Hospitality Industry Outlook: 4 Ways to Meet Rising Expectations

Savvy hospitality leaders will invest not just in technology, but also in workforce reskilling and upskilling to leverage innovative capabilities and deliver customer-centric experiences.

The hospitality industry has good reason to cheer in 2024. The experience economy continues to bounce back, with hotels and restaurants welcoming more guests. U.S. restaurants, for example, will top $1 trillion in sales this year for the first time, according to the National Restaurant Association. And the industry’s overall growth should outpace the U.S. economy in 2024.

“Customers want to go out and socialize—they want experiences,” said Keith Pickens, global managing director, retail industry, at Workday Rising last year. But a growing number of consumers are looking for more than a one-size-fits-all service offering, he added. “People want—expect, really—personalized, customized experiences.”

To meet changing consumer demands amid staffing crunches, look for hospitality organizations to make bold moves in 2024. The goals: enhance customer experiences, boost productivity, and bring workers up to speed on valuable tech capabilities, including AI.

Technology will be the key ingredient that powers change across these areas, fueling the agility and innovation that businesses have long sought out through digital transformation.

Here’s a look at four big trends shaping the hospitality industry in 2024 and beyond.

1. Technology Powers Productivity Gains

Many hospitality organizations are accepting a new normal: keeping headcount at ideal levels is a very tall order. Staffing can feel like playing a game of Whac-A-Mole—one vacancy gets filled, only to have a new one pop up soon after.

Tired of the game, organizations are becoming lean operators, tapping digital solutions to bridge labor gaps. While staffing levels are on the rebound, more than half of hotel leaders (53%), for example, say their workforces are anywhere from 25% to 74% smaller than in 2019, according to a 2023 Deloitte survey. Half of these organizations are filling gaps through technologies, the survey found.

Leaders know that in order to keep their smaller workforces happy while still meeting rising consumer expectations, they need to make changes. Their first priorities are improving workforce efficiency and productivity (40%) and improving the frontline worker experience (33%), a recent global IDC survey found.

New technology, including tools with integrated AI capabilities, can improve both frontline worker and customer experiences. In fact, many hospitality companies have already made great gains by leaning on tech to give workers more time to spend on customer-facing issues.

Panera Bread, which operates more than 1,000 bakery-cafés, recently automated its audit reports and data validation processes to “run our payrolls faster, run the books faster, and easily validate info like journal entries,” said Barb Muellerleile, senior director of finance and payroll, at Workday Rising.

Panera’s finance leaders can now access more timely data and reports themselves rather than requesting that information from IT, leaving IT teams more time to spend on the company’s mobile and iPad customer apps. “They have more bandwidth to focus on growing the business,” Muellerleile said.

Leaders’ first priorities are improving workforce efficiency and productivity (40%) and improving the frontline worker experience (33%).

2. Talent Management Upgrades Are on the Table

With in-demand skills changing at the speed of technology and many new employees in need of upskilling, hospitality businesses are rethinking talent management for a new era.

For many, the biggest challenge is aligning the skills that managers need within the organization’s existing workforce skills. No surprise, then, that 42% of hotel managers report “retraining and reskilling employees for new technology” as one of their top three talent concerns, Deloitte found.

In response, many hospitality organizations are pivoting from focusing on job titles or work experience to embrace a skills-based approach to workforce management and training. That approach allows companies to solve for their skills gap and for employees to gain skills that can lead to new opportunities.

Given that hospitality employees are more likely to leave for a new role—sometimes in a new field—rather than because of wage, Workday found more and more firms see the value in helping frontline workers imagine their future in the industry.

Midtown Athletic Club clearly outlines employee expectations and training opportunities from day one through a seamless onboarding experience. New hires can log in to a single system to see which training sessions are assigned to them and role expectations, steering them on “the right path to becoming happy, productive Midtown associates, no matter whether they are part-time, full-time, or working in the corporate office,” says Courtney Brouse, Midtown’s learning and development manager.

