In the age of globalization, hospitality plays important role in development of country. Hospitality industry has a huge impact on financial sector of a country and it is also a major source of employment.
- Definition / Scope
- Market Overview
- Market Risks
- Top Market Opportunities
- Market Trends
- Technology Trends
- Pricing Trends
- Regulatory Trends
- Other Key Market Trends
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Distribution Chain Analysis
- Competitive Landscape
- Competitive Factors
- Key Market Players
- Strategic Conclusion
Definition / Scope
Travel and tourism is one of the world’s fastest-growing sectors, with the global bookings escalating close to $1.6 trillion in 2017. With rising disposable incomes and travel options getting less expensive, travel business is flourishing and is becoming one of the most profitable businesses.
Hospitality industry a multibillion business covering three are: Accommodation, food and beverage and travel and tourism industry. Accommodation cover hotel, motel and other lodging service. Food and beverage industry cover restaurant, pub, club, fast food chain etc. And last travel and tourism industry including airlines, train, bus and other means of transportation.
In USA, the accommodation segment is largest and accounts for 19% of the total hospitality industry. It is followed by the food services accounting for 16% of the travel and tourism market.
There was 3.4% of growth in restaurant industry in 2015 whereas the air travel sub sector accounts of 16% in travel industry. Among all the three sub-sectors the accommodation is largest which is catered by the hotels.
According to the U.S. Travel Association, over 75 million international travellers visited the U.S. in 2016, and that number is expected to hit over 83 million by 2020. The U.S. is also the number one destination in the world for long-distance flights, with one of the largest groups of travellers flying out of Dubai International Airport.
Hotel collects a lot of personal data of their guest for hotel safety. Having personal data of guest make them easy target of cyber criminal and hackers.
While the outlook for the hotel industry is generally positive, there are new advances such as travel apps that allow consumers to compare more hotel and private accommodation options than ever before. Along with extraordinary choice, however, comes exceptional traveler expectations for the hotel experience.
With instant access to hotel reviews and virtual tours, travellers can easily discover that hotels fail to offer something truly unique and memorable, and thus spread the negative word of mouth on social media, which could also lead to loss of customers.
Top Market Opportunities
- Catering to millennials: According to Cornell center for Hospitality Research, by 2025 millennials are expected to represent 50% all travelers. Hospitality related indusrtry can take benefit and develop strategy to focus on those market segment. satisfied Millennials in return actively promote their business on social media.
- Technology explosion: 21st century is a world dominated by technology. Most of guest are familiar and comfortable using app and website. Up-to-date and friendly companies website help in promoting their brand. Traveler expect hotel to have high Tech equipped and knowledgeable support staff.
International currencies have strengthened in comparison to the dollar, making the US an increasingly attractive travel destination. In turn, increase in tourism, and occupancy to peak in 2018 at approximately 72.6% nationally will be a historic high.
The rapid growth of online travel agencies and private accommodations also will likely continue to shape segments of the industry. The online travel agencies will continue to invest in their technology in agile manner followed by creating digital trip-planning experiences that are one of a kind.
Going forward, consumer and business spending are expected to keep the business upbeat, suggesting that the U.S. economy will remain on solid footing for 2018.
Hoteliers will be able to counter any economic volatility better, if they keep moving from owning real estate to franchising their brands and services.
The hotel industry is particularly vulnerable to the various risks and threats that can be brought forth by the deteriorating economic conditions. A solid economic condition spurring in upcoming year is likely to motivate the hotel industry.
As hotels receive customers of foreign clientele. Hiring employees who can speak multiple languages, as well as offering services and information in multiple languages will be essential for hotels hoping to attract foreign clientele.
A significant trend is the incorporation of different forces, from technology advances to new entrants into the marketplace, that together have the potential to drive travel bookings of hotels in upcoming year 2018.
Perhaps the most powerful drivers are a surge in global travel from an emerging middle class, strong indicators for consumer spending in the U.S., healthy corporate travel demand and a shift in consumer spending from goods to experiences. At the core of the industry’s growth is a stronger global economy.
Hoteliers strive to enhance value and competitiveness, industry-best practices such as sustainability, brand refreshment and increased visibility through technological innovation and social networking, especially among generation Y will remain the priorities.
