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Current data

With the continuous lifting of the pandemic restrictions, both the number of overnight stays and sales in the hospitality industry in Europe and the USA recovered significantly in spring/summer 2022, but are still below the figures for the pre-pandemic year 2019.

According to the UNWTO World Tourism Barometer, average international travel in the first half of 2022 reached again a level of almost 60% compared to 2019 (the strongest rebound can be seen in the EU with 74% and in the Middle East with 78% ).¹ The US state of Florida and Greece experienced a clear recovery. So far, both regions have benefited greatly from high domestic tourism demand combined with foreign tourists: In the first half of 2022, Florida even exceeded the numbers of the pre-pandemic year 2019 with 69.34 million visitors (first half of 2019: 67.76 million visitors).² In Greece, analysts of Alpha Bank are forecasting tourism record sales of EUR 20 billion for the full year 2022 (2019: EUR 18 billion).³

These numbers show that the hospitality industry is recovering. However, a look behind the scenes shows that the hospitality industry still faces major challenges. Between April and October 2022, I was able to exchange in person with hospitality insiders, investors and general managers of the upscale hotel industry in France, Germany, Greece, Italy, Switzerland, and in the USA. The knowledge gained here can be clustered into the following three fields of action.

Three fields of action

Understaffing

Due to understaffing, some hotels are forced to hold back hotel capacities (e.g. certain rooms are excluded from marketing), reduce parts of the range of services (e.g. lunch service is temporarily paused, executive lounges remain closed) or reduce operating hours (e.g. opening hours of restaurants and spas).

When hiring new staff, hotels often rely on foreign workers, who often have to be integrated and qualified with great effort. The provision of subsidized housing plays an increasingly important role in retaining staff. On the other hand, in many places, wages are increased only slightly to not put competitiveness at risk.

Falling profitability

Despite the good utilization of hotel capacities and higher average room rates than in 2021, it can be observed that business results are not improving synchronously in 2022. Massive cost increases, especially in the areas of energy/infrastructure, personnel and food, are reducing profits and future profit expectations.

Changes in consumer behavior

The change in consumer behavior has already been observed during the pandemic and is continuing: Especially among younger guests, the demand for authentic and sustainable experiences is growing. The need for health and safety, which has increased in importance during the pandemic, still plays a major role. Business travel is still lagging behind expectations. The high inflationary pressure on consumers is also having an impact on the consumer behavior of hotel guests: Their increasing uncertainty is reflected in shorter stays and falling F&B sales, making many hoteliers cautious about fall and winter.

Outlook

The outlined fields of action show that it will not be easy to achieve profitable growth in the near future. Now, that the summer season momentum is history, the outlook is less rosy due to the still unresolved Ukraine conflict, strong inflationary and recession pressures, staff and energy shortages. But what can possible solutions for the industry look like? Are price increases, energy surcharges and reduced service levels the solution? Or are management concepts needed in order to operate more foresightedly, efficiently and sustainably?

Author: Detlef Schmidt / viabledesign

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1 cf. UNWTO, International Tourism Back to 60% of Pre-Pandemic Levels in January-July 2022, Hospitality Net, September 26, 2022, retrieved October 12, 2022 under: https://www.hospitalitynet.org/news/4112618.html

2 cf. CBS MIAMI STAFF, Florida tourism continues to bounce back, WINK, August 17, 2022, retrieved October 12, 2022 under: https://www.winknews.com/2022/08/17/florida-tourism-continues-to-bounce-back/ (https://www.winknews.com/2022/08/17/florida-tourism-continues-to-bounce-back/)

3 cf. Greek tourism revenues to reach € 20 bn this year, ekathimerini.com, September 11, 2022, retrieved October 12, 2022 under: https://www.ekathimerini.com/economy/1192976/greek-tourism-revenues-to-reach-e20-bln-this-year/