The following article was published in Avendra’s 2019 Cost Outlook Forecast. Avendra customers can visit myAvendra.com to download Avendra’s comprehensive 2019 Cost Outlook Forecast.

To help hotel operators make informed decisions and budget for the remainder of 2018 and 2019, Avendra has compiled a comprehensive outlook for the travel industry and economy in Avendra’s key regions of the US, Canada and Latin America.

Here are some of the major takeaways:

In early June, the World Bank reported that it expected global economic growth to hold steady at 3.1% in 2018, before slowing down gradually the next two years. Another research organization, the Organization for Economic Co-operation and Development (OECD), shows global GDP for the 2018-19 period hovering near 4% growth, higher than it has been for many years.

Growth is expected to be driven by rising consumer and business confidence, as well as a recovery in manufacturing, investment and trade. While trade has begun to recover around the world after five years of slow growth, there is concern about protectionist trade rhetoric; if it becomes policy, any recovery is likely to be short-lived.

The Travel Effect

Strong economic growth is a key driver in the travel and hospitality industry. With improving economic indicators, the global hotel market is expected to remain healthy into 2019. The United Nations World Tourism Organization (UNWTO) shows long-term strong momentum, with international arrivals worldwide expected to increase an average of 3.8% per year through 2030.

Global GDP growth plus strong travel and tourism trends set the stage for a continued extended cycle of positive hotel operating performance. As reported in Deloitte’s 2018 Travel and Hospitality Industry Outlook, over the past 20 years, the number of international travel departures has more than doubled from 500 million to 1.3 billion. Factoring in indirect economic contributions, travel and tourism now accounts for 10.2% of global GDP.

Economic Metrics in the U.S.

The U.S. economy is heating up as 2018 progresses. CNBC’s Rapid Update, which looks at readings from top economists, sees the second quarter tracking at a healthy 3.7%, well above the 2.3% growth in 2017.

As explained by the OECD, the current U.S. expansion is one of the longest on record. Job growth, coupled with strong consumer confidence and the effects of the tax reforms, are supporting strong consumption growth.

With unemployment at a dramatically low 3.8%, inflation still hovering at or below 2% and business and consumer confidence strong, the U.S. economy appears to be robust.

Travel Forecast for the U.S.

Deloitte cites several key growth drivers for the U.S. in its 2018 Travel and Hospitality Industry Outlook: a robust economy, intense airline competition and healthy corporate travel demand, expected to surge to a 6.1% growth rate.

PwC, in its Hospitality Directions U.S. for 2018, also shows growth predictions:
• With occupancy levels at record highs, an expected uptick in commercial transient demand mid-week should bode well for stronger increases in room rates.
• Looking ahead to 2019, there is an expectation of gradual strengthening in occupancy and room rate growth as we move through the year.

STR and Tourism Economic research projects record-breaking performance levels through 2019, fueled by “strong underlying economic indicators and upgraded GDP forecasts.” For 2019, this group projects the U.S. to report a 0.1% increase in occupancy, a 2.3% lift in ADR and a 2.4% rise in RevPAR.’

Given the forecasted steady economic growth and its impact on the travel and hospitality industry, how should hotel operators strategically adjust their pricing and marketing strategies to maximize revenue during this period of strong demand?

In light of the positive economic outlook and anticipated growth in the travel sector, hotel operators should consider implementing dynamic pricing strategies to capitalize on increased demand. By leveraging data analytics, hotels can adjust prices in real-time based on fluctuating demand levels, ensuring they remain competitive while maximizing revenue. Marketing efforts should be intensified to highlight unique experiences and amenities that differentiate them in a bustling market. Personalization in marketing campaigns, targeting specific demographics and leveraging digital platforms, can help attract a broader guest base. Emphasizing flexible cancellation policies and enhanced health and safety measures, in response to ongoing global health considerations, can also reassure potential guests and encourage bookings.

With the expectation of continued growth in international travel arrivals and a strong momentum in the global hotel market, what investment priorities should hotel operators focus on to ensure their properties are appealing and competitive on a global scale?

Hotel operators should prioritize investments in technology and sustainability to enhance guest experiences and operational efficiency. Upgrading property management systems, implementing contactless check-in/out processes, and offering high-speed Wi-Fi are essential tech enhancements that cater to today’s tech-savvy travelers. Investing in sustainable practices, such as energy-efficient systems, water conservation measures, and sourcing local produce, can not only reduce operational costs but also appeal to environmentally conscious guests. Additionally, refurbishing guest rooms and public spaces to reflect contemporary design trends can help attract a global audience. Offering authentic local experiences and personalized services can further differentiate properties in a competitive market, meeting the growing demand for unique and culturally rich travel experiences.

Considering the projected increase in business travel demand, especially in the U.S., what strategies can hotel operators adopt to cater specifically to the needs of business travelers and ensure their properties are the preferred choice for corporate travel?

To attract business travelers, hotel operators should focus on offering streamlined services and amenities that cater to their specific needs. This includes creating flexible workspaces within the hotel, such as co-working spaces and private meeting rooms equipped with modern AV technology. Providing high-speed internet access, ample charging stations, and 24/7 business centers can address the needs of travelers working on the go. Hotels can also develop tailored packages for corporate clients, offering perks such as priority check-in, late checkout, and complimentary upgrades. Networking events and business seminars can be hosted on-site to add value. Ensuring the hotel’s loyalty program offers rewards that are attractive to business travelers, such as complimentary stays, flight miles, or exclusive access to events, can encourage repeat business and loyalty. Through these strategies, hotels can position themselves as the preferred option for corporate travel by addressing the unique needs and preferences of business travelers.

For a full overview of economic and travel metrics in Avendra’s key regions, please visit the PDF available below.