Hospitality Industry 3.0? – 2023 Top Hospitality Industry Trends from EHL Insights
This article originally appeared on EHL Insights.
What are the latest trends in the hospitality industry? Circumstances over the past few years have triggered a transformation within the hospitality industry. Many businesses didn't survive, others adapted swiftly and hung on in there, and some were born out of the chaos that ensued with innovative concepts tailored to our new normal. Technology has been evolving at breakneck speed, and the hospitality industry will be utilizing technologies in many new and wonderful ways in 2023. Consumer trends show travel is very much high on the wishlist for most people again in 2023, but will squeezed household budgets mean holidays, dining and leisure are put on the back burner once again? Only time will tell. But one thing is for sure, hospitality businesses must keep their eyes and ears open to the latest industry trends in order to streamline their costs and maxamize their profitability, to keep thriving in 2023 and beyond.
So what new trends are emerging? An increased consumer awareness of all things sustainable, purposeful and health & well-being has set new benchmarks for hospitality enterprises. EHL Insights presents to you the current trends in the hospitality industry of 2023.
The 10 trends that are shaping the hospitality industry in 2023
1. Bleisure travelers & hotel work spaces
Working remotely has today become commonplace for many employees and is forecasted to become more than just a passing trend. A shift accelerated by the global public health crisis, an unprecedented number of high-profile companies – with big tech companies like Twitter, Facebook, and Amazon leading the way – announced that they will adopt a hybrid or flexible approach to working remotely. A study carried out by freelancer platform Upwork found that 22% of American Workforce Will Be Remote by 2025.
This means that hospitality venues are turning themselves into remote working hotspots for locals and traveller's alike. This is a great opportunity for hotels and F&B venues to capitilize on the trend and adapt their offering to meet the needs and wants of this emerging segment; ample plug sockets, free high-speed WIFI, meeting rooms and great coffee are good starting points.
2. Holistic hospitality, health & well-being
Preventative medicine and self-care are undisputedly trending right now. The wellness industry is transforming into a booming trillion dollar market and hospitality venues are well positioned to take a large piece of the pie, especially those with existing spa facilities.
In addition to the usual beauty and relaxation spa offering, there is rapidly growing demand for health diagnostic technology and bespoke treatment plans delivered by experts who conduct personal or group sessions to develop vitality, healing, stress management, emotional balance, mindfulness and better sleep. Discover more spa trends for 2023 in this article.
3. Digitalized guest experiences
Apps are increasingly important in the way hoteliers manage the services they provide to their customers and can now control many aspects of the guest cycle and experience. Needless to say, the trend towards digital and contactless services has gained new momentum. Traditionally, customer-facing services are being given an overhaul thanks to the more widespread use of technology-assisted options, such as mobile check-in, contactless payments, voice control and biometrics.
Consumers who have become accustomed to unlocking their smartphones and laptops using facial and fingerprint recognition will soon come to expect the same convenience in accessing their hotel rooms. Unfortunately for the establishments looking to welcome them, these upgrades may be costly to install and maintain. If you want to stay ahead of the curve, we recommend you dig deep and make the investment.
Today’s guests have grown to expect to be recognized and treated as individuals, one study revealed that 71% of buyers expect personlized interactions. The problem for most businesses is that they're still personalizing at segment level and customer expectation has moved far beyond that in 2023, towards hyper-personlization.
Hospitality businesses can implement hyper-personalization by using technological platforms such as CRM and CEM which use big data to create highly customized one-to-one interactions between the guest and the host at scale. Hotel, Travel providers and Restaurants are able to draw on data to utilise insights into customers past browsing or buying habits, enabling hotels to tailor their offers and promotions, and automatically provide services the individual is searching for.
Hotel operations more generally are increasingly shaped by the use of management systems to monitor and optimize revenues, customer relationships, property, channels and reputation. Not to mention the rising importance of integrated messaging, predictive analytics, customer profiling and middleware, which seeks to connect any disparate systems. Even if you're establishment has some technical limitations, the front of house team can go the extra mile to personally greet guests in the offline world.