A highly intensive and intelligent investment in infrastructure to attract more business and leisure travellers will also hold the key to growth.
In the present context of low inflation and low unemployment, the US economy seems composed to sustain 2 to 2.5 percent growth through 2018. Consumer’s standard of living is rising. Incomes are rising, along with home values and stocks. That points to more income and more confidence to spend it.
Intense airline competition: Downward pricing pressures are at play thanks to a mix of low fuel prices, international competition, and low-cost entrants. That may be tough news for airline industry margins, but low fares drive spending throughout the travel sector.
Strong economies drive business activity. Business travel is projected to grow by more than 6 percent.
Travel is outpacing the demand for goods. Spending on recreation, travel, and eating out is up, while spending on many durable goods and staples like clothing is down.
The millennial’s are the group who are expected to spend the highest in travel-related spending. In Us alone, 31% increase than previous year. According to Internet marketing Inc., they are important because they are posting pictures and visits to hotels in social media, directly promoting the business. As 97% millennial’s who plan a trip are expected to share the details of their travelling experience in social media.
The strong confidence of RevPar trends has been identified in hospitality industry due to factors such as, a robust macro economy, a rising stock market and corporate confidence due to tax reform and other initiatives from the government.
While the weakening of U.S. dollar could increase inbound international travel, it would then have a negative impact on domestic consumer spending, forcing consumers to shift unrestricted spending. Additionally, higher costs and increased supply along with geopolitical instability and economic slowdown are likely to continue to obstacle the hospitality industry
The need of renovation, new technology trends and digital and marketing enterprises to boost traffic and exploit on growing tourism numbers has also invited step costs to leading hoteliers which is spoiling their profits.
High labor costs are likely to continue and be a major concern for hoteliers, and as they won’t be able to boost ADRs as much as they would like, their profits may be dented further.
- Price Sensitivity: It is a well known fact that customer are price sensitive. With one tap they can compare prices, hotel ratings, reviews and can make purchase decisions.
- Online Reviews: A big challenge faced by hospitality industry is protecting their brand image. Although online reviews are based on guest experience, they can affect overall image of the brand.
Entry of new home lodge segment companies like Airbnb Inc. are also providing new offer digital service allowing travellers to book homes at holiday destinations.
As they have low costs of operation and are not heavily regulated as hotel companies, these firms have made steady entry into the industry and are grabbing share from giants like Hilton Worldwide Holdings Inc. (HLT) and Marriott International, Inc. (MAR).
The explosion of companies like Airbnb have also changed travellers’ expectations when it comes to lodging. Accommodation rental websites have shifted traveler mindsets from wanting a standard hotel room to wanting a home like experience.
Among private accommodations, players are using niche strategies like luxury rentals. As a result, many traditional hotels are having to reconsider product and brand strategies to remain attractive to those consumers who love the rental experience.
It’s just one of several battlefronts for the consumer that continues to shape the industry.
Capitalizing on trend to attract new customer segments and retain existing has been a challenge for the hotel and lodging industry over the past few years. Hotels do not have much opportunities to bring back the customers for more stays.
People who travel more than once a year do for different reasons and their expectations differ so the hotels lack innovation to cater to the needs of customers.
- Mobile bookings: Online booking and mobile booking has made it easy to book a hotel room or make a reservation. website visit and price comparison has made it easier for travellers to look for suitable place according to their taste and preferences.
- Social network: Social media has made the world more transparent. People share their experiences on social media which has made it easier for travellers to make informed decisions.
- Artificial Intelligence: AI is new but rapidly growing platform. Chat Platform are becoming helpful in providing better service.
Brands like Starwood and Hilton, among others, offer their guests the ability to use their mobile phones as keys to unlock their rooms.
Marriott launched an in-room virtual reality headset program allowing guests to take virtual trips to other locations. Guests can share their experiences with friends and families on a new virtual travel content platform called “VR Postcards.”
24-hour concierge, which would eliminate the need for guests to pick up the phone or walk to a counter to speak with a knowledgeable employee. Caesars Entertainment, whose properties in Las Vegas use Ivy; Aloft, which uses a system and Hilton and Marriott, which incorporate this service into their hotel loyalty apps.
