The hotel industry is one of the fastest-growing sectors of the world and an integral as well as an indispensable part of the Hospitality industry. In this article, we discuss 6 Major Hotel Industry Challenges in 2020 and beyond.
The Hotel industry has shown little signs of slowing down over the years even during economic recessions. However, the COVID-19 pandemic wreaked havoc to the industry which had not seen a downfall in decades.
While the hospitality and tourism industry has begun to rebuild itself after the worst year of 2020, there are challenges that still needs to be looked upon. These were existent from the past few years and will need immediate lookup in 2021. So, what can be the major hotel industry issues in 2020 and beyond?
It is assumed through studies that by 2022 almost 1 in 10 people would be employed by the Hospitality and tourism industry. The hotel industry is an integral and indispensable part of the Hospitality industry
Please check the Overview of the Hotel industry to learn more about why and how the Hotel industry is one of the key sectors globally. Now getting back to the topic of major challenges in hotel industry and hospitality and travel sector on the whole.
Continuously Changing Consumer demands
This is no surprise. Technology has made us impatient and we want things in a jiffy. Less than perfect can easily throw compares out of business.
The understanding of the customer is thus the key and more so in the Hotel industry.
A better understanding of customers is sure to become a major challenge for the hotel industry in 2020 and beyond.
Why so? Here’s the argument.
Changing regulatory norms like data security, credit card fraud, compliance, consumer protection laws and more make it more and more difficult for organisations to adjust based on demands and norms.
Skift interviewed a lot of top hoteliers which included few of the prominent names of the hotel industry like Bill Walshe (CEO of the Viceroy Group), Ed French (Chief Sales and Marketing Officer of the Ritz Carlton) etc.
Here is what they got from these hoteliers.
- The Hotel customer is more culturally oriented now which makes understanding the more difficult.
- Whether the customer spends $200 or $2000 for the room, they are always looking for the value of money.
- Luxury is a term which has many definitions now and changes around customer perception more than ever.
- Brand or a well-designed hotel is not enough anymore. It’s about the experience.
The article on Luxury Hotel Opportunities and Challenges by Skift dwells deeper into this topic.
In short, the black box in the mind of customers is becoming accessible through the use of technology and better tracking of the customer helps hotels retain customers.
So, understanding the customer fully is going to be one of the key hotel industry challenges in the years to come.
Here is an example!
A famous US hotel chain (we prefer anonymising the name) started using customer tracking software to better understand the customers.
This is how the story unfolds and how the Hotel industry can win big time by understanding changing consumer demands.
- Customer checks in the hotel in New York. Asks for an extra pillow and a Budweiser beer.
- The customer visits a Hotel of the same chain in Brussels and to his surprise, he finds an extra feather pillow on his bed along with sufficient stock of Budweiser beer in the minibar.
Understanding consumer helps in repeat business and customer loyalty.
There are numerous other examples of how the hotel industry is using customer tracking technologies to increase customer loyalty and profitability.
2. Competition from Hotel industry alternatives like Airbnb
The hotel industry performed exceedingly well over the last few years until and unless the Covid-19 pandemic destroyed the growth completely. Although things are looking up in 2021, the sector still faces serious challenges that could threaten its development.
One of the biggest threats for hotels starting from 2017 itself and beyond has been the competition from Airbnb and similar apartment sharing websites.
According to a report from Hospitalitynet, the valuation of Airbnb is well over $10 Bn which is even higher than a lot of Large Hotel Chains in the world like Hyatt.
Airbnb vs the hotel industry has been a good competition to watch out in recent years. This is set to intensify further.
This app has impacted the hotel industry in a huge way because it provides customers with units at very much the same rates as new hotels or cheaper.
Airbnb has syphoned demand from hotels and limited-service properties in key markets and high tourist areas.
So far, it appears as though most of the people who opt to stay in hotels do so because Airbnb does not offer other services such as luxury and security.
While Airbnb is sure to put a dent in the Hotel industry as is already evident, there are a lot of other Hospitality Industry Apps that are helping the Hotel industry to outwit the competition.
3. Improper and ineffective marketing
The hotel industry is still Technology averse to an extent.
Other industries outpace Hotel Industry in the adaptation of cutting edge technology.
Being somewhat technology averse can be one of the major hotel industry challenges in the coming years.
As per the Latest Hotel Industry Trends, technology is going to be the key to achieve a competitive edge.
As technology continues to impact day to day human operations, hotels have been forced to re-evaluate their marketing efforts to capture the ever-growing online market.
Image courtesy- LinkedIn Pulse
Unfortunately, although a lot of hotels have embraced the internet and all aspects of digital marketing, a lot of hotels are still relying on old marketing practices.
Some of the Best Hotel Industry Marketing tools are still unexplored or under-explored.
As a result, sales and brand recognition have suffered immensely, which has affected the success of some of the businesses.
Current trends reveal that businesses now have to start moving towards online marketing as a way to increase ROI.
4. Difficulties with Energy Management as one of the Major Hotel Industry Challenges
A lot of hotels are going green and smoke-free.
This is a great initiative as the planet fights against global warming and other climate-related issues.
However, it is also a smart move to get more profits and an edge over the competition.
Yes, that’s true.
Hotels now have to start investing in eco-friendly and renewable energy sources because customers are on the lookout for green and sustainable hotels.
People want to contribute positively to climate control initiatives and staying in eco-friendly and green hotels is one such initiative by a lot of frequent travellers.
Establishments that refuse to take issues of sustainability seriously have been impacted negatively as the overall profit margin has suffered.
5. Poor customer satisfaction
With more technological advancements, the entry barriers are lowered and new competitors and disruptors are appearing in the scene.
Poor Customer satisfaction has been one of the major hotel industry challenges in 2019 and 2020.
This is set to intensify in 2021 with growing competition and better customer management tools.
While luxury and boutique hotels have managed to take advantage of the many opportunities for hospitality innovation ahead of them, other hotels are dealing with the increasing pressure to succeed.
As such, many hotels and their managers are constantly working on multiple channels and issues to improve hotel operations, as well as their level of service.
Customer Service in the Hospitality Industry holds the key to success in 2019 and beyond.
Hotels still face the issue of poor customer satisfaction, which is the killer of businesses in the hotel industry.
Once a hotel receives a bad review, it is extremely difficult to regain its reputable standing.
6. Shortage of trained personnel with Hotel industry expertise
This is again going to be another challenge for the Hotel industry in the future. The industry has already been suffering from this but with greater automation, this is set to become more challenging in 2019.
Hotels which do not take the time out to look for trained personnel are bound to face some challenges in its service delivery.
Although many hospitality businesses have managed to stay afloat in this tough economy, this is a major hotel industry challenges in the coming years.
Finding the right people may be difficult especially for small hotels.
There are a lot of challenges in hotel industry recruitment and thus it is important for recruiters to understand the needs and wants of today’s hospitality job seekers.
Usually, high-end luxurious accommodation providers recruit trained professionals at a high cost, which is an impossible feat for low budget hotels.
With more automation and expertise based jobs, it is going to be a difficult time for finding and retaining the right talent in the hotel industry.
Here you go, we outlined a few of the major hotel industry challenges which can be converted to opportunities for competitive business advantage.
It is always said that customer is the king. However, fresher concepts like Airbnb is giving tough competition to the traditional hotel businesses.
More than treating the customer as the king, it’s about creating the right experience for the customers. Meeting and exceeding expectations would hold the key.