The 7 biggest current issues in the Hospitality industry in 2023

Staff shortages, digital adoption competition and environmental concerns are just some of the current issues in hospitality that every business and professional should be aware of. However, it’s not all cause for concern; with every new challenge comes new opportunity.

It’s an exciting time to be in the industry. How you adapt and respond to current issues right now could shape your business or your Hospitality career direction for years to come.

1. Ongoing staff shortages

Staff shortages have continued to affect the hospitality and tourism sector worldwide, ever since the pandemic. Data from the EU shows that over 1.2 million jobs in tourism remain unfilled, while reports from the AHLA show that 87% of hotels in the US reported staff shortages this year.

A little closer to home, data from the Australian Government shows that accommodation and food services is the number one sector in the country for staffing shortages in 2023, with 45% of businesses reporting that they are in desperate need of staff.

The shortage of hospitality professionals has created real challenges for businesses, some of whom report cutting their operating hours in peak periods or even closing due to the lack of staff. However, for many hospitality professionals there’s a silver lining. Businesses competing for staff have begun to improve working conditions, offer more flexible hours, training and other incentives to attract and retain staff.

For any professional considering upskilling for a fast promotion in the hospitality sector, now is an excellent time to take advantage of this high demand for your skilled labour. Not only can you expect better pay and working conditions than the pre-pandemic industry, anyone with ambition and talent can be quickly trained up on the job.

2. Sustainability and net-zero targets

There is now very real environmental and consumer pressure on hospitality operators to meet meaningful climate and sustainability targets. For millennial and Gen Z consumers, climate change is a particularly big concern and they won’t be fooled by ‘greenwashing’. Data from Deloitte shows the next generation of consumers want genuine change and sustainable options for accommodation, food and beverage.

In response to this pressure, many of the world’s major hotel brands, including Accor, Marriott, Radisson, Hilton and Hyatt, announced in 2022 that they are setting new ambitious net-zero targets for 2030 to 2050 in line with the Paris Agreement, alongside a commitment to transparent measurement and reporting. Plus, more than 530 organisations have now signed the Glasgow Declaration for Climate Action in Tourism, a declaration created through the UN-led talks to achieve net-zero emissions across the sector by 2040.

With these ambitious targets now in motion across the hospitality and tourism industry, the big challenge for operators in 2023 and beyond will be shifting to ‘triple bottom line’ business practices and installing mechanisms to measure and report change. On the bright side, the transition to a sustainable economy brings new opportunities for operators and professionals who can embrace change and position themselves competitively in the green economy. For hospitality professionals who want a career that’s helping the environment, this is just the beginning of a whole new sector of green jobs in sustainable hotels and restaurants.

3. Digital skills gap

Almost every hospitality business in 2023 has to engage with mobile booking platforms and other digital technologies in order to remain competitive. Whether it’s a small hotel getting bookings via Expedia, a restaurant running delivery orders through UberEats, or a major hotel chain with its own App, smart rooms and digital concierge: everyone in the industry is now using digital tools, including social media.

Despite this widespread usage, many hospitality operators currently have trouble finding staff with digital skills across many areas of ICT and digital marketing. Research suggests that as many as one in three hospitality workers have no digital literacy.

At a time when digital tools can play an important role in helping operators with staff shortages, there’s a shortage of the digital professionals that hospitality businesses need to guide their digital transformation. Across the economy more broadly, almost 70% of businesses report being held back in digital adoption because of a shortage of tech professionals.

Training up existing staff in digital skills and outsourcing digital tasks to skilled freelance workers online are two ways hospitality businesses are addressing this issue. For hospitality professionals, this digital skills gap presents a real opportunity to develop a highly in-demand skill set. Training up in some of the key ICT skills and digital tools needed to fill this gap will put you in an excellent position to enter a digital career in the hospitality industry.

