tougher.
4. Skilled talent shortage
As the accommodation and restaurant industry is creating jobs at the fastest rate of any sector in the economy according to the International Labor Organization, fuelling this growth with the right skilled labor is yet another concern for owners. Attracting and retaining younger generations of hospitality professionals will require a lot of flexibility and attention from hoteliers in the future.
5. Energy crisis
The global energy crisis is the perfect storm of multiple factors causing a huge surge in energy demand which the limited global resources are struggling to fulfil. Added to this is Russia’s invasion of Ukraine, one of the main suppliers to Europe. Whilst the world grapples with accelerating the development of green infrastructure, the hospitality industry has an even bigger incentive to make efforts to switch to renewable energy sources where possible, not only as our environmental social responsibility but also to reduce the reliance on particular states which fuels the weaponization of energy.
6. Supply chain issues
Supply chain issues have affected most of the world, although Europe was the hardest hit, according to data from the 2022 State of the Third-Party Logistics Industry Report by Extensiv.
These issues are ongoing and are triggered by undulating demand, price volatility and uncertainty. The hospitality industry is affected on an operational level when bottlenecks cause delays on delivering food & drink, bed linen, housekeeping products and other replenishable goods. Running out of these items means giving customers a disappointing experience and leaving a poor impression that could diminish the business’s reputation.
7. Economic downturn
According to the UNWTO Panel of Experts, the economic situation remains the main factor weighing on the effective recovery of international tourism in 2023, with high inflation and rising oil prices translating into higher transport and accommodation costs. As a result, tourists are expected to increasingly seek value for money and travel closer to home.
Is there a silver lining? Well, we know that economic downturns make way for innovation and entrepreneurship! The public needs new solutions for new problems, so now may just be the time to start thinking of your next business venture.
Travel and hospitality industry: Top trends
Travelers' expectations have greatly evolved especially now that technology is taking center stage in every area of guest experience. As 2024 progresses, hospitality professionals are gearing up to leverage various innovations and strategies that promise to reshape customer satisfaction and industry standards. Here are hospitality trends 2024 elevating guest satisfaction and driving business growth.
1. Towards sustainable travel
The reasons we desire to travel are many and include experiencing the beautiful things the world has to offer, meeting new people, supporting local culture, etc. In fact, more than 33,000 travelers across 35 countries and territories have been surveyed in Booking.com's Sustainable Travel Report 2023. 76% of global travelers say they want to travel sustainably over the next 12 months.
Ecotourism is all about intentionally organising travel plans in a way that doesn't harm the environment. Thankfully, sustainability is a major driving force in the hospitality industry, with hotels and restaurants welcoming eco-friendly initiatives to minimize their environmental footprint.
A growing number of hotels are rising to the challenge of running a sustainable business. Beyond plastic usage, general waste production, food waste, usage of local produce, energy and water consumption, and many other factors are to be considered for operators that are serious about their claim. Going one step further, the term sustainability is also often used not only for environmental protection but also corporations’ approach to managing their people and their finances. All across the board, resources of all kinds are being used more efficiently in the hospitality industry and while various strategies are being adopted by hotels, a paradigm shift is becoming more recognizable.
From implementing energy-efficient technologies to sourcing locally produced ingredients, businesses are prioritizing sustainability to appeal to eco-conscious travelers—which is echoed in the next point.
2. Wellness for holistic hospitality
A lot of guests today are looking for experiences that promote physical and mental well-being. Hotels that have embraced wellness travel can now cater to this demand by offering activities like yoga retreats, on-site spa treatments, fitness centers with cutting-edge equipment, and healthy dining options.
Creating a relaxing and stress-free environment through thought-out design elements can contribute to a holistic wellness encounter. Travelers return from their trip feeling refreshed, rejuvenated, and ready to take on their day-to-day life.
The wellness tourism market is projected to reach well over $1,700 billion, in accordance with Precedence Research. Even so, investing in the health niche is beneficial for guests and financially rewarding for businesses.
3. Enhanced experiences with advanced technology
The integration of artificial intelligence and other technologies is reshaping the hospitality industry. AI-powered chatbots are being employed for personalized customer service to provide instant assistance and support to guests throughout their stay. Whether it's answering inquiries, making reservations, or addressing issues, chatbots offer convenience for both guests and staff.
On the other hand, predictive analytics algorithms help with demand forecasting and pricing optimization. AI is gaining traction in the hospitality industry because of its enhanced data analytics of consumer behavior patterns and improved ability to meet client demands. Data-driven personalization enables hotels to tailor offerings and marketing messages to individual guest preferences.
Global Market Estimates predict that between 2021 and 2026, the niche will rise at a compound annual growth rate (CAGR) of approximately 10%. Robots are also making inroads into the hospitality industry in automating housekeeping tasks, food delivery, and concierge services. While robots cannot replace humans entirely, they free up hotel staff to focus on higher-level guest relations and contribute to operational efficiency.
