In long-term projections, between 2022 and 2032, the Travel and Tourism industry sector is expected to contribute to the growth of the global economy at an average annual rate of 5.8%. This standard more than doubles the estimated average annual growth of 2.7% for the world economy, as reported by WTTC.org
By Sol Andreassa
The Hospitality market was valued at $4,107.6 billion in 2022 and is expected to reach $9,950 billion in 2028, with an annual growth rate of 16.13% during the 2023-2028 estimated period, according to Market Data Forecast. As a remark, it is important to say that Trips and Tourism accounted for 6.1% of global gross domestic product (global GDP) in 2021 (Statista.com) and are now heading for even greater records. In the fascinating universe of luxury traveling, the global market moves US$1.54 trillion per year, according to survey data from the ILTM | Barton Consulting | Wealth-X.
In this collection of industry data, it was found that at the end of December 2022, unaffiliated hotels representing approximately 30.000 rooms were under construction – a growth of about 2% compared to 2021. The largest brands and hotel chains had 131.000 rooms under construction in the same period. Highlight for the hotel registrations in the USA: at this moment, there are around 60.000 hotels, a third of them being independent, according to data released by Skift.
Worldwide, STR estimates that there are more than 17,5 million rooms in 187.000 hotels worldwide. (Phocuswire).
TRENDS CHANGING THE WORLD STAGE
After analyzing the current global statistics of the sector, the idea that trends have remained the same over the last seasons is reinforced. And which are they? We can mention value-based decision-making, the rise of experience travel, hybrid concepts in hospitality, virtual reception and new forms and behaviors of research for the issues that involve traveling. However, new predispositions have been presented, and they have changed this area. As we know, the economy quickly changes the scenario of a segment, and therefore, one of the new trends includes the resumption of backward markets, that is, a change in travel strategies to mitigate inflation and experiences are less impacted, reveals the CloudBeds Report – Independent Hospitality Panorama Report 2024.
WHO SPENDS MORE?
Since the outbreak of the pandemic, the demand for leisure has been so significant that it would be easy to forget other segments that are recovering slowly. However, with the virtually stagnant growth of leisure trips, all attention is focused on three market segments: international, corporate and group travel. In 2023, international tourism reached almost 90% of pre-pandemic levels, paving the way for a full recovery in 2024. Foreign tourists tend to extend their stay and spend about 90% more than domestic travelers, as remarked by Aoife Roche of STR during Cloudbeds’ first Passport UserCon event. She also pointed out that strong demand in the Asia-Pacific region is likely to make up for any gap in other regions.
BUNISNESS TRIPS
After facing a myriad of adversities in recent years, a fast return to pre-pandemic spending levels on global business traveling is expected in 2024. Even though the trip volume may not reach 2019 levels, some of the recovery will be driven by the rising fares. China, for its part, is likely to take the lead, cementing its position as the world’s leading market for business traveling.
GROUP TRAVELING
Group travel took big strides in 2023 and the momentum is expected to continue throughout 2024. In addition to conference trips and small regional gatherings, this also includes team onboarding events, social groups, and group trips to sporting events. However, there are adjustments in individual experiences, where destinations and hotels from smaller or neighboring cities, for example, can be chosen, and this is where hoteliers need to be aware of the movements to find new business opportunities, thus optimizing their performance.
DESIRE FOR LUXURY
To enjoy a more enriching trip experience, different from home, travelers are adopting strategies to save money, such as opting for off-season periods, choosing days during the week, and closer destinations. Some select locations where the cost of living is more affordable, while others take advantage of discounts on day passes or choose to only eat at luxury hotels, while some prefer more affordable accommodations.
POSTPONING THE PAYMENT, NOT THE TRIP
“Buy now, pay later” (BNPL) is the fastest growing payment method in the US. In travel, service providers like Affirm and Afterpay have partnered with Booking.com, Expedia, Airbnb, and selected hotels to offer BNPL options; and the list is growing fast. In a survey by Atmosphere Research, four in ten travelers say a BNPL option made a trip possible.
AIRBNBUST?
After a considerable growth during the pandemic, the short-term rental (STR) sector is experiencing a serious setback. Is this the beginning of the end? Traditionally, a major draw of private rentals is value: more space for less money. However, the price difference compared to hotels has narrowed and travelers are complaining about pricing tactics. At the same time, governments are closing in on STR operators by limiting the number of permits issued and the number of days that properties can be rented per year. New York is one of the cities that has just entered this fray and with strict new regulations barring Hosts from renting an entire home and requiring them to be present during guests’ stay. As a result of all this activity, rumors of apocalyptic decline (“Airbnbust”) spread online. However, on closer inspection, it seems that thoughts on the annihilation of short-term rents have indeed been greatly exaggerated.
While some secondary markets had an oversupply, the overall demand increased. In addition, over the past year, hotel rates have risen faster than rental rates. Globally, short-term rentals account for about 14.2% of the accommodation sector (Skift). Available Accommodation Revenue (RevPAR) in rental vacation sector grew 5.7% in the first six months of 2023. (TravelPulse). Demand for short-term rentals in the U.S. grew 7.6% in August 2023 year-over-year, while demand for hotels fell 1.3%. CBRE
Generative AI
The year 2023 will go down in history – period in which Generative artificial intelligence (AI) became popular. Since its launching in late 2022, ChatGPT has amassed more than 180 million users worldwide. Not to be outdone, Google launched Gemini in December, an AI chatbot that understands and generates text, audios, videos, and images. What’s really exciting about AI chatbots is their potential as trustworthy travel advisors, offering personalized information and recommendations, from flight routes to accommodation options, based on the traveler’s budget and preferences; as well as acting as translators, tour guides, and concierges. However, one of the most significant impacts of AI is perhaps its potential to revolutionize the operational efficiency of independent properties. Technological advances have democratized access to AI tools, with visionary technology vendors creating innovative products with advanced AI and machine learning. This change is ushering in a new era, where hospitality operators of any dimension can use AI to optimize operations and accelerate efficiency, since:
- An estimated 42% of corporate tasks will be automated by 2027. World Economic Forum
- Worldwide, 91% of properties use a PMS, 64% have a booking engine, and 33% have a channel manager. (Skift).
- 100% of hoteliers say AI budgets will increase or remain stable in 2024. (Hospitality Technology)
NEW RULES ARE EMERGING
When travelers’ behavior patterns change, hoteliers must re-evaluate their strategies to stay competitive. Today, this means embracing new approaches in all areas of the organization, from marketing to revenue management, operations, and guest experience. The fundamental foundation for the success of a hospitality property is the acquiring of modern technology. Hoteliers can no longer afford to remain stuck with manual processes and obsolete softwares as their competitors’ usage of the agility and efficiency of automation and cloud technology goes on. Additionally, continuous guest satisfaction and loyalty cannot be guaranteed without the usage of unified data to cater for their preferences. To make competitiveness remain, hotel properties need an integrated platform that meets their specific needs and can grow along with their business.
With information from CloudBeds – Independent Hospitality Panorama Report | 2024.
By Sol Andreassa
Foto: Freepik