The hospitality industry is in recovery mode from its historic lows during the worst of the COVID-19 pandemic. There are indications that the recovery is nearly complete, but challenges still exist. The possibility of another COVID variant is always in the background, threatening to bring travel to a halt again. The industry as whole has been forced to adapt to the changing conditions caused by the pandemic, and the overall health of the sector will be partly determined by the success of those adaptations and innovations.
Emerging from the Depths of the Pandemic
The pandemic affected the hospitality industry more than most other sectors of the economy. Many restaurants and bars closed their doors permanently after temporary lockdowns and shelter-in-place orders, and hotels sat empty trying the weather the storm. The pandemic may not be truly over, but cases, hospitalizations, and deaths are much lower than they were previously, temporary business closures have expired, and travel is up again. Still, challenges remain.
One of the worst effects of the pandemic was the labor issue. So many workers left the industry in the last couple of years that there is now a serious shortage of labor plaguing many businesses. The hospitality industry has always had a high turnover of employees, but the pandemic took this trend to a whole new level. The mass exodus of workers from the industry is still impacting operations. Many bars and restaurants now operate on reduced hours due to lack of employees. Hotels are feeling the crunch, too.
Looking ahead, the industry must find a way to make hospitality jobs more desirable to attract good candidates, and to make serious efforts to raise the retention rate of employees. Already companies are attempting to address the problem. Many companies are offering higher wages and allowing workers more power when choosing their shifts. Expect this to continue until staffing levels rise.
In addition, the pandemic accelerated a trend that was already well underway in the hospitality sector. The need for more non-contact methods of checking into hotels or picking up take-out food orders saw the widespread adoption of apps and other web-based options. Coming out of the pandemic, most businesses have not only retained the technology, but have increased their reliance on it. Many hotels now offer not only non-contact check-ins, but also allow guests to open their room doors and control many other amenities through their own smartphones. This greater use of technology comes with certain risks, however. Hackers have breached security and put customers’ personal data at risk. The industry is going to have to be vigilant and aggressive with cybersecurity protections to prevent serious problems in the future.
Good News and Bad News
The hospitality industry is experiencing a major bounce-back in 2022. Hotel occupancy rates are nearing pre-pandemic levels, and the public has returned to bars and restaurants. Business travel has increased tremendously, and is predicted to continue at high levels into 2023. Leisure travel is also contributing to the recovery. But there are danger signs on the horizon that threaten to derail the industry’s resurgence.
The recent rise in gas prices has put a damper on leisure travel. Pandemic-related supply issues, the war in Ukraine, and sanctions on Russian oil pushed the cost of gas to new heights this year. Although prices have subsided somewhat, they are still elevated.
What’s more, gas is not the only product that is becoming more costly. The rise in inflation has many concerned that the economy is heading toward a recession. Higher food prices are likely to drive people away from eating out. To compensate for higher costs, hotels are slowly raising room rates. For high-end luxury hotels, this is less of a problem, but economy hotels will be hit hard if they need to raise their rates, as they really on value pricing to attract travelers. If they are forced to raise their prices, they will drive away many people looking for a cheap place to stay.
As mentioned earlier, the labor shortage continues to be a problem. Unless this can be successfully addressed, some businesses may be forced to reduce their operating hours. The need to offer higher salaries and provide more benefits increases operating costs, and at some point, these costs will be passed on to the consumer in the form of higher prices. This, in turn, can drive customers away.
The hospitality industry took a major hit during the pandemic. The entire year of 2020 was basically lost to the industry. Despite this, the sector was able to adapt enough to make it through and start a solid recovery. While the outlook for 2023 is optimistic, there are still serious issues that need to be addressed if the industry is to continue its upward trajectory. How the sector deals with these challenges will determine its fate for years to come.