Hospitality industry which includes several other sectors such as Travel and tourism Industry, Food and
Beverage industry and recreational and leisure industry like spas, clubs, theme parks, historical
landmarks and museums is seen one of the fastest and largest growing industries in the World. It has major
impact on global economy and encompasses 266 million jobs which directly contributes 9.5% of GDP (Gross
domestic product) globally.
Many other developing countries have seen continued economic growth which
creates potential in future for expansion and investment by foreign institutional investors. Hotel and
tourism sector serves as an economic booster for country’s economy and generates large revenue for
governments and organization. It has highest employment potential with 90 jobs creation per 10 lakhs of
investment. It is also significant source of foreign exchange for the country.
- ➥ Introduction
- ➥ Current status of hospitality Sector
- ➥ Issues faced by industry
- ➥ Conclusion
- ➥ Threats faced by Hospitality industry
- ➥ Recommendations to minimize the threats
- ➥ References
The hospitality industry is often consider for providing luxury service and needs an extra income. Basically that means for a well performing hospitality sector in an particular region requires a good economic growth along with positive GDP growth. The hospitality industry contributes $3.14 Trillion to global economy every year. It was responsible for generating 3 millions jobs in the year 2018 up by 1,60,000 from year 2015. Hotels spend an average of 33% of revenue on labor costs. The global hotel industry which is now worth USD 525 Billions consisting of total 18 million rooms in which 54% of rooms are affiliated to global international branded chains, which was earlier 50% for year 2012 and 46% were independent Hotels.
The top five hotel brands accounts for almost 25% of the market share which was 19% for a year 2012. 10% of total global workforce is employed by the tourism industry which is now worth almost $1.6 trillion globally. Hotel industry almost employed 173 million people globally and 25-30% of total revenue are generated from increased wages in hospitality industry.
Number of properties owned by leading hotel brands and chains
According to data, there were transactions of around 85 Billion dollars in Hotel industry worldwide, in which $46 Billion dollars were single asset transactions. For year 2018, retail value of global hotel industry as crossed USD 500 Billions generating a total revenue of USD 200 Billions in USA alone. Travel and tourism industry which is now 10% worth of global GDP in which hotel industry along with Food and beverages industry accounts for half of it.
For year 2019, Europe had highest occupancy rate of 72.2% along with Asia pacific region having second highest occupancy rate of 69.3 %. Hospitality sector was worst hit by recession of 2008 during which occupancy rate of America falling to 54.7%, while other region managing to stay above 60%. The ADR of hotel room rose from $124 to $129.78 between year 2015 to 2018 from which RevPAR was $85.96 up by 2.9% annually in US. The countries with highest average daily rate are Geneva, Switzerland with ADR of around $308.
Lower occupancy rates indicates the need to halt the development of new hotels as this will decreases profits and revenue. The largest direct contribution of travel and tourism sector to the GDP is USD 580.7 Billion in US, followed by China with USD 403 Billion dollars.
Leisure tourism spending from year 2001 to 2019 (In billion US dollars)
One of the biggest challenges this sector is going to face is oversupply of hotel rooms. Along with Occupancy rate, the performance in hospitality sector also depends on average daily rate and revenue per available room. Globally, for most of the year occupancy rate remains between 50 -80%.
Also Price creep is constant issue faced by the hotel owners as the economy improves which results in tight labor and increased wages, as the occupancies increases it requires high labor which directly results into less profits.
World oil markets also have significant affect on hotel industry as rising oil prices stunt the growth in hospitality sector but drop in oil prices doesn’t have an opposite effect.
Global hospitality industry are expected to which were generating approx $147.57 Billion in 2018 is expected to generate around $211.54 Billion by 2026. The expected revenue amount for 2020 is $383 Billion in hotel industry.
An expected revenue growth between year 2020 to 2023 is 4.1% which will result in market volume of around US $ 432 Billion. In 2018, the well known hotel Marriott International and it’s chain had generated approximately 20.8 billion U.S. dollars in sales revenue. This was entirely more than the double of the sales revenue of any other hotel firm or company in the ranking.
Currently, the average revenue generated per user is around $333.86. The hospitality industry including travel and tourism and hotel industry contributed total $ 8.81 trillion U.S. dollars to the global economy in 2018. Currently, The total contribution of specifically the travel and tourism industry to the global economy is approximately around 9.31 Trillion USD and also the total number of international tourists arrivals throughout the world was 1,323 Millions. Total global international revenue generation by tourism and travel sector is 1.45 Trillion USD. International Total expenditure of United states 144 Billion USD. Global hotel industry is worth around 600 billion USD for year 2019.
- ➥ The Sharing Economy: In these recent years everyone have seen a spike in sites. Sites like Airbnb, Homestay, HomeAway and HouseTrip.
- ➥ Continuously Changing Consumer Demands
- ➥ Shortage of Experienced Personnel
- ➥ Consumer Perception of Risk.
- ➥ There is uncertainty in various International Travel.
- ➥ Guest-Focused type of a Technology.
- ➥ New Regulations by government and Political unrest
- ➥ Economic Turndowns
- ➥ By maintaining emergency fund of liquid capital as recovery for an unexpected losses and also by prioritizing effective and sustainable marketing.
- ➥ By Maintaining a proper reserve fund of liquid capital one can minimize the threats in this industry, also it can be done by offering some insurance against the adverse political situations which in most cases are resolved within few weeks. Also, Hotel owners with sufficient capital can cope up with local threats by diversifying across the wider geographic locations, so that losses in one area due to a regional factors like weather conditions and political unrest can be compensated by profits made in other region.
- ➥ Hotels can protect themselves from new technologies such as Airbnb by forming trade associations which had put outright ban on services provided by Airbnb and OYO like platforms.
- ☞ Deloitte (2019), Hospitality Industry Employment Statistics retrieved from https://financesonline.com/hospitality-statistics/
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“An Overview of The Hotel industry – It’s definition, Segments, Types & Aspects”
retrieved from https://www.soegjobs.com/overview-hotel-industry sectors-segments-aspects/ -
“The Current State of the Hospitality Industry”
(2018) retrieved from https://medium.com/aqua-intelligence/the-current-state-of-the-hospitality-industry-700fd4a148e7