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2024 Trends

Checking in for a year of growth

BY Marton Takacs


International hotel operators, owners and investors are looking to the future with confidence after a remarkably strong year in which astute resource management and increased digitisation have helped sharpen performance and boost profitability.

The sector has reached a watershed moment. This year, sector leaders will no longer define success by comparing key performance indicators to ‘before’ and ‘after’ the global pandemic. Many hotel groups advanced into new territory in 2023 in terms of average daily rates (ADR), occupancy and revenue per available room (RevPAR) in 2023.

The prime focus in 2024 will be on defining and applying strategies, technologies and transactions that can help them scale new peaks of success.

Technological innovation, particularly use of Artificial Intelligence (AI), will be a key theme as the sector progresses from relatively low-level experimentation such as using chatbots for customer service and ChatGPT to create marketing campaigns, to bigger and bolder applications.

We are only beginning to glimpse the full range of possibilities for AI to transform hotel economics, from dynamic revenue management to security systems and energy and resource management.  New developments like smart sensors will also drive change.

Large international branded hotel groups are investing millions of dollars in AI applications. Some are running small scale pilots before committing to mass rollout but the pace of adoption is accelerating. The global AI in hospitality market was valued at $90 million in 2022 and is estimated to reach a value of $8.12 billion by 2033 with a compound annual growth rate (CAGR) of 60%.

Significantly, we expect to see a digitalisation drive take place across geographies and across the spectrum of hotel groups in terms of ownership and size. After years of being characterised as slow to adopt new technologies, the hotels sector is drawing on the hard-won experience of having had to reinvent business models after the pandemic and taking a proactive approach to digital transformation.

Confidence is underpinned by forecasts of strong demand – Global Business Travel Association data show that global spending on business travel is expected to reach $1.5 trillion in 2024, exceeding pre-pandemic levels for the first time.

We also expect growing spend on ‘bleisure’ travel, which involves business guests staying for longer in locations and spending more in order to enjoy some leisure time when travelling. The value of the global bleisure market is expected to more than double from 2022 levels to $731.4 billion globally by 2032, a CAGR rate of 8.9%.

Global investor interest remains keen too as hotels are regarded as a particularly attractive class of commercial real estate while inflation remains relatively high, effective eroding the real value of fixed yields from office and retail property assets. Hotel operators’ ability to dynamically price rooms to adapt to different market circumstances is a key attraction, as well as solid underlying occupancy trends.

Relatively high interest rates over the past couple of years have kept the cost of borrowing high but the cost of capital should fall in 2024 and this is likely to stimulate more merger and acquisition activity in the sector.

Major branded international hotel chains are pursuing ambitious expansion strategies and they are particularly keen on increasing their footprint in fast-growing economic regions. The Middle East, Southeast Asia and strong European destinations will also continue to be investment hot spots.

Naturally some significant uncertainties and challenges remain for the sector, from geopolitical risks to the impact of an economic slowdown this year in some traditionally strong territories, such as Germany, as well as rising input costs and persistent skills shortages. The latter is being tackled by investment in skills, training and education opportunities as well as through reward and recognition programmes designed to hold on to and develop the best people.

The sector will also continue to face intense competitive pressures as hotels compete for guest custom and loyalty in a world where expectations of guest experiences are continually rising. However, the industry has demonstrated great resilience and determination in the fact of even greater challenges and is heading confidently into a new year, ready to seize opportunities to grow and prosper.