Hospitality And Leisure Trends 2019 - PwC

Hospitalityand leisuretrends 2019Companies must find ways to bedistinctive to combat disruptionPart of PwC’s 22nd Annual Global CEO Survey trends seriesceosurvey.pwc

2 Hospitality and leisure trends 2019 Part of PwC’s 22nd CEO Survey trend seriesCreating a distinctiveexperienceThe hospitality and leisure (H&L) industry is big and diverse; ithas traditionally claimed some of the closest relationships withglobal consumers of any sector. People eat, sleep, play games,cement friendships and seek cures in H&L facilities. Given thisdynamic, it isn’t surprising that the ability to create brand awarenesscampaigns that feel like one-on-one communication with potentialcustomers — that is, campaigns that speak directly to customers’preferences and desires — has always been a keystone of successfor H&L companies. But recently, for many parts of the hospitality andleisure industry, that connection to consumers has frayed.

3 Hospitality and leisure trends 2019 Part of PwC’s 22nd CEO Survey trend seriesNowhere is this truer than in the hotelsegment of the industry. Not long ago,marketing campaigns were focussedon creating an image that distinguisheda company’s hotels anywhere in theworld — and consumers chose roomsbased on certain perceptions they haddeveloped about specific brands. Did theywant a swanky hotel or a budget one?Were they looking to be pampered with asmorgasbord of services, or did they simplywant a clean bed and free breakfast?Did they prefer chic or old-world? Spa orfirst-class chef? Kid-friendly or romantic?They’d contact the hotel whose brandmost closely matched their personalitiesand inclinations through the web, phone ortravel agent and book the room directly.No more. A growing number of rooms arenow booked through third-party servicessuch as booking.com, hotels.com orTripAdvisor. On these platforms, hotelsare barely differentiated, except by price.And although brand still plays a role, itsimportance is outshone by consumerreviews and star ratings.For hotels, this change has severelyimpacted the top line. Commissions paidto third-party booking services siphon off10% to 15% of revenue for large chainsand 18% to 22% for independenthotels and small chains. But much moredevastating to hotels is that their rooms arebecoming commodities. As long as reviewsare generally positive across platforms,many guests believe that a room in onehotel is the same as another room in adifferent hotel.Partly as a result of disruptions in theirability to connect with customers directly,H&L CEOs are pessimistic about thefuture for their businesses. In PwC’s22nd Annual Global CEO Survey, only27% of H&L respondents said that they45%40%of H&L CEOs believe globaleconomic growth will ‘improve’of global CEOs believe globaleconomic growth will ‘improve’

4 Hospitality and leisure trends 2019 Part of PwC’s 22nd CEO Survey trend serieswere ‘very confident’ about revenue growthduring the next 12 months, compared with35% of all CEOs surveyed. And these gloomysentiments are punctuated by the fact that H&LCEOs were actually more bullish about overallglobal economic growth during these next 12months than the full group of chief executivessurveyed — just not for their own businesses(see Exhibit 1). (These H&L results are for theindustry as a whole, although CEOs from thehotel segment represent by far the largestproportion of respondents.)To overcome these very real obstacles (andrevenue losses) from third-party bookingservices, hotels must find a way to againmake themselves distinctive destinationsfor customers. If vacationers and businesstravellers alike develop preferences and loyaltyfor the facilities and amenities offered atspecific chains and independent lodges, they’llgo to them first when planning a trip — insteadof the third-party bookers.One positive sign for hotel companies is thatby a large margin most vacation travellerswould prefer to stay at a value hotel (37%)or a high-end hotel (23%) than at sharedlodging options such as those provided byAirbnb (12%), according to PwC’s 2019 GlobalConsumer Insights Survey. But to maintainEXHIBIT 1QUESTIONH&L CEOs’ confidence in their ownorganisation’s revenue growth overthe next 12 months is notably lowerthan that of CEOs globallyHow confident are you about yourcompany’s prospects for revenuegrowth over the next 12 months?27%Very confident37%Somewhat confidentNot very confidentNot confident at allDont know/refused35%15%3%47%29%6%0%1%Source: PwC, 22nd Annual Global CEO SurveyBase: All respondents (hospitality and leisure CEOs, 51; global CEOs, 1,378)Hospitality and LeisureGlobal

