Navigating 2023 : How Hotels Continue to Adapt to Changing Guest Preferences

Andrea Stokes at J.D. Power writes that the hotel and travel industry experienced a surprising year in 2022, with a surge in leisure demand and high room rates due to consumers booking "revenge" travel after two years of the pandemic. The labor shortage in hospitality will continue to ease, but the industry needs to work on educating the younger generation about careers in hospitality and improving their software training. Hotel technology still has a long way to go, with many franchisees and independent hotel owners avoiding software updates and sticking to legacy systems. 2023 is set to be "The Year of Sustainability" with hoteliers having the opportunity to make their properties more environmentally friendly, and guests becoming increasingly interested in sustainability programs. With the waning effects of the pandemic and a brighter future, the hotel industry will continue to grow with job creation, resuming property improvements and capital investments, and providing returns for real estate owners.

Were you surprised at how last year played out for the hotel industry and the travel industry overall? In January each year on the J.D. Power Travel & Hospitality podcast, we make predictions about the year ahead. I recall our predictions in January 2022—the continued pandemic would depress (or eliminate all together) international inbound travel demand, luxury-oriented demand would push up leisure room rates, there would be continued softness in transient business travel but green shoots of recovery for group/MICE business travel.

While our predictions were largely correct, we underestimated leisure demand and how high hotel room rates would soar in 2022. While room rates had been rising by the end of 2021, we were experiencing another Covid surge at that time. No one knew how long the surge would continue; thus, it was difficult to predict how the high seasons (spring and summer) would play out. Yet if I were to sum up 2022 in one word, it would be “revenge”. Consumers were booking “revenge” travel after two grueling years of a pandemic, and hotel operators were raising room rates as “revenge” against to two years of ugly property P&Ls. So, what should we in the industry expect in 2023?

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The Hotel Yearbook 2023 - Annual Edition

As we have embarked on 2023, it is evident that the hotel industry has made a robust recovery from the pandemic. Occupancy and pricing have returned to their pre-pandemic levels. However, the future of our industry is contingent on how nimble the hospitality sector can be in adapting to ongoing innovation, changing market conditions, evolving consumer preferences, new staffing challenges, and sustainability realities. These uncertainties are the new normal in an unpredictable world.