Why contactless technology?
Contactless technology has become essential since the COVID-19 pandemic as a way to offer guests a safer, more convenient experience. These systems allow users to network with devices or complete transactions without physical contact, often achieved through short-range wireless communication, like tapping your phone to pay at a store.
Mobile check-in/out, digital room keys, and touchless payment options are now standard in most, if not all big hotel chains. This trend is expected to persist beyond 2024 as businesses prioritize contactless solutions to not only minimize the spread of germs but also meet a growing consumer preference for minimal physical contact.
Immersive virtual reality experiences
Hotels are using Virtual Reality or VR to offer immersive virtual tours so guests can preview accommodations and amenities before booking. While virtual reality offers the ultimate virtual experience, guest relations managers appreciate accessibility concerns.
For those without VR headsets, 360° videos provide a panoramic view of hotel space with just a phone or computer. Interactive floor plans also let you virtually walk through the hotel for a solid understanding of the layout. This has completely changed the way guests explore and engage with hospitality offerings.
VR-enhanced experiences, such as virtual city tours or immersive dining experiences create memorable moments for guests, too. VR technology will become more accessible in the future; therefore, its adoption in hospitality is a no-brainer.
Make each customer feel special with personalization
The global leader in employee and customer experience, Medallia Research Inc., reports that 61% of consumers are willing to pay more for hyper-personalized experiences. Guests crave guest-centric services that cater to their every whim. This is not just about remembering names but also using guest data to anticipate preferences and offer tailored services.
Information can include previous booking history, preferred room types, special requests, dietary restrictions, leisure activities, and feedback from past stays. With collated information, hospitality teams can customize everything from room amenities to dining recommendations to boost guest satisfaction and loyalty.
Embracing experiential tourism
If you've been bitten by the travel bug and want something extraordinary, you should definitely consider experiential travel. The idea behind this travel concept is to forge a deeper connection with a given destination than can usually be had from traditional leisure holidays so guests experience it as authentically as possible.
These often involve an element of adventure, whether cultural, culinary, or spiritual; as such, tours mainly focus on less "touristy spots." For instance, after the pandemic, family ski vacations to Japan are preferable compared traditional choices like Aspen or Canada. Add-on experiences such as samurai sword-fighting or temple tours add an extra dimension to the travel experience.
Experiential tourism is now high on nearly every traveler's wish list because trips aren't restricted to international pursuits. This trend presents an opportunity for hotels to partner with local businesses and offer unique experiences like cooking classes, cultural excursions, and outdoor adventures. Such offerings create memorable and enriching guest experiences.
Integrating storytelling marketing
As the name suggests, storytelling marketing is a powerful tool for captivating audiences and creating emotional connections with brands. Hospitality businesses are now crafting authentic narratives to showcase their unique offerings, heritage, and values to resonate with guests on a deeper level. This type of marketing can also set the stage for experiential travel by providing context and inspiration for visitors.
Through captivating narratives, travelers can visualize themselves in the destination, immersing themselves in its culture, history, and natural beauty. Storytelling paints a vivid picture of the travel experience enough to spark curiosity and ignite wanderlust among potential travelers. When utilized properly, hotels and restaurants can differentiate themselves from their competitors and boost brand loyalty.
Technology integration for advanced data security
Data breaches can be devastating. Guests entrust hotels with sensitive personal information and as the hospitality industry becomes increasingly reliant on technology, data security is crucial. Hotels must implement robust cybersecurity measures to protect guest data and maintain trust.
This is where technology integration comes in; from cloud-based property management systems to smart room automation. It can ensure data security by implementing advanced encryption protocols and access controls across all integrated systems, safeguarding guest information from unauthorized access or breaches.
Further, continuous monitoring and regular updates of integrated technology systems can help detect and mitigate potential security threats. Embracing innovative technologies and staying abreast of industry trends can future-proof hotel business operations and boost guests' trust.
Commitment to net positivity
Sustainability is no longer a niche concern; it's an expectation for many travelers. Hotels that prioritize green practices like energy efficiency, water conservation, and local sourcing reduce their environmental footprint besides appealing to eco-conscious guests. The industry is moving beyond simply being sustainable to aiming for net positivity, with regenerative tourism that gives back to the environment.
Management with a vision
None of the discussed hospitality trends 2024 are possible without effective management. Leadership in the hotel industry requires a clear vision for the future, an ability to adapt to changing trends, and a commitment to continuous improvement. Hospitality leaders must invest in their own development and the teams they lead can ensure their businesses remain competitive and thrive in the years to come.