The smart room technology which enables guests to modify their experience by controlling lights, temperature, entertainment, room service, requests, and other settings from a tablet or the guests own device. Many hotels in popular leisure and resort destinations like Las Vegas are making this technology available to guests.
A guest leaving the gym may be offered a deal on a protein shake, or a guest sitting at the pool may be recommended a pinacolada and notified of an upcoming music performance nearby. Hilton is one company on the forefront of rolling this out at locations including Hilton Waikiki and Hilton Dallas resorts.
If a hotel guest is dissatisfied, he or she can easily complain on Facebook, Twitter, Yelp or Trip Advisor. Hoteliers must be able to quickly respond. Engaging with customers and responding to their needs through these public forums help maintain positive guest relations and drive future bookings.
- Direct booking from companies website have cut some expenses of distribution chain.
- According to statista average daily rate of US hotel is $ 132.60.
- Average daily price for travelling in US is $220.
- $42 is average price of food for one day.
Due to the introduction of new companies like airbnb in the hotel and lodging industry, this has changed the whole pricing trend of the existing hotel in the industry.
According to Statistica, the average cost of an Airbnb room in San Francisco was 18.8 percent less than the cost of an average hotel room in 2015. In order to stay competitive, traditional hotels and lodges must continue to offer competitively priced rooms, as well as more personalized facilities and experiences that make visitors feel at home.
In near future, if increases in hotel room rates are not at or above the inflation rate, then the price increases year-over-year are not sufficient to cover the increased cost of doing business. When ADR growth was examined over time, the U.S. industry wide ADR in 2010 was approximately $10 below the inflation-adjusted rate charged in 2000.
Hospitality law is the body of law relating food and service, travel and lodging industry.
- Keeping customer Safe: Knowledge about how to clean and store food and fire safety guideline.
- Protecting your reputation: Provide access to disable patrons. discrimination against people gender, race, religion, age or disability can draw negative attention.
- Honouring agreement and fair marketing: Agreement between staff and union should be valued. contract with customers, vendors and contractors should be honoured as well. Deceptive marketing is illegal.
- Proper record keeping: Record of tip sheets, employment agreement and payroll tax paperwork should be kept.
Uncertainty, both international and domestic, may continue to consider on the performance of the U.S. lodging industry. Moreover, negative sentiment related to traveling to and from the United States given the Trump administration’s stringent policies on immigration and tourism
CTP (Croporation for Travel Promotion) which is a new public-private partnership in travel business as “Brand USA”. It was established for the purpose of enhancing this industry by distributing information on Us entry policies and promotes leisure, business and scholarly travel within U.S. It is an active institution for the travel market in USA
On the regulatory front, local governments around the country are getting smart about regulating short-term rentals, which the industry has termed “illegal hotels.” For instance, in Southern California and in other major cities around the country, municipal governments now understand that short-term rentals are causing substantial impacts to tax revenue and are implementing policies to address this.
Other Key Market Trends
Shortage of skilled human resource is a major challenge for this industry especially for small business. With more automation more expertise are needed which is going to be hard to find and retain the right talent.
Mobile apps catering to hotel marketing has escalated. These apps are mostly focused on loyalty points, streamline check in, open doors and more properties offer virtual reality to preview a property. For e.g.: Marriott Hotels offer VR postcards through room service and allows visitors to preview their destination.
Eco-friendly practices are becoming the norm, as hotels main focus is on the management of the renewable energy resources and water scarcity. Many hotels are installing solar panels and updating systems so that air conditioners and lights automatically switch off when guests leave their rooms.
With so many brands to choose from, the hotels who re involved in the competition need to find a way to stand out. Some are offering free daily wine tastings in their lobbies or bars; some are incorporating sophisticated informational screens in bathroom mirrors; and others are giving away curated set lists of downloadable music which are the differentiation strategies used by these properties.
A number of U.S.-based hoteliers are targeting the unsaturated markets in Asia-Pacific, the Middle East, Brazil, Russia and Africa. China is the fastest growing lodging market in the world. Interestingly, the country is a major revenue contributor for Marriott International, Inc. (MAR). The key players in the industry are also targeting the high-potential Middle East countries such as Turkey and United Arab Emirates (UAE) that offer strong infrastructure.
