Don’t call it a comeback



The past three years have taken hoteliers and hotel guests for a wild ride; COVID-19 shut down many aspects of the hospitality industry for a number of months, packed savings accounts, sent a rush of travelers to the forefront in 2022, and now, macroeconomic factors such as rising interest rates and inflation have the potential to deal another rough year to hotels and tourism.

Travelers poured through hotel doors in mid and late 2022, with many hotels seeing pre-pandemic recovery levels or very close to it, but individual spending in hospitality faces many headwinds this year. Stimulus checks feel far in the past and 56% of Americans are planning to focus on saving money in 2023.

Despite these valid concerns, the industry is showing promise. Hoteliers are resilient, innovative, and adaptable, and it’s these qualities that will ensure the hospitality industry remains strong no matter what’s ahead.

Last year was one of leisure travel, as lockdowns were lifted on a global level, travelers were itching to see new places, and favorable price points. As gas prices shot up and the S&P 500 slipped throughout the year, CBRE noted that these events usually coincide with a decline in RevPAR (revenue per available room). In Q1 of 2022, however, RevPAR was up 61% from the year prior, thanks in large part to the travel bug that was flying around the world. In fact, this RevPAR growth was driven by a 39% increase in ADR and a 16% increase in occupancy.

Although leisure travel is set to remain at healthy levels, hoteliers should be aware that drive-to locations are much more affordable and manageable for guests who are looking to save on flight costs or exorbitant gas bills. This means that guests are more likely than ever to opt for a destination that’s within driving distance of where they live, illustrating the importance of hotels and other hospitality industries to connect with, market to, and satisfy communities that are close in distance.

Hoteliers need to focus on business travel and group bookings this year as well, because last year wasn’t great for business travel or large groups. Many organizations weren’t conducting business travel due to the pandemic, and large events like conferences and trade shows were put on the back burner. Offering major opportunities to the industry in the current year, business travelers and group bookings will help reduce inventory, keep prices level, and provide guaranteed income. The focal points might be shifting, but there won’t be a shortage of customers flowing through hotel doors in 2023.

Though experts and analysts are optimistic, there still are a number of factors that have an unclear path forward. All of the forecasted global growth in bookings and room rates is without outbound travel from China recovering. That country is grappling with a COVID-19 crisis after ending a years-long lockdown, and only time will tell when rising cases level out, enabling Chinese people to travel freely. If that “free Chinese travel” accelerates in 2023, global markets could see a wave of pent-up travel plans, though on a smaller scale than in 2022.

Another critical component of hotels in 2023 is the ever-present staffing shortage throughout the entire hospitality industry. So, if guests continue to create this demand, technology and innovation can help reduce the impact of these staffing shortfalls. Guests are loving contactless check-in, attendant-free food and beverage service, zero-staffing “Amazon Go” stores, and myriad other functions with reduced human interaction, giving a clear launching point for hotels to start implementing automation and more. This technology will help combat staffing shortages rippling throughout the industry. For example, Q4 2022 saw 1.5 million open positions in the travel, hospitality, and leisure sectors. Quickly adapting is what this industry does best, and technology is making the impossible possible.

Guests aren’t going away in 2023, but they may be taking a slightly different path to your front desk. Hotels at all price points need to open themselves up to this new landscape by focusing on business travel, group bookings, drive-to “staycations” and, of course, leisure travel. While it’s hard to tell exactly what may be coming on a macro level this year, guests will rely on hotels to provide stellar service, exceptional stays, and creative amenities – just as they always have.

Ken Patel is the owner and CEO of A&R Group. After immigrating to the U.S. in 1996, he began his career in the hospitality industry by managing a family-owned hotel. In the years since, Patel has accumulated a portfolio of globally recognized brands such as Hilton, Intercontinental Hotel Group, and Wyndham.




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