Onwards through the tunnel – evolving challenges and opportunities for the hospitality industry

2022 saw some fantastic developments for our industry. Restriction-free travel became possible in most markets once again and demand reached or even surpassed 2019 levels in many regions. Despite this, not all is rosy in the world of hospitality. During the year, new challenges for the hospitality industry emerged and plenty of challenges remained after the pandemic. The gloomy economic outlook in many countries is casting a shadow on what could have been the first “normal” year in travel since 2020. 

Still, there are opportunities for hotels to thrive, but they’ll likely look different than what the industry may have been expecting or hoping for. 

Celebrating the travel industry’s impressive rebound

In early 2022, most countries finally eliminated Covid-related travel restrictions. The possibility to travel once again paired with pent-up demand sent occupancy and RevPAR levels soaring. According to STR, roughly 80% of markets were close to or already back to their 2019 results by mid to late 2022. 

“Seeing the industry recover so strongly is great for many reasons. First and foremost, it proves that we’re extremely resilient, despite facing the sector’s hardest-ever challenge. It also proves our industry’s value. The desire to travel, meet in person and create new experiences can’t be wiped out, even by something as formidable as a global pandemic. Even though travel was quickly marked as ‘non-essential’ in early 2020, it is clear that people need it to thrive. Given the circumstances, that was surely the right call, but it’s good to have shrugged off this label again,” says Atomize founder Alexander Edström.

It’s always good to beat predictions of slow growth or recovery. While pundits were quick to claim the end of business travel, in-person meetings and events, even these sectors are regaining their momentum. For example, Cvent, one of the world’s largest meeting and event tech providers, recently found that 83% of planners are looking to host in-person gatherings next year

 

Coping with high demand in a time of staggering staff shortages

While the recovery in all areas of hospitality and travel was impressive, it often brought unexpected challenges for the hospitality industry such as sudden demand surges and shifts. This, in turn, resulted in its own set of challenges. 

Around the world, hospitality businesses are struggling to find qualified team members. According to the World Travel and Tourism Council, one in nine positions is currently unfilled in the European Union. Things look similar in North America and other regions. This is forcing many businesses to stretch their existing teams thinner or reduce service hours. At the same time, changing expectations from guests and the desire for more personalized and tailored offers have added to the pressure hotel employees experience. 

This means two things for the industry. First, companies must create more attractive workplaces that offer increased flexibility, higher pay and better conditions overall. If they can’t, the continuing staff shortages could hamper long-term growth and reduce properties’ chances to generate revenue. Second, for the time being, hotels everywhere must embrace ways to do more with less. Luckily, travelers are more open to and even expect a certain degree of automation during their travels today. 

 

Adapting to the wish for a more digitalized guest experience

The need to reduce in-person contact for safety reasons pushed hotels to explore online services as well as automation. Online check-in and check-out as well as chat solutions and automated upselling are just a few of the digital services that gained massive traction over the past two years. And even though face-to-face interactions are deemed safe once again, guests have embraced digital services and want to see more of them. 

This requires hotels to look more closely at their workflows and guest journey. Identifying friction points and implementing new tools to improve the experience for guests and staff. This can feel like a challenge, especially if you’ve never been keen on investing in or enhancing your tech, but it’s also a fantastic opportunity because new tech solutions can help your team save time, work more efficiently and provide better service. 

In the thick of the pandemic, many hoteliers saw this opportunity forced on them. After all, certain new tools were needed simply to keep doing business. But today, the benefits are clear, and many hoteliers have decided to keep using their new solutions while looking for more ways to optimize their workflows, guest interactions and services. And that’s a good thing. Because leveraging technology is the key to creating the personalized experiences guests are craving and setting a property apart from the competition.

 

Making the most of unpredictable markets

Apart from staff shortages and the need to digitalize the guest journey, frequently changing travel restrictions kept hoteliers on their toes throughout the pandemic. Even as travel opened up, the combination of changing consumer behavior for both business and leisure travel meant that old booking patterns did not re-emerge in many markets. As a result, it has remained challenging to accurately predict demand and always set the optimal price. 

In this scenario, understanding and leveraging demand and market data in real time became crucial. Those who did were able to perform comparatively well, even during the toughest times. But manually tracking and reacting to market shifts still only brought limited results. There was (and still is) simply too much data to gather and analyze, and even the best revenue team can’t keep up. And that inevitably leads to making decisions in the dark and missing business opportunities. 

The properties that worked with automated revenue management tools fared much better. Even when markets changed erratically, they were able to drive bookings successfully. The team at VESTA Hospitality, for example, saw their RevPAR increase by over 16% once they implemented Atomize to automate their pricing. 

 

The importance of tech-driven processes and real-time decision-making

The previous point already touched on how important tech-driven processes are not only in operations but also in commercial departments. They were a key ingredient for success in 2022 and will remain so in 2023 and beyond. 

Revenue management serves as a prime example here. Real-time pricing became more important than ever during the pandemic due to the constant unexpected demand shifts. On top of that, classic models like driving demand by rate alone didn’t work since travel restrictions made even the most advantageous prices ineffective. This motivated more hoteliers to implement automated RMS, business and market intelligence tools to support their teams and free them up for more strategic work. That’s only the first step though.

“Leveraging the power of modern tech tools is important for guaranteeing your property’s success now and in the long run. But for the best results, go one step further. Prioritize tools that integrate, share data and provide live market and performance insights. This is essential not only for commercial solutions like RMSs and business intelligence tools but for the entire tech stack because it streamlines workflows and allows for the best possible decisions on all fronts – something that will remain crucial as hotels keep competing fiercely for business in 2023,” Alexander goes on to say. 

 

A renewed focus on offering value

Those who have already done their homework and invested in new technology have an advantage now. While Covid has slipped to the back of most people’s minds, the cost-of-living crisis and a gloomy economic outlook are now impacting demand and the ability to travel. With money not stretching as far as it did just a few months back, guests are especially keen on value-packed offers and advantageous deals. 

At the same time, the hospitality industry also has to contend with resources becoming more expensive. Restaurants have been getting the lion’s share of media attention in this regard, but hotels have to deal with higher costs as well. And even though they can shift rates upwards, increased operating costs often eat up more than properties can correct for. 

Facing the downward pressure on rates and rising costs at the same time means two things. First, hotels must offer attractive packages to justify rates that do more than merely cover costs. Second, they must be smart about their pricing tactics to seize every revenue opportunity. For this, a complete market overview is becoming ever more important. It’s no longer just about looking at competing hotels. Every type of alternative accommodation provider is now relevant since guests shop around broadly to find the best deal. Hoteliers must do the same to fully understand the market, find new opportunities and successfully navigate these circumstances.

“While it won’t be easy, I’m confident that our industry will get through this new challenge. Luckily, we have the tools to support smart decisions and assist lean teams with nearly every aspect of running their property. More and more hoteliers are beginning to leverage these solutions and consequently, they see improved or at least consistent results even in tough times. Given this development, I look into the new year with optimism and I am excited to be part of hotels’ future success. ” Alexander concludes. 

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