HOTEL AND HOSPITALITY

INDUSTRY REPORT
Lauren Ortiz
07 December 2020
Table of Contents
Table of Contents ........................................................................................................................1
Industry background....................................................................................................................3
Current information.....................................................................................................................3
Relevant trends ...........................................................................................................................3
Effect of COVID-19 ................................................................................................................3
Recovery forecast ....................................................................................................................4
Target Markets ............................................................................................................................5
Business travelers ....................................................................................................................5
Leisure travelers ......................................................................................................................7
Competitors ................................................................................................................................8
References ................................................................................................................................ 10
Table 1: Occupancy Levels in Percentage....................................................................................4
Table 2: Change in RevPAR in Percentage ..................................................................................4
Table 3: Occupancy Forecast to 2024 ..........................................................................................5
Table 4: Business Traveler Demographics ...................................................................................6
Table 5: Business Travel Internet Access Demographics .............................................................6
Table 6: Business Travel Buying Preferences ..............................................................................7
Table 7: Leisure Traveler Demographics .....................................................................................7
Table 8: Leisure Travel Internet Access Demographics ...............................................................8
Table 9: Leisure Travel Buying Preferences ................................................................................8
The hotel and hospitality industry provides individuals with a short-term, usually ranging from a
few nights to a few weeks, place to stay. This document strives to explain the hotel and
hospitality market with a focus on the hotels to a varied audience in order to help them better
understand the industry. By covering the industry’s background, current information, relevant
trends, target markets, and competitors.
Industry background
The hospitality industry has existed since ancient times when people opened their homes to
travelers. According to the Merriam-Webster dictionary, the word hospitality is partially derived
from hospitalis, a Latin word referring to the guest and host (Hospitality, n.d.) The early
references to the idea of hospitality and the guest-host relationship traceable to the written
language of ancient Rome.
Current information
The industry is affected by recessions but recovers steadily and consistently. The 2020 predicted
annual revenue should be 107,655 million dollars, while the industry value added (IVA) for the
hotel and hospitality industry has an estimated annual growth of 0.9% until 2025 (Ristoff,
August 2020). Furthermore, the predicted annual revenue in 2025 predicted annual revenue is
214,396 million dollars, nearly double the 2020 prediction and the number of hospitality
establishments is projected to increase an annual 4.5% to 108,668 existing establishments by
2025 (Ristoff, August 2020). Despite fewer customers utilizing the hotel and hospitality industry
during recessions which leads to a dip in profit in the industry and greater volatility in times of
recession, growth remains steady allowing the industry to solidly recover and flourish.
Relevant trends
Effect of COVID-19
Covid-19 caused a dip in the hotel industry but should not affect the industry long-term. As seen
in Table 1 below, occupancy level decreased by an average of 38.4% from the end of Q3 2019 to
end Q3 2020 across two hotel chains (Airoldi, 2020). Revenue per available room (RevPAR)
averaged 85.13% lower in 2020 Q2 than 2019 Q2 among three hotel chains but increased by an
average of 19.2% by 2020 Q3 as shown in Table 2 (Airoldi, 2020). The global pandemic affected
the hotel industry with an immediate decrease in customers and loss of profit, but the industry is
already showing signs of improving and adapting, even as the pandemic is still ongoing.
Table 1: Occupancy Levels in Percentage

Marriott Hilton Worldwide

90
75.9 78.5
80
70
60
50 42.5
40 35.1
30
20
10
0
End Q3 2019 End Q3 2020

Retrieved from: (Airoldi, 2020)

Table 2: Change in RevPAR in Percentage

Marriott Hilton Worldwide Hyatt Hotels

0
-10
-20
-30
-40
-50
-60
-59.9
-70 -65.9
-80 -72
-90 -81
-84.4
-90
-100
End Q2 End Q3

Retrieved from: (Airoldi, 2020)

Recovery forecast
The hotel industry is predicted to be mostly recovered from the COVID-19 pandemic by 2024.
As displayed in Table 3 below, occupancy in the hotel industry historically, in 2019 before the
pandemic onset, has been 66.1% (Smith, 2020). Moreover, Table 3 reveals that the 2021
prediction shows a 39.2% occupancy level and -40.8 percent change in occupancy levels leaving
hotels, while the 2024 forecast projects an occupancy level 65% and a percent change of only
0.8% (Smith, 2020). The predictions for 2024 both shows an occupancy level similar to the
historic and a decrease in growth back to a steady rate of percent change, clear indicators of a
near full or full recovery.
Table 3: Occupancy Forecast to 2024

Historic Forecast

2019 2020 2021 2022 2023 2024

Occupancy 66.1% 66.1% 39.2% 63.5% 64.5% 65.0%

Percent
0.0% 40.8% 15.1% 1.5% 0.8%
Change

Retrieved from: (Smith, 2020)

Target Markets
Business travelers
Business travelers choose hotels from a broader range of price points: economy, midrange, and
upscale but are striated based on personal preferences. As shown in Table 5 below, economy
prefers internet access in their rooms more than 20% more than midrange or upscale travelers
(Victorino, Verma, Plaschka, & Dev, 2005). As demonstrated in Table 6, economy business
travelers prefer child-care options at the hotel 10% more than midrange or upscale travelers and
midrange and upscale business travelers vary little in hotel internet or customization preferences
(Victorino, Verma, Plaschka, & Dev, 2005). Overall business travelers care less overall about
customizations other than in room internet access than other customizations regardless of their
price range.
Table 4: Business Traveler Demographics