Hear how P.F. Chang's balances the needs of their employees and customers with Workday Scheduling.

3. Agility and Speed Are Key to Staying Competitive

In a world full of rapid innovation and new business models, hospitality industry leaders have to stay on their toes to remain competitive.

Organizational agility and growth go hand-in-hand—yet many hospitality leaders aren’t confident they can flex to meet future challenges when they arise. An IDC survey found that while 30% of global hospitality executives think the industry is healthy overall, organizations are either “​​not prepared or ill-equipped to pivot” in the event that conditions change.

Their top stumbling block for achieving agility? Limited visibility into operations and lack of confidence in the data supporting decisions. The culprit is often a complex tech stack and legacy systems that leave the organization trying to break down silos and improve slow decision-making processes. Time spent standardizing, formatting, or reconciling data is less time spent analyzing recent performance and emerging competitive threats.

To move forward faster and more nimbly, expect hotel, restaurant, and other hospitality enterprises to embrace cloud-based tech platforms built around a unified data core enabling full visibility across both front- and back-office operations. This full-stack approach, enhanced by the power of AI, gives leaders access to up-to-the-minute analytics and data-driven insights for quick and confident decision-making in the face of whatever challenges—and new technologies—may arise.

“In sports, if you’re dehydrated, it’s too late,” Pickens said. “You have to be prepared for whatever’s next. Whether it’s omni-channel or AI, everything starts with data and solid but flexible operating platforms. There’s no alternative, in terms of speed and agility.”

U.S. restaurant chain Denny’s boosted its agility by saying goodbye to an outdated finance system. The payoff for streamlining processes and automating financials was immediate: no more manual journal entries and reconciliations. Now leaders have easy access to timely data that supports financial modeling and scenario planning. Denny’s now generates 60% more what-if scenarios and slashed the time to create a scenario from 3 days to just hours.

To move forward faster and more nimbly, expect hotel, restaurant, and other hospitality enterprises to embrace cloud-based tech platforms built around a unified data core enabling full visibility across both front- and back-office operations.

4. Mass Personalization Goes Mainstream

Robot butlers and waiters. Meal ordering via tabletop tablet. Keyless entry into voice-controlled smart hotel rooms. The integration of next-gen tech into hospitality industry experiences is well underway—but there’s still plenty of room for growth.

While some industry leaders have embraced new tech to enhance guest experiences, many organizations lag behind. For instance, just 11% of hotels and 25% of hotel rooms globally are supported by a hotel app, and only 3% offer keyless entry, according to a McKinsey report.

These tech amenities will likely go mainstream in the coming years, creating new and seamless customer experiences. But the deeper challenge facing hospitality businesses is much trickier—deciding how to develop personalized experiences attuned to customer preferences.

“If you think about it, we use data in hospitality very, very little,” says Matteo Pacca, a senior partner at McKinsey. “We can customize emails, we can customize promotions, but the customization of experience, for now, is a rarity.”

Across the hospitality industry, organizations are on the hunt for new ways to use technology to meet the needs of increasingly diverse consumer bases. Imagine, for example, a custom generative AI tool designed to curate a guest’s itinerary based on personal interests and preferences.

“Flexibility is important—it’s about listening closely to what the customer wants, and meeting that need,” said Muellerleile.

In the digital era, customer-focused flexibility requires a strong technology backbone. That includes seamless connections between digital systems so that customer data can flow smoothly, supporting a range of possible customer experiences and personalized recommendations.

In a similar way, interoperability is imperative, enabling functions across the business to collaborate and bring new offerings to market. Research shows that interoperability is a boon for growth: companies with high interoperability grow revenue 6x faster than those with low interoperability, Accenture found.

The reason is clear. When enterprise applications can seamlessly interact and exchange data to create a single source of truth that powers faster time to insights and better decisions, good things happen. Hospitality organizations that already have their core systems in tip-top shape are ready to meet their customers wherever they are.

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