I was asked by my team to provide insights from the road, what I’ve seen, and what trends and challenges are looming on the horizon. I joked that I needed to dust off my crystal ball, but in reality, the only prediction I feel comfortable making is that the Green Bay Packers will not make it to the Big Game this season (wink, wink.) What I can do is provide a look at some industry challenges I’ve seen this year that will continue into 2024.
As I traveled to industry shows and visited customers throughout the year, it seemed many conversations expressed frustration about the ongoing need to bring together key data sources and numerous technology systems. We’ve talked about it before, and certainly, it will be an ongoing challenge for hoteliers and their technology vendors as they look to consolidate the growing data ocean and wrangle it into a cohesive, streamlined workflow that provides actionable insights leading to better results.
However, I believe great challenges are the enablers of great change. So, with that in mind, let’s look at some of the key challenges facing our industry in the coming year.
Resiliency and Growth as Challenges Continue
The travel and hospitality sectors depend on a higher degree of stability and certainty to flourish. The world is walking on eggshells right now, and with geopolitical and economic challenges growing, it can feel as if we are caught in a state of purgatory, on the brink of breakaway growth and hitting the bottom all at the same time.
While our industry is bouncing back, 2023 brought great challenges to the table, many of which will linger into 2024 and beyond.
- The evolution of the working environment (return to office vs. fully remote vs. hybrid.) A recent study conducted by McKinsey, revealed that office attendance is still 30 percent lower than it was before the pandemic. Of all the survey respondents, 37 percent go to the office every day. An additional 56 percent have hybrid work arrangements and thus spend one to four days per week in the office. And 7 percent work fully remotely.
- The increasing cost of capital and the pending crisis in commercial real estate continues to constrain investments that hotel owners can make. Morgan Stanley analysts think commercial real estate is heading for something ‘worse than in the Great Financial Crisis.’ We will likely see much more of this in the coming months.
Downward pressure on operating profits due to rising operating costs may hamper investment in technologies, particularly AI.
S. hotel gross operating profit per available room, or GOPPAR, fell year over year for a second consecutive month, according to CoStar’s June 2023 P&L data release. Speakers at several major shows this year noted the unrelenting pressure from ownership about costs and profitability. Even as rates hit record highs, there are still three-plus years of profitability to catch up on. This drive will certainly put the industry behind from an AI-adoption perspective as owners/operators shift funds away from advanced technology investments to other pressing matters.
- Proliferation of technology solutions. There has been a significant wave of new data and technology solutions coming into market – solving new problems or old problems in new and different ways. Too many, in fact, to consider or evaluate. Hoteliers want to try new things but are looking to technology leaders for some way to consolidate or streamline trials across the board in an aggregated approach. Today’s sales and ops teams want fewer tools that do more for them, not more tools.
- Increased confusion and separation of booking brands and stay brands with major technology players making a strong play to ‘own the customer.’ Google’s recent entry into the hospitality space with products such as Google Travel has grown and is rising in popularity. The hospitality industry is keenly aware of how this might affect their online traffic and booking conversions.
- Aging assets requiring investment will need to be addressed. The underinvestment in aging assets over the past three years will certainly need attention. The hospitality industry must mitigate this issue by prioritizing reinvestment in aging assets. Renovations, upgrades, and maintenance projects can enhance the guest experience, improve operational efficiency through technology, and help properties remain competitive in a rapidly evolving industry. Many businesses in the hospitality sector recognize the need to adapt and invest in their assets to remain relevant and competitive in the face of changing customer expectations and industry trends.
- Geopolitical issues and cross-border conflicts create a FUD (Fear, Uncertainty, and Doubt) factor. Certainly, these conflicts are already having an impact on travel, and hoteliers in troubled areas are facing new and difficult challenges.
While these challenges may paint a dark picture, the hospitality industry continues to demonstrate its resiliency. We’ve seen a bit of stabilization in the new normal, as recent reports have shown. Revenge travel, largely fueled by leisure, is plateauing and settling into similar seasonality trends of the past.
Group business is surging, as evidenced by the recent success and record-breaking attendance at IMEX. Business travel is figuring itself out as the working environment evolves.
Leveraging Technology to Solve Tomorrow’s Challenges
What do the above challenges have to do with the importance of technology integration? As we look ahead to 2024 and behind at the events of 2023, it seems technology is evolving so rapidly that industry leaders may not have the time or resources to assimilate everything that is coming at them.
Certainly, the proliferation of data is making it easier to mine for actionable insights with AI, enabling complete revenue management across all aspects of the hospitality experience. But where does that leave us as we look to consolidate and coordinate technology across portfolios?
We have learned the necessity of bringing new and existing staff up to speed quickly and efficiently in the use of technology and business applications. We’ve also learned that failure to do so will result in frustration, abandonment of the technology at the property level, or, worse, mismanagement of the system. This can result in higher direct and indirect costs.
For those hoteliers who are actively working on rebuilding and retooling, a critical area of focus in these efforts must be ensuring that the technology in place is working properly and being used to its full advantage. At the very minimum, it is vital first to implement tools that actively monitor technology investments, ensuring they function as promised, and second to reveal if staff is using them efficiently.
The growth of data insights is enabling hoteliers to know guests better and create more personalized experiences. It also provides better insights into operational inefficiencies to optimize labor utilization. The evolution of Generative AI combined with Big Data will certainly enhance and increase our ability to leverage data insights.
Change is Constant
As we move ahead, we don’t know what lies ahead. We can be afraid of turmoil, or we can try to leverage it. Prolific author and speaker Alan Watts said it best, “The only way to make sense out of change is to plunge into it, move with it, and join the dance.” I don’t know about you, but I would rather dance than huddle in a corner. Let’s leave the huddle to the football team and step into the next challenge with determination and an eye on growth.
Knowland is the world's leading provider of data-as-a-service insights on meetings and events for hospitality. With the industry's largest historical database of actualized events, thousands of customers trust Knowland to sell group smarter and maximize their revenue. Knowland operates globally and is headquartered just outside Washington, DC. To learn more about our solutions, visit www.knowland.com or follow us on X (formerly Twitter) @knowlandgroup.