Outlook: Hospitality Poised for Growth in Bookings in 2018

LOS ANGELES—The hotel sector is projected to sustain 5-6% growth throughout 2018, setting up the industry to hit a record-breaking $170 billion in gross bookings, according to the “Deloitte 2018 Travel and Hospitality Industry Outlook.”

“I think there is a strong convergence of forces that will help the hotel industry sustain its growth into 2018,” said Marcello Gasdia, manager and research lead, Deloitte Travel, Hospitality and Leisure (THL) sector. “The most powerful drivers continue to be a swell in the global traveler pool from an emerging middle class, healthy indicators for consumer spending in the U.S., healthy corporate travel demand and a consumer spending shift from goods to experiences. I think the industry sometimes forgets how powerful the rising global economy is. Over the past two decades or so, global international travel departures grew from 600 million to 1.3 billion. Many of these consumers are traveling for the first time. That’s a direct injection of new bookings into the travel economy.”

The report is an overall look at the market. “What we expect in the year ahead [is]based on the experiences of our THL leaders who interact with travel clients throughout the year, and secondary analysis of publicly available travel data,” he said.

Travel is becoming more experience-driven, and most hoteliers are concentrating innovation on the higher tiers, perhaps at the detriment of the midscale segment. “If there is one segment that should capture the attention of hotel developers in 2018, it is midscale hotels,” according to the outlook. “Forward-thinking hotel brands are already taking advantage of the opportunity to deliver travelers some of the look, feel and experience of a pricy lifestyle hotel in an affordable package.”

Another area that can provide growth for hoteliers is to explore adjacent spaces, offering more than a place to stay during a trip. “The rules of consumer business are being rewritten. Businesses that once focused on a certain core product or service are branching out and venturing into others,” said Gasdia. “Think about how many types of services some of the big tech companies provide. They continue to grow their ecosystems, and many hoteliers are already benefitting from this type of thinking. Most travelers don’t take trips to ride in planes and stay in their hotel room. A trip is often packed with many experiences across many providers. Hotels should be thinking about how they can be more relevant to their guests across their broader travel journey. Health and wellness, retail and local activities are all good starting points.”

According to Gasdia, travel brands have been cautious in implementing personalization technology, though 2018 could be the year that changes. “The entire travel industry has been tiptoeing around data-centric personalization because it’s extremely more complex compared to the product recommendations and TV show recommendations we are used to,” said Gasdia. “When the product is the experience, such as the hotel stay, personalization often needs to happen in real time, to unique travelers in unique situations. And often, it is absolutely an issue of cost. What’s the ROI on incorporating facial recognition to speed up the check-in process? It’s difficult to connect ROI to many experience-driven tech initiatives and often requires confidence that certain investments will be a value-add for your guests. That’s never too clear cut, so there are risks.”

Woven throughout the outlook is the fact that technology is an integral part of the travel industry experience. Although this is the case, the authors of the report stressed that “technology must be leveraged to produce elevated, authentic experiences without losing sight of the human connection.”

“There is plenty of hype around emerging technology such as the Internet of Things, artificial intelligence and several others,” said Gasdia. “These platforms have huge promise to improve a travel experience still riddled with pain points, but perhaps, in the growing digital world, it becomes easy to lose sight of the importance of people-to-people interaction—particularly in an industry like hospitality. There are creative ways to marry the digital and human worlds, and I think that will be a key evolution of the travel experience.”

He continued, “For example, forward-thinking travel brands are starting to launch interesting pilot programs where customer data is pushed to front-line employees in real time via personal devices, empowering them to create better service experiences.”

The report also takes a look at online travel agencies (OTAs) and how they should be approached from a perspective of collaboration instead of competition. “OTAs are really good at what they do—aggregate massive amounts of travel content in a user-friendly way to facilitate comparison shopping, so consumers can make confident travel decisions,” said Gasdia. “It sounds simple. But it isn’t. OTAs work tirelessly and invest aggressively in their tech stacks to make sure their user experiences are second to none. It’s difficult for supplier sites to match the breadth of content, but there is room to coexist. Both types of sites typically cater to different audiences, and there is opportunity to excel in each segment.”