The past ten years have certainly been one of the most disruptive periods in living memory for anyone who's had a long career in the hotel industry. It has been a challenging time, but it has also been a decade of innovation and evolution, leading to leaner and greener business models.
As we come out the other side of the pandemic into 2023 and an anticipated period of hospitality industry growth and recovery, it’s the perfect moment to take a look back and reflect on what’s changed for hotels since 2013.
The enduring impact of the pandemic on the hotel industry
In 2019 the hospitality industry worldwide accounted for around 10% of the global GDP and employed roughly one in ten people worldwide. The pandemic had a massive impact on the hospitality and tourism industry worldwide, that’s still being felt today.
According to estimates from 2020, the pandemic cost the global tourism industry around US$935 billion and potentially over 120 million jobs. In Australia, national accommodation occupancy plunged by 29.8% to 51.7% just during the first period to September 2020.
In 2022, borders fully reopened and international tourism fully resumed in many countries. The industry began climbing into a recovery period as consumer demand for holidays returned. Globally, the number of international tourists rose by 130% in January 2022 compared to January 2021.
Growth projections for the global hotel industry from 2023-2028 anticipate a healthy CAGR rate of 8.6%. The growth outlook for hotels in Australia is also once again looking good, particularly since China has now begun to reopen and allow outbound travel. The reopening of festivals and events in 2022 such as Vivid Sydney has had a major positive impact, pushing occupancy back up to pre-pandemic numbers.
Before COVID-19, the rise of new middle-class international travellers from China, Southeast Asia and other fast-developing economies was contributing to growing new markets for hotel operators, a trend expected to continue as we enter this new growth phase.
The hotel industry has officially survived COVID-19: but not untouched.
- To survive the pandemic, hotels diversified their revenue streams and innovated their way into new areas of business such as real estate development, coworking or wellness facilities open to the public, and branded residential apartments.
- Business travel is forever changed. The corporate traveller is no longer flying around the world wasting gas and money for single meetings; instead, the long-stay digital nomad is moving their laptop into your hotel’s new coworking space for a blended working holiday.
- The ‘great resignation’ and pandemic layoffs combined with sudden economic growth after reopening, led to enduring post-COVID hotel staff shortages in Australia and worldwide. These shortages are expected to ease into 2023, as hotels continue to offer more attractive conditions to entice workers back.
Climate change and the rise of sustainable hotels
Another seismic shift that’s happened in the past decade is the rise of sustainable hotels. In the earlier part of the last decade, hotel brands like Marriott, IHG and Hilton set sustainability targets to 2020 including goals like reducing water consumption by 20%, switching to green energy and removing single-use plastics from their hotel properties.
Over the past two years, these fairly soft sustainability targets have been replaced by more ambitious goals as the need to address climate change in line with the Paris Agreement becomes more urgent. Many global hotel brands have committed to net-zero carbon emissions targets within the past two years, including Accor, IHG and Marriott.
In Australia, hotel developments over the past two years are increasingly focused on sustainable building design due to new government incentives. These incentives such as Green Financing and Green Grants encourage hotels to build sustainably, in order to receive ESG (Environmental Social and corporate Governance) Certification and qualify as an ‘eco hotel.’ Some Australian hotel brands leading the way in this growing sector of sustainable luxury include Amora Hotel, Alto Hotel and Crystalbrook Kingsley.
The growth of sustainable hotels is fuelled by their increasing popularity among consumers over the past decade, a trend further accelerated by the pandemic. According to Booking.com annual data, in 2016 62% of travellers surveyed had chosen an eco-hotel, and by 2018 this figure reached 68%. In 2023, 73% of travellers would prefer to stay in an eco-hotel over a regular one.
The digital revolution and the evolution of online travel agencies (OTA)
The development and adoption of new digital technologies have massively reshaped the industry over the past decade and will continue to do so into the next. The rise of OTAs, machine learning and AI-driven search and booking engines has changed the industry landscape forever. In an industry now defined by social media, booking apps, influencers and review sites, every hotel guest is a potential critic online.
