While the hospitality industry has seen a post-pandemic resurgence, this growth hasn’t been easy. Indeed, in an era of rising expectations and fierce competition hospitality firms are now grappling with a perfect storm of challenges.
According to STR estimates, there are over 17.5 million guest rooms in 187,000 hotels worldwide. Add to that 15 million restaurants, and countless pubs, bars, clubs, resorts, theme parks, and other venues, and it’s clear this is a bustling and dynamic sector.
Indeed, guest room demand hit an all-time high in 2024. However, meeting this demand presents real difficulties. From talent shortages and evolving guest expectations to supply chain disruptions, this industry simply cannot afford to sit still.
Given the positive reception to our retail industry article, we felt compelled to address the unique challenges facing the hospitality industry. To do this, we’ve compiled a list of ten key obstacles and practical solutions. But first, let’s explore the diverse range of businesses operating within this market.
A Quick Guide to the Hospitality Industry
Hospitality is a term that covers a broad range of businesses that provide services to guests and visitors. Typically, this includes organisations that house, feed, transport, and entertain people. For instance:
- Accommodation: Hotels, motels, hostels, resorts, guest houses, bed and breakfasts, campgrounds, etc.
- Food & Beverage: Restaurants, bars, clubs, cafes, food trucks, catering services, etc.
- Travel: Airlines, cruise lines, travel agencies, tour operators, rental services, etc.
- Entertainment: Theme parks, casinos, theatres, sports venues, museums, etc.
- Events: Convention centres, exhibition halls, wedding venues, etc.
As you can see, the list of associated businesses is extensive. Unfortunately, so too is the list of challenges that hospitality organisations face. With that said, let’s dive into the common obstacles that plague this industry.
The Top 10 Hospitality Industry Challenges
1. Talent Shortages
It’s difficult to overstate the impact that the COVID-19 pandemic had on the hospitality industry. In the US alone, 70% of hotel staff experienced job cuts or were placed on leave. This forced many to reevaluate their career paths, with a number choosing to leave the industry for good.
Hospitality roles often demand shift work, including evenings, weekends, and holidays. In some cases, this is coupled with low pay, limited benefits, and restricted opportunities for career advancement. As you might imagine, this can make it difficult to attract potential employees.
According to UK Hospitality, there are currently over 132,000 vacancies in the UK market. This is 48% above pre-pandemic levels. What’s more, the American Hotel & Lodging Association reports that 79% of hoteliers are experiencing a staff shortage.
Compounding this issue, Bureau of Labor statistics suggest an astonishing annual turnover rate of 70-80% in the hospitality industry. Not only is it hard to attract staff, it’s hard to keep them too. This is one of the key challenges that must be overcome for the hospitality industry to move forward.
Top Tip: The talent crisis won’t be solved overnight, but incremental changes can be made through a shift in focus. To get started, you’ll need to create a positive work environment, offer a genuinely competitive compensation package, and provide real opportunities for growth.
As a result, you’ll not only attract new employees, you’ll also engage and retain them. According to Gallup’s meta-analysis, organisations with a highly engaged workforce are 21% more profitable. That sounds like a win-win to us.
2. Evolving Guest Expectations
Every time we interact with the hospitality industry, we bring a set of expectations with us. These are the standards by which we measure our experience. Traditionally, comfort, cleanliness, and good service has been our focus.
However, these expectations have evolved dramatically in recent years creating a new set of challenges for the hospitality industry. This is driven by globalisation, evolving lifestyles, and technological advancements. To illustrate the scale of this shift, consider the following statistics.
- 71% of guests prefer self-service or self check-in technology.
- 96.4% of hospitality professionals say their guests appreciate keyless tech.
- 78% of guests prefer to book properties that offer personalised experiences.
- 73% of guests prefer to manage their hotel experience using their mobile device.
Clearly, the world’s changing. Meeting and exceeding this new set of guest expectations will be crucial for building customer loyalty and driving business success. But how can you keep pace?
Top Tip: To meet guest expectations, you’ll first need to understand what they are. If you haven’t already, then consider implementing and utilising a guest management system to collect and analyse data on customer preferences.
You can then use this information to create personalised experiences that delight and excite your guests. Better still, this data-driven approach may help you to identify emerging trends and opportunities, enabling you to stay ahead of the curve.
3. Reputation Management
What’s the first thing you do before you book a room in a hotel, or a table at a restaurant? You check the reviews of course. In fact, according to TripAdvisor, 81% of us ‘always’ or ‘frequently’ read reviews before making a final decision.
This places immense importance on reputation management. Indeed, failing to cultivate a positive online presence and control the narrative around your organisation has a real impact on booking rates and business performance.