5 Hospitality and leisure trends 2019 Part of PwC’s 22nd CEO Survey trend seriesthis measure of support and stem thetide of travellers reaching out to thirdparty bookers, traditional hotel brandawareness campaigns won’t do thetrick; they feel too detached in today’s24/7 you-are-there media environment.Instead, hotels must provide a more highlypersonalised experience that anticipatesand then goes beyond the needs of theirparticular customer base — and count onword of mouth and allegiance to keep thisbase coming back and expand the poolof potential customers. Three strategicapproaches should be priorities: modernisethe service offering; hire high-touchoriented employees who can make guestsfeel noticed, welcomed and pampered;and implement the latest technology torealise savings on back-end administrativeprocesses, which could be invested in newdigital-based programmes that improve thequality and convenience of the interactionsbetween guests and the hotel.Modernise the service offeringModernised services can cover a widerange of options. They can includeinnovation touching on sci-fi, such asCrowne Plaza’s use of a robot named Dashto deliver snacks, toothbrushes, messagesand other items to guests in their rooms.More pedestrian services are in-room TVbased workouts — often with an exerciseapparatus that can be delivered to a guest’sroom — and 24-hour snack bars for guestswho want a bite at 3am. And some hotelshave expanded their business centres intoshared working spaces to accommodatepeople — predominantly millennials — whoare accustomed to working in offices withan open floor plan. At least one hotel, theRevolution Hotel in Boston, lets nonguestsuse this office space and drink all thecoffee they want for a fee, providing anadditional revenue stream.To draw customers, these new serviceshave to surpass in quality similar offeringsin the local area. Twenty-four-hour snackbars may stand out to guests if that’s theonly place they can find food in the weehours — but not if Uber Eats also deliversin the area at any time of the day or night.And the value of a shared workspace in ahotel may depend on whether there is asimilar, more fully equipped facility, such asa WeWork site, within walking distance.There are two approaches for enhancingservices that hotels should consider.The first is unbundling services to keeptop-line rates competitive. Rather thanincreasing room fees to cover the costs ofa multimillion-dollar spa upgrade, chargeguests to use the spa. Guests who use thespa will enjoy the improvements, andthose who don’t will not feel that they arebeing forced to pay for something theydon’t need.The second option is to partner withlocal facilities, including spas, sharedworkspaces, gyms and restaurants. Manysuch facilities — especially if they belongto a chain — would welcome providingdiscounts to guests, as some of theseguests may continue to use the company’sfacilities when they get back home.Hire high-touch-orientedemployeesPeople who think about the top tenexperiences they have had in hotelsmore than likely recall unexpectedly goodinteractions with hotel employees. Did theytake care of a guest who was ill? Were theynice to a guest’s children? When a guestwas lost, did they walk him or her to thedestination instead of just pointing.But putting together a top-notch, customercentric staff is not easy for hospitality andHotels mustprovide amore highlypersonalisedexperience thatanticipates andthen goes beyondthe needs oftheir particularcustomer base.

6 Hospitality and leisure trends 2019 Part of PwC’s 22nd CEO Survey trend seriesleisure companies. In fact, 63% of H&L CEOs in oursurvey said that it was difficult to hire workers — andthat this difficulty stemmed from the ‘industry’sreputation’ and ‘working conditions’, among otherfactors (see Exhibit 2).To overcome some of these issues, hotels mustbegin to pay higher wages, which will go a longway toward recruiting staff who view hospitality asa legitimate career path and not a stopgap beforethey get a better-paying job. Moreover, hotels needto broadly increase their headcount in front-end,customer-facing employees. Too many facilities areunderstaffed and it shows in the generally lacklustreexperience that guests have — which, of course, leadsto the attitude that one hotel is just like another. Twoor three extra employees in the lobby to help guestsas they enter — to ask them about their trip, go overhotel services, answer questions about the bestlocal restaurants and so on — can start off the guestrelationship on the right foot.Cross-training is also a good way to heighten acustomer-centric experience. Although some jobs,such as bartending or mechanical maintenance,require specialised skills, most front-line hotelemployees can be trained to do more than one job.Customers respond well and feel they are being takencare of when, for instance, a front-desk staffer quicklydelivers a bottle of wine within minutes of the callto room service or brings extra towels immediatelyEXHIBIT 2QUESTIONMore H&L CEOs than global CEOsbelieve that candidates’ viewsof the industry’s reputation andworking conditions have changedWhich of the following is theprimary reason it has becomemore difficult to hire workers?47%Deficit in supply ofskilled workersSkills requirementsin our industry havechanged9%Compensationexpectations6%Growth rate ofthe industryOther19%9%9%8%Candidates’ view ofindustry reputationhas changedWorking conditions50%8%47%9%3%3%13%6%Source: PwC, 22nd Annual Global CEO SurveyBase: All respondents (hospitality and leisure CEOs, 32; global CEOs, 852); ‘don’t know’ responses not shownHospitality and LeisureGlobal