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 will generate approximately $2.3 trillion in 2022, according to Plunkett Research estimates. In the U.S., the Census Bureau reports total food service and bars revenues at $975.3 billion for 2022. America enjoys about 1 million restaurants of all types, from snack counters to fast food to fine dining. Estimates of the number of restaurants that closed 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. Many of these restaurants were later able to reopen. Also, many empty restaurant spaces have been taken over by entrepreneurs eager to open new restaurants.

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 will be approximately $850.0 billion during 2022, according to Plunkett Research estimates. U.S. hotels, inns and motels generated $205 billion in 2022 revenues, according to the Census Bureau. In the U.S., the traditional lodging sector includes roughly 64,000 properties containing 6.0 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, 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.

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 and Yum! Brands (operators of KFC and Taco Bell) have enjoyed extraordinary growth in China. 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.

= The Coronavirus has had a very significant effect on the entire industry. Staff is hard to hire, and travelers have become accustomed to lower levels of service in hotels and motels, including less frequent room cleaning and fewer menu options in hotel restaurants. Automation, including self-service check-in, is increasing in hotels.

Source: Plunkett Research, Ltd.

Cruise Lines: The Coronavirus pandemic was devastating to the cruise industry, initially leaving some ships burdened with passengers under quarantine and all ships eventually taken out of service temporarily. Cruise Lines International Association (CLIA) reported passenger embarkations falling from 29.7 million in 2019 to 4.8 million in 2021 (down 84%). Passenger numbers rebounded on a global basis to 20.4 million in 2022. (North America is by far the largest market.) The cruise industry’s total economic impact on the global economy (on a broad basis) plummeted from $154 billion in 2019 to $63.4 billion in 2020 (down 59%) but rose once again in 2021 to $75 billion. The CLIA is optimistic about the resilience of the industry, projecting that passenger volume will recover and surpass 2019 levels by the end of 2023. 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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