It’s no secret that it’s been a turbulent few years for the hospitality industry.
Amidst widespread stay-at-home orders, the pandemic hit hotels, restaurants, and other venues hard, while the subsequent rampant inflationary pressures and cost-of-living crisis have created a collective sucker-punch that left millions of the world’s businesses out for the count.
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Given the obvious importance of maintaining industry growth, Elavon recently conducted research with a range of UK hospitality stakeholders and industry experts, incorporating secondary data to support our insights.
Our research highlighted developing industry trends, the challenges that businesses are facing (and will face), and the payments strategies they can now implement in order to boost their recovery efforts and grow their revenue streams.
Getting on top of new trends
Fortunately, as we enter Spring there are green shoots of recovery scattered amongst the fierce cost-of-living crisis. While certain statistics show the hospitality industry facing a decline in volumes when compared with 2023, data also exists which suggests that customers are coming back to hotels, bars, and restaurants – albeit with new habits and service preferences.
But while the industry may have passed through the eye of the storm, commentators remain divided about just how optimistic we should actually be.
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By GlobalDataResearch by Deloitte shows that the number of hospitality leaders and investors who believe profitability will improve within the next five years nearly doubled from 38% in 2022 to 64% last year. Opposingly, PwC research has suggested that growth in demand for UK hotel accommodation is expected to stall this year.
This divergent view can be attributed to the emerging challenges we have identified in our report, which businesses will need to deal with if they are to succeed.
There are a host of macro trends impacting the operations and economics of the hospitality industry. For example, many hotels and restaurants continue to face difficulties when it comes to hiring staff, with the hospitality job vacancy rate standing at 11%, compared to the average UK-wide vacancy rate of just 4%.
Compounding these macro trends, consumer preferences are changing fast, driven by emerging societal influences and the new technologies flooding the market. Modern consumers are more demanding. To illustrate this point, our report shows that 88% of customer service teams believe people have higher expectations than ever before, while 75% of consumers will stop using a particular brand following three, or fewer, negative experiences.
In light of these developments, one area to watch closely is the UK’s hotel sector
The revenue projections included in our research place the UK as the largest market in Europe, with the UK’s hotel industry expected to generate more than $22.3 billion in revenue in 2026. This can be attributed to a rise in domestic UK travelers using hotels for business and leisure, as well as a post-pandemic boost in terms of returning international customers. Our research suggests that a combination of higher hotel prices and an increased overall number of hotel stays are driving increased spending.
Tying into these developments, the way that people interact with hotels is also changing, with an increasing proportion of hotel bookings and purchases made online. By 2026, it’s expected that online spend will comprise around 80% of total hotel revenue.
Investing in payments technology can provide a sharper competitive edge
The hospitality industry now needs to study and understand these new trends and patterns, so that it can adapt and give customers the kind of experiences that they want – and will want to return to in the future.
There’s no magic bullet; it’s not that easy. Customer preferences vary by sector, location, and sub-sector, along with a spectrum of micro-factors that influence decision making. This means that businesses must take the initiative and determine which trends are relevant to them, how they can apply them, and what they’ll need to do to capitalise on them moving forward.
One thing that’s clear, though, is the need for innovative payment solutions that can help businesses to meet evolving customer demands whilst boosting efficiencies in light of the macro trends that are reshaping the industry.
By drawing on data and insights from the market, such as spending habits, forward-looking hotels and other hospitality businesses can gain a sharper competitive edge, and ultimately improve their service levels.
Going forward, payment integration with hotels’ primary websites will be key to increased revenue. Hotels should also be thinking about how they can leverage software tools to increase the personalisation of guest stays – and work with their payment processing partners to explore the potential to extend these experiences into payments using card-not-present (CNP) transactions. And by encouraging direct bookings – with perks such as discounted prices and inclusive meals – hotels can increase their profile with users and encourage repeat stays.
While opinions may be divided over the extent of the industry’s recovery, caution shouldn’t come at the expense of seizing new opportunities, such as embracing new payments innovations and technologies as a way to supercharge revenue.
Dave Wheatcroft is Head of Hospitality, Elavon Europe
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