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4 reasons why there’ll be a dip for hospitality businesses in 2022

Innovation Growth

Domestic hospitality in the UK received a short boom in the summers of 2020 and 2021. But the industry is set for a problematic mid-term outlook. The opening up of international travel, coupled with a slow pace of recovery, means that the race for sustainable growth is on.

The hospitality landscape is set for a challenging couple of years. According to the Department for Digital, Culture, Media and Sport, tourism in the UK is not expected to return to 2019 levels of volume and expenditure until 2025.

A perfect storm could ultimately significantly impact domestic hoteliers and restaurateurs. Organisations operating in the hospitality sector, including hotels and restaurants, must prepare themselves to manage a potential ‘dip’ period in the sector’s recovery.

So, what four factors are likely to contribute to a dip?

1. International travel is opening, and competition is increasing

While the 2020 and 2021 summer months have been good for domestic travel and hospitality, relaxing international travel restrictions will increase options for UK travellers and holidaymakers. Holiday companies have reported a rise in bookings for trips abroad in 2022 due to the attraction of cheaper international travel over expensive domestic travel.

According to the UK’s largest tour operator, TUI, international bookings for May 2022 were up 150% on May 2021. Meanwhile, inbound tourism (travellers visiting from outside the United Kingdom) is still likely to be minimal.

Competition among accommodation types will cause more of an impact on hotels and restaurants. For example, as post-pandemic restrictions ease, self-catered bookings through Airbnb soared.

2. Recovery is expected to be slow

Internationally, senior figures in hospitality increasingly believe that disruption to the sector, because of COVID-19, will be long term. 71% of Deloitte’s Hotel Sentiment Survey respondents expect disruption to last beyond 2022, with 24% expecting disruption to last until 2023. 38% expect a recovery in 2024 and beyond. 

3. Customers’ rising expectations

COVID-19 has forced hotel and restaurant guests to see the world differently, leaving an impact on consumer behaviour. Guests have different needs and rising expectations as the competition among rentals, hotels, guesthouses, and resorts heat up. For example, research from Hospitality Net shows that critical influences on bookings now include flexible cancellations, perceptions of cleanliness, and adherence to preventative measures of spreading viruses, as well as location and value for money.

4. A rise in cancellations

Cancellation rates are steadily rising. Many hotels now offer penalty-free cancellations, partly because of increasing booking rates due to the global pandemic. This has caused an effect known as “booking infidelity”, where customers will continue to look for hotel and restaurant options well after booking at one or several hotels and restaurants. This will become a significant challenge to manage in 2022 and beyond. Avivo predicts that hotels will face 20% or more direct cancellation rates in 2022.

How this could impact your business

For hospitality businesses, the threat of a prolonged dip could significantly impact restaurant bookings and covers, as well as hotel occupancy rates and RevPAR (revenue per available room), which benefited from increased demand in domestic travel and staycations in 2020 and 2021.

The rise in domestic travel may not be a sustainable shift to plug the gap between inbound and corporate travel. There is enhanced competition from international travel, loyalty programmes from OTAs, increasingly discerning guests, and changing consumer needs in the marketplace. As a result, we are likely to see a rise in cancellations as guests continue to shop around, look for value for money in a dynamic market, and seek out the best, frictionless experiences tailored to their needs.

How can you beat the dip? 

For over 20 years, we've been helping hospitality businesses solve sales, marketing & operational problems when it matters most. We partner with leading hospitality brands such as The PigWatergate Bay, and The Swan to simplify the complex and create sustainable growth.

We know in the ever-changing post-pandemic landscape that there’s no silver bullet. However, our experience has shown us that in 2022, there will be three key opportunities that stand out above all others for hospitality leaders who want to beat the dip.

They are: 

  1. Transforming digital guest acquisition to increase direct bookings and remove reliance on OTAs
  2. Smarter guest experiences to foster loyalty and spend per customer
  3. Building resilience through a culture of adaptability and innovation