Industry Forecast: 3 Things Hotels Should Expect in 2023

If your hotel is expecting business as usual through 2023, think again. 

• Sky-high rates are expected to come back down. 
• Labor challenges are here to stay. 
• And, how you use data to market your hotel will change abruptly this year. 
• Is your hotel ready?  

We often underappreciate quite how resilient—and adaptive—the hospitality industry is. 

In just the past decade, we’ve seen the rapid pace of digitalization, disruption of business models, and overwhelming new competition that is vacation rentals. And then, a global pandemic hit, forcing hotels worldwide to close their doors overnight for what turned out to be an extended period.  

And yet, the hospitality industry keeps on rolling, adapting to new realities, and consistently treating trends (and challenges) as opportunities. Take last year alone—still in post-pandemic recovery mode, hotels were also faced with managing the barrage of constantly changing travel behaviors and a seemingly never-ending labor shortage. Yet, the hospitality industry saw what was, for many, record-setting revenues.  

How? Well, ask anyone who traveled in 2022—hotel rates were at an all-time high while customer services were at an all-time low. Thanks to what many call “revenge travel,” hotels were able to charge significantly higher rates to customers while operating at lower capacities and, thus, leading to revenues greater than even before the pandemic hit. 

But how long can hotels continue to ride last year’s record-breaking rates while getting away with subpar service levels that are normally unacceptable? And what’s going to impact hotels most in 2023? If you think this year will be a repeat of last year, think again. But the good news is that there’s still time to get your hotel prepared for the challenges ahead.  

Psst... there’s a potential recession coming...  

If you ask many travel industry CEOs, this year will be just as profitable as the last. This is fueling unrealistic optimism for hotel revenues and contributing to a familiar industry habit of thinking that strong current performance will just keep going. But what their rosy optimism is masking is that a potential recession is knocking at the door. 

Yes, travelers are continuing to make up for missed vacations, and in-person business events are finally coming back, allowing hotels to see a sunny forecast for this year. However, an unfavorable global economic outlook is unlikely to allow them to achieve rate rises on the same scale as 2022. Hotels that take steps today to ensure their strategies and forecasts accurately reflect what’s likely to happen will be three steps ahead of even the largest hotel brands.  

How? By finding ways to transition revenue generation when the wave of rate rises finally falls. Come up with new ways to promote your hotel, or look at your strategy for market segments with long lead times, like group and corporate travel, for example. Overly optimistic hotels will continue with business as usual, likely keeping their group prices higher and limiting availability for group blocks this year, believing that high rates will displace business travel. But, by being proactive and realistic about this year’s strategies, hotels that act now in anticipation of the likely downturn will come out ahead.  

And... there’s still no one to hire... 

While many industries have struggled (and continue to) with staffing challenges over the past couple of years, the hospitality industry remains one of the hardest hit. This past summer, the American Hotel & Lodging Association surveyed hotel executives across 500 hotels—97 percent reported being understaffed, and 49 percent classified themselves as being severely understaffed.  And, unfortunately, this trend is not going to magically disappear.  

Last year, we saw hotels making changes to try to entice new and existing hires through increasing wages, expanding benefits, and providing greater flexibility, which helped to some extent. But hotels cannot simply pay their way out of a labor shortage that is also about improving work-life balance, training, and career development. Professionals industry-wide are forcing hotel management to rethink their approach to labor. 

In the meantime, hotels will have to weather the labor shortage storm through creative ways that supplement their current staff—and retain their existing team in the process. Whether through easy-to-use, automated technology platforms that unburden staff from busy work, more robust training programs for career development, or outsourcing services to experienced partners, hotels will have to rethink how they attract and retain staff in this continued tight labor market. 

Oh, and... the data you use (and how you use it) will change...  

On top of an impending recession and continued labor challenges, one more storm is scheduled to impact the hospitality industry this year: Google Analytics 4, or GA4 as it’s affectionately known. It’s on the horizon and will have monumental impacts on how your hotel leverages data to market effectively.  

To put it mildly, in addition to the phaseout of third-party cookies, all your hotel’s historical data will be obsolete when Universal Analytics (the platform used for years by most independent hotels and some brands) goes away, and GA4 becomes the reigning platform. Thankfully, you’re not alone in this latest never-ending technology challenge. The entire industry is undergoing the shift, the reeducation, and the rethinking of how they will market their hotels in this new era.  

For more information on GA4 and how it will impact hotels, check out our recent insight, a high-level overview of what hotels need to know if they plan on marketing after July 2023. It sheds light on how data and the way you use it will drastically change.  

But... there is some good news! We can help. 

While you’re still riding high on one of the best years for your hotel, consider the likely challenges ahead. At Shift Digital, we know just how resilient and adaptive the hospitality industry is because we’ve seen it. And we also know that having the right digital partner in place to help navigate the challenges ahead will give your hotel the support it needs to be successful. Why? Because we’ve done it. Contact Shift Digital today so our team of hospitality and digital experts can help your hotel excel this year and beyond.