Soaring demand, a strong dollar, and the easing of travel restrictions are fueling a robust return of the travel and hospitality industry following devastating losses triggered by the pandemic. But challenges such as rising costs, labor and supply-chain shortages, and shifting consumer expectations are at least temporarily perpetuating some of the uncertainty that has impacted the sector over the past two and a half years.
Here, industry experts who are also faculty members in the USC Bovard College Online Master of Science in Hospitality and Tourism program share insights into current trends affecting the sector — as well as their predictions for fall 2022 and beyond.
Pent-up Demand, Rising Costs
“The pandemic showed us what we were missing, and a lot of us were missing travel,” says Anna Abelson, a consultant & specialist in destination marketing and global tourism.
“People are coming back to normal life, and that starts with hospitality before anything else,” adds Hicham Jaddoud, senior director of hospitality operations at North Star Mohican Casino Resort in Wisconsin. “We have seen a huge pent-up in demand.”
Part of that demand was spurred by increased savings accumulated during the pandemic, he says. According to Federal Reserve data, household savings increased by more than $4 trillion between 2019 and 2021. While much of the accrual skewed to the already-wealthy, extra cash on hand for many families helped drive up demand for travel and hospitality once businesses reopened in earnest.
With the June 2022 lifting of COVID-testing restrictions on travelers entering the U.S. — and the dollar reaching parity with the euro for the first time in two decades — Americans’ interest in international travel spiked over the summer. Abelson also notes a marked increase in family travel.
Andria Godfrey, senior director of vertical solutions at Epsilon — agrees. “We’re seeing a lot of multigenerational travel,” she says. “People are looking for ways to reconnect and they want to catch up on that lost time. The industry has dubbed it ‘revenge’ travel but I don’t like that term. It’s so joyous that people are getting back out and doing those trips they had to put off.”
Before travel restrictions were removed, Godfrey says about a third of American travelers opted for domestic sites or staycations rather than foreign travel. High gas prices were a big concern, especially in the spring and early summer, and affected decision-making regarding destination choice.
“Now people are traveling despite the new COVID-19 variants, rising inflation, airline service disruptions, and the cost of transportation – which for many, these factors are influencing how they are traveling,” she adds.
Jaddoud attributes some of the recent cost hikes to growing demand. “Airline prices are skyrocketing,” he says. “Companies across the sector are taking advantage of the demand,” he says. The price increases also reflect higher costs for labor, gasoline, and supplies, he notes.
Even though flights are expensive, hotels are raising prices and restaurants are charging more per guest, people are still going to travel and dine out, Jaddoud says. “Consumers are still going to do what they like to do.”
A bigger immediate concern is the ongoing industry-wide labor shortage following mass layoffs in 2020, despite many having since returned to the workforce. “Everywhere you go, there is not enough labor to serve the demand,” he says. “This is a struggling moment for our industry.”
In a July 2022 report, the U.S. Travel Association found that the leisure and hospitality industry remains far behind in job recovery. “With 1.3 million jobs still [gone], leisure and hospitality losses far exceed those of any other industry,” the report said. “This underscores how disproportionately the sector was and continues to be, impacted by the pandemic.”
Many hospitality workers left for other industries. Some have lingering health-and-safety concerns and are reluctant to return. Others have taken extended time off to be with family. A significant number have retired — a particular issue among airline captains and pilots, according to Abelson. While flight attendants and other airline staff remain in short supply, it’s the lack of trained pilots that led to many of the widely reported flight cancellations over the summer, she says. “It was a big deal when United increased salaries for captains and pilots,” she adds.
Across the board, industry employees currently have the power to insist on higher wages and more flexibility on the job.
“As the hiring and reopening started, the hospitality and tourism industry was raising wages at a faster rate than any other sector in the U.S.,” Godfrey notes. “The downside is that, for many businesses in this sector, we were already below averages for other industries.”
Jaddoud adds that companies are creating more innovative ways to attract employees — “anything from offering in-house childcare to gas money or in-house food or discounts.” Cross-training is another strategy being used for both employee retention — giving them a wider range of valuable skills — and for improved operational efficiency, enabling companies to fill gaps in departments that are short-staffed.
“The expectation for upskilling, or advanced training, is much higher now,” Abelson agrees. “This is part of the benefits package employees want. The bar is higher now.”
Consumer expectations have shifted along with those of industry employees.
“People are starting to realize that the distance created between staff and the customer is no longer just a function of health and safety,” Godfrey says. “Rooms are not being serviced regularly because there’s no one to service them. If visitors don’t have a quality experience — or it doesn’t match what they feel they are paying for — they will not be coming back.”
“Today’s guests want more than what they wanted before the pandemic,” Jaddoud notes. “They want more information, more personalization, and more technology — from a digital room key to online ordering, payment, and reviews.”
He adds that, in addition to being desired by consumers, technology can help hospitality companies address the labor shortage. Marketing will increasingly be done on the digital platform, he notes.
While they all agree that high-tech is here to stay, Abelson says high-touch is still preferred by some categories of travelers, such as Baby Boomers.
Personalized experiences are sought by all consumer segments, they observe. “Consumers are tired of the monotonous brand experience they get at traditional hotels or chain restaurants,” Jaddoud says. “They’re looking for something unique and customized to them. Every hotel has a bed, every restaurant has a table. It’s about creating something that’s unique that provides an emotional connection with the consumer.”
Abelson agrees that “bespoke and immersive experiences are definitely on the rise” and that such personalized experiences build loyalty.
One related trend is the increased use of timed-entry admissions for museums and parks. Another is the additional fees — such as resort fees, event setup fees, and reservation fees — charged by hotels and restaurants to reduce crowding while expanding revenue streams to compensate for increased costs. Abelson adds the example of museums and other organizations returning to special events and after-hours entry for members. Technology is furthering the ability to produce hybrid and one-of-a-kind experiences, she notes.
Consumer spending habits have also changed since the onset of the pandemic. Luxury and mid-level consumers are spending the same or more on travel and hospitality than they did pre-pandemic. For those of more limited means, inflation and higher overall costs have had a more significant impact.
“Many people are changing the way they travel,” according to Godfrey. “They’re looking for how they can get that dollar to stretch further, opting for mid-service hotel properties with a free breakfast, for example.” They may still take that big annual vacation but cut back on getaway weekends, she says.
Abelson anticipates that many people will be more creative in how they travel, such as doing a home swap, especially if they have a large family.
“We aim to be an inclusive industry,” she says, “and we need to make sure we continue to have offerings for all income levels.”
“The threat of recession is real, and the challenges are real,” Abelson says. She predicts that the high demand experienced this summer will slow down in the fall as people go back to work and school, but the strength of the dollar may motivate travelers to plan overseas trips this fall.
As for the industry’s long-term prospects, she says, “One in 10 people worldwide typically works in our industry. That speaks volumes to the sector’s future.”
Jaddoud agrees that demand will stabilize after the summer travel season and that the industry is bouncing back even stronger than before. With companies focusing on both the consumer and employee experience, it’s a great time to enter the field, he says. “Although the industry is sensitive to market factors, it’s very resilient.”
Learn more about earning your MS in Hospitality and Tourism from USC Bovard College.