What the top CEOs are saying about the future of the hospitality and tourism industry
As an industry that depends on a stable environment in order to successfully operate - societal and environmental changes are having a greater impact on hospitality businesses compared to other industries. A recent global survey among CEOs by PwC has shown that heads of hospitality and leisure companies are notably less confident about their companies’ prospects for revenue growth in the near future than their counterparts in other sectors.
With disruptors in the industry, a wave of consolidation, and many external factors impacting their operations, hotel operators must find new ways to overcome these hurdles. Solutions to future challenges that companies are currently coming up with are the result of new thinking among the world’s business leaders and CEOs.
In a crowded field of competitors, hotels must find ways to distinguish themselves and position their property as distinctive destinations for customers, to develop preferences and loyalty in order to drive direct bookings. To do so, hotels must offer more highly personalized experiences that anticipate and go beyond the needs of their target customers – and count on word of mouth and allegiance to not only retain their customer base, but also grow it with more potential customers.
We have been a super good hospitality group for the last 50 years. We are not shying away from it. We are shifting and expanding the hospitality notion to Augmented Hospitality. We are being even more audacious and going one step further by saying: Since people want to be recognized, want to have something extremely personalized, why don't we try going from Augmented Hospitality to a Lifestyle Augmented Hospitality player?
Sébastien Bazin, Chairman and CEO of Accor (Source: Accor TV - New Accor Strategy).
Other ways that are often discussed when dealing with the impending changes are the implementation of new technologies, training employees to move away from standard SOPs to become true high-touch experience providers and modernizing the service offering towards individualization and “lifestyle” to create true differentiation.
What leaders can do to ensure hospitality businesses remain competitive
Fully take advantage of technology and personalization to create experiences
A generational shift towards how travelers are consuming hospitality services is making hotels evolve from being mere suppliers of accommodation to experience providers, leading to a need for outstanding customer relationships across all stages of their customer booking journeys.
Focus on talent acquisition and retention
From targeted recruitment efforts to a meaningful interview process and to the actual hiring and onboarding, organizations that are well-equipped to recruit in the era of millennials think holistically about the overall experience delivered to potential hires.
Embrace sustainability as part of your business model
As a result, a growing number of international hotel companies have developed sustainability and corporate social responsibility strategies. These initiatives can be perceived as the beginning of a paradigm shift toward a more positive and conscious form of hospitality which is highly valued among consumers today.
The hospitality management careers of tomorrow
Reshaping the future of hospitality jobs
Over the past two decades, the hospitality industry has experienced significant growth, with international arrivals doubling from 600 million to over 1.4 billion in 2016.
In 2023 however, in the wake of the global pandemic and facing increasing economic uncertainty hospitality has shown that it is resilient and a sector that consumers are just not willing forego entirely. Travel and tourism is an integral part of our lives therefore even as the global economy retracts the industry will always bounce back. This ability to withstand difficult times makes it a viable sector to launch a career for anyone with a hospitality mindset and appreciation for top-level service, culture, and leisure experiences.
It's clear that the industry is evolving and adapting all the time, making it a fantastic career opportunity for the problem solvers and innovators of tomorrow. Hospitality Management will provide a career rich in experiences, human connection, personal development and comes with many perks.
Future of hospitality: What's on the horizon for hospitality & tourism professionals
Employers across the board are looking for professionals with a combination of both hard and soft skills. In hospitality, developing skills such as cultural awareness, multitasking, customer service and communications is paramount to effectively deliver outstanding customer experiences.
The increasing complexity of the hospitality sector and evolution of its modus operandi - due to the expanded use of technology and data, the evolution of business models with the separation of management from operations or the ever-increasing trend of brands becoming publishers - is leading to the creation of new job profiles, such as asset managers, data scientists or content marketing specialists.
The Covid-19 crisis has underlined the global importance of the travel and tourism industry economically as well as its interconnection with other industries. From small tour operators to multinational hotel chains and major airlines, everyone in the industry has been impacted and continue to reset and recover.
To every negative repercussions of a crisis there is also some positive change that could be foreseen for the future. The World Economic Forum’s recent “Rebuilding Travel and Tourism panel” at the “Sustainable Development Impact Summit” explored the intersection of consumer consciousness, acceleration of technology and destination management and found some solutions that could have the potential to reshape the way we market, manage and plan our travel:
- Travelers are becoming more impact-conscious
- Tourists are looking for experiences in nature
- Digital solutions are improving sustainability
- Long-term progress requires cooperation
The end result is in an industry that will recover as it is an essential part of modern human lives that derive much pleasure and discovery from it. It is simultaneously undergoing huge digital transformation and other shifts to adapt to consumer sentiment, therefore a career in hospitality won't necessarily be a quiet one, but it will be an exciting adventure with a multitude of possible career paths to explore.
