Restaurant, Hotel and Hospitality Market Research

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Restaurant, Hotel and Hospitality OVERVIEW

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 and drinks to customers or provide lodging services 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 foods sections of supermarkets.) On the lodging side of hospitality, we include hotels, motels, inns, resorts and hostels. In addition, we include 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, retail shopping areas or resort amenities.

Restaurants: The global restaurant industry generated approximately $1.2 trillion in 2020, 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 $621.5 billion for 2020. America enjoyed more than 1 million restaurants of all types before the outbreak of the Coronavirus in 2020. Estimates of the number of restaurants that closed permanently in the U.S. due to the Coronavirus vary widely, but at least 110,000 were closed for a significant amount of time, despite an injection of financial support from the federal government.

Hotels: The total number of hotels and inns of all types in the world is more than 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 2020, they reported more than 206,000 properties in their database, containing more than 18.8 million rooms. Global hotel revenues were approximately $440.9 billion during 2020, according to Plunkett Research estimates.

U.S. hotels and similar properties generated about $160.2 billion in 2020 revenues, according to the Census Bureau. In the U.S., the traditional lodging sector includes roughly 62,000 properties containing 5.8 million guest rooms, according to Plunkett Research estimates.

The world’s largest hotel chains include Hilton Worldwide, Marriott, Hyatt and Accor. (Marriott acquired giant competitor Starwood in September 2016.) 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: Cruises departing from North American ports embarked approximately 15.4 million passengers during 2019. Globally, the major cruise lines (those that are members of the Cruise Line Industry Association) operated ocean-going ships that carried 30.3 million during 2019 and only 17.8 million passengers a few years ago in 2009. The Coronavirus pandemic was devastating to the cruise industry, leaving some ships famously filled with passengers under quarantine and all ships eventually taken out of service temporarily. Some cruise activity in the U.S. was expected to resume in the summer of 2021.

The long-term growth outlook for the hospitality sector was excellent, prior to the Coronavirus pandemic in 2020. Restaurants were primed to benefit from a rapidly growing middle class worldwide and may still do so once the virus is contained. 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 were set to benefit from the very positive long-term outlook for travel in general, both in the U.S. and worldwide, before the outbreak of the Coronavirus. On a global scale, for example, the UN estimated that there were 527 million international tourism arrivals in 1995, which more than doubled to 1,500 million in 2019. They expected this trend to continue, with international arrivals rising at a 3.3% yearly rate between 2010 and 2030, reaching 1,800 million by 2030. As of mid-2020, however, businesses and leisure travelers alike had put nearly all types of travel on hold, and a growing reliance on video conferencing, instead of face-to-face meetings, may create a long-term decline in demand for business travel. By May 2021, travel was beginning to rebound to a promising degree, particularly in the leisure sector. Business travel had improved but was still severely depressed.

Hotels face two increasingly difficult challenges, in addition to the devasting effect of the Coronavirus. The first is the rapidly growing phenomenon of rooms, homes and apartments competing with traditional hotels via the sharing economy. Firms like Airbnb have been taking a serious amount of market share away from hotels.

Second, hotel chains have been enduring very significant marketing challenges due to the proliferation of online travel agencies (OTAs) such as hotels.com and expedia.com. These OTAs were taking as much as 15% to 25% of a hotel room booking’s revenue. At the same time, the OTAs give travelers a convenient way to compare multiple hotels, locations, features and prices on one internet site. Many consumers respond regularly 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 loyalty points from hotels 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 both the customer and the customer’s loyalty.

China was one of the most exciting factors in the future of the hospitality industry before the outbreak of the Coronavirus. Restaurant and coffee shop chains, such as Starbucks and Yum! Brands (operators of KFC and Taco Bell) have enjoyed extraordinary growth in China. At the same time, China was one of the largest generators of international tourism, as more than 154 international million trips originated from China each year. Likewise, India offers very significant growth for the hospitality industry over the long run.

What’s Changing the Hotel Industry?

= Hotel chain mergers and acquisitions will continue. There are plenty of promising, small- to mid-size chains that larger firms may target worldwide, including those in underserved regions of the world such as Africa. Acquisitions by large firms with significant financial and marketing power continue to make sense.

= Airbnb will not only continue to grow in the number of individually-owned homes and apartments it offers to travelers, it will also offer a growing number of traditional hotel and motel rooms over the long term. Its growing, global customer base and low fees are attracting listings from hotels and motels. Airbnb aggressively targeting business travelers as well as the individual leisure traveler.

= Travelers’ desire for local experiences will continue to influence hotel features and marketing. Many travel consumers respond favorably to food, drinks, tours/excursions and amenities that feature local flavors, foods and culture.

= More hotels will become dog-friendly. Millennials are delaying marriage and children, but are keen on owning, and traveling with, their dogs. Mature adults are likewise often keen to travel with their dogs.

Source: Plunkett Research, Ltd.