Five predictions for 2023

By Shilpan Patel

2022 has been a successful one for the hospitality industry, with hotel room occupancy surging near the record-high 2019 levels. The American Hotel & Lodging Association also estimates 2022 hotel room revenue of $188.4 billion, which surpasses 2019 revenue.

But what lies ahead? What hotel trends will impact 2023? Here are some insights into emerging trends that will impact the hotel industry’s future.

1. More people will opt for experiences.
People are placing greater emphasis on travel over material purchases, and we expect to see this trend continue in 2023.

A June 2022 McKinsey & Company survey asked people what they would do with $10,000. After putting it in savings or paying off debt, the next most-popular response was travel. It ranked significantly higher than paying rent, going shopping or even getting a car.

In fact, almost 70% of people planned on traveling for vacation “no matter what.” External factors like inflation may cause people to vacation closer to home or take shorter trips, but the resounding point is that people want to travel.

2. Bank on extended-stay.
Extended-stay has been a booming segment with substantial growth in recent years. We expect it will continue to be a main driver in the market heading into 2023, particularly as demand for these accommodations soars and labor remains expensive and in short supply.

In 2021, the segment outperformed all other chain scales, with occupancy running nearly 20 points higher than all other U.S. segments combined. More recently, Q3 2022 industry data from STR shows guests checking into economy and midscale extended-stay hotels at a higher rate (76%) than that of traditional economy and midscale hotels (62%).

Travelers today are looking for value, especially long-term guests booking extended stays. At the same time, they want a space that looks and feels like them—a space that’s well-designed and inviting.

3. Sustainability will attract more guests.
Being eco-friendly is much more than a passing trend—it’s a movement that has a significant impact on the way people travel.

Hotels that adopt more sustainable measures attract travelers looking for environmentally friendly accommodations and can benefit from increased bookings. In the aforementioned McKinsey survey, 75% of participants said sustainable travel is important. Half the travelers, particularly those from younger generations, expressed that they would pay more for green initiatives like plastic key card alternatives.

Acting sustainably helps hotels not only drive revenue, but can also help reduce operational expenses. Simple changes like implementing a towel and linen reuse program or swapping out traditional lightbulbs for LED lights can add up to sizable savings on a hotel’s operating costs while creating a more sustainable environment.

4. Technology will empower owners as labor costs soar.
According to CBRE, labor is the most significant expense for hotels—and it’s only increasing.

As of Q3 2022, labor cost per occupied room was $97.19, which is up 5% from 2019. The compound annual wage growth for hotels hit 8.5% between 2020 and 2022, almost double what it was from 2017-2020.

To help maintain and even expand profit margins despite growing labor expenses, hotels are turning to technology and automation. As an example, instead of hiring more staff to manage tedious tasks like physically checking that rooms are ready for check-in, hoteliers are implementing technology solutions that automate these processes and empower current staff to work more efficiently.

Hotel technologies and services that streamline operations also appeal to travelers.

A recent Oracle report found that about half of travelers want to see more contactless payments and check-in/checkout systems by 2025. Nearly 40% also listed mobile guest services as a priority.

Mobile check-in and checkout as well as cloud-based, mobile-first revenue management systems are designed to help franchisees optimize their revenue strategies and grow market share. Mobile tipping solutions make it easier for guests to recognize hotel team members via their preferred mobile device. These technologies are expected to advance the industry in 2023.

5. Continued growth of select-service hotels.
Select-service hotels offer a win-win for both guests and hoteliers. The average cost of labor as a percentage of revenue runs lower in the select-service hotel space than in the industry overall. Select-service hotels also remain popular with guests because of their value and perks like free WiFi.

What really sets select-service hotels apart for continued growth in 2023 is their resilience. Select-service hotels consistently remained more stable than their STR upscale counterparts during times of upheaval or economic downturns. In fact, RevPAR for Wyndham select-service hotels outperformed STR upscale and above hotels during the COVID-19 pandemic by 2,500 basis points.

With this resilience and stability, we predict that select-service hotels will only continue to grow, especially as developers consider adding select-service hotels to their portfolios to help future-proof their investments.

Gaining the competitive advantage
The hotel outlook for 2023 appears positive, especially as guests prioritize experiences over any other purchase.

Hoteliers can benefit from guests seeking out these experiences by implementing sustainability options, innovative technology solutions and extended-stay options. By partnering with an established hotel company, capitalizing on these trends can be easier.

Shilpan Patel serves as EVP, North America operations, Wyndham Hotels & Resorts.

This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.