Market Size and Forecast
- Hotel Industry: Total revenue of hotel industry in 2017 was 208 billion dollar and it is expected to have market growth of 5-6 % in 2018.
- Food and beverage: Total market revenue of food and beverage sector in 2017 was 38 billion dollar.
- Travel and Tourism: Total revenue of travel and tourism was 1.7 trillion in 2017.
U.S hotel industry in 2017 has received only a reasonable demand growth which also assisting both occupancy and average daily rate (ADR) of the rooms at hotel. As a result, revenue per available room(RevPAR) is witnessed a rise of 3% over 2016. Occupancy is expected to increase 0.3 percent to 66.1 percent in 2018, according to the forecast.
Average daily rate is forecast to rise 2.4 percent to $129.77, while revenue per available room should see a 2.7-percent gain to $85.82. The researchers do note that RevPAR grew at least 3 percent each year from 2010 to 2017
More than 75 million visitors traveled to the U.S. in 2016, according to statistics from U.S. Travel Association. That number is expected to rise to more than 83 million by 2020. The U.S. is the No. 1 inbound destination for long distance flights in the world.
When breaking down segments, the researchers project that the luxury and independent chain-scale segments are likely to report the largest increases in occupancy at 0.4 percent. Independent hotels are forecast to see the most substantial growth in ADR (+2.5 percent) and RevPAR (+2.9 percent). The lowest rate of RevPAR growth is projected in the upscale segment (+1.8 percent).
After eight straight years of RevPAR growth, PwC’s forecast for 2018 anticipates that a stable economy and tax stimulus will help to support the highest occupancy level in the hospitality industry since 1981. The company forecasts occupancy to grow to 66.1 percent for U.S. hotels in 2018.
While inbound international travel, which is an important source of leisure business, declined in the first and second quarters of 2017, researchers note that the weakening U.S. dollar could help to offset that decline moving forward. Finally, corporate temporary travellers will continue to show slow demand growth, which has helped contribute to the slow ADR growth the industry has seen.
- US is leading in terms of of global travelers.
- 5-6% growth is forecasted by end of 2018.
- 44% of food budget is spend on eating outside by American.
- By 2025, 50% millennial are expected to represent travellers.
In 2017, with gross domestic product (GDP) growth remaining decent at 2.6%, the economy prolonged at an annual rate of 2.3%, better than the 1.5% growth rate recorded in 2016.
There has been accounts of growing employment, higher real income, and increased household net worth strengthened consumer confidence and sentimentality. This has resulted in a steady rise in business and leisure travel, and higher transaction volumes, which are likely to continue.
Expenditures by the international tourists in USA generated a record breaking $220.6 billion sales and $74 billion in trade surplus in 2014. The international traveler is foretasted to grow by 4.3% annually through the year 2020. This makes US the leader in the international travel and tourism exports, top tourism service export accounting 31% of all the US export services in 2014
The hotel industry continues to become robust and performance and is projected to sustain strong 5–6 percent growth throughout 2018. Usually, this industry is usually cyclic, but the factors contributing to positive growth has outnumbered the negative barriers.
In USA, the upcoming trend for the hoteliers would be that they will be looking for an opportunity in strategic places, including a re-entry of the midscale experience, traveler-facing tech, health and wellness, and loyalty.
Google recently developed a pair of ear buds that could help put hotels ahead in this area. The Google Pixel Buds are a pair of wireless headphones that automatically translate 40 languages in real time. The development of this kind of user-friendly translation technology could be a game changer for the hospitality industry.
According to a SaaS industry market report the trend of technology adaptation in hospitality industry was recorded at only 20% in 2016 whereas compared to 65 for real estate and construction and 96 for health. This suggests that at present the technology adaptation is not up to the mark
The majority of guests today are tech-savvy travellers who are comfortable using apps or mobile websites. Hotels need to make sure their offerings are up-to-date and user-friendly. Many travellers seem to prefer technology to human beings—they want to check-in digitally and don’t mind if a robot delivers room service. This will give staff the opportunity to focus on more personalized service, as opposed to rote tasks.
