Restaurant, Hotel and Hospitality Market Research

At Plunkett Research, we look at the “hospitality” industry in a broad way, to include most types of services or sectors that serve freshly-prepared food to customers, or provide lodging to travelers.  That is, they literally provide hospitality to their paying guests.  Consequently, we include restaurants of all types, as well as catering, cafeterias, coffee shops and bars or taverns.  (However, we do not include the prepared food sections of supermarkets.)

On the lodging side of hospitality, we include hotels, motels, inns, resorts, hostels and cruise lines—a hospitality segment that is of growing importance to the global economy.  Of course, many lodging businesses, such as hotels and cruise lines, also include restaurants, and more than a few include casinos or resort amenities.

Restaurants:  The global restaurant industry generated approximately $2 trillion in 2015, with the fast food segment accounting for about 12% of that number.  In the U.S., the Census Bureau reports total food service and bars revenues at $623 billion for 2015.  America enjoys approximately 230,000 restaurants of all types.

Hotels:   The total number of hotels and inns of all types in the world is roughly 200,000, containing more than 15 million guest rooms.  STR Global maintains a database of significant hotel properties (those with 15 or more rooms in North America and 10 or more rooms elsewhere).  As of early 2016, they reported more than 156,000 properties in their database, containing more than 14.5 million rooms.  Global hotel revenues will be approximately $550 billion during 2016, according to analysts at Hotel Management.

American hotels and similar properties generated about $226.4 billion in 2015, according to the Census Bureau.  The sector includes roughly 53,400 properties containing 5 million guest rooms, according to the American Hotel and Lodging Association.

The world’s largest hotel chains include Hilton Worldwide, Marriott, Starwood (likely to be merged into Marriott), Hyatt and Accor.  These chains operate multiple brands within their systems, generally ranging from luxury brands at the high end to extended stay hotels and modestly-priced motels at the lower end.  The hotel industry is extremely competitive, and consumers are sensitive to prices, location/convenience, and amenities, such as Wi-Fi.

Cruise Lines: The North American cruise industry embarked approximately 12.3 million passengers during 2015. 

The long term growth outlook for the hospitality sector is excellent.  Restaurants will benefit from a rapidly growing middle class worldwide.  In emerging nations, more women will continue to enter the workforce permanently, creating both higher household incomes and more demand for convenient, prepared meals, including those provided by restaurants.

Hotels will benefit from the very positive long-term outlook for travel in general, both in the U.S. and globally.  On a global scale, for example, then UN estimated that there were 527 million international tourism arrivals in 1995, more than doubling to 1,133 million in 2014.  They expect this trend to continue, with international arrivals rising at a 3.3% yearly rate between 2010 and 2030, reaching 1,800 million by 2030.

Nonetheless, hotels face two increasingly difficult challenges.  The first is the rapidly-growing, global phenomenon of rooms, homes and apartments competing with traditional hotels via the sharing economy.  Firms like Airbnb are taking a serious amount of market share away from hotels.

Second, hotel chains are enduring very significant marketing challenges due to the proliferation of online travel agencies (OTAs) such as hotels.com and expedia.com.  These OTAs take as much as 20% to 25% of a hotel room booking’s revenues.  At the same time, the OTAs give travelers a convenient way to compare multiple hotels, locations, features and prices on one site.  Many consumers respond to this convenience and return to the OTAs to book on a non-brand-specific basis.  OTAs have convinced many consumers that they offer a way to save time and/or money.  While the travelers may give up the opportunity to earn hotel chain loyalty points when they book via OTAs, they make up for it by enjoying loyalty programs set up by the OTAs themselves.  This is a very serious problem for hotel chains, as the chains are losing control of the customer and the customer’s loyalty.

While China’s torrid economic growth rate was slowing as of 2016, it nonetheless remains one of the most exciting factors in the future of hospitality.  Restaurant and coffee shop chains, such as Starbucks and Yum! Brands (operators of KFC and Taco Bell), have enjoyed extraordinary growth in China.  Restaurant demand will continue to be strong in China as millions of people move to urban centers from outlying areas in coming years.  Domestic hotel demand is strong in China and will continue to grow. At the same time, China is one of the largest generators of international tourism, as more than 100 million people now travel internationally from China each year.  Likewise, India offers very significant growth for the hospitality industry over the long run.

Wages and Employment: The restaurant sector is one of the world’s largest providers of employment.  In the U.S. alone, restaurants and various other food service establishments employ about 11 million people, which is about 10% of the entire private sector workforce.  Likewise, hotels and similar businesses are also very large employers, at about 1.8 million workers in the U.S. alone.

While the count of jobs provided is exceptionally high, the wages tend to be among the lowest of any industry.  This tradition of low wages is due to many factors.  To begin with, restaurant work is an entry-level job for many people, with few formal skills required on the low end.  Next, the profit margin at typical restaurants is relatively low.  Restaurant customers are very price sensitive.  It is a significant challenge for restaurant operators to maintain profitability at all, leaving little room for substantial employee wages and benefits.

There are a few exceptions to this low wage scenario:  waiters, wine experts and service captains in very fine restaurants can earn substantial tips and pay.  Managers of high volume restaurants may also earn good salaries and benefits, and highly experienced head chefs can enjoy good salaries. 

Otherwise, most restaurant workers are hourly, and often part-time.  Many work for minimum wage.  Their benefits are usually very limited, if any benefits are offered at all.  This creates a paradox:  One of the most enjoyable and vital things a consumer can purchase is a good meal.  Nonetheless, consumers are unwilling to pay enough for those meals to create good wages for those who cook for them and serve them.

Restaurant wages are creating a great deal of public interest.  A few cities and states have enacted minimum wages that are significantly higher than the federal minimum.  Elsewhere, some restaurant workers are publicly demonstrating their demands for higher pay.  These factors may lead to higher pay in restaurants.  On the other hand, they may lead to rapid adoption of automation in restaurants, eliminating jobs.  For example, table computers and touch screens are now well advanced and in use in a limited number of restaurants for ordering and paying for meals.  Meanwhile, robotics for repetitive kitchen tasks are nearing commercial viability.

A small number of table-service restaurants have eliminated tipping and instituted standard service charges or higher menu prices that include service.  (The French have been doing this for decades.)  The idea is that each meal served will generate a standard service fee percentage, that is then shared in some reasonable way among servers, cooks and dishwashers.  Unfortunately, this has also lead to unintended consequences in some cases, as some servers found that their earnings declined significantly once they were no longer receiving direct tips.

Hotels are likewise very large generators of jobs, most of which are at relatively modest pay levels.  Those jobs include high numbers of maids, hotel restaurant staff, gardeners and desk clerks.  However, a big difference between the hotel and restaurant sectors is that major hotel chains, such as Marriott, tend to offer somewhat better levels of pay than restaurants do, at the properties they own and/or manage.  Major companies such as Marriott also tend to offer good benefits and excellent opportunities for career advancement from within the ranks.

Cruise lines are an outlier.  While North America is the world’s largest cruise market and major cruise lines require vast numbers of crew members for their ships, they nonetheless employ very few residents of the U.S., Canada or Mexico.  Instead, crew members at the lower levels (such as cabin stewards, servers and kitchen workers) tend to be contract workers from emerging nations, recruited in Eastern Europe, Southeast Asia and Central America.  Many are content to have low wages, a relatively steady job, good living conditions onboard and, in some jobs, the ability to earn tips.