Major trends for hoteliers to watch in 2023

Increased digitalization, the return of business travel, the continued evolution of “bleisure” and impressive growth in average daily rates (ADR) are just some of the major trends the hotel industry has witnessed in 2022.

However, while many markets have seen a return to 2019 performance figures in terms of rates and occupancy, uncertainty still remains.

As hoteliers plan for 2023, what should be their focus? Where are the opportunities? And what are the threats? We caught up with hoteliers from around the world to get their views.

According to STR’s global recovery index, aggregate data for hotels from around the world showed September's performance was just 6% behind pre-pandemic levels. This was the fifth consecutive month of global demand recovery, with performance levels at 90% or above on pre-pandemic figures. 

STR believes that this slow but steady recovery is indicative of a reset in demand mix - as above-average leisure demand stabilizes to more normal levels and corporate travel picks up.

Hotels can expect to see performance returning to 2019 levels, but hotels have to take the learnings of the past two years forward with them and not fall back into old habits. Here’s how:

• Incorporate forward-looking data into your strategy. Historic data is no longer sufficient to build a hotel revenue strategy.
• Demand will continue to be variable. This is because the world will continue to experience multiple overlapping market crises repeatedly. Hotels need to adopt very flexible pricing models, especially in high-volume hub city destinations.
• Pricing must be dynamic and flexible. Hotels can no longer rely on fixed pricing models to deliver consistent and reliable volumes of business. Dynamic pricing and rate flexibility have become essential, not just for the hotel, but also to attract a new breed of engaged travelers.

So what can we expect from 2023? There will be more tech adoption as hotels continue to get to grips with doing more with less; business travel is returning but in a new guise as corporates are repeatedly asked to curb travel spend; and that short-term booking window remains.

Short-term booking window remains

Duetto’s latest Pulse Report data shows that the short-term booking window remains, and this will continue to challenge hotel teams, both operationally and from a revenue perspective. Across all global markets, bookings drop off more than three months from stay date, with the eight to 12 week booking window remaining prevalent. But this is not necessarily a bad thing.

“Increasingly, a short-term booking window represents an opportunity to connect with a more mobile, more astute, and engaged traveler, switching seamlessly between business and leisure profiles,” says Chris Crowley, chief revenue officer at Duetto.

“Hotels are learning to integrate customer data and loyalty profiles across the entire spend onsite to curate personalized offers for a more discerning guest. A guest that is used to shopping in a short-term booking window and to making direct decisions with their hotel supplier,” he adds.

The good news is that there is still a great deal of pent-up demand for travel, even if it is waning slightly. But margins are being squeezed both for hotel operators and for travelers. Revenue management has never been more important than it is now, as price remains one of the biggest levers in the customer purchasing decision.

“There is still a lot of pent-up demand for post-COVID travel. And there are still people that have got disposable income, although that is becoming less,” says Shona Whitehead, founder of Cogent Blue, a hospitality consulting firm that helps hotels project manage their technology transition.

Bleisure and remote working are here to stay

Whitehead believes there are three consumer trends hoteliers need to have an eye on in 2023: bleisure, digital nomads and staycations.  

“As travel becomes more expensive, people traveling with work are thinking about adding on a little bit of holiday as well. That will continue in 2023,” Whitehead says.

“Also, remote working continues to open up opportunities. People are realizing that this means that they can work from anywhere, enabling them to explore new destinations before or after their workday.

“And in the United Kingdom, particularly with the way the economy is, staycation demand will also continue into next year.”

Business travel returns

Business travel remains a big focus for hoteliers in the United States as well. Nick Knight, national director of revenue and distribution for ASH Hotels, a small independent owner/operator hotel group based out of New York City with ambitious expansion plans, has business transient firmly in his sights.

“The big one for 2023 is the return of business transient,” he says.

“That market is coming back. Some of our hotels have already exceeded 2019 levels because we perform in that segment. I foresee next year definitely surpassing it,” he adds.

A new tech stack has helped rate and occupancy growth at ASH. The company onboarded a new revenue management system from Duetto and a new booking engine and GDS.

For ASH, which doubled its portfolio during the pandemic and opened its fifth hotel, Ulysses, in Baltimore in the fall, the focus for 2023 is on driving customer experience.

“Now that we're maximizing revenue, we're looking at our offerings and making sure that our service and amenities match that rate rise and exceed it,” Knight says.

Using technology to drive efficiencies

United States-based hotel owner/operator Bridgeton underwent a tech grade similar to ASH, replacing the property management system (PMS) and RMS to streamline operations and drive efficiencies.

For 2023 the focus is on continuing to provide efficiencies for staff wherever possible.

“Being able to accomplish the same amount of work in fewer hours is invaluable to making your business more profitable right now and to help protect you from a downturn in the long run. Duetto has helped us accomplish this by making us much more efficient as a revenue management team so we can accomplish more with fewer people,” says Lucas R. Proffitt, director of revenue and e-commerce at Bridgeton.

The New York City-based investment, development, and management company owns and operates six properties, with growth plans including development in Sonoma County, California.

Proffitt believes its small size and lean operating model are a benefit to Bridgeton and that these benefits are enjoyed across the independent hotels segment.

“I believe that independent hotels are uniquely positioned for the future. The generations which are starting to travel now are much less focused on brands as a whole and are more focused on a unique experience. I think the real strength of being an independent hotel is that we have the flexibility to quickly move to the demand and to provide the types of experiences that the guest is wanting,” Proffitt says.

Groups business provides stable base

The hotel management company, Linchris Hotel Corporation, has also enjoyed strong ADR growth in 2022 and is focusing on groups to build out a solid business base for 2023.

“The ADR growth due to the leisure segment and due to inflation is here to stay,” says Jenna M. Bergamino, corporate director of revenue management at Linchris Hotel Corporation.

“We are starting to see some associations and groups come back and look forward to more growth in those segments. We are also focusing on ways to grow hotel revenues as a whole across all profit centers within the hotel and working towards revenue management strategies for those other revenue sources within our hotels,” she says.

With many economists predicting that a recession is just around the corner for the U.S., Linchris executives are already thinking ahead about how they can shore up business.

John P Argonish, senior vice president of sales and marketing at Linchris Hotel Corporation, explains how the group was building out a base of business with group contracts: “We are focusing on market and pricing trends and looking at group base business to reduce our inventory in our hotels. We are looking for group-based business that will still be in business and have travel needs during a recession, if one should occur.”

Sports and leisure return to Spain 

In Spain, Helios Hotels, which owns and operates the Helios Benidorm, Helios Costa Tropical, Helios Mallorca and Helios Lloret de Mar, totaling 1,100 rooms, continues to see success with its leisure markets and is confident of further success in 2023.

“Couples and sports people have proved to be our biggest market. Majorca is a big market for cyclists of all ages and all levels, and we were so happy to start to see this returning. Cyclists have come back strongly, and we're celebrating this,” says Kris Vanaerschot, chief commercial officer at Helios.

“Our figures support the impression that the start of the year will be better than the same time last year. We hope that we will start better, and if we can maintain that, bearing in mind that 2022 is now outperforming 2019, then we will be happy.”