Distribution Chain Analysis
Hospitality industry in US cover three main area; hotel, food and beverage and travel. These all are interrelated with each other. Global distribution system is a network that is primarily used by travel agent to book things like airline seat, hotel rooms and car rentals for their client and customer.
Global distribution system makes booking process easy. Global distribution system is beneficial to attract demand from all over the world. the key success factor is to keep information up to date, so that rates remain competitive.
Other major players in this industry include Hilton Worldwide and Marriott International with 4,278 and 4,424 hotels, respectively, across the world. This statistic shows the revenue of Marriott International worldwide from 1999 to 2017. Marriott generated approximately 22.9 billion U.S. dollars in revenue in 2017.
- Human resource: When it comes to hospitality industry, human resource plays central role. Customer satisfaction and proper customer service is a key success factor in case of hospitality industry.
- Technology and information technology: With adoptation of new technology and being innovative can attract more customer.
- Flexibility towards client demand: Being flexible towards client demand can increase customer satisfaction. customer satisfaction can not only sustain business but can also help in business growth.
Hoteliers must look for ways to sustain their growth as online private accommodation are all over the marketplace with new portfolio. In fact, Marriott’s acquisition of Starwood Hotels & Resorts Worldwide Inc. was a strong move to combat the rising threat from online travel agents and home-sharing companies.
Other hoteliers like Hyatt Hotels Corp. (H) and Wyndham Worldwide Corp. (WYN) are also venturing into new segment of home-sharing start-ups to combat Airbnb.
The wellness industry is now $3.7 trillion worldwide. Healthy meetings have continued to be a popular tropic and a requirement in new hotel projects. MGM Grand recently announced it would be working with health and wellness guru Deepak Chopra to expand the Stay Well Rooms concept into new meeting space in Las Vegas.
Marriott International’s acquisition of Starwood Hotels & Resorts Worldwide Inc. created the largest hotel company in the world with a number of distinct sub-brands such as Le Meridien, AC Hotels, Moxy, and all the way down to Fairfield Inn.
Hilton Hotels’ brand portfolio also offers choices that cater to distinct travel expectations and experiences as well. In short, these large hotel companies now have brand portfolios that cater to almost every niche type of travel experience.
Brands that can offer something uniquely compelling are likely to grab market share and thus the ability to innovate will be their key to success. Therefore, ace hoteliers like Marriott, Belmond Ltd. (BEL) and Hyatt are firing on all cylinders to sync their brands to the order of the day.
Big hotel brands are thus launching more lifestyle hotels, which are mainly boutique brands that benefit from parent companies’ infrastructure. These include brands like Marriott’s Element, Aloft and Edition; Andaz by Hyatt; and Inter-Continental Hotels Group ‘s (IHG) Hotel Indigo.
Key Market Players
Marriott International Hotels
Owner: Marriott Family Number of location: 6,520 Number of employees- 177,000 Total Assets: $29.498 billion
Hilton Worldwide Hotels
Owner: Conard Hilton (Founder) Number of location: 570+ Number of employees – 163,000 Total Assets: $14.308 billion
Hyatt Hotels Corporation
Number of location: 777+ Number of employees – 45,000 Total Assets: $7.67 billion
Number of location: 9,000 Number of employees – 25,000 Total Assets: $10.4 billion
Hospitality industry in US play a major role. Hospitality industry is broad and contain other industries also like: hotel, food and beverage and travel and tourism industries. This industry mainly focus on satisfaction of customer and providing specific experience for them.
As the number of international travelers visiting the U.S. is continuously growing every year, the hospitality industry must focus on providing an extraordinary experience to both international and domestic visitors. The hotels at present have been differentiating to stand out in terms of design, food, technology use, sustainable innovation etc.
The marketing has been mostly through word of mouth through the means of social media but with a market that has already reached a saturated point, the properties must focus on venturing into new segments and across boundaries to recognize themselves as a global brand.
The positive outlook for lodging demand growth indicates that people are unwavering on spending time with loved ones, despite economic or political upheaval in certain places worldwide.
They’re looking for unique experiences at all price points and hoteliers believe that their diverse portfolio of travel offerings can continue to deliver on that growing demand. Thus, there are plenty of reasons to be optimistic about the broader hotel industry over both the short and long terms.