A Year in Review: Hospitality Industry Trends 2016

By Alex Gaggioli, December 1, 2016

Introduction:

Last year, we predicted what we thought would be the hospitality industry trends that would define the year. For the most part, our predictions were accurate to some degree. The industry is still in a growth phase, technology continues to evolve, the sharing economy shows no sign of stopping, niche marketplaces continue to provide bookings, and owning your online presence is becoming more important than ever. Let’s discuss how each of these trends played out this year.

The Hospitality Industry Continues to Grow

hospitality-trends

While the official numbers won’t come out until 2017, 2016 appears to have been a growth year for hospitality according to STR/Tourism Economics. The 2016 outlook showed all key performance indicators to increase:

  • Supply 1.7%
  • Demand 2.1%
  • Occupancy 0.4%
  • ADR 4.0%
  • RevPAR 4.4%

While occupancy appears to be the slowest growing metric, properties are making more money as seen in the increase in ADR (average daily rate) and RevPAR (revenue per available room). STR has already projected 2017 will be another growth year for hospitality, but slightly smaller than 2016.  We will update this section as more data becomes available.

Hospitality Technology Evolves

software-as-a-service

Every year we see technology evolve and it’s especially exciting to see new tech appear in the hospitality space. There are so many new tools available to independent hoteliers, making their lives continuously easier. Products continue to become more comprehensive, which we’ve seen in our own product suite, as well as our partners.

For example, Cloudbeds partner TrustYou, acquired CheckMate earlier this year to add text-based communication to their product suite. Now TrustYou is able to offer a well-rounded suite of products that directly relate to reputation management and guest experience.

In an effort to give independent property owners an all-encompassing system, Cloudbeds also added several features in 2016. From financial reports to integration partners, we’ve made our product faster, more efficient, and easier to use.

We will continue to see more software companies operate online and see more flexible options for everything from revenue management to frontdesk optimizations. As technology evolves, it becomes less expensive and more accessible. Software as a service businesses have helped power small and large businesses around the world at a fraction of the previous cost.

The Sharing Economy Will Grow

sharing-economy

We largely reported that sharing economy companies like Airbnb, Uber, and Lyft would begin to mature in 2016. We’ve seen all three services grow and pick up more steam. Airbnb has become one of the most lucrative platforms to both travelers and accommodation providers.  

Many Cloudbeds customers use Airbnb to attract more guests, and with a low 3% commission rate, they platform remains one of the least expensive third-party distribution partners. Airbnb announced that they now have more than 3,000,000 listings on their site and the number grows despite pressure from city, state, and country laws prohibiting the service.

In the case of most sharing economy businesses, antiquated laws either partially or completely prohibit these services. Most recently, Airbnb sued New York City for proposed legislation that would hold the company liable for illegal listings displayed on their site. Airbnb hosts are subject to steep fines if they rent out space that by law cannot be rented for fewer than 30 days. Right now, it is the individual host’s responsibility to make sure their activities are legal, rather than Airbnb. Airbnb argues that it is not their job to police the actions of their customers, and therefore they want New York to revoke the law.

Of course, there are other prominent sharing economy websites out there as well. Some of the most popular sites include HomeAway who is now owned by Expedia. HomeAway also includes smaller, more niche sites like VRBO, TravelMob, and VacationRentals.com as reported by Tech Boomers. Niche marketplaces for vacation rentals have gained popularity over the last few years. Many of these sites are prominent in specific geographic areas, like Europe, as opposed to Airbnb’s very global approach.

New Customer Facing Technology

consumer-facing-tech

This year, we didn’t see consumer-facing technology make a large, direct impact on travel. We saw several consumer-facing startups and attempts from existing companies, but not much has panned out. We’re even seeing attention drift away from sites like Hotel Tonight, which once dominated conversations in travel.

Other than Airbnb, including their latest announcement about experiences, we haven’t seen much attention or consumer behavior shift over the past 12 months. Hopefully in 2017 we’ll see a bit more of a shakeup, but for now, it seems like consolidation continues to dominate the game.

More Niche Marketplaces

niche-market-places

At the end of 2015, we predicted niche marketplaces would take center stage. While niche marketplaces are still viable distribution partners, they are still gaining steam. As mentioned above, we’ve seen acquisitions, like Homeaway and Expedia, define the channel space more than anything.

Niche marketplaces offer travelers who enjoy specific experiences to search for travel options within a certain category. Geographically-focused niche marketplaces currently dominate the scene with sites like despegar.com who cater to a specific market, which in this case is South America.

Direct Bookings

direct-bookings-matter

Direct bookings and your property’s online presence proved to be important in 2016. Direct bookings and third-party bookings both matter, and it’s important to focus on a wide variety of distribution partners. Direct bookings are lucrative because you don’t have to pay out commissions, whereas OTAs remain popular because of their reach. While you have to pay out a commission for third-party bookings, many times the guest wouldn’t have found your property without the third-party site.

In the future, we expect to talk more about the right balance of third-party and direct bookings. Identify your most profitable channels and focus on driving growth.

Conclusion

Now that 2016 is almost over, it’s a good time to look back on your own predictions for the year. Identify what worked, what didn’t and what can you improve upon for next year. In a few weeks, we’ll release our 2017 hospitality industry trend predictions, as well as our marketing trends.

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