Retrieved from: (Victorino, Verma, Plaschka, & Dev, 2005)

Table 5: Business Travel Internet Access Demographics

Retrieved from: (Victorino, Verma, Plaschka, & Dev, 2005)

Table 6: Business Travel Buying Preferences

Retrieved from: (Victorino, Verma, Plaschka, & Dev, 2005)

Leisure travelers
Leisure travelers have a broad range of preferences that they search for when choosing a hotel.
According to a 2003 study by Matovic and McCleary, there is an increase in leisure travelers
who prioritize convenience and value when choosing travel accommodations and as such there
has been an increase in demand for vacation clubs or timeshares from these consumers.
Additionally, as seen in Table 7 below, leisure consumers have a wide disparity in the separation
of consumer price range and hotel type (Victorino, Verma, Plaschka, & Dev, 2005). As observed
in Table 8 and Table 9 below, economy leisure travelers care more on average than other leisure
travelers about in room internet access, while leisure travelers of all economic demographics
have preferences for customization of childcare, a kitchen, and a pet-policy (Victorino, Verma,
Plaschka, & Dev, 2005). Despite leisure travelers having greater separation among hotel type and
price point, they care more on average about the additional benefits that hotels have.
Table 7: Leisure Traveler Demographics

Retrieved from: (Victorino, Verma, Plaschka, & Dev, 2005)

Table 8: Leisure Travel Internet Access Demographics

Retrieved from: (Victorino, Verma, Plaschka, & Dev, 2005)

Table 9: Leisure Travel Buying Preferences

Retrieved from: (Victorino, Verma, Plaschka, & Dev, 2005)

Competitors
Major competitors to the hotel industry are short-term home rentals specifically, on Airbnb a site
where people can advertise rental homes and rooms. Airbnb is a major competitor to the hotel
industry because in a survey of Airbnb travelers, 80.3% travelers used Airbnb to travel for
leisure and 64.8% of Airbnb users would have stayed at a hotel or motel without Airbnb, a clear
demonstration that the two differing forms of lodging work sphere of influence and target the
same customers (Guttentag & Smith, 2017). However, Co-founder and CTO of Airbnb, Shane
Dingman said “No hotels have gone out of business because of Airbnb … Airbnb is not a perfect
substitute for a hotel. We excel at different things. Hotels excel at their amenities, consistency of
service” in an interview about the effects that Airbnb has had on the hospitality industry
(Idzerda, 2015). Additionally, a 2019 study on how Airbnb has affected the hotel industry by
Mhlanga found that although Airbnb negatively impacted the occupancy level of hotels, the price
points and RevPAR were not significantly impacted. Airbnb has diverted some vacationing
customers from hotels; however, travelers use Airbnb rentals for different reasons than hotels.
Conclusion
This report discussed the hotel and hospitality industry’s background, current information,
relevant trends, target markets, and competitors. The hospitality industry overall is susceptible to
recessions but tends to recover from recessions quickly. The hospitality industry is affected by
competitors; however, due to the varying markets and the specific benefits that many hotels
have, the hospitality industry is not in any immediate danger from the competitors. Please refer
any questions to Lauren Ortiz at [email protected].
References
Airoldi, D. M. (2020, November 16). Hotel cos.' 2021 rebound optimism varies. Business Travel
News, p. 18.

Guttentag, D. A., & Smith, S. L. (2017). Accessing Airbnb as a disruptive innovation relative to
hotels: Substitution and comparative performance expectations. International Journal of
Hospitality Management 64, 1-10.

Hospitality. (n.d.). Retrieved from Merriam-Webster Dictionary: https://www.merriam-

webster.com/dictionary/hospitality

Idzerda, R. (2015, December 17). A billionaire on paper, Airbnb co-founder feels 'great
responsibility' to do good. Retrieved from The Globe and Mail:
https://www.theglobeandmail.com/report-on-business/careers/careers-leadership/a-
billionaire-on-paper-airbnb-co-founder-feels-great-responsibility-to-do-
good/article27825035/

Matovic, D., & McCleary, K. W. (2003). Marketing in the next decade. Journal of Travel &
Tourism Marketing, 47-65.

Mhlanga, O. (2019). Peer-to-peer-travel: is Airbnb a friend or foe to hotels? International

Journal of Culture, Tourism and Hospitality Research, 443-457.

Ristoff, J. (August 2020). US industry (NAICS) report 72111: Hotels & motels in the US.
IBISWorld.

Smith, S. B. (2020, June). Outlook for the hotel industry: The impact of current events on hotel
performance and values. Retrieved from hvs.com:
https://obta.org/images/downloads/june_2020_connect___hotel_industry_outlook__hvs_.
pdf

Victorino, L., Verma, R., Plaschka, G., & Dev, C. (2005). Service innovation and customer
choices in the hospitality industry. Managing Service Quality, 555-576.