The Future of the Restaurant, Hotel & Hospitality Industry

The hospitality sector will continue to be affected for the long run by three factors: the fight over higher wages, advancing technologies and the sharing/gig economy. To begin with, wages for hotel and restaurant workers have been under pressure to accelerate (particularly in lower-end jobs), at least in the U.S. and other well-developed economies. Several things are at work here, the most noteworthy being constant pressure in the U.S. for a higher minimum wage, while a large number of cities and states have raised their minimums. Activists, unions and many legislators have been clamoring for higher pay for those who work in such positions as cooks, cleaners, table bussers, maids, janitors and counter clerks. Employees themselves have been demonstrating for better pay and benefits, to a minor degree. Some restaurant workers have even voted to join unions, including workers at hundreds of Starbucks locations. Such trends are driving up operating costs. At the same time, in many nations, declining birth rates and/or aging populations will eventually lead to shortages of workers, here again creating the potential for wage increases.

Over the long-term, a rise in wages will boost the next trend: the application of advanced technologies to the hospitality sector. Hotels have been taking the lead here, with reasonably priced kiosks now in use that enable guests to check themselves in and pay their bills with little assistance from desk clerks. Likewise, major chains are rapidly adopting technologies that enable guests to use their smartphones as room keys, check-in platforms, and communications platforms for ordering hotel services such as room service or spa massages. A growing number of hotels are utilizing robots to deliver luggage, personal items and even room service foods to rooms. Hilton participated in a project with IBM to test a robotic concierge that can give guests tips about local attractions and transportation. Other chains testing robots have included Yotel, Crowne Plaza and Aloft.

Restaurants are very slowly adopting cost-cutting technologies as well. For example, in Chili’s restaurants, one of America’s largest and most successful chains, has purchased tens of thousands of tablets that enable guests to order and pay for their meals directly from their tables. Fast food restaurants will increasingly use apps, kiosks or tablets as order entry and bill payment platforms. Technology is becoming more effective and less costly, to the point that less customer interaction with employees will be the result. Ordering food in advance via smartphone and then picking up at the counter with no waiting is already becoming common. Starbucks has been a pioneer in this and other technologies, including ordering by smartphone and the firm’s wildly popular Starbucks Rewards program that enables guests to maintain a cash balance that is used to pay for orders, while earning generous loyalty points.

At a slower pace, kitchens will automate certain cooking tasks as well. Robots are also now commercially available that pick up completed food orders from the kitchen and carry them to the appropriate location in the restaurant. Robotic hamburger cookers and deep fryers are also coming into use. In February 2021, food delivery firm DoorDash acquired robotics startup Chowbotics, which makes salads and poke bowls prepared by a robot in under one minute. A significant level of robotic cooking, particularly in the fast food segment, will develop over time. Artificial intelligence will play a vital role in these robots. To watch a burger-flipping robotic arm in action on YouTube, see: https://youtu.be/yXdrfc5ZVi4.

Meanwhile, the sharing economy will have a continually growing effect on restaurants and hotels. To begin with, the use of restaurant food delivery services is booming, as consumers use services such as Uber Eats, DoorDash or Favor to view menus, order and pay for meals, and arrange rapid delivery directly to the home or office.

The traditional hotel industry is under major assault by the sharing economy, thanks to Airbnb and similar services. Airbnb, Inc., founded in 2008, operates as an online intermediary for travelers needing accommodations and those who have spare housing space that they want to rent out. Through Airbnb.com, members who are willing to let travelers stay in their homes, investment properties, resort condos, guest houses and other accommodations can post their information, including pricing and amenities. In turn, travelers may search in a given market for members who are willing to accommodate them. Airbnb offers millions of listings in about 200 countries.

There are a large number of similar services worldwide, some with a specialty, such as luxury properties. The net result is that traditional hotels are losing market share. (Some hotels are even listing their own rooms on Airbnb in order to stay competitive.) In some cities, short-term rental firms are being forced by regulations to operate in a more hotel chain-like manner, collecting room taxes, just like hotels do, and enforcing stricter safety standards at members’ properties, particularly in the U.S., Canada and Europe. This trend is likely to grow over time. Another factor has recently challenged the short-term rental firms. While companies like Airbnb were often seen by consumers as a way to get accommodations at bargain rates, higher prices and add-on fees are changing many markets. For example, many property owners are now charging substantial “cleaning” fees on top of their room/home rental rates.

In the meantime, hotel chains might adapt by building hybrid hotels. That is, they could build branded condominium buildings reasonably near hotel properties. The condominiums could be owned by investors who want to rent them out. Hotel chains could incorporate these rooms into their reservation systems, enable guests to use the amenities of nearby hotels (such as conference facilities, gyms, spas, pools and restaurants) and enforce strict standards in the rental units.

The hospitality industry will also be changed by increasing safety and guest-rights regulations. Another growing factor will be consumer demands for operations that are more sustainable.

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