Following the challenges of the preceding two years, 2022 saw travel resume at record-breaking levels, and hotels worldwide reaped the rewards. But as staff shortages and increasing costs loom over the industry, you’re probably wondering now: “What’s in store for hotels in 2023?” Keep reading this article to find out.
10 Hotel Trends to Watch in 2023
From our perspective, we anticipate that a number of the trends that emerged this year will continue in 2023, including a strong focus on sustainability and the need to invest in more automated solutions to ease the staffing pressures and provide an optimal service for guests.
Below are the top 10 Hotel Trends to watch in 2023:
1. High levels of Travel Demand may continue in 2023
Despite rising costs, early market indicators show that pent-up travel demand will likely continue in 2023. Travel is still top of mind for people, particularly across Western Europe and the US. In fact, our most recent market data shows that nights booked from British and US guests are significantly above 2019 levels, and at a much higher price too. This clearly indicates that travel is still an important part of people’s budget.
We expect that travelers may opt for either all-inclusive style holidays with full control of their budget, or go for very basic travel options and then top up with extra services and activities. This could present significant opportunities for hotels to either offer all-inclusive style holiday packages (similar to cruise lines and safaris), or to sell basic rooms and upsell add-ons prior to the guests’ arrival and during their stay.
2. Sustainable travel will be easier in 2023
Research by Skift shows that 83% of global travelers think sustainable travel is vital. In addition, according to Booking’s Sustainability Report 2021, 73% of travelers would be more likely to choose an accommodation if it has implemented sustainability practices.
Booking.com recently introduced a sustainability recognition program, 100% of 2022 RFPs for negotiated rates include sustainability criteria and Great Hotels of the World introduced sustainability awards to help consumers, corporates and groups make better decisions regarding sustainable travel. Thus, we expect to increasingly see people opt for more sustainable travel options in 2023, and not just environmentally but also socially and economically.
3. Increased Automation to ease labor shortage and a reinvention of guest service
Skyrocketing levels of travel demand combined with the current staffing challenges have forced hotels to find new solutions to ease this pressure and optimize the guest experience at all stages of their journey. This trend is likely to continue in 2023, in tandem with a complete reinvention of guest service.
Over the years, manual admin processes have significantly removed the direct connection to and empathy with clients. Indeed, we have seen an entire generation of staff who grew increasingly disconnected from customers because they were closed up in backoffices with managers, spreadsheets, and meetings. Thus, we expect hotels will prioritize automating more administrative processes whilst striving to retrain existing staff on customer-focused skills, leveraging technology to improve guest service.
4. ADR will continue increasing to combat rising Costs
According to Guestcentric’s most recent market data generated from its portfolio of hotels, 2022 revenue is still exceeding 2019 numbers by an average of between 25 to 30% This has all been driven by a significant increase in average daily rates. Pricing has been very high throughout the year, and this was largely driven by the demand.
The results of our December 2022 hotel business barometer shows that while we expect ADR growth to decelerate, ADR is likely to continue to grow in 2023, with the majority of Hoteliers surveyed expected to increase ADR in 2023.
The increase in prices going forward will likely be driven by rising costs and inflation, rather than pent up demand. More than ever, Hoteliers are concerned about reducing costs - for example, through leaving parts of their properties empty for extended periods of time or reducing utilities expenses through giving guests the choice to opt out of turndown service to promote sustainability.
The marginal cost of selling a room is now a material amount and thus the view now seems to be that if a hotel cannot profitably sell inventory against rising costs, then there is no point in selling it at all.
5. Business Travel will Change, rather than Recover to what it once was
Although GDS bookings - a good indicator of international business travel - have clearly picked up over Q3 and Q4 2022, they are still just over 40% of 2019 volumes for the same period. Rather than fully recover to pre-pandemic levels, it seems likely that business travel will be reinvented to meet new demands, and hotels will need to pivot accordingly.
Although many companies have significantly reduced their individual business travel budgets, group travel is on the rise to drive company culture, intra-company networking and learning opportunities. Networking will never die, because it provides both the human-to-human element for collaboration and content for learning. Thus, company meetings, big association meetings and conferences are definitely back on track to recovery in 2023.