5. Experience economy & essentialism
Customers request both extreme personalization and unique experiences. This could very well lead to the death of the travel agent and the rise of the independent traveler. Airbnb are placing their bets on experiences being the big hit of 2023 with their
Travel guilt is real. Minimalism has reinvigorated the otherwise somewhat dusty saying “less is more”. Travelers are decreasingly seeking lavish displays of wealth, preferring instead to spend wisely, purposefully and make a positive impact on the world. Unique experiences that give back to local communities in meaningful ways are in demand, as are niche properties, adventurous holidays and relaxation retreats.
6. Asset management strategy
The asset-light approach has become prevalent in the industry. The separation between the management of operations and real-estate assets now allows hospitality companies to focus on their core business, thus improving efficiencies.
It however induces additional complexity and potential agency problems, explaining the emergence of new types of jobs, such as asset managers. In addition, new job profiles have emerged following the increasing complexity of the hospitality industry. In parallel, the need for quantitative competencies (for forecasting, budgeting, etc.) has also increased.
7. Artificial Intelligence (AI)
Chatbots have proven to be a customer service asset both during the booking process and in responding to recurring questions. This is especially important in an industry such as hospitaliy which is expected to be on 24/7.
ChatGPT, a chatbot that uses the GPT-3 language model developed by OpenAI, is adept at imitating human conversational versatility when delivering answers. Think of it as a new smarter iteration of a search engine, one that will do away with the endless blue links which require the user to open up multiple tabs and sift through the information to find the answer, but rather, interpret the users wants and needs and bring back a succinct response that draws on all of the information on the web. This could be a search query for a user looking for travel recommendations, for example.
Whether it is specifically ChatGPT or another AI-powered chatbot, it’s inevitable that advanced AI will soon be deployed into customer-facing entities like travel and hotel search. So 2023 is the time to get ahead start on this trend which will surely feature heavily in the hospitality industry of the future.
8. Renewable energy
A hospitality trend that is both current and a hallmark of recent years: “sustainability” once again assumes its position, with a focus on renewable energy. In recent years hospitality outlets have been making small steps by prioritising the removal of disposable plastics, eliminating unnecessary paper consumption thanks to opt-in receipts and reducing food waste, however more far-reaching ethical and environmental considerations are shaping decisions made at the hospitality management level and within the construction stage.
Technology is beginning to play a role in this by enabling hotels to track and reduce their energy and water usage. This article explains how iconic London hotel Claridges installed a ventilation and extraction system in its kitchens that reduced energy costs by 30%. The intelligent system, supplied by Quintex, moderates its output or switches off depending on the conditions in the kitchen and saved the hotel £10,000 ($13,200) a year with a payback on the initial investment after 1.8 years.
EnergyLink defines the 5 renewable energy sources suitable for hotels: solar, wind, combined heating and power, geothermal and bio fuels. The problem is that it takes considerable funding and often space to implement many of these solutions. However, hospitality businesses are realising that not only is it the right thing to do environmentally but with the volatile energy market we are currently experiencing, there is cost saving insentive too. So 2023 is set to be year of the innovative renewable energy source.
9. Virtual & augmented reality (VR & AR)
Following on from the orientation towards visually appealing content, it seems only natural that businesses in the hospitality industry should seek to capitalize on features such as virtual tours, conjuring up a digital environment for consumers to picture themselves in.
Videos providing 360-degree views of restaurant ambiance, café terraces enveloped in greenery or hotel beachfront locations, for instance, are just the ticket to make an establishment stand out this year. As ever, keeping the access threshold low is key to reaching as broad an audience as possible with virtual reality material: making content accessible on a variety of devices, without the need for a VR headset.
Once on site, guests should be able to whip out their trusty sidekick – their smartphone – and simply point it at real-world artefacts to summon up additional information. Augmented reality uses graphical or informational overlays to enhance in-situ environments. Once they have downloaded the respective app, guests can use this tool to access restaurant opening times, reviews or interactive tourist information maps or even create user-generated content.
The bargain hunters are out in force due to the cost of living crisis many countries are facing due to global conflicts, soaring energy prices and record-shattering inflation rates.
