Introduction to the Restaurant, Hotel & Hospitality Industry

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 very significant hospitality segment. 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 generatd approximately $2.4 trillion in 2023, according to Plunkett Research estimates. In the U.S., the Census Bureau reports total food service and bar revenues at $1,094.1 billion for 2023. America enjoys about 1 million restaurants of all types, from snack counters to fast food to fine dining.

Hotels: The total number of commercial hotels, motels and inns in the world is in the neighborhood of 200,000, containing about 15 million guest rooms. Global hotel revenues were approximately $901 billion during 2023, according to Plunkett Research estimates. U.S. hotels, inns and motels generated $336.8 billion in 2023 revenues, according to the Census Bureau. In the U.S., the traditional lodging sector includes roughly 66,560 properties containing 6.2 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.

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

Also, 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 is one of the most exciting factors in the future of the hospitality industry. Restaurant and coffee shop chains such as Starbucks, KFC and Taco Bell built massive chains within China. (Eventually, their success also spawned major, domestic competitors that now have thousands of locations.) At the same time, China is one of the largest generators of international tourism, with tens of millions of international million trips originating 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 is aggressively targeting business travelers as well as individual leisure travelers. Many other firms are competing in the business of offering privately-owned rooms, apartments and vacation homes for temporary rental, including Vrbo.

= Travelers’ desires 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.

= Hotels, cruise ships and restaurants require large numbers of employees—major chains are among the world’s largest employers by head count. Attracting, training and maintaining sufficient staff levels is a massive challenge. Aging populations in many nations, from the U.S. to Asia to Europe, are shrinking the total pool of potential employees. At the same time, market conditions and government regulations are forcing hospitality firms to significantly boost their levels of pay. As a result, many companies have reduced the level of personal service and staff-to-guest interaction. For example, many hotels no longer provide daily maid service or meal room service. Many restaurants are relying heavily on automation—requiring that guests order and pay on tablets or kiosks, and a growing number of firms are utilizing robots for food preparation and/or delivery to the table.

Source: Plunkett Research, Ltd.

Cruise Lines: Cruise Lines International Association (CLIA) reported passenger embarkations on a global basis at 31.7 million in 2023. (North America is by far the largest market.) The cruise industry’s total economic impact on the global economy (on a broad basis). Large numbers of new ships are being launched. The global cruise industry is projected by CLIA to grow from 625,000 berths in 2022 to 746,000 in 2028.

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