Did you know that 40% of guests will leave a review if they’ve had a positive experience? Unfortunately, this number jumps to 48% if they’ve had a negative experience. This sort of feedback has a way of drowning out other voices, creating a distorted perception of your organisation.
This presents a series of challenges for the hospitality space, where all it takes is one bad experience to sully your reputation for good. So, what can you do to prevent this from happening?
Top Tip: To protect your reputation, you should adopt a two-fold approach. Firstly, take care to address and respond to negative reviews promptly and professionally. This demonstrates a commitment to customer satisfaction and shows that you care.
Secondly, implement a system that actively encourages satisfied guests to share their experiences. For instance, you could incorporate review requests into the checkout process or offer incentives to those who leave feedback.
4. Sustainability
Like many other businesses, hotels and restaurants use vast amounts of energy, water, and natural resources to operate. For instance, a hotel uses an average of 1,500 litres of water per room, per day. This far surpasses the water usage of local residents.
This presents a complex challenge. Modern consumers increasingly demand sustainable practices, yet their expectations for comfort, cleanliness, and exceptional service remain unwavering. It’s a delicate balance.
Indeed, according to a Booking.com report, 81% of travellers cited sustainable travel as a priority for them in their next trip. What’s more, 78% of travellers intend to stay in a sustainable property. Unfortunately, meeting these expectations has real cost implications.
To succeed, you’ll need to embrace both operational changes and guest education. In other words, you’ll need to create awareness and provide your guests with the tools they need to make eco-friendly choices.
Top Tip: To engage guests in sustainability efforts, clearly communicate your green initiatives, provide convenient recycling facilities, encourage towel and linen reuse, and promote energy conservation measures in your guest rooms.
Want to go a step further? Embracing online learning can also help to reduce your training’s carbon footprint by as much as 90%. That’s yet another great reason to go digital!
5. Skill Gaps
As we’ve seen, one of the hospitality industry’s biggest challenges is its alarmingly high turnover rate. This has also led to a skills shortage. After all, the constant churn of staff makes it challenging to recruit and train employees effectively, as many leave before their full potential can be realised.
According to a People1st report, 21% of hospitality businesses claim their staff lack ‘essential’ skills. This is 6% higher than the average in other industries. This can lead to inefficiencies, errors, and reduced productivity.
To truly excel in their roles, your staff will need a blend of soft and hard skills. For instance, they’ll need an in-depth understanding of the products and services you offer, alongside operational knowledge, technical skills, and more.
Soft skills are also vitally important for those working in customer-facing positions. Despite this, an alarming 61% of hospitality and tourism businesses report a lack of customer service skills. Yikes.
Top Tip: There’s only one way to overcome a skills gap. You’ll need to prioritise training and development for all your employees. What’s more, by offering opportunities for growth, there’s a good chance you’ll simultaneously improve employee satisfaction.
To maximise the impact of your training programmes, consider implementing a learning management system or a learning app. These platforms enhance accessibility and help you to track your learners’ progress. Check out our Caffè Nero case study to learn more.
6. Cybersecurity Threats
Unfortunately, the hospitality industry is a prime target for cyberattacks due to its extensive collection of sensitive guest data. This includes not only financial information like credit card and passport details, but also personal preferences, and medical needs.
In fact, almost one-third (31%) of hospitality organisations have experienced a data breach at some stage in their history. Worse still, the average cost per breach sits at around $3.4m. It’s clear that action is necessary.
The repercussions of a data breach extend far beyond financial and legal penalties. After all, a successful cyberattack can irreparably damage a hotel’s reputation, eroding customer trust and loyalty for good.
And let’s not forget, cybercrimes are a rapidly escalating threat in an industry that’s now embracing digital transformation. Cybersecurity Ventures predicts a 15% annual increase in cyberattacks until 2025, with associated costs reaching $10.5 trillion.
Top Tip: A well-informed and highly-vigilant workforce is your first line of defence against cybercriminals. As such, you should seek to invest in a cybersecurity training programme for all your employees.
To maintain this vigilance, you’ll also need to run regular cybersecurity awareness campaigns. Here, you should highlight the latest threats, reinforce best practices, and encourage your employees to report suspicious activity.
7. Seasonal Fluctuations
Perhaps more than any other industry, the hospitality space is heavily influenced by seasonal trends. Fluctuations in demand directly impact occupancy rates, staffing needs, maintenance costs, and operational efficiency.
According to the American Hospitality & Lodging Association, annual profits in the hospitality industry can fluctuate by as much as 50% due to seasonality alone. Such extreme volatility makes it incredibly difficult to maintain financial stability.