- The past decade has seen the continued rise of Online Travel Agencies (OTAs) such as Expedia and Booking.com. Before the pandemic, 15% of all bookings in Australia were completed via OTA. The past few years have seen pushback from consumers and hotels against OTAs because of issues with refunds and cancellations during the pandemic, as well as the high price of commissions (in some cases up to 45%). However, with an expected CAGR of 4.8% from 2022 to 2031, like it or not the OTA sector is here to stay.
- Partly in response to the rise of OTAs and partly to feed consumer demand for mobile convenience and personalised experience, hotel brands including Marriott and Hilton have increasingly invested in their own branded apps, and mobile integrated booking and digital concierge platforms.
- The last decade has witnessed the rise and rise of social media and the now ubiquitous Instagram travel influencer. Hotels have been investing in whole new teams of digital marketing specialists and social media management staff to develop effective strategies, as social sharing increasingly replaces traditional marketing channels.
- AI and machine learning have been changing how hotels understand and serve guests, with hotels adopting a whole host of new technologies ranging from intelligent chatbots to smart rooms and booking platforms that study your preferences.
- Since Airbnb was founded in 2007 it has gone on to completely reshape the accommodation sector and the ripple effect is still being felt by hotels today. As well as spawning a whole host of imitation app-based booking and hosting platforms, it’s challenged hotels to offer more personalised, convenient, price competitive, mobile booking friendly and unique stay experiences to guests.
Changed consumer behaviour among hotel guests
The past decade has seen some big shifts in behaviour among hotel guests and tourists in terms of how what and why they make their holiday choices. In part, these changes can be seen as coming out of the pandemic, but that’s not the whole story.
These changes also represent a generational shift as millennials and Gen Z play a growing role in the travel industry. In 2015, millennials officially overtook boomers as the generation with the biggest global consumer market share.
Changes in consumer behaviour additionally reflect the spread of progressive values among consumers, such as increasing awareness of environmental issues and demand for gender or ethnic diversity in management.
Plus, consumer behaviour of the past decade has been significantly influenced by the introduction of new technologies into our workplaces and daily lives. Social sharing, mobile bookings and working holidays are growing trends shaped by access to new digital tools.
- Staycations, experiential and localised travel are all on the rise, as a new generation of travellers prioritises meaningful, unique travel experiences over generic offerings. This has led to a boom in experiential travel-focused "lifestyle" hotel brands. Marriott has recently introduced its Aloft brand to Australia, and the company's Moxy brand is due to open there soon as well as IHG's Indigo.
- A growing segment of climate-conscious boomers, millennials and Gen-Z travellers are choosing sustainable hotels, low-carbon travel options and eco-retreats in nature. These travellers want more than a hotel that bans single-use plastics: they want net-zero targets, organic and vegan food options, local produce, artisanal design, and accommodations that integrate sustainability into their whole philosophy.
- Wellness has started to boom as an industry over the past several years, in part due to growing consumer awareness of physical and mental well-being as a result of the pandemic. A growing number of hotel guests are now looking for wellness packages beyond the typical hotel gym.
Hotels have been responding to this booming demand in 2022, with many brands including Marriott and Hilton investing in new wellness facilities and amenities, health services, treatment products and packages, and custom-designed wellness resorts.
The past decade has been a huge period of disruption and innovation for hotels. Environmental issues, new technologies, COVID-19 and the rise of a new generation of travellers are all factors that have shaped the direction of the hotel industry since 2013 and will continue to shape the hospitality industry in the coming years.
One thing is for certain: the hotel industry needs innovative leaders to guide businesses through the challenges of tomorrow.
If you’re considering a career and looking to become a hotel leader then you might want to look at the Blue Mountains International Hotel Management School (BMIHMS), the number one hotel management school in the Asia Pacific region.