Following the widespread shift towards fully remote and hybrid working models, another huge priority for companies is to get all their teams back together for team building and other social events that nurture culture and keep it alive. This trend is transforming the once formal face of business travel to a more laid back one, and hotels should be prepared to pivot to this new demand, by revamping meeting venues and restaurants accordingly.
The remainder of business travel will be bleisure, with an increase of people traveling for work but bringing with them spouses and family. This is an opportunity for hotels to proactively create more relevant offers. When communicating value to the traditional business traveler, it made sense to advertise gyms and conference halls. Nowadays, hotels may want to consider highlighting their more leisure-centric facilities, such as the swimming pool or rooftop terrace, for example.
6 Group Bookings will continue growing, but will remain below Pre-pandemic Levels in 2023
Since May 2022, our market data shows a significant and consistent uptick in group bookings. After two years of Zoom calls and online events, our group enquiries pipeline is now at 85% of 2019 levels of business and November is proving to be a good month in leads generated for our hotels.
Group bookings and MICE business is currently benefiting hotels, particularly those that have historically relied predominantly on the business travel segment. We expect these bookings to continue growing in 2023, but whether they reach pre-pandemic levels remains to be seen.
7. With ADR at max, Ancillary Revenue Strategies will help grow revenue
Airlines, particularly in the budget segment, have long led the way in implementing ancillary revenue strategies. When bookings plummeted during 2020 and 2021, many hotels rolled out more ancillary revenue strategies, offering a range of extra products such as vouchers and restaurant home deliveries.
With rising operational costs, inflation and an uncertain business environment, we expect hotels to continue ramping up ancillary revenue strategies in 2023 and beyond, upselling and offering a number of add-on services, such as room upgrades, in-house restaurant offerings, local experiences, car rentals and airport transfers, for guests to enhance their stays.
8. Hotels will need to Adapt to increasing demand for Personalized experiences
More than ever, customers are expecting personalization. A recent report by Google and Phocuswright reveals that nearly six in 10 travelers said that brands should tailor the information based on their personal preferences or past behaviors.
The same study shows that 76% of travelers will be more likely to sign up for loyalty programs focused on personal preferences or past behavior. In addition, 36% would pay more in return for receiving more tailored information and experiences.
Thus, we expect that hotels will be ramping up personalization in 2023, by combining CRM and online behavior data to tailor offers and communication around guests’ preferences.
9. A Rise in Alternative Booking Tools such as Social Media and Video Content
Recent years have seen a significant increase in Gen Z travelers, who according to research by TravelPerk travel an average of 29 days per year. Another recent poll by Morning Consult shows that more than half of Gen Z respondents said they would likely use social media to help plan their upcoming trips.
Thus, we expect hotels to focus strongly on optimizing their social media marketing strategies to tap into this rising travel market and drive more direct bookings.
10. Direct is here to stay in 2023 and beyond
At the start of this year, we predicted that 2022 would be the best year ever for direct bookings. As it turns out, Hotel direct bookings and stays grew 50% over the prior best year (2019), far surprassing our wildest expectation. We expect the momentum to continue in 2023 and beyond.
Although OTAs have reverted to more aggressive marketing tactics this year, hotel direct bookings are still performing significantly above pre-pandemic levels.
With rising costs it seems many Hoteliers are strongly prioritizing their direct channel to reduce commissions. With more direct bookings than ever, the next step will be to maintain the position. Guests are still reaching out to guests directly, and thus hotels have the opportunity to convert these enquiries into more direct business for their hotels.
Summarizing the above, many trends that have emerged in recent years are likely to continue in 2023 and beyond.
High levels of travel demand and persistent labor shortages will prioritize investing in automation whilst upskilling the existing workforce in more customer-focused attributes on the agenda for Hoteliers in 2023. We anticipate tentative adoption of AI technologies in 2023 to maintain an optimal level of service at less cost, and with smaller teams.
With the rise of remote working and how both the professional and the personal have become so deeply interwoven with each other in recent years, we don’t expect business travel to be the same again. Thus, hotels that have historically relied heavily on business travel will need to pivot their communications and offerings towards this new demand. The rise in group bookings could also help in this regard.
What are your expectations for the industry in 2023? Let us know in the comments section below.