4. Inflation and rising commodity prices

The past two years has seen a fast spike in inflation in Australia and globally, leading to rises in the prices of labour, energy and all kinds of commodities. Globally, inflation has remained at a high average rate of 7% for the past year. The IMF expects this to slow to 4.3% by 2024, but in the meantime the high cost of living right now is already presenting a challenge for hospitality operators in two main ways.

Firstly, the costs of running a business are now greater than they used to be, with everything from food and beverage to staff and the gas in the kitchen rising. Secondly, consumers are also feeling the pinch of increased daily costs, which has led in some cases to a decrease in spending on things like holidays and eating out.

Although experts expect the situation to improve over the next two years, hospitality operators in 2023 are already innovating in order to grow and adapt: adjusting prices, offering specials and affordable choices, changing menus or reducing costs, streamlining and adopting cost saving technologies.

5. Cybersecurity breaches

Earlier this year, a hacker posted for sale online what they said was data from 3.7 million Hilton customer records. This attack comes just a year after Hilton was fined hundreds of thousands of dollars for credit card data breaches, which occurred in 2014 and 2015.

Hilton isn’t the only one; many large hotels, including Marriott, are now among the most targeted businesses for cyber-attacks, because of the volume of personal data they store on their servers. In fact, according to one 2020 report, 13% of all cyber compromises that occur worldwide are suffered by hotels. Even smaller operators are at risk of attack.

As we adopt more digital tools, the risk of hacking grows. Hospitality operators need to get on top of their cybersecurity this year if they want to avoid data breaches that might compromise customers information. See what you can do to protect your hospitality business.

6. Personalisation and new technologies

There’s a vast spread of different options now out there for consumers as they engage with hospitality businesses: they can dine out, order takeaway via an app, stay in an AirBnb, get a package deal through an OTA or check directly into a hotel on their holiday. With so many options, it’s never been more competitive for hospitality businesses. One key way to gain a competitive edge is for businesses to improve their personalised guest services.

Data shows that consumers today are tired of being treated like a number: they overwhelmingly want a unique hospitality experience and personalised customer service. According to one survey, 65% of consumers say that personalisation will earn their loyalty in 2023. On the other hand, 63% of consumers will stop buying from brands that use poor personalisation strategies.

In this competitive environment, it’s important for hospitality businesses to get the right balance between digitisation and personalisation. It’s essential to adopt the right digital tools, provide exceptional customer experiences on the ground and to put in place a personalisation strategy.

Digital technologies play an essential role for many hospitality brands trying to improve their personalised customer experiences. Branded apps such as those developed by Hilton and Marriott allow for customer preferences and booking histories to be seen by staff worldwide. Machine learning powered booking engines and advanced AI chatbots are also now essential for any brand looking to provide personalised service during a time of staff shortages.

In the long term, consulting firm McKinsey predicts that personalisation in tourism and hospitality will expand further into ‘ecosystems’ supported by integrated digital platforms. This means personalised service that extends beyond the hotel into restaurants, activities, booking tours and tickets, and all aspects of the whole journey. Whilst the share of global sales that move through these ecosystems is still less than 10%, McKinsey predicts this will grow to 30% by 2025.

7. Direct bookings vs OTA battle

Ever since they came onto the scene over two decades ago, hospitality and tourism operators and Online Travel Agencies (OTAs) such as Expedia and Booking.com have formed an uncomfortable partnership that continues to provide friction to this day.

On the one hand, OTAs channel valuable bookings towards hotels, airlines, restaurants and other businesses, increasing their sales, reach and visibility to customers. On the other hand, some OTAs have been increasing their commissions and controlling the terms and conditions of bookings to a level that some hospitality businesses have found difficult to swallow.

For many hospitality businesses the answer in 2023 is to use a combination of both. By providing their own platforms and apps to facilitate direct bookings and at the same time working with OTAs, businesses can reach customers who prefer one or the other.

Hotel Tech Report provides this detailed list of advice for hospitality operators on how to achieve a win-win solution for OTAs and direct bookings that works for your business and your customers.