In some cases, there’s also the reverse challenge. After all, peak seasons can also bring their own set of problems. For instance, overcrowding, price surges, and strained infrastructure are all common issues that require careful management.
Likewise, it can also be difficult to maintain consistent service quality during these peak periods. After all, it’s in these moments where the industry’s staff shortages are felt the most. You’ll need to take action to avoid dissatisfied customers.
Top Tip: Since seasonal fluctuations are inevitable, you’ll need to adopt a data-driven approach. A well-developed forecasting system can help you to optimise your resources and maximise profitability throughout the year.
By analysing historical data and market trends, you’ll be able to anticipate peaks and valleys and adjust your strategy accordingly. For instance, you may choose to update your staff rotas and fine-tune your pricing options.
8. Managing Regulations
The hospitality industry is subject to a wide-range of regulations, including health and safety, food hygiene, licensing, employment, and environmental standards. What’s more, these regulations are frequently updated, which makes it difficult to keep up.
As a result, maintaining compliance can be expensive. It often involves extensive paperwork, record-keeping, and administrative costs. You’ll also need to implement a training and certification programme to address these regulatory challenges.
However, almost 1 in 4 (23%) organisations have no formal compliance training plan in place. And those that do suffer from low engagement rates. In fact, 49% of learners confess to not listening to their compliance training in detail. What a waste!
This is a problem, as non-compliance can result in hefty fines, legal issues, and longstanding damage to your reputation. In other words, this is more than just a box-ticking exercise.
Top Tip: When it comes to compliance, we recommend embracing digital solutions. After all, you can use technology to automate tasks, track compliance progress, identify risks, and generate reports. This is not the kind of detail you want to be recording using pen and paper.
For instance, Growth Engineering LMS can issue certificates upon completion of a training programme, serving as proof of compliance. These certificates can be set to expire, requiring the learner to complete refresher training and recertification.
9. Supply Chain Issues
Hospitality firms are reliant upon their supply chain to deliver an exceptional guest experience. However, this reliance exposes your business to a number of factors that are outside of your control.
Economic conditions and geopolitical events may make it difficult for you to source essential goods like food, beverages, and amenities. And even if you can source them, then their fluctuating price will likely be challenging to manage.
For instance, hospitality businesses in the UK have seen costs soar by 30% due to supply chain issues. This forces organisations to make a difficult choice: do more with less, or pass on the costs to their customers.
Then there’s the logistical issues that come with managing a multi-site business. The hospitality industry relies heavily on fresh produce and other perishable items. As a result, you’ll need to manage your inventory carefully.
Top Tip: As with seasonal fluctuations, you’re not in control of the economic conditions and events that place a strain on your supply chain. As such, you should focus on expanding and strengthening your strategic partnerships.
Where you can, work closely with your key suppliers to improve communication and supply forecasting. And where that’s not possible, develop a contingency plan. This may require finding backup suppliers or other sourcing options.
10. Rising Competition
The hospitality market is projected to reach an eye-watering $5,816 billion by 2027, growing at a compound annual growth rate (CAGR) of 5.5%. This is driven by new players entering the market and existing businesses differentiating themselves.
Either way, the hospitality market is getting increasingly competitive. For instance, 41% of leisure travellers now prefer to use Airbnb rather than stay at a hotel. Perhaps this is why they now have a market capitalisation of over $87bn.
Of course, this sort of intense competition makes it challenging to attract new guests and retain existing customers. This usually leads to a downward pressure on prices, eroding your profit margins and exacerbating all your other challenges.
To survive and thrive in this competitive landscape, businesses must clearly differentiate themselves. In other words, you’ll need to refine and enhance your messaging and unique selling points to attract and retain new customers.
Top Tip: This challenge highlights the importance of delivering an exceptional guest experience. After all, this is what leads to good reviews, increased online visibility, and repeat visits.
To achieve this, you’ll need to invest in innovative products, services, and technologies that empower your organisation to differentiate itself. You’ll also need to train your staff to deliver the kind of experiences that keep guests coming back again and again.
Final Words
Whilst the hospitality industry has made a strong recovery in recent years, its continued growth hinges on its ability to overcome a complex series of challenges. As we’ve seen, many of these issues don’t have easy solutions.
A thriving market means intense competition, which also leads to staff shortages, new guest expectations, supply chain issues, and numerous other obstacles. It’s enough to test the resilience of any business.
Thankfully, these difficulties are not insurmountable. By strategically embracing technology, actively seeking guest feedback, and investing in employee development, you’ll be ready for the future.
The journey ahead will be challenging, but the rewards will be worth it.
Thank you for reading. Are you a hospitality firm facing your own set of challenges? Then why not take your training programme to the next level? Download our 150 Learner Engagement Tips now!
