2024 Hospitality Industry Spend Survey

Sally Kelly
Annual IT Investment Survey

Asymmetrical. The word itself seems to have sharp edges that define its irregularity. While asymmetrical literally means “the quality of having two sides or parts that are not the same size or shape”, as a metaphor, asymmetry speaks to order and chaos, or, in more contemporary terms, opportunity, and challenge. Opposite but complementary forces.

During the past four years, the hospitality industry has faced an unprecedented and asymmetrical world filled with tension; the push and pull associated with challenge and opportunity. 2020 saw a once-in-a-century pandemic that effectively shut down the global travel industry. 2021 saw the rise of COVID-19 variants, a fragmented global response to the continuing pandemic and mixed economic indicators that slowed global travel recovery.

2022 ushered in a year of decades high global inflation, supply chain issues,and skilled labor shortages. 2023 saw the emergence of technological inno-
vation and competition, which required hotels to keep up with the changing needs and behaviors of consumers, a greater focus on environmental and social responsibility requiring hotels to adopt more sustainable and ethical practices, and geopolitical and economic uncertainties affecting the travel patterns and preferences of different regions and segments, creating volatility and risk in the market. Skilled labor shortages and record high global inflation continued to impact the industry in 2023. And then there was

Artificial Intelligence (AI). While AI has a long and rich history, it has captured the world’s imagination in the last two decades when it achieved remarkable breakthroughs such as image recognition, speech synthesis, natural language generation, self-driving cars and more. In January 2023, OpenAI introduced ChatGPT-4, bringing conversational, generative AI to a mass audience, and the world has not looked back.

As 2024 approaches, it seems that the industry will face many of the same challenges and opportunities as it did in 2023. This year’s Survey asked about adaptive investments, which are investments that enable enterprises to respond with agility to risk, volatility and other dynamic market forces. Respondents ranked the following as the Top 3 adaptive investments:

  • Demand Generation/Marketing Messaging tops the list of adaptive investment priorities for 40% of participants in this year’s Survey. According to The American Hotel and Lodging Association’s 2023 State of the Hotel industry Report, the emergence of new markets and segments, such as bleisure travelers, digital nomads, local travel, staycations, workations, and long-term rentals, created new opportunities and challenges for hotels to attract and retain customers.
  • Revenue Optimization/Channel Management ranks second among the adaptive investment priorities for 31% of respondents. This priority aims to cater to the varied and complex needs of different customer groups by offering more flexible and customized prices across channels.
  • Total Experience Strategy is the third most important adaptive investment priority cited by 29% of respondents. The goal of this priority is to optimize the experience of both staff and customers.

Agility remains the watchword for 2024 as the potential for many disruptive events remains on the horizon. While these events remain outside our control (the challenge), how we respond to them does not (the opportunity). 82% of respondents to this year’s Survey indicate that business and IT are aligned concerning the most effective way to move the business forward. This collaboration and communication between IT and business will create a better decision making environment, supporting a faster response to changing market conditions.

Steven M. Elinson, director of travel and hospitality at AWS, noted that “Today is the slowest pace of innovation that you will experience for the rest of your life.” Mr. Elinson is not wrong. To enable digital transformation and create the organizational agility necessary to continue to assimilate change at a rapid pace, companies need their people in the right structure, supported by the right processes, to harness the next generation of business capabilities. As the innovation gap will only widen, companies must reinvent their organizations to support continuous digital transformation, putting people first.

100% of respondents to the 2024 Survey stated that digital transformation was either “very important” or “somewhat important” to the overall strategy and success of their business. It is also interesting to note that 42% of respondents cited “budget constraints” as the No. 1 challenge they faced when implementing their digital strategy.

When technology leaders were asked where they believed they were relative to their company’s ability to compete in a digital world, 29% said they were ahead of the curve, 54% said they were keeping pace with competitors and 17% said they were behind the curve. The volume of legacy systems that are common in hospitality companies could cause them to be satisfied with the status quo, creating a false sense of “keeping up”. This challenge was acknowledged by 2024 Survey respondents, who placed modernizing software and hardware as their foremost digital investment goal, followed by shifting applications, data, and infrastructure to the Cloud.

2023 saw the rise of AI as a powerful technology that can't only create new possibilities and solutions for various challenges, but also poses unknown risks and ethical dilemmas that require careful consideration and governance.

While we, as an industry, will continue to face challenging times in 2024, there are still glimmers of hope on the horizon. According to the US Travel Forecast, domestic leisure travel is expected to surpass pre-pandemic levels and remain resilient in 2024 and beyond driven by pent-up demand, increased savings, and flexible work arrangements. Global outbound travel is expected to recover from the impact of the COVID-19 pandemic and grow significantly in 2024, reaching nearly the same level as in 2019, according to Statista. The volume of outbound travelers worldwide is predicted to grow by 15.9% in 2024, ending the year at 1.4 billion visits. According to a study by CBRE, hotels are following the airlines into green investment in 2024. An outstanding example is the Red Sea project in Saudi Arabia that will develop 16 hotels powered by renewable energy and achieve zero landfill waste and sea pollution.

In short, there is reason for optimism. The mood of respondents remained buoyant going into 2024, with a nod to “cautious optimism” engendered by the market volatility of the past several years. Winston Churchill famously said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” As we are optimists in this industry, albeit cautious ones, 2024 promises to be a year filled with opportunities.

Hotel Investment Priorities

As part of the 2024 Survey, respondents were asked to list their Top 5 hotel-level investment priorities. The 2024 list is striking as it shares 60% of the Top 5 initiatives identified in 2023. While the numbers have changed, the priorities remain largely the same, indicating that not as much progress was made in 2023 as expected.

Replacing the property management system (PMS) remains the No. 1 hotel investment priority for 2024. The fact that replacing the PMS remains the No. 1 hotel level investment priority reflects the fact that legacy PMSs are outdated, inflexible and inefficient, and don’t meet the changing needs and expectations of the hospitality industry and customers in the post-COVID era. Evolving guest and employee expectations and the availability of enabling cloud-based technology to further the digital transformation to a more personalized, frictionless experience those consumers, whether internal or external, are demanding. Older PMSs are aging out, both functionally and in terms of their hardware/software heavy cost model.

A new No. 2 investment priority was identified for 2024, Customer Engagement. Investment in customer engagement technology at the hotel level can help hotels appeal to today’s tech-savvy travelers, streamline and personalize their services, increase customer satisfaction and loyalty, and gain a competitive advantage in the post-pandemic market.

In the No. 3 investment spot this year is a new Top 5 entry, updating PCI Compliance. PCI DSS v4 was released in March 2022. It introduced 64 new requirements that address the evolving threats and technologies in the payment industry, such as phishing, skimming, and PSD2, the European directive that mandates strong customer authentication and open banking, which can affect how online payments are processed.

Some of the new requirements were effective immediately, while others become mandatory in April 2025. The No. 4 investment position for 2024 was occupied by Service Optimization, last year’s No. 2 investment. Given the growing reliance on contract labor, the impact of inflation on wages, and the continued shortage of personnel at the hotel level, Service Optimization is a logical choice for continued investment in 2024.

The No. 5 investment priority for 2024 is upgrading payment processing ecosystem, which was 2023’s No.3 investment priority. There is a direct relationship between the 2024 No. 3 and No. 5 investment priorities. The relationship between upgrading the payment processing ecosystems and complying with PCI DSS v4 is that both aim to enhance the payment experience and security for hoteliers and their guests. By investing in modern payment technologies and solutions, hoteliers can meet the new PCI DSS v4 requirements, and also gain other benefits, such as increased customer satisfaction, loyalty, and revenue.

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