Covid-hit hotel industry may not recover until 2023
Travel will return. But the recovery will likely take longer than in other industries, and will vary across segments
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Business and leisure travel will return at different paces, as will domestic and international travel. What's certain is that the next normal will be marked by structural shifts, especially around customer expectations for hygiene and flexibility
According to a Mckinsey report, Covid-19 has affected every sector across the globe, and the hotel industry is among the hardest hit. Our research suggests that recovery to pre-Covid-19 levels could take until 2023 - or later. Investors are providing similar views of hotel companies' prospects, as seen in the underperformance of US lodging real estate investment trusts (REITs). Like so many industries, hospitality will also see both subtle and substantial shifts in the post-pandemic era. Some are already apparent today.
Travel will return. But the recovery will likely take longer than in other industries, and will vary across segments. Business and leisure travel will return at different paces, as will domestic and international travel. What's certain is that the next normal will be marked by structural shifts, especially around customer expectations for hygiene and flexibility.
Companies say they plan to turn off their travel restrictions in phases, and are developing decision-making processes and more agile travel policies to account for safety before authorizing travel. Client-facing visits such as site visits and sales calls are likely to return first. Day trips and self-drive travel are likely to return earlier since physical-distancing measures, exposure, and risk will be more manageable. Conferences and industry events will likely be the last to return.
In leisure, we expect that travel to visit friends and relatives will return first, likely by car. Travel restrictions combined with economic uncertainty will likely translate into a higher share of domestic and close-to-home travel. Longer international leisure trips will be slow to return, and travellers will expect greater flexibility in cancelation and change fees. The recovery may include extremely short planning cycles driven by gradual lifts of the travel restrictions and very short booking windows as travellers monitor the situation.
Hotels face the prospect of a long recovery. Over the coming months and years, properties' circumstances will vary based on a number of factors, including chain scale, location, and demand profile. There is no one right response for everyone, but some guidelines apply universally. Hotels must care for their employees, staying engaged with them through the pandemic and keeping them safe when they return. They must manage customer expectations, recognize that these will continue to evolve, and prepare to act agilely to address health and safety concerns. And they must revise their commercial strategy for the restart, with an eye toward the next normal. In the long term, travel will return because of an important shift in consumption - an accelerated pivot from buying things to buying experiences. The global hospitality market is expected to grow from $3486.77 billion in 2020 to $4132.5 billion in 2021 at a compound annual growth rate (CAGR) of 18.5 per cent.
The growth is mainly due to the companies rearranging their operations and recovering from the Covid-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. .
Asia Pacific was the largest region in the global hospitality market, accounting for 45 per cent of the market in 2020. North America was the second largest region accounting for 25 per cent of the global hospitality market. Africa was the smallest region in the global hospitality market.
Hotels are using technologies that are transforming the customer experience. Some technologies are leading to significant improvements and savings in the hospitality market. The most significant trends in this market are the use of near field communication (NFC) technology, infrared technologies, and robots.
Hotels are also using robots to deliver amenities to guest rooms and for many other functional purposes. Hotel operators are investing in systems and technologies that can automate processes and personalize the experience for guests.
The hospitality market growth is aided by stable economic growth forecasted in many developed and developing countries.