Wulfric Light-Wilkinson, General Manager International at Wunderkind a behavioral marketing software company said: Consumers are more price sensitive. “Consumers will ultimately always seek value for money, but the ongoing cost of living crisis has certainly heightened price awareness.” He continued,”This means that consumers are definitely in ‘deal-seeking mode’ and will be particularly receptive to timely recommendations and offers from businesses. This is especially the case when the messaging is relevant, personalised and based on previously viewed products, categories and basket behaviour…”.
Today – Hospitality Industry 2.0
What does the future of hospitality hold? EHL faculty carried out an internal survey with a view to unearth the direction the industry is heading in. Overall, our faculty suggests the need for hoteliers to properly embrace the above mentioned trends and understand what's at stakes. Six dimensions came out from our survey:
1. Standardization can no longer be the norm
It is becoming critical to personalize and tailor the services to the needs and preferences of the traveler.
2. To create value, focus on niche markets
More customization and specialization may enable increased value creation for hospitality companies. But be careful, as a respondent said, this requires to genuinely think about the value proposition of your offer and not “simply branding and rebranding”.
3. Exploit technology as an accelerator for business
Technology will be at the core of the hotel experience both in room, before and after the trip. This will lead to the development of new concepts and more innovation in the industry, and contribute to the emergence of an ever more individualized offer.
4. Social responsibility is a moral and economic obligation
The impact of global warming can today be considered a major risk for both corporations which may lose in revenues and profits, and society as a whole. It is thus critical for governments, but even more so for corporations, to become more sustainable: “not just green, but real sustainable business models”.
People are becoming increasingly sensitive to environmental and social issues. A respondent said that this “has to be considered in branding, but beware of green-washers: consumers are now well-aware that window-dressing exists and they will not buy it.”
5. Develop more responsive and resilient business models
“Tourism, despite ever-growing flows of travelers, will become riskier and more prone to crises” as the number of travelers steadily continues to grow. This will be accompanied by increased regulation as a response to a disproportional increase in tourist flows in some places (e.g. Venice or Barcelona).
The Covid-19 pandemic, now thankully behind us, upturned work and childcare schedules and have made delivery services a new feature in our daily lives. No longer content with (always) ordering the usual go-to pizza, Chinese or Indian takeaway, consumers are now looking to take things up a notch. Not wanting to forego the frills of fine dining, they are now looking to emulate the experience at home. F&B outlets are making this possible by incorporating drinks deliveries and offering extras: atmospheric candles, QR-code playlists and unexpected freebies. Whilst hotels have diversified their offering thanks to the pandemic, many now offer alternative work spaces for those tired with working from home.
6. Manage talents actively
The days of long-lasting employee retention as well as passive, hierarchical management styles are definitely gone. “Attracting, developing and keeping the right talent into and within the hospitality industry remains a core challenge.”
Tomorrow – The Hospitality Industry 3.0?
While, as seen above, the consensus revolves around the need for the industry to evolve in order to better adapt to the current environment, some respondents were more ‘extreme’ and suggested that hotel rooms, as we know them today, “will become a thing of the past”.
These respondents refer to the impact of the sharing economy and the tendency of today’s customers to avoid traditional hotels. They believe that adjustments in the offer, like the ones listed above, are not sufficient and that the industry has to truly reinvent itself.
This standpoint is reinforced by the increasing importance of technology in the hospitality industry and the power that technology firms are acquiring. A respondent elaborates:
Major technology firms will replace most hotel brands, because they can offer technology solutions and create markets to attract customers. The traditional hospitality industry will evolve into niche markets (serving specific types of customers), or extremely luxury sector (so they can afford to pay their staff a reasonable salary). Those who can't identify their niche will become the money machines for technology companies. Some brands big enough may survive, but their business will get tougher.
While respondents are more or less alarmist as to the future of the industry, all nevertheless agree that it has to evolve and reinvent itself in order to exploit the opportunities and cope with the challenges it faces. The only question remaining is up to which extent this transformation will have to take place.
Associate Professor of Finance at EHL Lausanne
Associate Professor at EHL